Bills Digest no. 138 2012–13
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WARNING: This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments. This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.
Paula Pyburne
Law and Bills Digest Section
13 June 2013
Contents
Purpose of the Bill
Background
Exposure Draft
Committee consideration
Statement of Compatibility with Human Rights
Position of major interest groups
Financial implications
Key issues and provisions
Concluding comments
Date introduced: 29 May 2013
House: House of Representatives
Portfolio: Treasury
Commencement: On the day after Royal Assent
Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill's home page, or through http://www.aph.gov.au/Parliamentary_Business/Bills_Legislation. When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the ComLaw website at http://www.comlaw.gov.au/.
The purpose of the Competition and Consumer Amendment Bill 2013 (the Bill) is to amend the component pricing provision of the Competition and Consumer Act 2010 (CCA)[1] to insert a regulation making power.
Component pricing occurs when a trader advertises a price in its component parts, rather than as a single all-inclusive figure.[2] The Trade Practices Amendment (Clarity in Pricing) Act 2008 amended the Trade Practices Act 1974 (now known as the CCA) to require businesses to provide a single total price in any representation to consumers, rather than a price which is based on component parts.[3] Speaking in relation to the originating Bill, the then Minister for Competition Policy and Consumer Affairs, Chris Bowen, is reported to have stated:
It is not appropriate that additional compulsory fees and charges are disclosed in fine print disclaimers, particularly when those additional compulsory charges may be significantly larger than the component price that is highlighted.
The Australian Competition and Consumer Commission received 430 complaints over confusing component pricing last year. Many other consumers were probably misled, but had not complained to a regulator.[4]
At the time that the amending Bill was introduced, the motor vehicle industry, the airline industry and the rental car industry were singled out for particular criticism.[5] This involved, for example:
- the advertising of new and used motor vehicles which failed to include the additional on-road costs and dealer charges
- advertising of ‘cheap’ air fares where various additional fees and charges included in fine print disclaimers could be greater than the price of the airfare highlighted to consumers and
- advertising of rental car charges which did not include the additional fees and charges which consumers discovered on collecting their vehicle.
The amendments came into force in May 2009 and were transferred into the Australian Consumer Law when it was created as Schedule 2 to the CCA with effect from 1 January 2011.[6]
The regulator, the Australian Competition and Consumer Commission (ACCC) allowed an amnesty period of 13 months from the date that the laws came into effect. That amnesty ended on 1 July 2010. At that time, the ACCC was reported as being dissatisfied with restaurants ‘flouting the law on public holiday surcharges’ stating that the law required ‘restauranteurs to advertise surcharges more clearly’.[7] It was further reported that the ACCC was ‘dispatching mystery diners to check compliance’ with the laws.[8]
According to ACCC Chairman, Graeme Samuel, ‘businesses could set out a separate pricing column on their menus or provide separate menus on days where a surcharge might apply, such as Sundays and public holidays’.[9]
Subsequently the Federal Court ordered two restaurants to pay a penalty of $13 200 each for breaching the all-inclusive pricing law on their menus. The orders were made by consent after the ACCC took action alleging that the menus in those restaurants failed to tell customers the full price they would pay on a Sunday or a public holiday, relying instead on a qualification indicating the application of a percentage surcharge.[10]
However, the Productivity Commission released a report in October 2010 in which it recommended that ‘unnecessary regulatory burdens in the hospitality and tourism sector’ should be addressed by exempting Sunday and public holiday menu surcharges from the amendments to the Trade Practices Act dealing with component pricing.[11]
The Productivity Commission acknowledged that the purpose of the component pricing provisions was ‘to ensure that consumers were aware of the actual price that was to be paid for a good or service and were not misled by advertisements that only covered part or a component of the price’.[12]
However, the Productivity Commission took into account the submissions of stakeholders that the ‘amendments have impacted on restaurants by imposing extra costs in regard to their menus’ because previously, ‘restaurant menus could indicate that there was a percentage surcharge on Sundays and/or public holidays’.[13] As a result restaurant businesses had to print and distribute a different menu for these days or show two or more lists of prices on the same menu.
