Businesses can generally increase or decrease their prices at will. There are no laws that specifically prohibit price gouging in the context of carbon tax. The law prohibits false or misleading statements about the reason for any price increase. If a company reasonably estimates its costs to have increased by 5% due to the carbon tax, then
A business that wishes to raise prices after the 1st of July can do so in one of two ways. They may first claim that the tax is responsible for their price increases (or future price increases). They may also simply increase their prices after the introduction of tax. If they use the first method and their claims are untrue, they may be subject to detection and enforcement actions. The ACCC won’t take any action against them if they use the second method.
The ACCC’s powers
ACCC does not have the role of stopping price increases that occur after the introduction of carbon tax. Instead, the ACCC has the responsibility to ensure businesses don’t make false claims when attributing any price increase to carbon tax. The ACCC relies on s. 18 of the Australian Consumer Law, which prohibits misleading or deceptive conduct.
The ACCC can issue warnings, infringement notifications (imposing fines of up to $666,000 for listed companies), and substantiation letters (requiring businesses to prove any claims about carbon price increases). The ACCC can also request that the Federal Court impose penalties of up to $1.1m per infringement and adverse publicity order. To obtain this penalty, the ACCC will need to bring a legal action in front of a Court. The Court must then be convinced that the corporation has engaged in false and misleading conduct that violates the Act. Finally, the Court must also be confident that a $1.1 million penalty is appropriate.
The ACCC is likely to use its powers of warning, substantiation, and infringement notifications, which are quicker and can “name and shame” offenders.
The ACCC recently set up a hotline where customers can report concerns to help identify false carbon claims.
Price Gouging Before the Tax
The ACCC received hundreds of complaints despite the fact that the carbon tax is not yet in place. This has led to about 20 initial investigations. Several cases are currently being investigated more seriously. The carbon tax was cited as the cause of increased prices for beer, petrol, building a pool or other construction work, taxis (reports on “carbon levies”), and weddings (charging $5 per person “carbon tax” for weddings after July 1).
Some businesses also encourage customers to “buy Now” or to lock in long-term contracts to avoid carbon pricing. Solar panel companies were also scrutinised for exaggerating the likely increase in energy prices to attract customers.
Will ACCC be effective
The experience of ACCC after the introduction of GST is instructive. The ACCC, despite having more powers to deal with price gouging under the GST system, concluded that “significant opportunistic prices by businesses” were not evidenced. They also concluded that the majority of infringements involved misleading conduct.
The market will also provide competitive discipline in the case of most goods and services to prevent any attempts to raise prices above the actual cost of tax. Businesses that operate without a competitive field could already be increasing their prices. The carbon tax may provide an increased incentive for them to do this in the short term, but it should not be regulated on a long-term basis.
The ACCC has the power to prosecute those who engage in false or misleading conduct.