Consumer

Fairer Pricing Laws

^{Graeme Samuel | AUGUST 2009}

When perusing an advertisement for a new car or a holiday package, most people know the price doesn’t include the fees and taxes. Recent changes should make prices more transparent.

Comparing prices is hard when the price on the sign is not actually the total price. The main offenders are cars and holidays – but now new changes to Australia’s pricing laws should make it easier than ever to compare prices.

The changes to the Trade Practices Act, which came into force at the end of May, are designed to do away with confusing component pricing that fails to show the total price you will need to pay for a particular product or service.

Component prices have most commonly been used to sell expensive items that have various charges attached, for example an airfare that is advertised for $30, but may carry a further $70 in government taxes, airport charges and so on.

But before you can take full advantage of the change, it’s important to understand how advertising will be affected and the exemptions that apply.

Under the changes, businesses will still be allowed to advertise the component price, but they will now also be required to display prominently the total, all-inclusive price.

This should make it much easier to compare similar products or packages, and therefore choose the one that represents the best value.

While the legislation applies to all goods and services now on sale in Australia, there are several areas where the change is likely to have the biggest impact.

Car dealers around Australia are looking at how they can make sure their advertising now complies with the changes. The days of “plus on-road costs” should now be a thing of the past and as a buyer you will be well within your rights to expect to see the price you will pay to drive the vehicle off the lot.

However, dealers are only required to advertise the price for the base model. Optional extras, upgrades or better models will still cost more.

Keep in mind that as before, the base price doesn’t necessarily mean it is the best possible price. Buyers are still able to negotiate a deal when purchasing a car.

Likewise, the travel industry has also been told it will have to consider whether its advertising meets the new requirements. As well as taxes and charges levied on flights, one of the most confusing areas for holiday makers has been trying to compare various package tours.

Take for example a seven-day winter escape package at a five-star resort. If the deal is promoted as including airfares, accommodation and transfers, then all those components have to be included in the advertised single price. If a condition of the deal is that you are also required to pay for a certain number of meals at the hotel, at a known minimum cost, then that cost also has to be included.

When buying furniture or large electrical goods, you should now be able to find the total price for packages that may previously have been advertised in parts, for example “six easy payments of $299.95”. That offer would now have to also include a prominently displayed total price of $1799.70.

While the store cannot hit you with surprise charges or taxes such as warehousing or sales commissions at the last minute, one important exception to the new law is that delivery charges do not have to be included in the advertised single price, so they may need to be calculated separately.

There are times when fees or charges can fluctuate or it may not be possible for the final price to be advertised. In these cases, the single price must include all components that can be easily calculated while also clearly noting any additional variable costs that also apply.

Another area treated differently under the new law is the cost of services provided under a contract that requires regular periodic payments, and any goods related to that contract – for example, a mobile phone plan. In that case, the minimum total cost of the contract must be shown in a prominent way, but it does not need to be more prominent than any of the components shown.

The new requirement for any advertisement using component pricing that also shows the single total price should make life a lot easier for shoppers. Once understood, the changes should help you compare major purchases more easily, while preventing businesses from hiding a range of extra costs from their customers.

If you come across advertising you think may not comply with the new requirements, the first step should be to take it up with the retailer. There are some exceptions to the single price requirement, so ask the retailer if the price shown is the total, all-inclusive price, and if it isn't, ask why not. If they aren't aware of their obligations, advise them to contact the ACCC for information.

If you are still concerned that the business is not meeting its obligations, you can also pass on your concerns to the ACCC's Infocentre on 1300 302 502 or through the webpage www.accc.gov.au.