On 29 April 2015, the Australian Competition and Consumer Commission (ACCC) issued its report to the Minister on its operations during the March 2015 quarter relating to the carbon tax price reduction obligation (the Report).

The ACCC has cleared airlines, retail electricity and natural gas suppliers and the construction industry of wrongdoing in relation to carbon price exploitation, but has outstanding queries with respect to synthetic greenhouse gas (SGG) suppliers and will continue to seek information from landfill operators in respect of excess funds received during the carbon tax period for anticipated future carbon tax liabilities.

Background

Following the repeal of the carbon tax, the federal government amended the Competition and Consumer Act 2010 Cth (the Act) to impose price reduction obligations on businesses. These amendments are found in Part V of the Act.

Broadly speaking, Part V prohibits entities from engaging in price exploitation in relation to the repeal of the carbon tax. Entities will engage in price exploitation if:

  1. the entity makes a regulated supply (being a supply during the period of 1 July 2014 to 30 June 2015 of natural gas, electricity, SGGs, SGG equipment or other goods specified by the Minister)
  2. the supply does not pass through all of the entity’s cost savings relating to the supply that are directly or indirectly attributable to the carbon tax repeal.[1]

Particular entities are exposed to substantial penalties in the event they fail to pass on cost savings. Contravention could land entities with penalties equal to an amount which is 250% of the cost savings that were not passed through.[2]

Division 4 of Part V also prohibits entities, in trade or commerce and in connection with:

  • the supply or possible supply of goods or services, or
  • the promotion by any means of the supply or use of goods or services

from making false or misleading representations during the carbon tax repeal transition period (being the period starting on 1 July 2014 and ending on 30 June 2015), concerning the effect of:

  • the carbon tax repeal or a part of the carbon tax repeal, or
  • the carbon tax scheme or a part of the carbon tax scheme.[3]

The general provisions under sections 18 and 29 of the Australian Consumer Law (contained in Schedule 2 of the Act) (ACL) which prohibits misleading and deceptive conduct and the making of false or misleading misrepresentations may also capture such conduct.

The ACCC is entitled under Part V of the Act to monitor prices in relation to the carbon tax repeal. It also has information gathering powers and the power to issue infringement notices. The Court can also order pecuniary penalties it considers appropriate against contravening businesses.

The ACCC is required to report to the Minister within 28 days after the end of each quarter on its operations in relation to the carbon tax price reduction obligation.[4] The Report is the ACCC’s most current report under this provision. The July 2015 report will be the final report the ACCC is required to provide the Minister.

The March 2015 Report

In the Report the ACCC focused on the impact of the carbon tax repeal in the following industries:

  • retail electricity
  • natural gas
  • construction material manufacturing
  • domestic passenger air transport services
  • SGGs
  • landfill.

The ACCC concluded, amongst other things, that:

  • it was satisfied that all carbon cost savings had been returned in the electricity and natural gas sectors with the exception of one small retailer
  • it was satisfied that, where carbon-tax related price increases were made, there was no information available to indicate that any liable entities in the construction material manufacturing sector were continuing to charge prices which include carbon tax components
  • it completed its assessment of the representations made by Virgin and Qantas about the effect of the carbon tax repeal on airfares and the ACCC did not propose any further action.

With respect to landfill, the Report noted that the Department of Environment had prepared a draft report suggesting methods for the use of funds received by landfill operators in respect of a carbon tax component included in their 2014/15 gate fees. The ACCC considered that the approach prepared by the Department of Environment was appropriate, and confirmed that it will continue to seek information from landfill operators confirming their decisions regarding the excess funds.

With respect to SGGs, the ACCC stated in its Report that it did have some outstanding issues to be resolved with respect to bulk SGG suppliers and SGG equipment suppliers. The ACCC issued notices using its information-gathering powers under the Act[5] to confirm the effect of the carbon tax repeal on the price of SGGs to those entities who did not respond to the ACCC’s queries in a timely manner. The ACCC anticipates reporting any additional findings in its July report.

The Report also notes that no enforcement action was undertaken in the March 2015 quarter and that complaints declined steadily since the December 2014 quarter (and are lower than the number of complaints received in the March 2013 quarter following the introduction of the carbon tax).

Actrol

The Report follows the ACCC’s proceedings against SGG supplier Actrol Parts Pty Ltd (Actrol) in the Australian Federal Court. In a judgment handed down by the Federal Court on 2 April 2015[6], Actrol was ordered to pay a fine of $520,000 in respect of statements it had made about the effect of the carbon price.

Actrol had issued letters to approximately 8,000 of its customers, and had posted a notice on its website, stating that significant price increases were due to the carbon tax.

The ACCC asserted that the letter mislead Actrol’s customers about the impact of the carbon tax on the price of hydrofluorocarbon (HFC) refrigerant gas and that Actrol’s price increases were not introduced to cover the cost of the carbon tax, but were actually intended to increase its margins and take into account increased supply costs.

The Federal Court declared that Actrol had made false or misleading representations with respect to the price of such HFC refrigerants and had engaged in conduct that was misleading, deceptive or likely to mislead or deceive.

In addition to paying the $520,000 fine, the Federal Court also ordered Actrol to:

  • send a letter to each of the recipients of the first letter informing them of the outcome of the proceedings and to publish a corrective notice on its website and in The Australian newspaper
  • to implement a competition and consumer compliance program
  • to refrain from engaging in similar conduct for three years
  • to contribute $50,000 towards the ACCC’s costs.