The ACCC will form a new 20-person team dedicated to tracking down and punishing companies who attempt to make false or misleading claims about the impact of the carbon price on their prices.
In the lead up to the Federal Government releasing its Draft Clean Energy Bill last week, Treasurer Wayne Swan announced that the Australian Competition and Consumer Commission (ACCC) would form a new 20-person team dedicated to tracking down and punishing companies who attempt to make false or misleading claims about the impact of the carbon price on their prices. The Government will provide the ACCC with an extra $12.8 million over four years to achieve this end.
Parallels can be drawn between the ACCC’s new role and its role during the rollout of the Goods and Services Tax in 2000. The Government made amendments to the (then) Trade Practices Act 1974 (Cth), which gave the ACCC specific powers to investigate and penalise any company that was charging a price that was unreasonably high when having regard only to the introduction of the GST. The ACCC was also given the power to investigate and penalise companies that were misleading or deceiving customers about the impact of the GST on their prices.
These amendments were accompanied by ACCC guidance that price adjustments should only reflect actual and not anticipated tax increases. The ACCC is expected to release similar carbon price-specific guidelines.
After the GST was introduced, the ACCC investigated several thousand cases, named and shamed companies that charged consumers too much, initiated a number of high profile court proceedings, and extracted enforceable undertakings to repay millions of dollars to customers who had been misled.
This time, the Government has not proposed to make any specific amendments to the Competition and Consumer Act 2010 (Cth) (CCA). The ACCC will have to rely on its existing ordinary powers under the Australian Consumer Law (ACL) to penalise companies that have engaged in misleading or deceptive conduct or made false or misleading representations.
Businesses shouldn’t underestimate the ACCC’s power to investigate and punish businesses under the new ACL.
The ACCC has the power to issue substantiation notices, requiring the recipient to justify claims regarding increased costs associated with the carbon price. Companies may face a penalty of $16,500 if they do not comply.
The ACCC can also issue infringement notices of up to $66,000 for a listed company, or $6,600 for an unlisted company, if the ACCC has reasonable grounds to believe that the company has made false or misleading representations about the price it needs to charge to offset carbon price costs. The ACCC issued 27 infringement notices to SingTel Optus in relation to advertisements for its “Max Cap” plans earlier this year. In May, SingTel Optus paid all 27 notices, a total penalty of $178,000 per contravention.
Penalties of up to $1.1 million may be imposed per contravention if a company makes false or misleading claims in respect of carbon–related price increases. Singtel Optus was penalised $5.26 million in July 2011 for 11 instances of misleading advertising of broadband internet plans. Given the zeal with which the ACCC approached GST enforcement, it is anticipated that the ACCC will investigate a large number of companies in relation to price increases implemented around the same time as carbon pricing. Whilst most companies will avoid prosecution, the companies investigated will be required to allocate significant resources to deal with the inquiries.
Businesses, from coal giants to retailers, are sure to experience increased costs as a result of the carbon price which they may then seek to pass on to customers and end-consumers. Whilst it is probably safest not to make any statement that prices have increased as a result of the carbon price, customer concerns may prevent that. If so, businesses could take the following precautions when attributing a price increase to the carbon price:
For further information, please email Glenn Taylor or contact by phone on +61 2 9210 6593.