Beware carbon tax price gougers

With new powers for the ACCC, price gouging on the back of the carbon price could lead to a new wave of class action litigations. Businesses must tread carefully.

Businesses which try to price gouge as a result of the carbon price could be opening the door to a new wave of consumer class actions.

The ACCC now has the power to bring what is essentially a class action on behalf of consumers who have been misled about the impact of the carbon price on the cost of their goods or services.

Unlike traditional class actions, individual consumers would not need to opt in to, nor contribute any money for, the litigation. These actions could potentially involve hundreds of thousands of customers who, if the action is successful, will receive a proportion of any compensation award. 

It is hard to predict how large any compensation award may be as it would depend on the level of price gouging and how many consumers were affected. However, if for example, a national retailer of washing machines with a large customer base were to increase the price of its products by $100 each and incorrectly blame this increase on the carbon price, then it is possible that the compensation award could be huge. 

What businesses need to be aware of is that while the ACCC may bring these class actions against business, there is nothing to stop them from bringing civil penalty proceedings as well. This means that if a company inflates its prices and uses the carbon price as a smokescreen, they could face not only large compensation awards to misled customers, but also fines of up to $1.1 million for each act of misleading and deceptive conduct. 

The ACCC has already made it clear that it is very interested in this issue and the Australian government has given it an extra $12.8 million to monitor carbon price increases. Just this week the ACCC launched the Carbon Price Claims Hotline to make it easier for consumers and small business to alert them and lodge complaints about potentially false and misleading carbon price claims.

It is not only the ACCC that may be interested in bringing class actions regarding inflated carbon prices, litigation funders and compensation lawyers will no doubt be monitoring this situation and will not hesitate to commence a class action if they believe customers have been misled.   

IMF (Australia) Ltd, Australia's largest and most successful litigation funder, in conjunction with Maurice Blackburn lawyers, has already commenced large scale class actions against banks for exception fees they believe have been unfairly deducted from customers' accounts. If significant price increases result from the introduction of the carbon price on July 1, there is no doubt that litigation funders and compensation lawyers will be investigating and commencing class actions themselves.

As ACCC chair, Rod Sims has made clear, in general businesses that are not subject to price regulation may raise and lower prices as they see fit. What they can’t do, Sims emphasised, is mislead people that a price hike is due to the carbon scheme.

There is little doubt that when the carbon price is introduced, the effects will be felt by all organisations, large and small.  Businesses need to be very careful about the claims they make regarding the price impact of the carbon scheme and need to be able to justify price increases if the ACCC, litigation funders or disgruntled customers come calling.

Authored by Peter Keel, Partner, Norman Lucas, Partner and Erin Hourigan, Associate at Maddocks.

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