Component pricing
When you present prices to your consumers, you should state the total price. This applies to advertising across all mediums. If you promote a price that is only part of the total price of goods or services, you must also include the total price (as a single figure) at least as prominently as the part price. It is also illegal to represent to consumers that the price of a component or components is the total price.
The single price must include any tax, duty, fee, levy or other additional charges (e.g. GST or airport tax). It should also include any optional fees or charges pre-selected for the consumer during the purchasing process unless and until they are de-selected by the consumer.
Legislation: Australian Consumer Law section 48
Example: A ticket seller prices its tickets at $40. The seller also pre-selects $5 ticket insurance, and imposes a mandatory booking fee of $3 per ticket on all customers whether they purchase over the phone, internet or in person. A purchase also attracts 10 per cent GST.
This could be advertised as:
- $52.80 (including $5 ticket insurance, $3 booking fee and 10% GST)
- $48 + $4.80 GST = $52.80
- $40 + $5 ticket insurance + $3 booking fee + $4.80 GST = $52.80.
A prominent single price is one that is clear and stands out so that it is easily noticed by a consumer. What is ‘prominent’ may vary on a case-by-case basis and you should consider factors such as the advertising medium, size, placement, colour and font of the price, as well as the background of the advertisement. For example, in print advertising, if a single price is smaller or in a colour that is harder to read than any component price, then this is likely to mean that it is not as prominent.
The single price requirement has some exceptions, including:
- optional charges or extras that cannot be quantified (converted into a dollar amount) at the time of making the representation
- price representations made exclusively by your business to another business (being a body corporate) as they do not involve advertising to consumers.
An optional charge or extra is something a consumer must elect to include as part of a product or service (i.e. it is not part of the standard product).
Real case study: The Federal Court imposed a penalty of $200 000 against an airline for contravening the single pricing provisions. The airline, for 10 months, did not display on its website some airfare prices inclusive of all taxes, duties, fees and other mandatory charges in a prominent way and as a single figure.
Case law: Federal Court of Australia - [2012] FCA 1413
Media release: Airline pays $200,000 penalty for breaching the Australian Consumer Law
Exemption for restaurants and cafés
The ACL provides a conditional exemption from the component pricing requirements to cafés and restaurants. Café and restaurant menu surcharges are not required to adhere to the component pricing requirements so long as certain conditions are met:
- the menu displays a surcharge for the supply of food or beverage on specified days by the restaurant or café, and
- the menu displays the following words 'a surcharge of [percentage] applies on [the specified day or days]', and
- the prescribed words are displayed in a transparent and prominent manner on the menu.
The term ‘transparent’ is defined under the ACL and requires information about pricing to be expressed in reasonably plain language, legible, presented clearly and readily available to the target audience. The term ‘prominent’ is not defined but has been interpreted as requiring information to be conspicuously or noticeably displayed.
Restaurants and cafés that rely on the exemption must ensure that a consumer who looks at a price on a menu can immediately determine that the price displayed is not actually the final price that they will be charged.
Restaurants and cafés should note that the exemption does not apply to any other form of advertising, which must continue to display the single price of the goods and services including any surcharge or other compulsory fee. The exemption also does not cover goods other than food or beverages, services such as corkage or cover charges that are included on a menu. A single price for these services must be displayed at all times.
The exemption also applies to room service menus and menus for banquets and other events if the food and/or beverages delivered or provided are not expected to be consumed at a later time.
Legislation: Competition and Consumer Regulations regulation 80A