New laws aimed at increasing price transparency for online shoppers commence on 26 October 2019. Is your business ready?
The Treasury Laws Amendment (Australian Consumer Law Review) Bill 2018 (Bill) gives effect to certain recommendations of the Australian Consumer Law Review Final Report (CAANZ Report) by amending the Competition and Consumer Act 2010 (CCA) and the Australian Securities and Investments Commission Act 2001. The Bill received Royal Assent on 25 October 2018 and commenced the following day, on 26 October 2018.
One of the amendments to the CCA aims to increase price transparency by requiring that additional fees or charges associated with pre-selected options are included in the headline price. This article discusses the effect of that amendment.
The current law
Under the Australian Consumer Lawi, the price for the supply (or promotion of the supply) of a good or service of a kind ordinarily acquired for personal, domestic or household use or consumption, must be displayed in a prominent way and must include all charges payable by a person for that supplyii (single price). There are certain exceptions to this requirement, including where charges are optional.
The ability to leave out optional charges from the single price arises from the former section 48(7)(a) of the Australian Consumer Law which provides that the single price must include “a charge of any description payable to the person making the representation by another person (other than a charge that is payable at the option of the other person)”.
The classic example is where an airline ticket is purchased online. The single price of the airline ticket may be displayed as $500 while the optional charges such as seat booking fees or additional baggage are not required to be displayed in this single price because they are optional. The Explanatory Memorandum accompanying the Bill (EM) provides the following example:
Alex is looking for an airline ticket.
He finds a ticket advertised by Viagem Airlines for $500. However, Viagem Airlines pre-selects an option for carbon offsetting, priced at $5.
As soon as Alex clicks through to the Viagem Airlines website the ticket that he thought was $500 becomes $505.
By the use of the words “As soon as Alex clicks through to the Viagem Airlines website” in the example, it can be inferred that the conduct in question involves the promotion of the airline ticket on a third party platform, such as on social media, a travel aggregator website or a travel agency’s website. The concern is that the initial single price represented to the consumer did not include the price of the optional extras, yet the optional extras are already pre-selected as part of the online purchasing process and the consumer is required to actively de-select the extras (for example, by unticking a box), otherwise the consumer will be charged for the optional extras.
The CAANZ Report describes this practice as “drip pricing” because fees are incrementally revealed over the course of a booking or payment process, and refers to stakeholder feedback suggesting that it causes issues for consumers who are time-poor, unfamiliar with online payment processes, have vision impairments or are from culturally or linguistically diverse backgrounds.
The new law
The Bill, amongst other things, repeals section 48(7)(a) of the Australian Consumer Law and provides that the single price represented to the consumer must include all pre-selected optional charges. If the consumer de-selects an optional extra, the single price can then be decreased accordingly. Alternatively the business can choose not to pre-select any optional extras and leave it to the consumer to decide whether to select them. If the consumer selects the optional extra then the single price can be increased accordingly (new law).
Using the above example, the EM explains the effect of the new law as follows:
…The ticket is priced at $505. This includes a carbon offset of $5 which has been pre-selected by the airline.
He clicks through to the Viagem Airlines’ website. This time the price remains $505 as the price for the carbon offset is included in the advertised price.
When buying the ticket, Alex de-selects the carbon offset. The price is reduced to $500, which is the amount Alex pays for the ticket.
If a business does not wish to increase the single price displayed by the amount of the pre-selected optional extras, it can instead refrain from pre-selecting the optional extras.
The new law commences one year after the commencement of the Bill, being 26 October 2019.
Who does the new law affect?
While airline bookings are the obvious example, there are many goods and services which may be sold with pre-selected optional extras. For example, accommodation may be sold with pre-selected breakfast or late checkout options, concert tickets may be sold with pre-selected insurance, electronic goods may be sold with pre-selected extended warranties and a range of goods and services may be sold with pre-selected charitable donations or payments aimed to offset the environmental impact of the goods and services.
All businesses selling online or otherwise making price representations about the goods and services of other businesses are recommended to review their price display practices in preparation for the commencement of the new law. Aggregator businesses (for example, ecommerce platforms which aggregate travel services or financial services) and other advertising businesses will need to conduct due diligence on the pricing practices of the businesses that they advertise, otherwise they are also at risk of contravening the new law.
Although the new law does not commence until a year from now, businesses have an overarching obligation not to mislead or deceive in trade and commerce. Even in the absence of the new law, certain pricing communications may attract scrutiny. For example, several airlines worked with the ACCC in 2016 to cease using pre-selected options during the booking processiii.
This article was written by Teresa Torcasio, Partner and Marian Ngo, Senior Associate.
i Schedule 2 of the CCA.
ii Section 48(1) of the Australian Consumer Law.
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Important Disclaimer: The material contained in this publication is of a general nature only and is based on the law as of the date of publication. It is not, nor is intended to be legal advice. If you wish to take any action based on the content of this publication we recommend that you seek professional advice.