Regulation
Impact Statement:
unit PRICING
Contents
Part
A Introduction and Background
- Introduction
- The objective of government action
- Unit pricing
Part
B High-level options for a unit pricing scheme
- No scheme
- Voluntary scheme
- Mandatory scheme
Part
C Implementation options
- Form of the scheme
- Scope of the scheme
- Nature of disclosure
- Education and
information
- Enforcement and
penalties
- Summary of impact
analysis
Part
D Consultation
Part
F Implementation and Review
Attachments
A Report of the ACCC inquiry – Unit pricing overview
B Queensland Fair Trading Amendment draft 2008
C Summary Table of Issues Paper Submissions
PART A INTRODUCTION AND BACKGROUND
1. INTRODUCTION
This regulation impact statement (RIS) addresses options for the design
and the implementation of a mandatory, nationally consistent unit pricing
scheme for standard retail grocery items.
On 5 August 2008 the Assistant Treasurer announced that the Government
would consider the best way to implement a mandatory, nationally consistent
unit pricing scheme. This announcement was part of the Government’s preliminary
response to the Report of the Australian Competition
and Consumer Commission (ACCC) Inquiry into the Competitiveness of Retail Prices
for Standard Groceries (the ACCC report).
In its report, the ACCC (see Attachment A) concluded that:
•
Unit pricing should apply in a consistent manner to
standard grocery items sold through significant supermarkets and large
independent stores. Such consistency should extend to product coverage, unit
of measure and display characteristics.
•
Significant benefits would flow from the mandatory
introduction of unit pricing through its promotion of easier price comparison
to consumers.
•
The administrative body responsible for introducing
unit pricing should have the flexibility to make binding decisions regarding
the precise application of unit pricing. Any legislative instruments should
clearly delineate which supermarkets and products are included in the unit
pricing regime and allow for compliance monitoring and enforcement.
•
A public education campaign should accompany the
introduction of unit pricing to ensure the greatest impact.
•
A 6-to-12-month implementation period will
sufficiently reduce costs, while ensuring that unit pricing is implemented in a
timely manner.
•
A cost-benefit analysis should be undertaken to
determine the application of the scheme to smaller retailers.
Prior to the 1990s, the packaging of groceries was regulated such that
packaged food items could only be sold in a range of standard package sizes. Since
the deregulation of standardised packaging in the 1990s, packaged goods have
been sold in an increasingly large array of different sizes. Goods may now be
sold in similar, but not identical package sizes. While providing increased
flexibility for industry and consumers, this move away from standardised sizes has
made it difficult for consumers to accurately and efficiently compare value for
money on a price per quantity basis in a timely way. This is particularly the
case for consumers with low numeracy skills. Unit pricing is a transparency tool
which empowers consumers to readily compare different sized goods by representing
prices for standard units of measure, without reducing businesses’ ability to
package their products in the most effective and efficient way.
The extent to which consumers could benefit from unit price information
is difficult to estimate, however, a number of pieces of research have been
cited in submissions to Treasury.
A report by Insight Partners and Citi Investment Research
found that, based on overseas experiences, the implementation of unit pricing
could lead to savings for consumers of approximately $810 million per year.
2. THE OBJECTIVE OF GOVERNMENT ACTION
The Government aims to empower consumers to make informed decisions
about their purchases of grocery items through greater price transparency.
3. UNIT
PRICING
Unit pricing is the display of a price of goods per unit of measure
(e.g. per 100 grams, per kilogram, per litre or per item). A standard per unit
price is displayed regardless of the actual volume or quantity of the good
packaged to be sold.
Currently, unit pricing
is usually applied to the sales of meat and fresh fruit and vegetables pursuant
to state and territory trade measurement legislation which requires products
sold by weight to display unit prices. The existing Commonwealth trade
measurement legislation does not contain similar provisions. However, on 24
September 2008 the National Measurement Amendment Bill 2008 was introduced into
Federal Parliament. The legislation introduced will establish the legal
framework for a single system of weights and measures replacing the current
situation across each State and Territory. The Commonwealth is currently
examining which aspects of the existing UTML and Regulations will be
transferred to the Commonwealth. The national trade measurement system will be
administered by the Commonwealth from July 2010.
Benefits of unit pricing
Unit pricing provides a convenient comparison tool for consumers. Unit
pricing aids consumers who choose to compare across-brands and inter-store, or
different sizes of the same brand, by providing a clear reference point on
which to compare prices. Once quantity is held constant, differences in unit
pricing should only reflect qualitative differences in the products.
