Commission, Forum agree on fuel surcharges

Media Release

Issued 3 February 2006/096

Commission and Road Transport Forum agree stance on fuel surcharges

Following a recent meeting with the Road Transport Forum on the use of fuel surcharges, the Commerce Commission and the Road Transport Forum have achieved a common understanding on how prices should be represented.

Consistent with the Air New Zealand judgment, price increases should not be disguised as fuel surcharges: headline prices must include all operational costs.

“Companies are free to vary their prices, either up or down. Prices may also vary during the term of an agreed contract, provided the total price is represented and provided that this is allowed for in the contract. In addition, companies are able to inform customers as to the basis for any variation. They just need to do this using a total price and not hide price increases by calling them ‘surcharges’”, Commission Director of Fair Trading Deborah Battell said.

“Using surcharges puts those businesses that do include all costs in their quoted prices at a competitive disadvantage. It is about ensuring that customers can easily compare prices.

“All businesses have input costs that vary and the transport industry is not a special case. The Commission is also following up other companies in other industries who are using surcharges in their pricing.”

Ms Battell also added that the Commission had received a large number of calls from members of the public asking whether they were entitled to refunds of the surcharges. “Consumers are not entitled to any refunds of the surcharges. This is an issue of how people should be informed about the price they have to pay, not the amount they have to pay.”

Background

In his 24 November 2005 judgment against Air New Zealand’s fare advertising, Judge Thorburn ruled that fuel costs are a normal operating cost of business and must be included in headline prices.

Since that judgment the Commission has contacted more than 70 businesses, mainly in the road transport industry. Of these, 32 were found to be imposing extra charges for fuel.

The Commission issued a warning to those businesses on 25 January 2006 that fuel costs must be incorporated into the price.

The Commission continues to find examples of businesses that have seen fit to introduce fuel surcharges.

ENDS

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