Component pricing is advertising a price in its component parts rather than as a single figure, and can create an impression that a product is being offered for sale at a lower price than it actually is. The Australian Consumer Law (ACL), which is a schedule to the Competition and Consumer Act 2010, requires under section 48 that if you choose to use component pricing in advertisements, you must also provide consumers with a prominent single total price for goods and services, as they are able to be quantified at that time.
What is the single price?
The single price means the minimum total cost that is able to be quantified (or calculated) at the time of making the representation.
You must include in the single price any:
charges of any desciption payable by a consumer to purchase the good or service (e.g. administration fees, compulsory services charges, booking fees)
taxes, duties, fees, levies or charges payable by the consumer for the supply of the good or service (e.g. goods and services tax or sales tax).
You do not need to include in the single price any:
optional extras—additional charges that a consumer may choose to pay
sending charges—unless you are aware of a minimum charge that must be paid
any components that are not ‘quantifiable’ at the time the representation is made
amounts your business pays to third parties that are not passed onto the consumer.
What does ‘prominent’ mean?
To ensure that you are providing a price in a prominent way, you should check whether the single price you are advertising is clear and can be easily seen by the consumer. You should also consider the medium you are using as well as factors such as the size, placement, colour and font of the text the price appears in, as compared to the background of the advertisement.
However, when services are supplied under a contract that also provides for periodic payments, you do not need to provide a single price as prominently as any component. Goods directly related to the services also fall within this exception.
Although in this circumstance you do not need to provide a single price as prominently as any component, you do still need to provide a single price.
How do I determine whether a component is quantifiable?
An amount is quantifiable if at the time you are making the representation, you are able to readily convert it into a dollar amount. If a total price comprises a number of components, you are to quantify and add up each component to the extent you are able. Where a total price involves:
a combination of quantifiable and non-quantifiable components, and/or
a component amount that fluctuates or varies,
you calculate the component/s and total price based on information available at that time. You also need to clearly advise consumers of the basis on which the amounts were calculated and that they may change. This will allow you to provide consumers with the minimum total cost they need to pay to obtain the product.
How do I calculate the single price for goods advertised in a national catalogue where the freight charges vary according to geographic regions?
Where additional freight charges apply to certain goods advertised in a national catalogue, and those charges vary between geographic locations, such charges are not likely to be a quantifiable component of the single total price to be charged for the product. As such, failing to include them in such a price would be unlikely to breach section 48.
The other provisions of the ACL, including the prohibition on misleading and deceptive conduct, still apply so businesses should therefore consider advertising goods in a national catalogue with a 'recommended national price' but clearly and prominently disclose to consumers that an additional freight cost may apply.
Other relevant sections of the ACL
In addition to section 48, two other sections of the ACL that are particularly relevant to price representations are sections 18 and 29.
Section 18
This is the general provision prohibiting misleading or deceptive conduct.
Section 29
This prohibits the making of false or misleading representations about goods or services. In particular, a representation that the price is the whole of the consideration when in fact it constitutes only part of the consideration for the goods or services is likely to breach s. 29(i).
The ACCC actively promotes compliance with these price-related provisions of the ACL. To assist businesses to comply with these obligations, the ACCC has published a range of industry-specific guidance materials on component pricing for electrical goods retailers and the motor vehicle and travel industries.