In many markets, unit prices decline with package size, which in part
represents the economics of packaging, but this relationship does not hold universally.
Unit pricing would make the pricing of different sized packages within the same
type and brand of product more transparent.
A nationally consistent unit pricing scheme would allow consumers to
more easily compare goods between retailers. It eliminates the possibility of
different systems from store to store and therefore would lower potential confusion
for consumers comparing goods across retailers.
Unit pricing in Australia
Voluntary unit pricing schemes currently exist in the Australian
grocery market. Leading grocery retailers have unit pricing systems already in
place or planned in the near future.
•
In November 2007 ALDI introduced unit pricing into
its Australian stores. ALDI’s unit pricing model generally provides prices for
units of 100mL or 100g, however there is flexibility to use a different unit of
measure where appropriate.
•
In July 2008 NSW–based supermarket chain Franklins
announced that it would introduce unit pricing into its stores in September
2008.
•
Woolworths and Coles indicated in their evidence to
the ACCC inquiry that they intended to introduce unit pricing and that both
would prefer a mandatory scheme if the Government was to regulate.
•
Coles has since indicated it will be in the
position to pilot unit pricing in selected stores during March 2009. Pending
the success of the pilot, Coles would introduce unit pricing into further
stores over a 6-12 month period.
•
On 3 November 2008 Woolworths announced it would
apply unit pricing across all of its Australian stores. Woolworths stores in
New Zealand have displayed unit pricing for several years.
In addition, a number of
proposals for regulatory unit pricing models have been proposed recently.
•
On 15 May 2008 Senator Fielding introduced into the
Senate the Unit Pricing (Easy comparison of
grocery prices) Bill 2008, which set out a regulatory scheme for
introducing a unit pricing regime. On 18 June 2008, Senator Fielding’s
Bill was referred to the Senate Standing Committee on Economics.
–
On 1 September 2008 the Senate Economics Committee
recommended that the Bill not be passed as it did not achieve the right balance
between maximising the utility of the scheme for consumers and minimising costs
of implementation to retailers.
•
The Queensland Government has prepared a draft Regulation
under the Fair Trading Act 1989
(see Attachment B) to implement a state-based unit pricing scheme. The
Queensland Government has announced that the scheme may commence in mid 2009.
Unit pricing internationally
In New Zealand unit pricing is a common practice in the retail grocery
industry, although it is not mandatory.
European Union
In 1998, the European
Commission adopted Directive 98/6/EC on
consumer protection in the indication of the
prices of products offered to consumers. This is a principles-based
directive that requires member states to achieve a result — the display of unit
prices by retail businesses. The directive does not prescribe the manner in
which a unit pricing scheme must be designed. In practice, schemes differ between
member countries.
•
The Directive stipulates that the unit price must
be unambiguous, easily identifiable and clearly legible. The Directive allows
Member States to exempt certain small retail businesses where the obligation to
indicate the unit price would entail an excessive burden.
United
States of America
Unit pricing was first introduced
in a small number of American states in the 1970s. Unit pricing is regulated
at a state level and a range of mandatory and voluntary systems currently exist.
In addition, the Uniform
Unit Pricing Regulation prepared by the National Institute of Standards and
Technology (NIST) provides a template national approach for States that choose
to adopt unit pricing. A number of States have adopted this template with or
without modification. The NIST is a non-regulatory federal agency, within the
US Department of Commerce, that promotes innovation and industrial
competitiveness by advancing measurement science, standards and technology.
In 1997 the National
Conference on Weights and Measures (NCWN), a statutory development body, in
partnership with the Office of Weights and Measures of the NIST, adopted a
revised version of the regulation to permit retail stores that voluntarily
provide unit pricing to present prices using various units of measure.
PART B HIGH-LEVEL
OPTIONS FOR A UNIT PRICING SCHEME
On 5 August 2008, the Australian Government announced its
intention to consider the best way to implement a mandatory nationally consistent
unit pricing scheme. This RIS examines options to implement that scheme.
To establish the context in which the unit pricing scheme will be
implemented it is useful to identify and briefly discuss the three high-level
options that exist in respect of the introduction of unit pricing: no action
from the Commonwealth Government; implementing a Commonwealth voluntary scheme;
and implementing a Commonwealth mandatory scheme.