In particular, the Australian Hotels Association requested that the ACCC be given the ability to exempt restaurants from the clarity of pricing requirements ‘where it could be demonstrated that the costs to business outweighed the benefit to the customer’.[14] This request was based on their view that ‘customers in food and beverage areas are fully able to understand the price they were to be charged provided any surcharges are presented in a clear and unambiguous manner’.[15]
Other submitters to the Productivity Commission supported the removal of these surcharges from the scope of clarity in pricing provisions as ‘doing so would reduce the costs placed on restaurants and cafés without any significant impact on consumers’.[16]
The Productivity Commission recommended:
The Australian Government should amend the Trade Practices Act 1974 to have restaurant and café menu surcharges for specific days placed outside the scope of the component pricing provisions of that legislation.[17]
The aim of this Bill is to give effect to the Australian Government's response to this recommendation of the Productivity Commission by inserting a regulation making power into the clarity in pricing provisions in the CCA. According to the Explanatory Memorandum:
The regulations-making power will allow a regulation to be made to prescribe that restaurant and café menu surcharges for specific days are placed outside of the component pricing requirement if conditions relating to disclosure, prominence and transparency are satisfied.[18]
On 5 December 2012, the Assistant Treasurer, David Bradbury, released Exposure Drafts of the Commonwealth's proposed amendments to the component pricing requirements in the Australian Consumer Law for restaurant and cafés.[19] The terms of the Exposure Draft are equivalent to the terms in this Bill.
At the same time that the proposed amendments to the CCA were published for comment, an Exposure Draft of the proposed amendments to the Competition and Consumers Regulations 2010 was also published.[20]
At the time of writing this Bills Digest the Bill had not been referred to Committee for inquiry and report.
At the time of writing this Bills Digest, the Senate Standing Committee for the Scrutiny of Bills had not published any comments in relation to the Bill.
At the time of writing this Bills Digest, the Parliamentary Joint Committee on Human Rights had not published any comments in relation to the Bill.
As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011, the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act.[21] The Government considers that the Bill is compatible.
As noted above, this Bill reflects the recommendation of the Productivity Commission. That recommendation was based on evidence from stakeholders in the tourism and hospitality sector that the clarity in pricing provisions had resulted in increased costs for business with no significant benefit for consumers.[22]
There were nine submissions to the Treasury in respect of the Exposure Draft of the legislation. For the most part, these submissions were from industry groups which supported the proposal.
However the submission from the Consumer Law Action Group was not supportive of the proposal. The argument by the Consumer Law Action Group is that:
The Federal Government is creating a precedent in exempting cafes and restaurants from single pricing, which in future may pave the way for other businesses to seek to exempt themselves from the single pricing requirements. Through providing in the Act that a category of business can be exempted from single pricing if a regulation is made through the Competition and Consumer Regulations 2010 (Cth), the government is creating a mechanism to allow further exemptions to be created in future.[23]
The basis for this concern lies in the content of the Intergovernmental Agreement for the National Consumer Law (IGA) which was entered into by the Council of Australian Governments (COAG) on 2 July 2009.[24] The IGA sets out the procedures to be followed by all the parties to implement the Australian Consumer Law and provides in particular that ‘except as agreed by the Parties, a Party will not submit a Bill to its legislature which would be inconsistent with, or alter the effect of, the Australian Consumer Law.[25]
In addition, the IGA outlines a process for amending the Australian Consumer Law, including that an amendment must receive support from the Commonwealth and at least four other members (at least three states).[26] According to the Consumer Law Action Group, ‘it does not appear that this requirement extends to regulations being made’ under the Australian Consumer Law.
