introduction
since being elected, the rudd government has been sinewy and active in exploring ways to amend the trade exercises act 1974 (tpa) to prohibit varying kins of business manner and conduct. As an illustration, the federal government has moved rapidly to introduce legislation to criminalise hard-core cartels with a maximum jail term of 10 years.
the federal government has also recently issued a report recommending the creation of “an australian buyer law” which, between other changes, is likely to give the accc a swoop and range of new faculties and powers to protect consumers, suchlike the capacity and capacity to seek civil pains and penalties and disqualification orders, and to issue populace warning faculties and powers and infringement notices.
amongst this flurry of energy and activity, another very primary modify to the tpa has passed largely unnoticed. The federal government has introduced new laws, which came into gusto and effect on 25 may 2009, which regulate the way that businesses may promote the prices of their goods and services. The lack of attention to these proposed laws between businesses and legal practitioners is exceptionally surprising given that the legislation will introduce significant criminal pains and penalties for failing to promote the single price of goods and services. In this article will profile and outline the key provisions of the legislation, the trade exercises amendment (clarity in pricing) act 2008 (cipa) and reconnoiter and explore the implications for business.
background
currently, beneath the tpa, there is an compulsion to state the money price for goods and services in sure causes and circumstances. Section 53c provides that -
a corporation shall not, in trade or commerce, in connection with the supply or possible supply of goods or services or in connection with the publicity by any means of the supply or use of goods or services, make a representation with attention and respect to an quantity that, whether or not remunerated, would constitute a portion of the consideration for the supply of the goods or services unless the corporation also specifies the money price for the goods or services.
the current s. 53c places an compulsion on businesses to state the money price for goods or services where the business represents an quantity which would constitute a portion of the consideration. By implication, s. 53c requires businesses to state the full money price for good and services.
section 53c was only imposed and imposed periodically by the australian competition and buyer commission (accc) prior to 2000. Notwithstanding, in 2000, the section took on particular prominence and importance with the first appearance of the goods and services tax (gst). During this period, the accc relied to a great extent on s. 53c to strength businesses to show the full money price for goods and services, inclusive of the gst. In fact, s. 53c became the accc’s major weapon in preventing businesses from representing gst-exclusive prices to their customers.
the accc preferred to utilize s. 53c rather than s. 52 of the tpa to accomplish gst-inclusive pricing because, beneath the former section, there was no compulsion on the accc to demonstrate that the manner and conduct was spurious and misleading or deceptive. All the accc had to prove to launch a contravention of s. 53c was that the business had failed to represent the full money price in causes and circumstances where the business has represented portion of the consideration.
one implication of the accc’s approach to s. 53c was that it didn’t discriminate between representations aimed at consumers and representations aimed at businesses. Consequently, during the gst period the accc would frequently require businesses to represent their prices as gst-inclusive even when they were offering goods or services completely to business consumers. A heap of business groups were highly unsmiling and vital of the accc’s position on publicity the gst in business-to-business transactions. These groups argued that businesses should not be expected to represent gst-inclusive prices in business-to-business transactions because the gst factor was not relevant to businesses which could claim an input tax credit. In other words, business customers were only fascinated in knowing the price net of gst.
while the accc understood the worries of these business groups, it was faced with a dilemma. A significant number of complaints received by the accc in the gst period regarding gst-exclusive publicity came from small businesses which claimed that they had been misled by other businesses publicity gst-exclusive prices. The picture became even more mixing up in industries where a heap of businesses advertised gst-exclusive prices and others advertised gst-inclusive prices.
indeed, on a number of occasion, the accc wrote to a business which was publicity gst-exclusive prices to other businesses, just to be told that they had recently changed from gst-inclusive publicity because their challengers were publicity gst-exclusive prices. When the accc pressed these businesses to explain why they had felt the want to modify, they claimed they had to modify to gst-exclusive pricing because they were losing too a heap of customers to challengers which were publicity gst-exclusive prices. These types of stories provided the accc with a substance and basis for concluding that a heap of small businesses may in fact be in a similar position to consumers in terms of being misled by gst-exclusive publicity.
reasons for the clarity in pricing act
in the explanatory memorandum for the cipa, the justification for the legislative modify was based on the perceived shortcomings of the interpretation placed on sv53c by the federal court in two cases taken by the accc.