4. NO
COMMONWEALTH ACTION
In the absence of
Commonwealth regulation, there would be no additional requirements for
retailers to display unit pricing. This would allow the status quo to
continue. There are a number of key features of this approach which it is
worthwhile discussing.
First, pursuant to the
Uniform Trade Measurement Regulations (UTML) that exists in the states and
territories, items sold by weight, including grocery items such as meat,
seafood and fruit and vegetables, would continue to be subject to unit pricing
regulation.
•
For example, the Trade
Measurement Act 1989 – Regulations (Trade Measurement (Pre-packed Articles)
Regulations 1990 applies unit pricing to certain pre-packed retail
foods (other than where the package is a rigid container). Fruit, cheese and
cheese products, dressed poultry, fish (including crustaceans), mushrooms,
vegetables, meat and smallgoods must be marked with the total price and price
per kilogram, in such a manner as to be readily seen and easily read.
Second, there is
currently no regulatory restriction on retailers implementing self or industry initiated
unit pricing schemes for packaged grocery items.
Third, there is no
constitutional impediment to State and Territory Governments regulating in
respect of unit pricing. In this regard, the Queensland Government has stated
its intention to implement a mandatory unit pricing regime within that state.
There is also potential for other jurisdictions to develop their own regimes. In
the context of the Productivity Commission’s Review
of Australia’s Consumer Policy Framework, the Commonwealth
Government and the Council of Australian Governments (COAG) have observed that
overlapping and inconsistent economic regulation impedes productivity growth
and reduces the competitiveness of the economy. In an increasingly national market,
differences between jurisdictions increase the burden and costs for enterprises
trading across state and territory borders and potentially reduce the utility
of unit pricing schemes to consumers.
5.
IMPLEMENT A COMMONWEALTH VOLUNTARY SCHEME
Since the publication of the ACCC report, there has been a greater
profile given to unit pricing within the retail grocery industry. A number of
retailers have indicated a willingness to implement unit pricing voluntarily. The
principle mechanism available to the Government to implement a voluntary unit
pricing scheme is through a voluntary code of conduct under part IVB of the
TPA.
Part IVB provides for
both mandatory and voluntary codes of conduct. Mandatory codes are binding on
all participants in an industry while voluntary codes are binding only on
industry participants that choose to be bound.
The co-regulatory option of a voluntary scheme would allow traders to
nominate whether to participate in a unit pricing scheme. This option would therefore obviate the need for Government to
determine any exemption criteria for smaller retailers. Those that chose
to enter the voluntary scheme would have the resources to implement unit
pricing in their retail outlets and the market‑driven incentives to do
so.
A voluntary scheme may allow for retailers with existing unit pricing
schemes to continue with their schemes without modification. This would reduce
any transition and set-up costs incurred by such retailers.
A disadvantage of a voluntary
scheme is that it would be difficult to compel retailers who choose to adopt
their own unit pricing schemes to comply with the industry-agreed
arrangements. In this context, there may not be a nationally consistent
approach to unit pricing, especially given a large number of retailers do not
operate in multiple jurisdictions. This could lead to divergent and
different unit pricing schemes. In addition, there is potential for the
usefulness of unit pricing to consumers to be undermined by poor unit pricing
practices. For example, retailers who are not covered by the mandatory scheme could
engage in selective unit pricing, whereby they only display unit prices for
items for which they are competitive, and give an overall impression that all
items they sell are relatively cheap.
6. IMPLEMENT A COMMONWEALTH MANDATORY
SCHEME
This is the approach that has been announced by the Government. In its
report the ACCC recommended a national mandatory unit pricing scheme. The
Assistant Treasurer announced on 5 August 2008 that the Government
would consider the best way to implement a mandatory, nationally consistent
unit pricing scheme.
A mandatory unit pricing
scheme would be binding on all industry participants covered by the scheme. This
approach would clearly best facilitate customer understanding by creating a
single nationally consistent system that is recognised from store to store.
Many consumer, government
and industry stakeholders favour a mandatory unit pricing scheme. Consumer
advocate groups CHOICE, the Consumer Action Law Centre and the Queensland
Consumers’ Association have campaigned for unit pricing over an extended period
and expressed strong support for a mandatory scheme throughout the ACCC’s and
subsequent inquiry processes.