We do not believe that this is the intent of the Commonwealth and States and Territories. We strongly argue that the proposed provisions should be redrafted to ensure that agreement with the states and territories is required before any further representations or industries are exempted by regulations.[27]
The Queensland Consumer Association indicated its agreement with the concerns raised by the Consumer Law Action Group as well as two additional concerns. First, that the case for exemption was not supported by convincing information about the cost implications for restaurants and cafés of the current requirements. Second, that there was insufficient recognition of the importance to consumers of access to easily understood and visible information about the total price.[28]
According to the Explanatory Memorandum, the financial impact of the Bill is ‘nil’.[29]
Clause 48 of Schedule 2 to the CCA[30] contains the general prohibition that if businesses choose to advertise a part of the price of a particular product or service, they must also provide a single figure that reflects the total price to be paid.
Item 1 of the Bill inserts proposed subclause 48(4) into Schedule 2 to the CCA to exempt those representations which are in a class of representations prescribed by regulations—as long as any conditions which have been prescribed by regulations in relation to the representation have been complied with.
It would appear that that the process for amending the Australian Consumer Law as set out in the IGA has been followed in this instance. According to the Member for Dunkley, Bruce Billson:
The government … had to go through quite a process to get multiple jurisdictions to sign up to a change. I think three states and the Commonwealth need to agree to that, and that level of agreement has been secured by the Assistant Treasurer.[31]
However, the concerns expressed by the Consumer Law Action Group and the Queensland Consumer Association in relation to the breadth of the regulation making power are valid.
The general drafting of the provision, ‘the representation is in a class of representations prescribed by the regulations’ could allow any class of representations to be prescribed by the regulations. At present the proposed regulation deals directly with the issue in question. However, this may not be the case in the future and as a result of any changes being included in the regulations, the IGA process does not apply.
That said, any regulation which is made under proposed subclause 48(4) of Schedule 2 to the CCA, must be tabled in each House within six sitting days following registration on the Federal Register of Legislative Instruments.[32] Unless laid before each House within this time limit, the regulation will cease to have effect.[33] As the regulation is a disallowable instrument, a Senator or Member of the House of Representatives may move a motion of disallowance within 15 sitting days of the day that the regulation is tabled. The motion to disallow must be resolved or withdrawn within a further 15 sitting days of the day that the notice of motion is given. However, it should be noted that if there is no notice of motion to disallow the regulation, then there is no debate about its contents.[34]
This Bill gives effect to a recommendation of the Productivity Commission in relation to reducing regulatory burdens on business. It will be welcomed by stakeholders in the tourism and hospitality sector.
Members, Senators and Parliamentary staff can obtain further information from the Parliamentary Library on (02) 6277 2500.
[6]. P Pyburne, Trade Practices Amendment (Australian Consumer Law) Bill 2009, Bills Digest, no. 19, 2009–10, Parliamentary Library, Canberra, 2009, viewed 3 June 2013, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22legislation%2Fbillsdgs%2F0UFU6%22 and P Pyburne, Trade Practices Amendment (Australian Consumer Law) Bill (No. 2) 2010, Bills Digest, no. 187,
2009–2010, Parliamentary Library, Canberra, 2010, viewed 3 June 2013, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22legislation%2Fbillsdgs%2FYW2X6%22
[9]. L Bicknell, ‘Watchdog to act over surcharges’, op. cit.
[17]. Ibid., recommendation 3.3, p. xxx.
[21]. The Statement of Compatibility with Human Rights can be found at page 7 of the Explanatory Memorandum to the Bill.
[22]. Productivity Commission, Annual review of regulatory burdens on business: business and consumer services, op. cit., pp. 105–106.
[26]. Council of Australian Governments, Intergovernmental agreement for the Australian consumer law, op. cit., clause 19.
[27]. Consumer Law Action Group, Submission to Treasury, Exposure Draft of the Competition and Consumer Amendment Bill 2013, op. cit.
[29]. Explanatory Memorandum, Competition and Consumer Amendment Bill 2013, op. cit., p. 7.
[30]. Schedule 2 of the CCA is the Australian Consumer Law.
[34]. Section 42 of the Legislative Instruments Act 2003.
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