in the original case, accc v dell computers pty limited, the accc alleged that dell had breached s. 53c by not stating the full money price of their computers because of not including the mandatory declamation and delivery charges. In this instance, equity and justice branson held that a statement to the gusto and effect of “$1999 plus $99″ was tangible and enough to satisfy the necessaries of s. 53c of stating the full money price.
in the second case, accc v signature ease and security group pty limited, the accc alleged that signature ease and security had breached s. 53c by publicity gst-exclusive prices for complex and respective ease and security services. In this instance, equity and justice stone found that the expression “$295 plus gst” was a compound statement of price which didn’t overstep and contravene s. 53c.
based on the effect in these two cases, the federal government concluded that s. 53c was not adequate to accomplish the broader goal of ensuring that businesses advertised and quoted the full price for goods and services. Consequently, the government identified the want for personal and specific legislation, namely the cipa, to resolve this perceived problem.
trade exercises amendment (clarity in pricing) act 2008
the cipa has repealed the existent s. 53c and replace it with the next provision -
(1) a corporation should not, in trade or commerce, in connection with:
(a) the supply or possible supply of goods or services to somebody (the relevant person); or
(b) the publicity by any means of the supply of goods or services to somebody (the relevant person) or of the use of goods or services by somebody (the relevant person);
make a representation with attention and respect to an quantity that, whether or not remunerated, would constitute a portion of the consideration for the supply of the goods or services unless the corporation also:
(c) specifies, in a huge way and as a single figure, the single price for the goods or services; and
(d) whether or not, in relevance to goods:
(i) the corporation doesn’t include in the single price a charge that is payable in relevance to sending the goods from the supplier to the relevant person; and
(ii) the corporation knows, at the time of the representation, the minimum quantity of a charge in relevance to sending the goods from the supplier to the relevant person that ought to be remunerated by the relevant person;
specifies that minimum quantity.
the main difference between the existent s. 53c and the new s. 53c is that businesses are going to be expected to specify the full price for the goods or services as a single figure, in a huge way.
subsection 53c(7) defines the term “single price” as “the minimum quantifiable consideration for the supply embarrassed and concerned at the time of the representation embarrassed and concerned. . . ” the subsection lists the next types of charges which would be covered by the term “single price” – namely, taxes, duties, and levies. Charges which are payable at the option of the purchaser are excluded from the definition of “single price”.
subsection 53c(4) states that a price are going to be specified in a huge way whether or not the single price is “at least as prominent as the most prominent of the constituents of the consideration for the supply”. This would seem to indicate that -
- the single price ought to be in the same or larger font than any representation of a factor of the single price and
- no factor of the single price may be represented in a larger way than the single price by the use of such gadgets as bold font or underlining.
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a farther implication of subsection 53c(4) is that the use of asterisks may no longer be allowed as, by utilizing an asterisk, the single price will not be as prominent as the factor prices, whether or not the single price is located at the bottom of the publicity.
businesses will not be expected to specify charges for delivering goods to a client as portion of the “single figure”. Notwithstanding, businesses ought to specify the minimum quantity of any declamation and delivery charge which are going to be incurred by the client. The cause for this exception is that declamation and delivery charges frequently vacillate depending on where the client is located. Consequently, it is going to be totally unlikely for a business to promote the single figure inclusive of declamation and delivery for every prospective client emplacement.
subsection 53c(3) states that the compulsion in subsection 53c(1) doesn’t utilise when the representation is made completely to a body corporate. While this would appear to exclude business-to-business transactions, this is not the case as representations to unincorporated businesses suchlike sole traders and partnerships are not exempted by s. 53c(3). As an illustration, price representations made to big legal, medical or accounting partnerships will without doubt have to comply with s. 53c(1).
in addition, the necessity that the price representation ought to be made exclusively to a body corporate to qualify for the exemption integrated in s. 53c(3) is likely to broaden the application of the legislation. Even whether or not a representation is made to a large number of integrated businesses, whether or not the representation is also made to even one sole dealer or cooperative relationship, the exemption in s. 53c(3) would not utilise.
one limiting principle to the latitude and scope of s. 53c is integrated in subsection 53c(6) which states -
a allusion in this section to goods or services is a allusion to goods or services of a kind
ordinarily acquired for impertinent and personal, domestic or household use or consumption.
