Are you ready for the new component pricing laws?

May 27, 09 | 1:53 am

New provisions in the Australian Trade Practices Act 1974 restricting the use of component pricing come into effect on 25 May 2009. Component pricing is when a business represents the cost of its goods or services as being the sum of component parts - for example "$X per month" or "$Y plus fees and charges".

If your business uses component pricing to promote its goods and services, then from 25 May 2009 you must also provide consumers with a prominent single total price for the goods and services.  This requirement applies to all advertising - catalogues, websites and other advertising, as well as point of sale promotion in store.

Prominent single price requirement

From 25 May 2009, businesses will be prohibited from using component pricing when advertising the price of goods or services unless they also specify in a prominent way the single price that the consumer must pay to purchase the goods or services.

What is the "single price"?

The single price is the total minimum price the consumer must pay that is able to be calculated at the time the price representation is made, inclusive of all fees, taxes and charges.  However, the single price does not need to include:

• delivery charges - provided that the minimum amount of any compulsory delivery charge is specified;

• non-quantifiable components - although any additional non-quantifiable charges should be brought to the consumer's attention; and

• optional charges - namely, any optional extras that the consumer may choose to acquire.

What is in a "prominent way"?

With exception of certain services contracts (discussed below), the single price must be stated at least as prominently as the most prominent component.

In a recent publication, the Australian Competition and Consumer Commission has also said that a prominent single price is one that:

• stands out so that it is easily seen by a consumer; and

• is clear, eye-catching and noticeable.

Periodic payments under services contracts

The new component pricing provisions also apply to contracts for the supply of services that provide for periodic payments over the term of the contract, such as mobile phone contracts.  However, for these contracts, whilst the single price must be stated prominently, it does not need to be as prominent as any other component. 

This means, for example, that if a business offers consumers mobile services for $30 per month under a 24 month contract, the total minimum price payable by the consumer ($720) needs to be stated prominently but this total price does not need to be as prominent as the monthly charge. 

Business-to-business transactions

The single price requirement does not apply if the price representation is made exclusively to another business.  However, where price representations are made to both consumers and corporations, a single price will still need to be stated.

Consequences of non-compliance

There are parallel civil and criminal provisions implementing the new component pricing requirements.  This means that failure to comply with the new provisions will expose businesses to potential fines of up to $1.1 million for companies and $220,000 for individuals, in addition to civil remedies such as injunctions, declarations and damages.


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