ACCC issues guidelines on carbon price claims

The Australian Competition and Consumer Commission (ACCC) today released guidelines to ensure that businesses do not use the introduction of a carbon price as a convenient excuse for price rises.  The guidelines are intended to help businesses ensure that any claims they make about their pricing and the impacts of the carbon price scheme comply with the Australian Consumer Law (ACL), part of the Competition and Consumer Act 2010 (Cth) (CCA).

ACCC response

On 8 November 2011, the Federal Parliament passed new law to introduce a carbon price from 1 July 2012.  Details of the carbon price scheme and how it will operate were set out in our previous alert. 

Hot on its heels, the ACCC has released guidelines to ensure that businesses who make claims or provide explanations about price increases caused by the carbon price scheme continue to comply with the ACL.  While the guidelines deal mainly with businesses indirectly impacted by the change (by way of increased input costs), the principles apply equally to pricing claims made by businesses impacted directly by the scheme.

Interestingly, the ACCC has not been charged with a specific mandate in relation to carbon pricing claims, however it is championing its role as the national consumer protection agency to ensure carbon pricing claims do not mislead or deceive.  This is not unlike the role that the ACCC adopted in recent years in relation to green marketing and environmental claims. 

At a business breakfast last month, ACCC Chairman Rod Sims flagged carbon pricing claims as a “hot spot” that it will closely monitor in the coming year, with recent news reports suggesting that the ACCC has been given $12.8 million to play the role of “carbon cop”.

Summary of the guidelines

Businesses must ensure that any claim made that a price increase is due to the introduction of the carbon price:

• is truthful and accurate;
• does not mislead consumers (individuals and businesses);
• is based on reasonable grounds; and
• is capable of being substantiated.

Claims can be made in a broad range of circumstances, including publicly in television, radio or print advertising, on the internet, in a contract or correspondence, or in discussions or negotiations with another party.

Where a business makes a claim regarding price increases based on information provided by a third party, the ACCC places the onus on the business making the claim to satisfy itself that it is reasonable to rely on such information.  The question of reasonableness may require the business to take account of various factors including:

• the actual impact on the business (as opposed to the estimated impact, or average impact on businesses in that industry);
• whether the supplier is passing on the carbon price to the business; and
• the impact of any carbon rebates available to the business or its suppliers.

The ACCC heeds the same cautions in relation to use and reliance on carbon price calculators.

Finally, ACCC reminds businesses not to be tempted to discuss changes in pricing as a result of the carbon price scheme with competitors, as this may amount to an offence under the cartel provisions of the CCA.

The guidelines should come as no surprise to businesses, as they reflect the current position on complying with key provisions in the ACL.  It is also important to bear in mind that businesses are not generally required by law to justify a price rise, but that, where they do so, the fundamental principles set out above will apply.  As ACCC Chairman Rod Sims stated in his press release launching the guidelines:

“Business costs increase all the time, and businesses are free to set their own prices.  However, if a business chooses to raise their prices, they should not misrepresent this is as a result of the carbon price when it is not the case.”

Enforcement

The ACCC has a range of powers available to it under the ACL, and may ask businesses to substantiate any claims that they make in relation to carbon prices by way of an informal written request or by issuing a formal substantiation notice in relation to a representation.  Where the ACCC considers that a breach of the ACL has occurred, the ACCC may seek a range of remedies including financial penalties up to $1.1 million from a corporation for a false representation and correction notices.

Going forward