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Pricing questions answered

THESE were some of the most asked questions from the ACCC GST Price Line.

Q. 1: The ACCC guidelines say that some prices will go up, some will come down and some will remain the same. But some businesses are repricing their products well beyond 10 per cent. Is this allowed?

A: There will always be traders willing to risk breaking the law even when the potential gains from doing so are far outweighed by the potential costs. Competitive pressures and a very strong price exploitation law should operate against widespread price hikes. The ACCC is investigating a number of businesses that may have set post July 1 prices above the 10 per cent ACCC guideline that relates to the New Tax System changes. Where there are other factors causing prices to rise at the same time as the tax changes these need to be carefully documented.

Q. 2: I’ve heard about the ACCC making available on the Internet or on CD a small business cost savings estimator. I run a small business but don’t see the need for a computer, so how will this help me?

A: The ACCC has released a Small Business Pricing Kit, which contains a small business compliance guide, a cost savings estimator and a retail price adjuster. If you don’t have a computer, the Small Business Compliance Guide explains in plain English what a business must do to comply with the ACCC price exploitation guidelines. It’s free, and provides many practical examples. These tools are designed to help small business avoid price exploitation during the transition to the New Tax System. Also, the ACCC and GST Start-up Assistance Office have published a short guide to help small businesses review their costs and prices. The booklet is called Re-Pricing and the New Tax System.

Q. 3: If I use the small business Cost Savings Estimator will I be safe from action by the ACCC?

A: Where a business can show it has made reasonable efforts to identify cost savings and is still unable to work out what those savings might be, using the estimator will be a good alternative. Small businesses often have exactly the same problems that consumers do. Their suppliers try to push their prices up or the people they supply try to squeeze them out. For this reason, the estimator can be used to help identify where cost savings are likely to occur. The ACCC will be sensitive to the possibility of an inadvertent breach of the Trade Practices Act occurring during the New Tax System settling-in period. But the full scope of the Trade Practices Act will be used to deal with businesses that blatantly disregard the law about price exploitation.

Q. 4: My Internet service provider is charging a flat 10 per cent rate increase as at July 1. How can I be sure that this is the correct percentage?

A: Any business that just adds 10 per cent to the price of their goods or services without factoring in tax and business cost savings is at risk of being investigated. Business operators, including ISPs, will save by not having to pay wholesale sales tax on things they buy to run their business. Wholesale sales tax will be abolished from July 1.

l Allan Fels is chairman of the Australian Competition and Consumer Commission.

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