25 May is advertising law D-Day

Ever seen one of those restaurant menus that say ’15% surcharge on Public Holidays’ ? 

Well, advertising prices like that will be illegal for companies in Australia from 25 May 2009.  And the new law has significant impact on ISP and telco advertising.

In a nutshell, if an advert mentions any pricing details for a product or plan, it must also state the total buy price.  But the rules are not completely simple.

Why a new law ?

Consumer protection regulators were concerned that customers were getting only part of the pricing story.  It’s all very well to say that a plasma TV is $999 but if there’s a compulsory $99 delivery charge then the real all-up price is $1,098. 

So the Trade Practices Act has been amended to create (what is supposed to be) a level playing field for businesses and consumers.  It’s called ‘Section 53C’.

Who does the law apply to ?

All companies (or interstate traders even if they aren’t a company) when they offer ‘consumer-style’ goods and services to an audience that isn’t 100% corporate. 

What are ‘consumer-style goods or services’ ?

‘Consumer-style goods or services’ is our shorthand for ‘goods or services ordinarily acquired for personal, domestic or household use or consumption’.  That’s a key phrase in trade practices law.

Here’s the test:  If a product is commonly used by people for non-business purposes, it counts as ‘consumer-style goods or services’ even if it is also used for business purposes … or even predominantly used for business purposes.

All that matters for this test is that it is commonly used for non-business purposes.

So, a mobile phone is always ‘consumer-style goods or services’.  Sure, they are often used for business.  But they are commonly used for non-business, so they qualify.

The new rules

If your ad doesn’t mention any part of the price, you don’t have to worry about Section 53C.

If any element of the price is mentioned, then the total buy price must also be prominently stated.

‘Prominently’ means ‘at least as prominent as any other part of the ad that mentions price.’  There’s one wee exception to that.  If you’re advertising a contract plan with monthly charges and bundled equipment for use with the service (e.g. handset or modem) you are allowed to make the monthly charge the most prominent pricing statement.  But total price must still be included and must still be ‘prominent’.

ACCC has published more details

Visit ACCC’s web site for a more detailed ‘Component Price Advertising’ guide.

And why is the 15% menu surcharge illegal ?

Because (a) the menu mentions prices and (b) it does not state the actual total buy price.  The diner needs to calculate that for themselves, and that’s a no-no under the new law.