The two largest industry
stakeholders, Coles and Woolworths, indicated a preference for a mandatory
scheme during hearings of the ACCC inquiry into the grocery sector, if the
Government was to regulate in this area. The Australian National Retailers
Association, which represents large retailers, indicated in its submission that
all retailers should be included in the scheme.
A mandatory national
scheme would provide certainty for consumers and industry. While estimates of
the total compliance cost impact of implementing unit pricing vary, there appears
to be general consensus among stakeholders that operational costs will likely
be low following initial set-up costs. Set-up costs can be reduced by
providing a longer initial implementation period, which takes into account a
period in which retailers would usually replace existing price signage.
The implementation and
ongoing compliance costs to retailers clearly are sensitive to the decisions
made about the detailed design elements of the unit pricing scheme. The
principal categories of costs have been identified by stakeholders as:
•
additional wages for manual information entry and
re-labelling/re-stripping existing labels;
•
any necessary changes to shelf stripping,
electronic shelf labels and store layouts; and
•
IT systems costs — back office software system
upgrades and vendor solutions, including;
–
file format changes and integration;
–
upgrading product catalogue file management; and
–
any necessary changes to hardware, such as label
printers.
In submissions received
by Treasury, retailers and their representatives have given estimates of the
costs involved, with the caveat that these are subject to the final scope and
form of the scheme. These estimates are summarised in Table 1.
TABLE 1: Compliance cost
estimates.
|
Retailer
|
Implementation Costs
|
Description
|
|
Coles
|
$10 million
(6-12 month period)
|
Coles indicated that the implementation cost
estimate would be subject to the scope of the scheme and time frame for
implementation — a shorter implementation period would increase the cost
estimate.
If the scheme requires changes to the entire shelf
edged pricing strips in all stores, the total implementation cost would
increase to $17 million. The most likely trigger for these additional
costs would be highly prescriptive unit price display requirements.
This estimate does not included ongoing compliance
costs.
ACCC inquiry1
Coles estimated the
costs of introduction would be around $20 million if immediate implementation
was required. This estimate would decrease to between $5 million and
$10 million if a 12-18 month timeframe was allowed.
|
|
Metcash
|
$10 million
(12 month period)
|
Metcash based their estimate on implementation of a
mandatory scheme with no change to shelf stripping required. If shelf
stripping is to be changed, the implementation cost could rise to $23.8m.
ACCC inquiry1
Metcash estimated that the costs of a unit pricing
regime would be at least $9.9 million. This was comprised of:
•
changes to the IT systems used in price
calculation and label printing activities ($1.2 million);
•
one-off change to all price labels involving
labour costs of $8.8 million; and
•
ongoing costs associated with additional data
entry for unit pricing requirements are estimated at $0.4 million annually.
|
|
Woolworths2
|
$4-5 million
(immediate)
|
Woolworths indicated an
estimate of wages alone, if a unit pricing was required to be rolled out
immediately.
ACCC
inquiry1
At the ACCC inquiry
Woolworths anticipated the cost of implementation would be around $4
million. The cost was largely dependant on the timeframe permitted for the
introduction and the scope of the regime. If Woolworths was required to
change its ‘shelf-stripping’ to accommodate mandated font size, the capital
costs would be around $6 to $7 million.
|
1Coles, Metcash and Woolworths also
provided initial cost estimates to the ACCC Grocery Inquiry.
2 This information was provided by
Woolworths on 6 August 2008 to the Senate Standing Committee on Economics’
inquiry into Senator Fielding’s Unit Pricing (Easy comparison of grocery
prices) Bill 2008.
A nationally consistent
scheme would entail lower compliance costs than equivalent, but different,
schemes applying in some states and territories for retailers that operate in
more than one jurisdiction. The benefits of the scheme,
which would accrue to consumers, are also difficult to quantify a priori. As
such, it is not possible to undertake a detailed cost-benefit calculation prior
to implementation of a scheme. However, the likely compliance cost impacts of
the specific design approaches are discussed where relevant in Part C —
Implementation Options.
PART C IMPLEMENTATION
OPTIONS
This section considers the impact of feasible options for specific
design elements of a mandatory national unit pricing scheme. Where relevant and
material, the impacts on consumers, businesses and government administration
are discussed.
7. FORM
OF THE SCHEME
A mandatory national unit pricing regime could be implemented either
via specific legislation or via an industry code prescribed under Part IVB of
the TPA.
