"The Australian Competition and Consumer Commission is conducting extensive monitoring of prices to ensure manufacturers and retailers do not profiteer when the excise changes affecting tobacco products take effect on 1 November 1999", ACCC Chairman, Professor Allan Fels,GST Commissioner, Dr David Cousins said today.
From 1 November 1999 excise on cigarettes and other tobacco products will be determined on a per-stick basis rather than on a weight basis and the overall level of excise will increase.
"These changes will impact on prices in the marketplace. The survey work already undertaken by the ACCC and that to be undertaken after the change means the ACCC will be well informed about these price impacts," he said.
"The ACCC also has powers to prevent price exploitation under Part VB of the Trade Practices Act 1974 relating to the New Tax System changes
"The ACCC has advised manufacturers and retailers of tobacco products that they risk action being taken under the Act if they attempt to profiteer from the excise changes.
"The ACCC has issued Guidelines that spell out its view about when price exploitation is considered to occur.
"The general principle is that cigarette manufacturers and retailers should not increase the net dollar margin on tobacco products following the increase in excise.
"This may require changes to current practices by cigarette retailers who, until now, have generally obtained an increase in (profit) margin when there has been an increase in cigarette excise.
"This has been because of the practice of adding percentage-based margins to the wholesale price (including excise).
"It is important to understand that, under the ACCC Guidelines, cigarette retailers can obtain the same dollar margin on cigarettes sold as they do now. They just should not increase this margin.
"Some businesses may find it difficult to assess their existing net dollar margin," he said. "Based on the information provided to the ACCC by the manufacturers, a simple method to ensure that the net dollar margin remains the same may be for retailers to apply the same difference in dollars and cents between recommended retail prices (RRP) and selling prices as they do to current RRPs.
"The ACCC has discussed the implications of the Guidelines with manufacturers and, through the manufacturers, has provided information to all retailers about their compliance with the Guidelines.
"We have also been in contact with the Retail Tobacconists Association and major retailers to advise them of the ACCCs views. Major retailers have indicated to the ACCC that they will be complying with the Guidelines.
"This is a positive way to ensure businesses do not engage in price exploitation.
"The ACCC is committing considerable resources to its education and awareness activities to assist business and consumers understand the effect of the New Tax System changes on the price of goods and services they supply," he added.
Price exploitation is a serious matter and businesses that engage in it are liable for penalties of up to $10 million for corporations and $500,000 for individuals, per offence.
"The ACCC will monitor the prices of cigarettes and other tobacco products after the 1November change in tobacco excise duty to ensure that manufacturers and retailers do not revert to past practices, which are likely to breach the price exploitation provisions of the Trade Practices Act," he said.
