Legal News & Analysis – Asia Pacific – Australia – Environment 

 

In brief

 

The Federal Government is concerned to ensure carbon tax repeal savings are passed through to customers and the Australian Competition and Consumer Commission (ACCC) is accordingly very focused on this issue. The ACCC will be `keeping a close eye’ on prices to ensure that what went up comes down. The ACCC expects cost savings from the repeal to be passed on ‘fairly quickly’¹ and promises to view with scepticism claims that there are no savings to pass on.²

 

It will therefore be crucial to be on the front-foot. Businesses should:

 

1. understand how the carbon tax repeal affects their supply chain, in particular, what savings are likely to be made and how they can be passed on – this is likely to require businesses to review their contractual arrangements, and
2. review marketing materials to ensure they do not misrepresent the effect of the repeal on the price of goods or services that the business supplies.

 

Misleading representations about carbon issues

 

There is a new provision in the Competition and Consumer Act 2010 (Cth) (the Act) against companies and individuals making false or misleading representations, in connection with the supply or possible supply of goods or services, about the effect of the carbon tax scheme or its repeal on prices.

 

This prohibition will only apply for a one year ‘transitional’ period between 1 July 2014 and 30 June 2015.

 

However, the general prohibitions against misleading conduct, or false or misleading representations, will continue to apply to any representations made about the impact of the carbon tax repeal.

 

These prohibitions apply to all businesses, irrespective of the industry in which they operate.

 

Penalties of up to approximately $1.1 million for companies and approximately $220,000 for individuals per contravention, apply for misleading representations about carbon tax issues. Remedies available under the existing Part VI of the Act, including damages for loss suffered and injunctions against making misleading statements in the future, may also apply.

 

Prohibition on price exploitation

 

The repeal legislation also introduces a prohibition against price exploitation by suppliers of electricity, gas, synthetic greenhouse gas (SGG) and SGG equipment. This requires these suppliers to pass through all of their cost savings directly or indirectly attributable to the repeal. Failure to do so will incur a penalty of 250% of the cost savings not passed through.

 

ACCC and customer disclosure

 

The repeal legislation also imposes disclosure obligations on electricity and natural gas retailers and bulk SGG importers. They must:

 

1. prepare and provide to the ACCC by 18 August a ‘substantiation statement’ estimating their cost savings from the repeal that will be passed onto classes of customers. This statement must be published on the entity’s website,
2. prepare and communicate by 15 September the substance of the statement to customers, and
3. respond to a notice from the ACCC (to be issued by 18 August) explaining how the repeal has affected input costs and how the cost reductions are reflected in prices charged.

 

Endnotes

 

1. Peter Ryan, ‘ACCC talks tough on carbon tax rollback’, World Today, 29 July 2014.
2. Peter Hannam, ‘Qantas, Virgin targeted by ACCC over carbon pricing’, The Age, 29 July 2014.

 

 

For further information, please contact:

 

Michael Voros, Herbert Smith Freehills

[email protected]

 

Herbert Smith Freehills Environment Practice Profile in Australia