Businesses have been reminded that they need to fully inform consumers of the price of goods or services on offer, including the cost of the Goods and Services Tax.
ACCC Chairman, Professor Allan Fels, was commenting on orders handed down recently by Justice Margaret Stone of the Federal Court concerning an ACCC case against Signature Security Group Pty Ltd for misleading advertising.
The Federal Court found that Signature had breached the Trade Practices Act 1974 by advertising and otherwise promoting its security system exclusive of GST and on a 'price plus GST' basis.
The court ruled that advertisements which specified prices without reference to an additional GST component payable were false, misleading and deceptive in breach of sections 52 and 53(e) of the Act. Advertisements which specified prices as "from just $295*" and elsewhere in the advertisement, in fine print, stated "* plus GST where applicable" were ruled to be false, misleading and deceptive in breach of sections 52 and 53(e) of the Act and also found to have stated part of the price of the goods and services without also specifying the cash price, in contravention of section 53C of the Act. Further, the court ruled that Signature had also contravened sections 52 and 53(d) of the Act, by representing to a particular customer that Signature had an arrangement which allowed it to quote its prices exclusive of GST, thereby falsely misleading or deceiving the customer by giving the customer the impression that approval had been given for quoting on a "GST exclusive" basis. The ACCC had not given approval to quote on a "GST exclusive" basis to Signature.
The court also ruled that by promoting goods on a price plus GST basis, for example "from $295 plus GST", Signature had contravened section 53C of the Act by stating part of the price of the goods and services without also specifying the cash price. However, the court ruled that this conduct was not misleading or deceptive under section 52 of the Act.
"The court did not specifically have to decide whether pricing had to state one all-inclusive price", Professor Fels said. "However, Justice Stone indicated that in her opinion, section 53C of the Act, which deals with stating the cash price, did not require the cash price to be stated as a GST inclusive price. For example, a statement that the price of a good or service is $295 plus $29.50 GST would conform with the Act.
"There was a similar indication by the Full Court of the Federal Court of Australia in the Dell Computers case. However, the court did state that representations as to price may constitute a breach of section 53C where the representation is ambiguous or involves complicated calculations.
"Further in the Signature case, Justice Stone did not formulate a general test as to all circumstances when a price would not be properly 'specified' for the purposes of section 53C. Therefore whether representations about price which specify the price in the form of a number of components is acceptable under 53C would depend on each case's circumstances.
"The ACCC believes strongly that it is best practice and prudent risk management for businesses, when making price representations that are made up of a number of price components, to state the price in full and inclusive of those components.
"Businesses need to continue to ensure that the false and misleading provisions of the Act are not contravened. "Consumers ¡V including business consumers - need to easily understand the true price of goods or services. They expect suppliers to advertise the total price to be paid to allow them to compare prices from competing sources.
"The Signature decision sends a clear message to businesses that advertising and the promotion of goods and services at specified prices needs to clearly and specifically advise any additional charges payable, particularly GST.
"Price advertising is a substantial drawcard for consumers making purchasing decisions, so businesses must be careful in advertising a price.
"Advertisers must be upfront about any additional costs. Compulsory costs should not be tucked away in the fine print. Customers should not have to scour an advertisement or pages of a price list for additional compulsory charges".
The ACCC will ensure that its various guidelines aimed at assisting businesses and consumers in understanding the Act are updated to reflect the courts' clarification of the law.
Justice Stone made the following orders in relation to the contraventions of the Act by Signature detailed above:
- injunctions restraining Signature Security Group from:
- making representations that its security systems are available at prices exclusive of the GST component, and which make no reference to the GST component payable;
- specifying prices which are exclusive of GST without also clearly and expressly specifying the amount of GST payable for its security systems; and
- making representations that it has an arrangement in place whereby it is allowed to quote prices exclusive of GST.
- declarations that Signature Security Group has contravened sections 52, 53(e), 53(d) and 53C of the Act.
- a declaration that Signature Security Group breached certain terms of the written undertakings given to the ACCC pursuant to section 87B of the Act and accepted by the ACCC on 21 December 2000.
- an order that Signature pay the ACCC's costs of the proceedings.