Fuelling the ACCC’s fire – carbon tax repeal powers

Published On 24/10/2013 | By Tahlia Brysha-Pullen | Consumer protection, Reform

Hot on the heels of the election, the Commonwealth Government has released draft legislation that provides for the repeal of the carbon tax legislation.  In addition, the draft legislation proposes to introduce new prohibitions and powers into the Competition and Consumer Act 2010 (Cth) (CCA), which will enable the ACCC to monitor and take action against businesses that attempt to exploit the carbon tax repeal process by charging unreasonably high prices or making false or misleading claims.

The Clean Energy Legislation (Carbon Tax Repeal) Bill 2013 (the Bill) (see here for a full copy), published on 14 October 2013, will be one of the first items of legislative business for the 44th Parliament, and has been drafted on the basis that the carbon tax will no longer apply from 1 July 2014.

Schedule 2 of the Bill introduces into the CCA time-limited provisions that:

  • prohibit corporations from engaging in carbon tax-related price exploitation with respect to “regulated goods” (natural gas, electricity, synthetic greenhouse gas, SGG equipment and any other goods specified by regulations);
  • prohibit corporations from making false or misleading representations concerning the effect of the carbon tax repeal or scheme on the price for the supply of goods or services; and
  • provide the ACCC with the power to monitor prices of “relevant goods” (which are, by definition, regulated goods and any other goods specified by regulations).

These provisions closely resemble those introduced in relation to GST with the A New Tax System (Trade Practices Amendment) Act 2000 (Cth).  For the most part, the provisions will apply only during the carbon tax repeal transition period (transition period), being from 1 July 2014 to 30 June 2015.

Price exploitation

Schedule 2, Division 2 of the Bill prohibits corporations from engaging in carbon tax-related price exploitation with respect to regulated goods.  This will occur where:

  • the corporation supplies regulated goods during the transition period;
  • the price for that supply is unreasonably high, having regard only to the carbon tax repeal; and
  • the price for that supply is unreasonably high even when the supplier’s costs, supply and demand conditions and any other relevant factors are taken into consideration.

Corporations that contravene the prohibition could be subject to pecuniary penalties of up to approximately $1.1 million for a corporation and $220,000 for an individual.  In addition, the Bill gives the ACCC the power to issue a written notice to a corporation where it believes that:

  • the corporation has engaged in carbon tax-related price exploitation; or
  • this will assist in preventing carbon tax-related price exploitation.

Where the ACCC believes that a written notice will assist in preventing price exploitation, the notice must specify the maximum price that the ACCC believes should be charged for the relevant supply.  The ACCC similarly acquired this power in relation to the introduction of the GST and the guidelines that were published by the ACCC at that time (GST Guidelines) indicated that the ACCC would generally provide businesses with opportunities to justify prices charged before enforcement action would be initiated or such notices would be issued.

Price monitoring

Schedule 2, Division 3 of the Bill provides the ACCC with the power to monitor prices to assess the general effect of the carbon tax repeal on prices charged, advertised, displayed or offered by corporations for the supply of regulated goods.  This applies to both the time leading up to and during the transition period.  The Bill also provides the ACCC with information gathering powers in relation to prices or the setting of prices, where this information is considered useful to the ACCC in monitoring prices.  The ACCC must report on a quarterly basis on matters arising from its enforcement and price monitoring activities.

False or misleading representations and infringement notices

Schedule 2, Division 4 of the Bill prohibits corporations from making false or misleading representations concerning the effect of the carbon tax repeal or scheme on the price for the supply of goods or services.  This provision does not form part of the Australian Consumer Law.

Furthermore, Schedule 2, Division 5 provides the ACCC with the power to issue an infringement notice where it believes that a person has contravened the price exploitation or false or misleading representation prohibitions.

What does this mean for corporations?

As these prohibitions and powers are time-limited additions to the CCA, corporations will need to take care when passing carbon tax-related prices through to customers until the end of June 2015.  Although the prohibitions will apply during the transition period only, the ACCC will be authorised to monitor prices from the date the legislation commences.  Even without formal monitoring powers, the ACCC has openly investigated corporations that have made misleading or deceptive carbon price claims since the introduction of the carbon tax.  Most notably, the ACCC took action against Brumby’s, whose managing director wrote to franchisees suggesting that they raise prices and “let the carbon tax take the blame”.  Brumby’s escaped a fine by entering into an undertaking with the ACCC (see here), with ACCC chairman Rod Sims stating that “claims must be truthful and have a reasonable basis, or the business will face potential ACCC action” (see the media release here).  The ACCC has also accepted undertakings from Polaris Solar Pty Ltd and ACT Renewable Energy (see the media release here).

Whilst corporations that supply regulated goods (those in the natural gas, electricity and synthetic greenhouse gas industries, amongst others) are specifically targeted by the price exploitation and monitoring provisions, the false or misleading representation provisions apply to all corporations that supply goods or services.  Corporations that supply regulated goods should also be conscious of the ACCC’s power to specify maximum prices where it considers that this will assist in preventing price exploitation.

The draft materials provide little information as to what corporations may be required to do to ensure that they comply with the new provisions.  The ACCC may in due course publish guidelines for businesses on the operation of the new provisions (as it has with respect to carbon price claims – see here and as it did with the GST Guidelines).  The GST Guidelines published by the ACCC may provide some indicative guidance to corporations in understanding how the ACCC may interpret the new price exploitation provisions prior to guidelines being issued in due course.

If the Bill passes the House of Representatives and the Senate, the ACCC will have a new set of powers to monitor prices and pricing behaviour of carbon tax-effected corporations.  Although the ACCC has not yet suggested whether, or the extent to which, prices for the supply of regulated goods should come down, the Government estimates that electricity prices are likely to come down by an approximate 9% and gas prices by 7%.

The Bill is subject to public consultation until 4 November 2013 and submissions by interested parties can be sent to [email protected].

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About The Author

is a solicitor in the commercial dispute resolution practice of King & Wood Mallesons, based in the Melbourne office.

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