The Commerce Commission is reminding businesses that they risk breaching the Fair Trading Act if price increases are misleadingly represented as being due to the GST increase. This follows a warning issued to the owners of Wellington’s daily paper, The Dominion Post, which represented that a price increase was ‘forced’ by the GST change, when this was not the case.
The Commission has received a flurry of complaints from consumers this week following the increase in GST to 15 per cent on 1 October. Many of the complaints concerned prices that had increased by more than the rise in GST but were allegedly advertised as being due to the increase in GST.
Among complaints received was that it was misleading to use the GST change to explain the reason for the increase in price of The Dominion Post’s weekday edition from $1.50 to $1.60. The GST increase alone would have resulted in a new price of $1.53. The notice explaining the price increase was on the front page of the newspaper on 1 October 2010.
The Commission has issued a formal warning to Fairfax New Zealand Limited, owners of The Dominion Post. When contacted by the Commission the company accepted the notice was “incorrectly worded” and in fact the 10 cent price increase included its annual scheduled price increase, which had been delayed from June 2010.
“Businesses can increase their prices whenever they like, for any reason. However, if a business offers a reason for the price increase it must not be misleading. To claim that an increase in price is due to the increase in GST, when the increase is far greater than the cost of the GST rise, is potentially a breach of the Fair Trading Act,” said Graham Gill, Enforcement Manager, Auckland, for the Commerce Commission. “Some businesses are choosing a price that is different from the GST increase to ensure that a price is practical, particularly for goods that are often paid for by cash. However, they need to ensure that any reason given is clear and accurate.”
“Consumers are entitled to expect accurate information when they buy goods or services. The Commission had earlier issued advice to businesses not to misrepresent the GST increase and it appears that message either did not get through or was ignored by some,” said Mr Gill.
The warning to Fairfax is the first issued by the Commission in relation to the GST increase. The majority of GST related complaints received so far have been assessed as either unlikely to breach the Fair Trading Act or have not met the Commission’s enforcement criteria. The Commission has four other GST cases currently under investigation and will make no further comment about those cases.
The Commission will continue to monitor the situation, and assess complaints received, and may take further action against businesses that continue to misrepresent the GST increase in the future.