With the carbon tax repeal on the legislative agenda, the proceedings recently commenced against Actrol Parts Pty Ltd (Actrol) serve as an useful example where contraventions of Australian Consumer Law may arise from reasons given to consumers for changes to price that may be linked in some way to the carbon tax.
The Australian Competition and Consumer Commission (ACCC) has commenced proceedings against Actrol alleging the refrigerant gas wholesaler engaged in misleading and deceptive conduct and made false or misleading representations, contravening Australian Consumer Law. The conduct contravening Australian Consumer Law occurred prior to the introduction of the carbon tax when Actrol allegedly made misleading representations about the cause of its price increases to consumers.
Australian consumer law
The Australian Consumer Law, found in Schedule 2 of the Consumer and Competition Act 2010 (Cth) (CCA), provides in s 18(1) that:
A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or, is likely to mislead or deceive.
Further, under s29(1)(i) a person must not in trade or commerce in connection with the supply or possible supply, promotion or use of goods or services:
make false or misleading representations with respect to the price of the goods or services.
Actrol's alleged conduct
The ACCC has alleged that on 20 June 2012, Actrol sent a letter to its customers and posted on its website false or misleading representations that the price increases for some of its hydroflurocarbon (HFC) refrigerant gases were due to changes in input costs and general market conditions.
Further, the ACCC alleges that the letter impliedly made false or misleading representations that the price increases were due to:
- an increase in its costs of supplying those types of HFC refrigerant gas
- the introduction of the carbon tax.
Actrol's now parent company, Reece Australia Ltd, released a statement on 2 May 2014 to the ASX stating that the company was considering its position in respect of the proceedings. The ACCC alleges that Actrol stockpiled HFC gases ahead of the introduction of the carbon price to increase its margin and achieve a significant windfall. Significantly, it was Actrol's representations in relation to the cause of the changes of the prices that activated provisions of the Australian Consumer Law.
The ACCC's Chairman Rod Sims stated in its 30 April 2014 media release that the case was an example of the ACCC's increased scrutiny in relation to claims connected with the introduction of the carbon tax, and that the ACCC will be equally vigilant in monitoring the practice of businesses following the repeal of the carbon tax to ensure that consumers get the benefit of the repeal as quickly as possible.
The carbon tax
The carbon pricing scheme, or carbon tax, was introduced in Australia on 1 July 2012 under the Gillard Government through the Clean Energy Act 2011 (Cth) aimed at:
- giving effect to Australia's obligation under the Climate Change Convention and the Kyoto Protocol
- supporting the development of an effective global response to climate change
- reducing Australia's net greenhouse gas emissions in a cost-effective way
- putting a price on greenhouse gas emissions in a way which encourages investment in clean energy and supports economic growth and competitiveness in the economy.
However, in opposition, the Coalition pledged to abolish the carbon tax and the bill seeking repeal of the Clean Energy Act 2011 (Cth), the Clean Energy Legislation (Carbon Tax Repeal) Bill 2013 passed the House of Representatives on 21 November 2013 and is now before the Senate.
The Coalition has contended that electricity prices should drop immediately by at least nine percent while gas prices will go down by seven percent following the repeal. However, the refrigerants industry has sought special treatment stating that its prices could not decrease immediately due to imported gases already covered by the carbon tax needing to pass through the supply chain.
Role of the ACCC
On 24 February 2014, the Coalition issued a Direction to the ACCC, directing it to monitor electricity and gas prices in the lead up to the repeal of the carbon tax with effect from 1 March 2014 and expiring on 30 June 2015.
If and when the bill repealing the carbon tax passes, the ACCC will be vested with new powers including:
- price monitoring
- issuing infringement notices where it believes businesses have made false or misleading representations concerning the effect of the repeal on prices
- the ability to take action against businesses believed to be engaged in carbon tax related price exploitation by issuing written notices that specify the maximum amount that should be charged for the relevant supply.
These new powers will allow the ACCC to monitor prices and ensure consumers are not exploited for the supply of electricity and gas as a result of the repealed carbon tax. Businesses supplying any 'regulated goods' (electricity, gas, synthetic greenhouse gases or equipment that contains a synthetic greenhouse gas) for an unreasonably high price, may potentially face significant court-ordered pecuniary penalties.
Reminders for the energy sector
The proceedings brought against Actrol serve as a warning regarding actions the ACCC may bring once the carbon tax is repealed.
Energy entities will have to conduct appropriate price reviews following the repeal to ensure that they are complying with the new law.
Importantly energy businesses should be wary of any conduct or representations they make about the cause of changes to prices. It was, after all, the allegedly misleading causal link of price increases and the introduction of the carbon tax which has brought Actrol to the Federal Court.