Legislative
scheme or mandatory industry code
The choice of a legislative scheme or industry code would not have a
material compliance cost impact on business and would not impact on consumers’
use of unit pricing information.
If the scheme was to be enacted under primary legislation, it would be
appropriate that a legislative unit pricing scheme would be enacted under the
TPA. The TPA is the primary consumer protection legislation that exists at the
Commonwealth level. Alternatively, these amendments could be included under
the Trade
Measurement Act 1989 or a stand-alone Act. However, given the extensive consumer law
enforcement infrastructure already established under the TPA and the
non-technical nature of a unit pricing scheme, the TPA would be most
appropriate.
In general, principal legislation can be less flexible than an industry
code (which would be a Regulation under the TPA) should minor or technical changes
be required to the scheme in future. This would be a particularly relevant
consideration in the context of a unit pricing scheme in the event that minor
changes to the design of the scheme (such as the categories of included
products) are required in future as retailers’ capabilities change or new
products enter the market.
Given industry support
for unit pricing amongst the larger retailers, an industry code of conduct
under Part IVB of the TPA is a viable option. Mandatory industry codes
currently exist under the TPA in respect of the wholesale oil industry,
franchising industry and wholesale trade in horticulture produce.
8. SCOPE OF THE SCHEME
There are a wide range of retail businesses that sell grocery items,
ranging from large ‘full service’ supermarkets to small retailers specialising
in a single category of grocery item, such as bakeries. Grocery items also are
often sold by retailers who predominantly provide non-grocery items. In
addition, there is no standard definition of ‘grocery items’ used in
Commonwealth regulation.
This section discusses the considerations involved in determining the
appropriate scope of the unit pricing regime in terms of both the types of
retailers it will apply to; and the range of grocery items for which unit price
information must be displayed.
SCOPE OF RETAILERS
Application to store-based retailers
Traditional grocery retailers, with a ‘bricks and mortar’ retail
shopfront range from small corner‑store businesses that are independently
owned, to large multiple-outlet supermarket chains that operate nationally.
Submissions received by the Treasury in response to the Government’s Issues
Paper of 12 September 2008 indicate that compliance costs could vary
significantly between retailers due to factors such as:
•
existing IT capabilities and methods of shelf price
display;
•
the ease with which shelf labels can be replaced;
and
•
individual businesses’ ability to absorb compliance
costs in the short term.
The benefit of unit pricing to consumers will vary depending on the
likelihood that consumers will use this information. While price is generally
a factor in all purchasing decisions, the importance of price, or the ability
of consumers to use unit pricing information, will vary depending on the
context in which they are shopping. If a consumer is shopping purely for
convenience to purchase a small number of items it is unlikely that price will
be as relevant as other factors such as store location. However, if a consumer
is shopping for a large number of grocery items to fill their household
requirements for a period of a week or fortnight, it is more likely that price
will be a primary consideration.
The Australian National
Retailers Association (ANRA) suggests in its submission that in smaller stores
(such as those with a floor space below 200m2), there is unlikely to
be a sufficiently broad range of products for consumers to make meaningful use
of unit pricing.
In its report, the ACCC
estimated that the share of packaged groceries sold by the two largest
supermarket chains (Coles and Woolworths) is around 70 per cent. This
indicates that the majority of consumers’ grocery purchases are made at larger
retail supermarkets, which also stock a wide range of products. The ACCC
suggested that it may be desirable to limit the application of a mandatory unit
pricing regime to significant supermarkets due to the relatively higher implementation
costs that could be borne by smaller grocery retailers if the scheme were
applied to all grocery retailers. In addition, the structure of the grocery
retail industry in Australia indicates smaller grocery retailers do not have a
large share of the market and the consumer benefit from unit pricing at smaller
retailers would be commensurately smaller.
The retail
grocery market structure
The Australian retail
grocery market is characterised by two major supermarket chains, two smaller
supermarket chains, independent supermarkets affiliated with large wholesale
operations and speciality retailers (such as bakeries, butchers, fishmongers,
greengrocers, markets and pharmacists). In total, there are approximately 4,500
supermarkets operating in Australia. In addition there are around 22,000
specialty grocery retailers.
While Australian
consumers may purchase their entire weekly grocery needs from a range of
retailers, the ACCC found that consumers tend to do a major grocery purchase
weekly in the one location with additional smaller ‘top-ups’ during the week.
