201406.20

Transcript – Interview with Chris Smith, 2GB

Subjects: ACCC, consumer affairs, small business

Chris Smith: What happens when you see an airline ticket for $90. Do you think you would get the same demand for the ticket when you have advertised it for $59? Of course you won’t. I thought we would clear up this little bit and what the Minister can do and what the authorities can do. Bruce Billson the Minister joins me on the line. Minister good afternoon.

Minister Billson: How are you?

Chris Smith: I am very, very well. It was the ACCC wasn’t it that you got onto this at the get go?

Minister Billson: Yeah we got both ASIC and the ACCC to deal with it. It seems to be bouncing between the two, a bit like a ping pong ball, and I was unsatisfied it was being handled in a surefooted way because this is a big concern for consumers. Chris, in your intro you nailed exactly what the problem is where under Australian law you’re supposed to disclose the full price of a goods and service that’s being offered to consumers, yet in some cases you’ll go an make a purchase and then have all these add-ons that aren’t optional, they are obligatory sort of further costs that should have been reflected in the advertised price. That’s drip pricing, that deals with some of what we have been talking about that you’ve touched on and the ACCC is taking some action in relation to some airlines.

Chris Smith: What do you mean action? What can they do?

Minister Billson: They are prosecuting actually so I can’t get into the gory details for fear of intervening into that legal process. But the ACCC has taken a couple of airlines to court over the issue of failing to disclose the full price of fares and having a whole bunch of fees that frankly you can’t opt out of Chris. It wasn’t as if there was an alternative for you to go some other way to get the fee that was advertised, you had to incur all of these additional fees to complete the transaction.

Chris Smith: But we are hearing today that the authority is powerless to act or punish.

Minister Billson: Yeah not in every respect. When it’s drip pricing – that’s when there are add-ons and add-ons and add-ons that aren’t disclosed, there is legal machinery to deal with that. But what I tasked ASIC and the ACCC to do was to work out what the scope is of the existing law and weather further action needed to be taken. We saw in some area’s including the utilities area, booking hotel rooms that they would advertise the price and then beneath it would be oh by the way we are going to charge you a monster if you want to use your credit card. This kind of add-on credit card surcharge is something that is slightly different. Where you’ve got limits in the legislative power, that’s what ASIC was reflecting on. The RBA a little over a year ago issued some guidelines. Our hope was that the few recalcitrant areas of the economy, and lets name them, they were the energy providers, hotel booking services and the airlines who were largely the villains in this regards. Some have changed their ways, but some haven’t and now we are looking to see whether further action is required.

Chris Smith: Don’t you have to change the law?

Minister Billson: That may involve a change to the law.

Chris Smith: Are you prepared to do that?

Minister Billson: Well we are waiting for the advice from the Financial Systems Inquiry. This is one of a number of things that they have been tasked to look at. Because if we are to change the law and put a cap on these kinds of things, what I am afraid of is that you then may see that cap applied as a standard charge right across the economy as an additional charge that doesn’t appear in most transactions now where these kinds of charges are simply absorbed. So we are just trying to make sure we are not creating a much bigger problem in solving a narrow one with a few recalcitrant players in the economy.

Chris Smith: Explain this to me – if they take out a full page advertisement in say the Sunday Telegraph and they put $59 to the Gold Coast in really big writing on a full page ad and then down in the small print at the bottom of the page where you need your magnifying glass to see it, if they put you must add a credit card charge onto this, you must add this onto that and the full price will be $89. If they do that – can they be touched?

Minister Billson: If they make it clear and they aren’t making false or misleading representations, it may be poor commercial practice but there are limits to the law. There’s that proverbial asterisks that I think I see on too many ads that’s got the ‘conditions apply’…

Chris Smith: So they are covered?

Minister Billson: They need to go to some effort to explain what the conditions are rather than just leave that hanging. So if they make that known that there are other burdens that accompany that price, that is less of an issue than if they put that price out there and then shock horror they put further charges on you.

Chris Smith:
But you’ve got to be an ant to read some of this fine print. You’ve got to have a magnifying glass to see it.

