One year on and most businesses comply with ACCC price guidelines

After one year of the GST the Australian Competition and Consumer Commission has found that most businesses have complied fully with its pricing guidelines.

ACCC Chairman, Professor Allan Fels said extensive price monitoring by the ACCC since before the introduction of the New Tax System (NTS) shows an overall average net effect on prices of about 2.5%.

"This is slightly less than many commentators expected," he said. "Most prices did not increase by anywhere near 10%, and many prices fell or were largely unchanged." Most prices moved in line with ACCC expectations published in the Everyday Shopping Guide.

Releasing the ACCC's price survey results from February this year, Professor Fels said that on the whole business had acted correctly in adjusting prices to take account of the NTS changes.

"The latest price monitoring survey, covering the period May 2000 to February 2001 shows an average price movement of 4.4%, consistent with the underlying rate of inflation and the one-off increases associated with the introduction of the NTS.

"The impact of the NTS on prices predominantly occurred in the September quarter 2000. Although some prices have risen further since that time and other price rises are occurring, these have generally been in line with underlying inflation."

The ACCC's August 2000 survey report showed that price changes were reasonably close to the ACCC's estimates of the effects of the New Tax System alone. Only the fresh food product group - with volatile prices due to seasonal supply and demand factors - had an average price change in August higher than the estimate.

Even with a range of non-tax factors increasingly influencing prices, by February 2001 eight of the 13 product groups' average price changes were still lower than or about the same as the ACCC's estimates. [The table compares the survey result (average price change) for February 2001 and August 2000 with the ACCC's estimate of the effects of the NTS.]

"Many companies which completed Public Compliance Commitments have advised the ACCC there will not be any further price increases as a result of the tax changes."

During this transition period the ACCC has been extremely active investigating potential non-compliance with the pricing guidelines. It has handled more than 120,000 inquiries, including about 40,000 GST complaints. Many were not found to be breaches of the Act and many were multiple complaints about the same businesses.

However, a large number of businesses have taken corrective action to remedy GST-related contraventions of the Act.

Since July 1999 the ACCC has investigated in detail about 5,000 GST-related matters, with the following results:

• 9 Federal Court actions concluded
• 40 court enforceable undertakings under section 87B of the TPA
• more than 600 administrative undertakings, such as apologies and

• refunds, corrective advertising and written undertakings

• refunds totalling almost $9.5 million for about 528,000 consumers.

There has been some criticism from business lobby groups that the ACCC's approach has harmed business.

"The ACCC makes no apology for the role it played in properly enforcing extremely strong price laws enacted by all parliaments of Australia. It does not consider it was unduly harsh. Its approach was to only oppose price changes that were excessive and over-recovered tax changes. Moreover, its active role greatly boosted consumer confidence in pricing and thus outcomes for business generally".

Professor Fels said the ACCC will continue to monitor prices actively for the next year to June 2002. 

Comparison of ACCC estimates of NTS effects on prices with average price changes.