How many of us are familiar with car adverts that say "Just $34,990*", with that asterisk covering $2000-worth of dealers costs and other fees. Or perhaps you've been caught out at a restaurant with 10% surcharges on menu items during public holidays?
Fortunately, that won't happen again. New regulations, that came into force last week as part of the Trade Practices Amendment (Clarity in Pricing) Act 2008, affect ‘component pricing' and will make it harder for sellers to give the impression that a product is offered for sale at a price lower than its actual cost.
Component pricing is advertising a price for all the individual components of an overall cost separately. It's still legal to advertise component prices, but sellers must now include a single total price too.
The rule is to help increase transparency in pricing for consumers, and means that advertisements must list any costs that must be paid in order to purchase an item (such as applicable fees, taxes, duties, mandatory delivery charges, administration charges, and GST) as prominently as the base price, and include them into a single price for the product, good or service. The single total price is the minimum payable by a consumer.
It's still worth keeping a sharp eye out, though - sellers won't need to include the cost of optional extras, delivery charges where they aren't mandatory, and components which are not ‘quantifiable' such as when the price depends on the volume or number of items purchased. Additionally, although the single total price lists the minimum payable, your cost may be higher.
The most obvious area affected is airline ticketing, where taxes and surcharges were often not included in advertising sale prices.
For technology purchases, it means that broadband usage charges will need to be stated prominently - Dodo has copped some flack over it's "free offer plans" which should now be clearer for consumers.
Online retailers face another set of issues, partly because selling online involves mandatory delivery charges, which will need to be included, but many online retailers sell across Australia, with different delivery charges for location, or for the amount of products purchased. We'll be keeping an eye on how online retailers manage the changes.
One area not covered is mobile phone costs over the term of a contract - the total minimum price doesn't need to be displayed as prominently as the per month costs. It still needs to be included, though.
Examples:
- Old: Just 12 payments of $9.95
- New: Just 12 payments of $9.95 ($119.40) or Just $119.40, over 12 monthly payments of $9.95
- Old: Just $100 plus installation and delivery
- New: Just $100 plus $10 installation and $20 delivery: total $130
- Old: $55 plus usage charges
- New: $55 plus 10c/GB download charges
- Old: $33, 990 plus onroad costs
- New: $35990, or $33990 plus $2000 onroad costs: total $35990)