Franklins to provide three-week discount to consumers for GST errors

24 July 2000

"Franklins Supermarkets, the third largest grocery retailer in Australia, will be taking steps to compensate customers who were charged Goods and Services Tax on GST-free goods since the introduction of the GST on 1 July 2000", Australian Competition and Consumer Commission Chairman, Professor Allan Fels, said today.

"Franklins inadvertently charged GST on 17 GST-free goods due to errors in its pricing systems; the goods included No Frills Weetbix, No Frills Orange Juice, No Frills Apple Juice and Peats Ridge Natural Water. As a result of these errors consumers were charged 10 per cent GST on these products.

"Franklins has agreed with the ACCC to implement a number of remedial measures to ensure that customers are compensated for having paid the GST on these products. Franklins will be discounting the normal retail prices of all the relevant products by 11 per cent for a three-week period commencing Wednesday 26, July 2000. Franklins have also agreed to provide all consumers who have retained receipts for their purchases of these products a full refund of the GST incorrectly charged.

"Franklins has also agree to publish full page advertisements in newspapers in NSW, Queensland, Victoria and South Australia on Tuesday, 25 July 2000 to apologise for the error and the proposed three week discount period. Franklins has agreed to run additional half-page advertisements in these papers on the two following Mondays. Franklins will also be putting in-store notices in all of its stores Australia-wide.

"Franklins will also be conducting a review of all products sold in its stores to ensure that there are no further errors. Franklins will be providing a copy of the report to the ACCC so that the ACCC can be assured that any other pricing errors are discovered and remedied as soon as possible.

"The charging of GST on GST free goods constitutes a breach of the price exploitation provisions of the Trade Practices Act 1974. The maximum penalties for breaching these provisions is $10 million for corporations and $500 000 for individuals.

"The ACCC became aware of these pricing anomalies due to the vigilance of consumers who rang the ACCC's Price Line to report discrepancies in their receipts. The ACCC has established systems for quickly analysing complaints that it receives from consumers about alleged price exploitation. The ACCC has also established a number of investigatory teams that are able to move quickly to stop price exploitation from occurring. In this case, the ACCC established a team to conduct a fast track investigation that involved the collection of evidence from many consumers over a two-day period. Once the relevant evidence had been collected Franklins were put on notice of the ACCC's concerns.

"Franklins responded quickly and comprehensively to the ACCC's concerns. This consumer outcome was achieved within seven days of the ACCC beginning its investigation. Also the provision by Franklins of an 11% discount for a three-week period constitutes substantial compensation for consumers.

"Franklins are the third largest grocery retailer in Australia with 13.6% of the national market for the supply of retail groceries. Franklins has over 250 supermarkets trading under the Big Fresh and No Frills trade names located in NSW, Queensland, South Australia, the ACT and Victoria.

"This matter also shows the need for companies for implement effective consumer complaint handling mechanisms. A number of the consumers contacted by the ACCC during its investigation advised the ACCC that they had raised their concerns about being charged GST on GST free goods with staff and management of their local Franklins store. Some consumers demanded a refund. In a number of these cases, the consumers concerns were not adequately addressed with some being told to contact the ACCC if they had concerns. Fortunately a number of these consumers took this advice".

Release number: 
MR 195/00
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