The ACCC also found that 81 per cent of the ‘one-stop’ shoppers
ranked price as very important and currently compare certain key value items on
price.
Coles and Woolworths are
Australia’s two major supermarket chains. They account for approximately 87
per cent of stores above 2000m2
and around 96 per cent of stores above 3000m2. The Nielsen
Company’s ScanTrack data and data from Coles and Woolworths suggest that they
account for between 60-78 per cent of national sales in packaged groceries.
ALDI and Franklins are
the two smaller vertically integrated supermarket chains. The majority of
independent supermarkets in Australia are provided marketing and wholesale
services by Metcash. Although not a retailer, Metcash maintains an ownership
share in a number of retailer businesses.
TABLE 2: Market structure
|
AUSTRALIAN GROCERY MARKET STRUCTURE
|
|
Retailer
|
Number
of supermarkets
|
Average
floor size
|
|
Woolworths /
Safeway
|
780
|
Greater than
2000m2
|
|
Coles / Bi-Lo
|
750
|
Greater than
2000m2
|
|
ALDI
|
170
|
850 m2
|
|
Franklins
|
74 owned, 6
franchised
|
Between 1000m2
- 2000m2
|
|
Metcash
affiliated independants
|
Supa IGA
|
416
|
1400 m2
|
|
IGA (top-up shops)
|
719
|
600 m2
|
The administrative costs
on Government associated with enforcement of the unit pricing scheme will also
vary proportionately with the number of retailers included.
Should
small retail businesses be exempted from mandatory unit pricing?
Larger retail businesses
have provided a range of estimates of the compliance costs of implementing a
unit pricing scheme. These estimates vary from $4m to $10m with a 6-18 month
implementation lead time, with higher costs for immediate implementation.
Metcash was the only grocery retailer to submit a compliance cost estimate on
behalf of small retailers, suggesting that its independent sector would incur
costs of around $10m with a 12-month implementation timeframe. Smaller
retailers within the range of stores associated with Metcash are also much less
likely to be able to easily bear the costs of compliance in the short term than
larger stores. Metcash has previously indicated in its submission to the ACCC
grocery inquiry that there are three types of stores associated with the IGA
brand with the smallest (IGA Express) having an average floor space of 220m2.
Many small retailers
either use older, more inflexible labelling software which may not allow for
unit pricing or they use hand-labelling where prices are affixed to the actual
product. In both those cases the costs of upgrading to a new system which would
allow them to provide the unit price would be high.
Some retail businesses
which provide goods that can be considered grocery items may offer a small
selection of grocery items. Such businesses may specialise a small range of
items, such as health food stores, butcheries or greengrocers, or their primary
business line may be non-grocery items—such as department stores. The overall
benefits for consumers from unit pricing would likely be less in the case of
very small retailers or in stores which offer only a small range of grocery
items. While consumers may in some cases value a unit price in those
circumstances, consumer benefits are likely to be significantly lower than at a
large supermarket with a wider product range to compare.
In the absence of clear
evidence of the benefits of unit pricing in circumstances where consumers are
not purchasing a large range of grocery items (which would constitute a large
proportion of household grocery budgets), the application of unit pricing
should be limited to larger supermarkets, rather than specialist retailers or
small supermarkets.
How could an appropriate exemption
for small grocery retailers be framed?
Limiting the scheme to larger supermarkets could be done in a number of
ways, for example by excluding businesses that have a turnover, physical size
or product range below a prescribed threshold.
Submissions received by
Treasury generally supported the use of floor space as a measure on which to
judge the size of a retail businesses. However, it would be appropriate to
apply a floor space threshold only insofar as the floor space used for the
retail display of grocery products. Doing so would ensure storage areas are
not considered as well as ensuring that large general retailers which only
offer a small selection of groceries for convenience are not included.
The ACCC did not examine
this issue in detail in its report. It did however note that the largest
supermarket retailers, Coles and Woolworths, accounted for more than 60 per
cent of the 2400 stores with a floor space of more than 1000m2. There have been a wide range of views
from stakeholders on the appropriate amount of floor space that should warrant
inclusion in a mandatory unit pricing scheme.
•
In its consideration of Senate Fielding’s Bill, the
Senate Economics Committee concluded that a unit pricing scheme should be
limited to stores with a retail floor space greater than 1200m2. By
contrast, the regulatory model proposed by the Queensland Government would
apply to stores larger than 200m2.
