The Australian Competition and Consumer Commission (ACCC) has recently been granted new enforcement powers, which make it easier for the regulator to penalise illegal advertising and pricing practices.
The ACCC has exercised one of its suite of new powers by issuing infringement notices against restaurants and cafes engaging in “component pricing” in breach of the Trade Practices Act 1974 (Cth) (TPA).
Component pricing is the practice of advertising only part of the price of a good or service, without also stating the total price payable (e.g. $50,000 plus on road costs). This practice was prohibited by the 2009 amendments to the TPA. The restaurants and cafes that were issued with infringement notices had failed to state a price for their menu items that was inclusive of weekend and holiday surcharges.
The ACCC’s ability to pursue businesses that offend the TPA’s consumer protection provisions has been enhanced by their ability to issue:
- substantiation notices requiring businesses to provide information and documents that support a claim or representation made by the business. A failure to respond to a substantiation notice may result in fines of up to $16,500 for corporations and $3,300 for individuals, and
- infringement notices where the ACCC has reasonable grounds to believe that a business has contravened certain consumer protection laws. The penalty payable under an infringement notice will vary, but will be $6,600 for corporations and $1,320 for individuals for most cases. If the penalty specified in the notice is not paid, proceedings may be issued against the business.
These new powers are intended to make the ACCC’s pursuit and prosecution of businesses that do not comply with TPA easier and more efficient. As the ACCC has and will continue to use these powers to target isolated and industry practices, it is important that businesses regularly conduct a “health check” of their TPA compliance.
In particular, it will now be easier for the ACCC to seek substantiation from businesses that regularly use comparative advertising and “was/now” savings claims as part of their marketing strategy. Many companies regularly make savings claims against the recommended retail prices (RRP) for their products. In franchising and independent dealer networks, the law prohibiting resale price maintenance means that the franchisor or manufacturer running the advertising campaign cannot always verify that its products have been routinely sold at the RRP. If the products have not been sold at the RRP, making savings claims against this price can amount to misleading and deceptive conduct in breach of s52 of the TPA. In this context, the ACCC may use a substantiation notice to require a business to evidence the fact that its network has sold a product at the RRP for a reasonable period prior to the relevant promotion.
For further information on component pricing, please click here.
For further information on the ACCC’s new enforcement powers, please click here.