New law to force personal business freight rates to be quoted ‘all in’

Late last year the Federal Government passed the Trade Practices Amendment (Clarity in Pricing) Act 2008 (the Act). For products caught by the regime, the Act prohibits price quotes or advertisements unless they include the total quantifiable consideration for the supply. If any minimum level of charge is known, it must be included in the quoted or advertised price.

This will affect a wide range of industries. For freight services caught by the regime, the new rules mean that giving a quote on the basis of a base freight rate plus GST plus surcharges will become illegal unless the “all in” price (ie, including GST and all quantifiable surcharges) is also given.

A number of exceptions that mean that most, but not all, shipping services will escape the new regime:

  1. The new rules do not apply when quoting exclusively to bodies corporate. If you know you are dealing with a company, you can provide a quote on a GST exclusive basis or quote a ‘base’ freight rate without adding in all applicable surcharges.
  2. The new rules only apply to services that are of a kind ‘ordinarily acquired for personal, domestic or household use or consumption’. This means the new rules will not apply to, say, full container load shipments, because this is not a service ordinarily acquired for personal use. On the other hand, shipping of personal effects or individual motor vehicles are services that might ordinarily be acquired for personal or domestic purposes. The new rules are therefore likely to apply to such services.
  3. Charges only have to be included if they are quantifiable. The minimum quantifiable consideration at the time of any price representation must be included in the quoted price. It is likely this means that, say, the bunker price at the date of quoting must be included in a quoted price. If that price might change over the life of the quote, a clear clause should be included explaining this. There is some doubt about how this particular exception will apply in practice. The ACCC is preparing guidelines setting out its interpretation of the new rules. These are expected to be released shortly.

The new regime will come into effect by 25 May this year and penalties for breach of up to $1.1 million per offence may be imposed.

Determining what lines of business are affected by the new rules and what must be included in a customer quote will, in many cases, not be simple. For many businesses, the simplest way to ensure you comply with the new rules will be to simply not quote to individuals. Other businesses - such as those that do significant business with individuals and, in particular, ship personal effects - should be preparing their systems to comply with these new rules now.

 

Written by Richard Westmoreland, Partner, Trade Practices.