•
Submissions from larger retailers have tended to
favour either applying the scheme to all retailers (with or without additional
transitional arrangements for smaller retailers), or making the floor space
threshold relatively low. Groups representing smaller retailers have suggested
that floor space thresholds should be used to exclude smaller retailers and
their suggested thresholds are usually targeted at stores that compete directly
in terms of product range or price with the large supermarket chains.
•
ANRA suggests that the 200m2 floor space
limit proposed in the Queensland regulation is too low as such stores are
unlikely to have a sufficient range of products for consumers to make use of
unit pricing. ANRA also contends that 1200m2 is too large and would
exclude around two‑thirds of supermarkets. ANRA suggests that 500m2
would be an appropriate threshold.
•
The National Association of Retail Grocers of
Australia (NARGA) suggests that 1500m2 would be the appropriate
threshold, on the grounds that in rural areas, large independent supermarket
stores may meet a lower floor space criteria despite being small businesses in
terms of their capacity to absorb implementation costs. In this context, there
does not appear to be any inherent justification for treating larger rural
retailers and rural consumers differently, particularly as the primary benefits
of unit pricing will most likely be in facilitating competition between brands
within a single supermarket, rather than competition between supermarkets.
Clearly, the use of floor
space dedicated to grocery sales as a criteria for inclusion in a unit pricing
scheme is generally considered by stakeholders to be the most appropriate
measure. However, to avoid unintended consequences, such as a fresh produce retailer
that also sells a small amount of other grocery items being included in the
scheme, it would be appropriate to limit the scheme’s application through a
secondary factor.
Other
measures of retailer size
Limiting the application of the scheme to those retailers that supply a
range of grocery products would ensure that large retailers with a limited
grocery product range would not be required to comply with the scheme. The
scheme is intended to make unit pricing available to retailers where consumers
would buy the bulk of their staple goods – primarily food items. However, other
non‑food items may be covered by the scheme if they are sold in that
store. This is the approach that has been taken by the Queensland Government
in its draft unit pricing regulation.
This could lead to situations where certain products must be displayed
with unit prices if they are sold in supermarkets but not at specialty stores
such as chemists or variety stores.
Other measures of business size, such as sales volume or revenue or
ownership structure would be impractical because they are more likely to change
over time and would require detailed investigations by regulatory authorities
to determine compliance with the scheme. This would impose compliance costs on
businesses and administrative costs on government and industry.
Recommended option for store-based
retailers
To ensure that both small grocery retailers and larger retailers with a
small offering of grocery products are excluded from the scheme, it would be
necessary to limit the application of the scheme both by floor space used for
the display groceries and grocery product range. Neither consideration by
itself would necessarily exclude both types of retailers.
Given evidence provided
to the Treasury, the appropriate level of floor space to be covered by the
scheme should be sufficient to cover those supermarkets that supply a large
proportion of consumers’ grocery needs. That is those with a floor space in
excess of 1000m2 and that offer for sale at least a certain range of
food-based grocery products. The size and range criteria could be refined
following more detailed consultation with stakeholders on a draft industry code.
Application of the scheme based on these criteria would have three principle
advantages:
•
they are most likely to cover those stores that
consumers use for the bulk of their grocery purchases;
•
they are readily understandable and would not be
complex to enforce (ie they can be ascertained via simple store inspection);
and
•
they have been favoured in other proposed
Australian regulatory approaches.
Application
to online retailers
The ACCC noted in its report that while the proportion of consumers
purchasing from online retailers was low, the popularity of this method of shopping
is increasing.
In respect of online grocery retailers, a definition based on floor
space is clearly not applicable. However, in general, it is reasonable to
expect that the compliance costs for online retailers would not be as
significant as a store-based retailer, since no physical changes to shelf
pricing displays would be required. Compliance costs for online retailers
would be limited to the costs of altering existing web pages to provide a unit
price in addition to a selling price. Consequently, the compliance costs faced
by online retailers would not vary in proportion to the size of the business.
It is, however, still appropriate to apply the second test — that the
retailer sells a range of food-based grocery items. This will ensure that supermarkets
that offer an online service must comply, but if a small company sells only a
few grocery items online they would not be required to comply.
Voluntary application of the
mandatory scheme
In the event that a retailer not covered by the scheme voluntarily
applies unit pricing to some or all grocery products in their range, the
question arises as to whether they should be required to comply with the
mandatory scheme or whether they could apply their own scheme.
