Carbon price claims
Under the Competition and Consumer Act 2010, you must not make false, misleading or deceptive claims about the price of goods and services. This includes false, misleading or deceptive claims linking price rises to the carbon price.
A carbon price commenced in Australia on 1 July 2012. The carbon price applies to certain greenhouse emissions, with some large businesses being required to purchase carbon credits against their emissions. For more information about the carbon price contact the Clean Energy Regulator on 1300 553 542.
The ACCC’s role is to:
- inform and educate businesses about their responsibilities under the Competition and Consumer Act 2010 (the Act) when making carbon price claims, including by providing guidance
- raise awareness amongst consumers about their rights under the Act
- investigate and, where appropriate, take action against businesses who engage in practices that contravene the Act, including misleading claims if a business falsely links a price rise with the carbon price.
Some of the ACCC’s powers include:
- requiring a business to provide information and documents that respond to a substantiation notice
- issuing infringement notices where it considers a claim is false or misleading
- taking legal action against a business for breaches of the Australian Consumer Law (ACL)
- seeking court-imposed penalties of up to $1.1 million for serious breaches of the ACL or injunctions to stop a business from making certain claims.
For more information about the ACCC’s enforcement powers see the Compliance and Enforcement Policy.
As a business, you are entitled to increase your prices as you see fit – it is business as usual. But like any other claim you make, if you choose to make a claim about the impact of the carbon price or why a price has increased, this claim should be truthful and have a reasonable basis. This includes falsely raising prices attributed to the carbon price in anticipation of a potential price drop following the proposed carbon tax repeal.
Be aware if you make a claim, the ACCC may ask you to provide information in support of your claims.
The information you should have regard to before making a claim about the impact of the carbon price will depend on the type of claim made. Before making a claim, you need to be confident that any price increase linked with the carbon price applies to your own business. This includes claims about percentage price increases, and increases within a price range.
It may not be practical or possible in all cases to separate out a precise increase in cost due to a particular factor, such as the carbon price. In these circumstances, you will need to carefully consider whether to make a carbon price claim.
Information you should consider before making a claim includes:
- invoices showing the impact of the carbon price on your supply chain or business input costs (eg. raw materials, packaging and transport)
- notices/invoices showing the impact of the carbon price on the cost of services (eg. gas, electricity, waste disposal and travel)
- information from your industry association and the government. This may provide guidance as to likely price impacts as a result of the carbon price in certain industries. Information dealing with your specific business model is more likely to reflect your particular costs.
- Think twice – make sure you are confident about the price impact on your own business. Consider the overall impression created by information you offer about the carbon price impact, and how your customers might interpret this.
When relying on information from other sources to make your own claim or representation about a carbon price increase, you should assess whether it is reasonable to rely on the information. Ask:
how has the carbon price impact and flow-on price increase been calculated?
have factors unrelated to the carbon price contributed to the price increase?
do my invoices show that price increases in my supply chain or business input costs are related to the carbon price, or do they show increases are related to other factors?
what do calculations from an appropriate business calculator (that considers increased costs relevant to your particular business or industry) say? Does the calculator note whether these costs are due to the equivalent carbon price or other factors?
Consider the impact of the equivalent carbon price on your own business and ask questions before relying on third-party information. Before making a carbon price claim to your own customers relying on information from your suppliers, seek further information from your supplier or wholesaler about any price rises linked to the carbon price. Remember, if your supplier has not attributed a price rise to the carbon price, then your business cannot assume that the carbon price is the cause of the price rise.
Before making your own claim, consider information and guidance from a variety of sources – including your industry association, the government and your professional advisors. Industry associations play an important role in providing members with advice about the impact of the carbon price, and your business advisors will often be in a position to provide you with advice that considers the specific circumstances of your own business. Consider information and guidance that best reflects your own business circumstances.
Bear in mind that general information from broader sources, such as newspaper reports, may not be sufficient to support your claim.
Businesses need to avoid making claims or representations about price increases based on assumptions that the carbon price is the primary or sole cause of increases to their own costs of supply. Claims or representations need to be truthful and have a reasonable basis.
Businesses are generally free to set their own prices – but if you choose to make a claim about the impact of the carbon price on your price rises, you have an obligation not to mislead your customers about the source of the price rise.
Like any claim made by a business, representations about the impact of the carbon price – including those made by your suppliers – must be truthful and have a reasonable basis. Suppliers are not generally required to move their own prices at particular times – some may wait until key dates to adjust prices. And some suppliers may opt not to make a claim or representation about the reasons for their price rises.
Industry associations have an important role to play in providing information to their members about the impact of the carbon price.
More information is available in the ACCC Business Snapshot - Carbon price claims: Guidance for industry associations.
As a business, you may consider information from a range of sources when determining the impact of the carbon price on your costs, and ultimately your prices.
If you intend to rely on information from third party sources when making claims about the carbon price to your customers, you need to assess whether you have a reasonable basis for relying on the information.
When relying on third party information to make a claim, you should consider:
- any explanation the third party has provided about the price impact of the carbon price
- whether the third party’s calculations reflect the cost of inputs into their own business – if they are being used to calculate a carbon price
- whether any price increases are consistent with the carbon price impact as predicted by other sources such as government, their industry association or other professional advisers
- if there are other factors (unrelated to the impacts of the carbon price) that have contributed to the price increase.
Advertising agencies or businesses providing marketing services must take particular care when working with clients and media operators to formulate marketing strategies and activities, as you may be held responsible for any breaches of the ACL. This responsibility also applies to representations or claims about the carbon price.
