Component pricing and restaurants, cafes and hotels—frequently asked questions
Price representations are an important consideration for all businesses. Ensuring that the prices you provide to consumers are accurate is not just good business practice—it’s the law.
Under section 48 of the Australian Consumer Law (ACL), if you make a representation about a part of the price a consumer will pay for a product or service, you must also specify, as a prominent single price, the total figure they will pay (to the extent that it can be calculated). This applies whether the representation is made in media advertisements for the purposes of comparison with your competitors or on an in-store price list like a menu used by consumers to help them decide between your different products.
These legislative requirements may mean that restaurants, cafes and hotels will have to change the way they make certain representations on their menus. For example, it is not sufficient to write ‘X% surcharge on weekends’ at the bottom of a menu because X per cent is a quantifiable component of the price that consumers will pay for their food or beverage on the weekend. This means you may need to provide a separate menu for times a surcharge is applied or consider pricing structures that do not require the use of different price components on your menu.
The Australian Competition and Consumer Commission is the Australian government agency responsible for enforcing the National Consumer Law. The ACCC has produced a range of guidance materials on component pricing, which are available online or in hard copy through the ACCC Infocentre on 1300 302 502. The ACCC has also provided the RCA with some questions and answers about how the new laws may affect you.
I apply a 10 per cent surcharge to all meals and drinks sold on Sundays and make customers aware of this with information provided on the bottom of each menu in large, bold print. Is that enough to comply with the new requirements?
No. Section 48 of the ACL requires that where you make a representation about a part of the price a consumer will pay for a product or service, you must also show, at least as prominently, the single (total) price they will pay (to the extent that can be calculated).
In this case, on Sundays the price of your menu item is only a part of the price the consumer must pay for that item—they will also be required to pay the 10 per cent surcharge, so you must provide a single price, inclusive of the surcharge, for each item.
I apply a surcharge of $5 per person on public holidays, regardless of what they order. How do I include that in the single price?
In this case, the surcharge is not a quantifiable component of the single price and therefore it cannot be included in the single price. This is because the $5 is paid by each customer as a ‘one off,’ whether they order one item off the menu or more. If you were to add $5 to each menu item, you would risk applying the surcharge multiple times to the one customer.
While the surcharge is not quantifiable for the purposes of s. 48, it is an extra charge the consumer will have to pay, so you need to be mindful of your broader legal obligations against misleading and deceptive conduct. Consumers should be made aware that the surcharge applies and how much it is, before they order their meals, not at the time they are presented with their bill.
What about side dishes? They can be a component of a meal.
While side dishes can form a part of any meal, they are generally an ‘optional extra’ that can be purchased by the consumer at their discretion. Optional extras do not need to be included in the single prices required by s. 48.
Side dishes should be treated in the same way as any other menu item.
When my supplier sends through price lists, a note near the bottom says I have to add 10 per cent goods and services tax to all prices. Are they breaking the law by not providing a single price?
No. Representations made by one business exclusively to another business are exempted from s. 48, so they do not need to include a single price. It’s important to note, however, that this exemption only applies where the representations are made between businesses. If they may also be seen by consumers, the obligation to provide a single price remains.
What about credit card surcharges? I add 3 per cent to all credit card transactions.
The answer to this question depends on whether you provide other payment options.
If a consumer has the choice of paying by credit card or by some other method (e.g. cash or eftpos), the credit card surcharge is an optional extra that does not need to be included in any single price representation.
However, if the only payment method you offer is by credit card, the 3 per cent surcharge will be a quantifiable component that must be included in the single price because the consumer cannot avoid paying it.
As in question 2, if the surcharge is captured by the requirements of s. 48, you need to ensure you do not mislead or deceive consumers about the surcharge and its application.
I offer a discount for meals purchased for takeaway. Am I breaching s. 48 by providing the meals at a cheaper price than the one on the menu?
No. While s. 48 requires the single price representation to be for the ‘minimum quantifiable consideration’, it does not prevent the negotiation of a lower price.
My restaurant is BYO. I charge corkage of $6 per bottle, but some tables bring one bottle and others bring three. How can I provide the single price required by s. 48?
Section 48 requires the single price to include all quantifiable components. In this case, given that the final cost of corkage depends on how many bottles are consumed at each table, corkage is not a quantifiable component of the total price.
Again, your broader legal obligations still apply, so the cost of corkage should be clearly expressed to your customers.
