Updated 14th May 2009 Component Pricing.
14th May 2009Discussions with the ACCC have provided valuable clarity on the issue of Component Pricing and the changes due on 25th May 2009. Following on from this discussion, we note the information provided on 18 March does not reflect the ACCCs views in relation to the new law.
The changes in May are significant and the ACCC has now finalised its Pricing manual for the motor vehicle industry.
Copies of this publication are now available to industry and through the ACCC website.
To assist you in understanding the component pricing rules that will apply from that date, the key principles are set out below. Of course you should however seek your own legal advice as to how the new rules will apply to your business.
What is component pricing?
Component pricing is where a business represents the cost of a good or service to consumers in, or as the sum of, multiple component parts. Where no total figure or sum is given, consumers may be misled into thinking that a product or service is being offered at a lower price than what it actually is.
The rules for component pricing, as contained in section 53C of the Trade Practices Act (the Act), will change from 25 May 2009. From that date, if you choose to use component pricing in advertisements, you must also provide consumers with a prominent single (total) price for goods or services - as it is able to be quantified at the time you make a price representation. This price must also be stated in a prominent way, and be at least as prominent as the most prominent component.
What does 'prominent way' mean?
A prominent single price is one that:
- is clear, eye-catching and very noticeable.
You should consider factors such as the size, placement,colour and font of the price, as compared to the background of the advertisement - and relative to the medium you are using.
What is the single price & how do I calculate it?
The single price means the minimum total cost that is able to be quantified (or calculated) at the time of making the representation in order for a consumer to purchase (and later use) the Good or Service. An amount is quantifiable if it can be readily converted into a dollar amount. If it is subject to variation you are to calculate it based on information available at that time and clearly advise consumers that it may be subject to change. Each of the components should then be totaled. However, by law, there are certain components you are required to include, and others that are excluded, or you may chose to exclude.
Components you are required to include are:
- Tax, duty, fee, levy or charge where this amount is imposed on your business or it is payable by your business and would otherwise (by law) have been imposed on the consumer in the supply of the vehicle.
Components you do not need to include are:
- Sending charges charges for sending or delivering goods need to be specified, or you may choose to include them in the total price
- Any components which are not quantifiable
- Amounts your business pays to third parties that are not passed on to the consumer.
The exceptions to this component pricing rule are where you make a representation exclusively to a body corporate or where services are supplied under contract (for a term) that also provides for periodic payments. In these circumstances a single price should still be given, but does not need to be as prominent as any component.
Press Release: ACCC & Changes to Pricing for the Australian Motor Vehicle Industry