this subsection will restrict the latitude and scope of s. 53c(1) to goods and services usually acquired for impertinent and personal, domestic or household use or consumption. This will mechanically exclude a broad swoop and range of business-to-business transactions, where the goods or services are clearly of a commercial statesmanship and character. Notwithstanding, the provision will also introduce a heap of added complexity, as it will mean that a preliminary step to determining whether s. 53c applies in a particular circumstance, are going to be to define whether the relevant goods or services are “of a kind usually acquired for impertinent and personal, domestic or household use or consumption”.
subsection 53c(5) excludes services supplied beneath contract from s. 53(4) whether or not a number of conditions are satisfied -
1. The contract provides for the supply of services for the term of the contract;
2. The contract provides for periodic payments for the services to be made during the term of the contract;
3. Whether or not the contract also provides for the supply of goods – the goods are directly related to the supply of the services.
section 53c(4) will not utilise to services supplied beneath a contract which are remunerated for through periodic payments. The supply of goods beneath such contracts will also be exempt where the original two conditions are satisfied and the supply of the goods is directly related to the supply of services.
the exemption in s. 53c(5) operates to relieve a business from ensuring that any factor of the single price be as prominent as the single price. As an illustration, goods and services which satisfy the constituents of s53c(5) may be advertised showing the gst-exclusive factor of the price in big, prominent writing and the single, full price in smaller, less prominent writing.
the most superficial and obvious area where this exemption will utilise is in the publicity of mobile phone plans. These advertisements usually show a huge headline price for the mobile phone whether or not a particular plan is entered into and a single price of the plan over the life of the contract in much smaller and less prominent writing. S. 53c(5) means that this exercise may carry on.
the accc is capable to seek a swoop and range of civil remedies for a breach of the new s. 53c including injunctions, declarations, compensation, corrective publicity and non-punitive orders. Financial pains and penalties will not be available for a breach of s. 53c.
the cipa also makes it a criminal offence to fail to represent a single price. Beneath s. 75azf(1) it are going to be a criminal offence to “. . . Make a representation with attention and respect to an quantity that, whether or not remunerated, would constitute a portion of the consideration for the supply of goods or services”. Section 75azf is effectively identical to s,53c in all respects, with one major exception – the maximum criminal penalty for contravening s. 75azf is $1. 1 million for a corporation and $220,000 for somebody.
implications for business
the main implication of the cipa for businesses is that they’ll be exposed to legal activity, including potentially a criminal prosecution, for failing to specify a single price for their goods and services. With maximum criminal fines of $1. 1 million for a single instance of failing to represent the single price for goods or services, corporations ought to see to it that they take a smashing degree of care when making price representations in their publicity, including newspaper advertisements, promotional brochures, price lists, on their web-sites and even when offering prices verbally.
while it’s highly unlikely that the accc would decide to refer a brief to the commonwealth director of populace prosecutions for a breach of s. 75azf unless the business had engaged in very blatant manner and conduct or was a repeat offender, the fact that such sedate and severe criminal pains and penalties utilise to this type of manner and conduct is cause for concern. As an illustration, businesses could be exposed to liability beneath s. 75azf where they have inadvertently failed to represent a single price to a client because they had no idea that particular client was unincorporated. Furthermore, liability may depend on whether a particular good or service is in the right manner characterised as “ordinarily acquired for impertinent and personal, domestic or household use or consumption. “
an example of manner and conduct which would be subject to the cipa is the supply of a price list for office merchandise by a huge multinational office supply company to a huge accountancy cooperative relationship. It would appear that the representation of prices in this circumstance would be caught by the cipa because the goods are of a kind usually acquired for impertinent and personal, domestic or household use and the recipient of the price list is not integrated.
a farther implication for business arising from the cipa are going to be the want for businesses to potentially prepare both gst-inclusive and gst-exclusive price lists depending on the nature of the goods sold. Whether or not the business sells merchandise of a kind usually acquired for impertinent and personal, domestic or household use or consumption as well as commercial merchandise, it may need to prepare two dissimilar price lists. The want for dissimilar price lists may also arise where companies deal with both integrated and unincorporated business customers. It may be more prudent for such businesses to simply use gst-inclusive price lists for all their goods and services and customers to stay clear from any prospective troubles beneath the new s. 53c.
the cipa is likely to have a significant impact on the way businesses promote their goods and services. Unluckily, the cipa is unnecessarily manifold and complex and has failed to exclude a heap of business-to-business transactions from its latitude and scope. As a result, when preparing price advertisements and price lists. Businesses ought to consider cautiously both the nature of the merchandise they trade to determine whether they may be exempt, and the types of customers they are likely to reach with their publicity.
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