Employees or agents making carbon price claims
If you engage an agent on your behalf to make a claim about the carbon price in promoting your goods and services, you need to ensure that your agent does not overstate or otherwise misrepresent the impact of the carbon price.
Remember you may also be liable if your agent breaks the law.
You may also be responsible for claims about the impact of the carbon price made by your employees – even if you did not instruct them to make a claim on your behalf. This means you should take care to train your employees and supervise their activities to ensure any claims made are truthful and have a reasonable basis.
Your business is responsible for verbal claims about the impact of the carbon price, as well as written claims. If your business is considering making a carbon price claim, you might look to a range of information before making the claim – to ensure it is truthful and has a reasonable basis.
Your suppliers might choose to make verbal or written claims to you about the impact of the carbon price on their own prices. Alternatively, they may opt not to make a claim at all.
When dealing with your suppliers and considering whether you have a reasonable basis to make your own claim, bear in mind the information you should have regard to will depend on the type of claim your business makes.
Businesses must not make misleading or deceptive claims about prices. This includes claims about the carbon price’s impact on refrigerant gases.
Refrigerant gases in air conditioning and refrigeration equipment may contain synthetic greenhouse gases. From 1 July 2012, an ‘equivalent carbon price’ applies to certain synthetic greenhouse gases.
Certain synthetic greenhouse gases, including some refrigerants, are subject to an equivalent carbon price levy at the time of import under the Ozone Protection and Synthetic Greenhouse Gas Management Act 1989.
To determine the equivalent carbon price that applies to specific synthetic greenhouse gases, use the calculator available at: www.environment.gov.au/equivalentcarbonprice.
As with any claim, if you choose to make a claim in a domestic construction quote or contract that links a price rise with the carbon price, the claim must be truthful and have a reasonable basis.
Domestic construction businesses may be considering ways to take account of existing and future potential price rises linked to the carbon price during the term of a building contract.
There are state and territory laws that regulate residential building contracts. Some jurisdictions may allow construction businesses to include clauses in contracts that take into account increased costs. For more information contact your local state and territory consumer protection agency.
The GST applies to the supply of goods and services. If the price of those goods or services increases because of a cost increase, including a carbon price increase, then the new total price attracts GST unless it is an exempt good. A carbon price-related increase makes no difference to the way GST would ordinarily be calculated for any other price increase.
The GST does not apply to the permits that liable entities need to purchase under the carbon price mechanism. However, if liable entities are required to purchase these permits, the charge will form a cost input into their business operations. Where that business chooses to pass some or all of the cost on through an increased price for their goods or services, the amount of GST will increase accordingly (unless that supply is GST-free or input taxed).
Businesses are reminded that if they make a claim about the impact of the carbon price it must be truthful and have a reasonable basis.
The Australian Taxation Office is ultimately responsible for administering the taxation consequences of the carbon pricing mechanism. For more information, contact the Australian Taxation Office (ATO) on 137 226.
The ACCC has received a range of carbon related complaints and enquiries about energy retailers. Consumers and businesses have contacted the ACCC reporting concerns or asking questions about how the carbon price will affect their electricity or gas bills, and whether the price increases communicated by energy retailers are appropriate.
We have reviewed a number of claims made to ensure they are not misleading or deceptive, including those made by energy retailers, and have reported that cost increases reviewed by the ACCC have generally been in line with Treasury and State regulatory agency expectations. The majority of contacts to the ACCC have been about general price increases, not specific complaints about carbon price misrepresentation. The ACCC does not generally comment on individual investigations.
See also: GreenPower & energy prices
In general – as a business considering your obligations not to make misleading claims – it is worth looking at information that relates directly to your own business circumstances before making a claim. This may include your own energy bills if you are confident it gives you a reasonable basis for your claim. You might also look to figures provided by other sources, such as your State or Territory energy regulator, for example the Independent Pricing & Regulatory Tribunal in NSW (IPART). In doing so, you need to be confident that any general figures apply to your own business circumstances.
Some energy bills may provide a breakdown of separate amounts including carbon price impacts, and some may not. As a business, you need to have confidence about the reasons for a price increase before making a claim about it. If you only have access to more general information, or electricity bills are showing increases relating to a range of factors, you might consider making a more general claim about the reasons for your own price rises.
As a small business operator, one of your key sources of information about the impact of the carbon price is information provided by your suppliers, such as invoices.
Suppliers are not generally obliged to provide their customers with information that sets out the carbon price impact on their own price rises. In many circumstances, business would hope suppliers would provide this information as part of good business practice. However, if you notice that supplier prices have gone up, and your supplier has not indicated why, you have a number of options:
- Ask questions – go back to your supplier and ask them why prices have gone up
- If your supplier does not provide an explanation about the source of the price rises, you may wish to do your own calculations or use a professional advisor such as an accountant to assist you
- Shop around – see what other suppliers are charging and the type of information they might be providing about price increases.
Carbon price claims: Guide for business
Carbon price claims: Guide for business (summary)
Carbon price claims: Information to support your claims
Carbon price claims: Dealing with your suppliers and competitors
Carbon price claims: Guidance for industry associations
Carbon price claims: Guidance for business advisors
Call the ACCC Carbon Price Claims Hotline on 1300 303 609 or submit a Carbon Price Claims Webform
On 15 October 2013 the Government released the Clean Energy Legislation (Carbon Tax Repeal) Bill 2013 (the Bill) for public consideration. The Bill provides a role for the ACCC in respect of the repeal of the carbon tax.