Minister Billson: Let’s be frank – some of it is pretty shabby and that’s why we are strongly supporting the actions of the ACCC and why we have put another $80 million into their budget for this and over the forward estimates to make sure they’ve got the power to catch up with businesses that aren’t doing the right thing. The vast majority are. We are seeking not to introduce new burdens that might actually have the effect of creating a new standard charge right across our economy, when the vast majority of businesses will simply take your card, they’ll give you the price, that’s the end of it and they’ll work out in terms of their pricing strategy if there are charges that need to be accommodated. They work that through when they are setting the price that we ultimately pay. We don’t want to see some plus two per cent added on across the economy where that is not where the concern is. It’s in a couple of particular market segments and I say to your listeners Chris, if you think they are doing you over or playing funny buggers with you, consider another business and let them know. While that work is going on we will continue with the Financial Systems Inquiry and to see whether the Reserve Bank Guidelines are going to have enough teeth to bring about a change in behaviour but early evidence with a couple of notorious parties suggest we might need to do more.

Chris Smith: Okay on another front, I know you’ve been selling the budget like the rest of the Cabinet have been as well but you were remarkably silent when Woolies was found to be badgering farmers for advertising money to support a celebrity chef campaign.

Minister Billson: Yeah I don’t think I was actually…

Chris Smith: Well that was poor form by those from the supermarket chain.

Minister Billson: Yeah look we’ve got a whole range of inquiries going on. You’d be aware there’s some litigation going on about unconscionable conduct involving the way in which big business are the most commonly referred to examples, in the supermarket industry, deals with their suppliers. There is some litigation underway there…

Chris Smith: But this was a one off. This is different, this is different.

Minister Billson: This is different in a sense that for your listeners benefit, a lot of suppliers already pay some kind of a marketing levy to the supermarket chains so that they get a bit of a presence and profile in the advertising.

Chris Smith: But this was an add-on. All of a sudden we have Jamie Oliver coming over here and they wanted more money out of the suppliers. Like fair dinkum.

Minister Billson: Well I think basically if Jamie Oliver was out there saying ‘don’t put a choccy biscuit in your kids lunch, put a bit of fruit’ I think this was to say if the pear producers coughed up a little more money they would say put in pear or if it was an apple producer, the ad would say put in an apple.

Chris Smith: Unfair.

Minister Billson: This was all done supposedly voluntarily but it reflects a real challenge in our economy where there is this imbalance in market power where suppliers might feel kind of obliged to do things they might not otherwise do for fear of losing share and supply opportunities. It’s been referred to the Commission to see whether the conduct breaches any of the current law but it does point to a key point Chris and that is, we’ve got the law we’ve got now and that’s the toolkit. We are not sure it is completely adequate and that’s why we have got Professor Ian Harper conducting a root and branch review of these laws, which were largely shaped 22 years ago when the two supermarket chains had about a 40 per cent market share. It’s now about 80 per cent and if you and I were suppliers to the supermarket chains, I tell you what, it’s a bit like trying to avoid upsetting your mother in law – there’s not a lot of joy if you get on the wrong side of her.

Chris Smith: Apparently I heard that Woolies was basically upset that the farmers came out and revealed all of this which is why they have taken it further. One quick one before we let you go. Big story about the four pillar banking policy, further deregulation of the banking sector according to Wiki Leaks to allow foreign institutions into Australia. Can you guarantee small lending businesses, mortgage operators and credit unions, they will not be wiped out by any mooted changes, any deregulation?

Minister Billson: We are looking to not wipeout smaller banks – we actually want to see competition enhanced, not reduced. That report in the Fairfax newspapers talks about a negotiation which started under the previous government and has barely got out of first gear. What we’re actually doing is trying to expand and improve competition in the financial services area. Many of your listeners that are small businesses would know it’s harder to get access to finance now and if you do, it’s more expensive and you’ve got to mortgage your house and your first born to get it. This has happened because there has been a concentration but we are trying to enhance competition and encourage those smaller and new entrants into the marketplace. So that story, let’s just say peaked early Chris. I mean, it’s very early days in the discussions, I haven’t seen the detail of the text but we don’t agree with any idea that someone puts forward if it’s not in our national interest and right now all that we are doing and putting our energy into is trying to enhance competition, not diminish it in the banking sector. The Financial Systems Inquiry has one of its objectives to look at what we need to do to extend competition, encourage new avenues for access to finance and to make sure those people that are the engine room of our economy, small business men and women, can have access to affordable finance rather than some of the headwinds they are facing now.

Chris Smith: You’re at a conference today, thank you so much for making and squeezing us in in between those commitments. Thank you very much for your time.

Minister Billson: Good to speak with you and your listeners.