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TRANSPORT |
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New law forces personal business freight
rates to be quoted ‘all in’ |
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9 February
2009 |
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Need to
know: § From May this year, the Trade Practices Act will
require quotes for some types of freight to include an ‘all in’ price.
Business lines affected by the new rules include shipping of personal
effects, gifts or motor vehicles. § Exemptions apply where a price is only being given
to a company, or where the freight services are not of a kind ordinarily
acquired for personal, domestic or household purposes. This means many
types of freight will be exempt from the new rules. § For affected business, forwarders must add up all
charges for the customer – you will not be allowed to just list the charges
and leave the customer to add them up. § Penalties for breach of up to $1.1 million per
offence may be imposed. § Guidelines are currently being prepared by the ACCC,
but are likely not to provide any detailed guidance for the freight industry. |
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Introduction Late last year
the Federal Government passed the Trade Practices Amendment (Clarity in
Pricing) Act 2008. This inserts a new section 53C into the Trade
Practices Act which requires quoted or advertised prices to be provided
on an “all inclusive” basis. What does
all inclusive pricing require? The new
provisions prohibit representations about price for the supply of goods or
services (eg, a quote or advertisement) unless the representation includes a
prominent statement of the total minimum quantifiable consideration for the
supply concerned. If any minimum level of charge is known and
quantifiable, it must be included in the advertised price. A wide range
of businesses will be affected. For example, car dealers will not be
allowed to advertise car prices that are “plus dealer delivery and statutory
charges” – they will instead have to only advertise “drive away” prices, and
airlines and travel agents must not advertise or quote air fares without
including any minimum applicable taxes and charges. For freight
forwarders and carriers, the new rules mean that in many cases it will be
illegal to just quote a base freight rate plus surcharges – instead, it will
be necessary to quote a total rate including surcharges. The new
rules will apply to some, but not all freight business The following
exceptions to the obligation to quote prices on an “all inclusive” basis will
apply: 1. The new rules don’t apply when you are quoting
exclusively to bodies corporate.
The obligation to quote all inclusive prices will not apply where the
relevant representation is made exclusively to corporations. If you
know that the customer you are dealing with is a company, you can quote a
‘base’ freight rate without adding in all applicable surcharges (however, you
must make it clear what the relevant quote does or doesn’t include). Not all
businesses are companies. The all inclusive quoting rules are required
when quoting to a sole trader or a partnership. They also apply when
quoting to individuals (eg, to move their personal effects). 2. The new rules only apply to services that are
suitable for personal, domestic or household use. The obligation to quote all inclusive prices
applies only to goods or services that are of a kind ‘ordinarily acquired
for personal, domestic or household use or consumption’. The new
rules therefore won’t apply to a quote for, say, a full container load
shipment, because this is not a service that would ordinarily be acquired for
personal, domestic or household use. On the other
hand, shipping of personal effects is a service that might ordinarily be
acquired for personal or domestic purposes; the new rules will therefore
apply to such services. The new rules will also apply to these types of
freight services even when they are acquired by businesses. 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 that this means that if, for
example, the fuel surcharge at the date of quoting is 20¢/kg, this must be
included in the quoted price. If the surcharge might change over the
life of the quote, this will need to be covered by a clear clause explaining
that the total price could vary due to changes in surcharges. If there is no
way to quantify a charge when you quote, then that charge does not have to be
included in the quote. For example, if you don’t know if a consignee
will collect a consignment on time or not, there may be no way to know
whether storage charges will apply. If so, you do not have to include
any storage charges in the ‘all in’ price that must be quoted. (You
must, of course, still disclose that they apply. Also, if you know that
at least a certain minimum level of storage charge will be payable, you must
include that minimum in your quoted price.) There is some
doubt about how this provision will apply in practice. The ACCC is
preparing guidelines setting out its interpretation of its application.
It is likely, however, that these will not be available for some months and
that they will not deal with issues associated with freight in any detail. Penalties Penalties for
breach of section 53C are severe. Fines of up to $1.1 million per
offence may be imposed. Next steps This
legislation has already been passed by Parliament and will come into effect
by 25 May this year. Once the rules are in force, the ACCC will be looking
to check and test compliance. 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 anyone other than companies. 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. |
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If you have
any questions, please contact one of our partners named below. |
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(02) 9334 8764 |
(07) 3002 6795 |
(02) 9334 8765 |
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(02) 9334 8856 |
(03) 8633 7517 |
(02) 9334 8857 |
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hwlebsworth.com.au |
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