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AUS: First GST Public Compliance Commitment

The Chairman of the Australian Competition and Consumer Commission, Professor Allan Fels, today welcomed the announcement by Qantas Airways of a Public Compliance Commitment to adhere to the ACCC's Price Exploitation Guidelines in relation to the New Tax System changes.

Qantas made the announcement at the same time as it indicated that it would increase domestic fares by 7.5 per cent for travel on or after 1st July 2000, when the goods and services tax (GST) is introduced.

A Public Compliance Commitment involves a clear statement of a corporation's intent to:

comply with the principles of Part VB of the Trade Practices Act 1974, namely not to engage in price exploitation in relation to the New Tax System changes;

comply with the Price Exploitation Guidelines;

pass on to consumers any cost benefits realised as a result of the tax changes;

advertise and display prices on a GST-inclusive basis in a manner which is not misleading or deceptive; and

extend its trade practices compliance program to cover the New Tax System changes.

The ACCC will examine the methodology used by the corporation to assess the impact of the New Tax System initiatives on costs and prices. Public Compliance Commitments will be backed up by the provision of relevant information to the ACCC about the cost changes for the corporation arising from the New Tax System changes. This information would include data on cost savings that should be passed on to consumers, the extent to which cost savings are actually realised and, retrospectively, the extent to which they were actually passed on.

Commitments will be placed on the ACCC's public register.

"Receipt of a Public Compliance Commitment cannot be construed as endorsement by the ACCC of any specific pricing decisions made by corporations during the period of transition in implementing the New Tax System changes.

"Companies will make their own pricing decisions and will need to explain the basis for these decisions to their customers.

"The ACCC has significant powers to intervene to protect the public should it have any concerns that any company is taking advantage of the New Tax System changes to increase profit margins, and not fully reflecting cost savings in its prices".

If an allegation of price exploitation arises, the ACCC will consider, among other things, the information provided in support of a Public Compliance Commitment in assessing whether or not any specific pricing decision was a breach of the Price Exploitation Guidelines and the Act.

"Consistent with the objectives of these commitments Qantas has stated it will cooperate with the ACCC in any inquiry should the ACCC have any concerns about its price changes", Professor Fels said.

Public Commitments are one element of the ACCC to ensuring price exploitation in relation to the New Tax System changes does not occur.in addition to Public Compliance Commitments, the ACCC:

has issued Guidelines about when it considers that price exploitation has occurred has established a nation Consumer and Business Hotline for information and complaints (1300 302 502) is currently promoting awareness of the price exploitation prohibition through publications, its website and its business, consumer and advises and is developing extensive business and consumer education campaigns to ensure there is a high level of awareness in the community about what can be expected in relation to price changes in response to the New Tax System initiatives. The ACCC will closely monitor price changes throughout the economy. The ACCC will take action to deal with those who contravene the prohibition on price exploitation. It also can take action to prevent price exploitation by issuing notices to set maximum prices or to seek injunctions and fines.

"The penalties for engaging in price exploitation are very significant with fines of up to $10 million per offence for corporations and $500,000 for individuals".

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