A retailer could be thought to have voluntarily adopted unit pricing
when they display a unit price for any grocery product that is included in the
mandatory scheme and under circumstances that are covered by the scheme.
Not requiring voluntary adopters to comply with the mandatory requirements
of the scheme may encourage voluntary take-up but would undermine consistency
in approach. It may also give some retailers the ability to apply unit pricing
only to items with which they are most competitive on price and hence give the
impression that their entire range is cheaper than their competitors.
By contrast, applying the full requirements of the mandatory scheme to
retailers that voluntarily adopt unit pricing would ensure that consumers could
be confident that any unit pricing of grocery products throughout Australian
retailers would be compliant with the scheme. However, this may also be a
disincentive to voluntary unit pricing as the requirement to fully comply with
the scheme may increase the retailers’ costs.
The Consumer Action Law
Centre (CALC) and CHOICE both support the application of the scheme to
otherwise exempt retailers which voluntarily provide unit pricing. Other
submissions to Treasury did not comment on this issue.
Overall, the application of the mandatory scheme to voluntary unit
pricing would provide certainty to consumers about the requirements that apply
in respect of unit pricing and would provide a level playing field for
businesses subject to the mandatory scheme.
To ensure that voluntary
unit pricing is not discouraged there should be a transitional period, similar
to the initial transitional arrangements for mandatory adopters, to allow an otherwise
exempt supermarket to manage their adoption of the mandatory scheme.
SCOPE OF
PRODUCTS
To ensure maximum consumer benefit it would be appropriate to apply the
scheme to all ‘grocery items’ where unit pricing will be practical and useful
to consumers. As there is no universally understood definition of grocery
items it is relevant to consider whether the scheme should be positively
limited to a defined category of products, or to all products supplied by
grocery retailers unless they are goods subject to a specific exclusion. The
latter approach is used in the draft Queensland regulation.
The ACCC developed a working definition of groceries for the purposes
of its inquiry but did not attempt an exhaustive definition. The ACCC has
considered that standard groceries are generally non-durable, purchased
frequently and not consumed at the retail site. The broad categories of
standard groceries that the ACCC has generally used are dairy, fruit and
vegetables, meat and seafood, bread and grain-based products, other foods and household
non-food items, such as cleaning products, nappies, toilet paper and personal
items.
Goods currently
subject to the requirements of the Uniform Trade Measurement Legislation
The UTML already requires that prices per weight (unit prices) be
stated for unpackaged goods sold by weight, such as meat and fresh fruit and
vegetables. In addition, the UTML requires that for certain pre-packaged
goods, including meats, vegetables and cheeses, the price per unit of measure
must be stated in addition to the selling price. There is no evidence that the
current unit pricing regulation in respect of those goods is inadequate and
accordingly it is not intended that the unit pricing scheme should interfere
with those requirements. Subject to the continued operation of the relevant
provisions of the UTML once it is transferred to the Commonwealth, the unit
pricing scheme could be limited to operate only to the extent that it is not
inconsistent with relevant trade measurement legislation.
Items that are covered by specific
legislation
To ensure regulatory consistency and preclude regulatory overlap it
will be necessary to have regard to any relevant provisions from existing
regulations in respect of the pricing of food (FSANZ), over-the-counter and
complimentary medicines (TGA) or any other goods sold by grocery retailers. A
unit pricing code could be expressed to apply only in the absence of other
regulation concerning the display of prices for those goods. Alternatively,
where existing regulation is identified, such goods could be explicitly
excluded from the operation of the unit pricing scheme.
Alcohol and tobacco are
not subject to specific pricing regulation, and while some submissions have
suggested that these products should be excluded from the scheme, there does
not appear to be a clear rationale for doing so. Both products are often sold
in supermarkets and unit pricing could easily be applied. The ACCC did not
consider these products in its report. While alcohol and tobacco would not be
considered as a possible part of the ‘range’ of groceries when determining the
application of the scheme, there is no reason to exclude those products from
the scheme when offered for sale in a grocery retailer subject to the scheme.
Specific products where unit pricing
is not appropriate or practical
There are a range of products typically sold by supermarkets, for which
the application of unit pricing would not provide additional or relevant
information to consumers. For example, goods that are not generally sold by
measure or number such as books, CDs or clothing.
The Queensland
Government’s draft regulation sets out a list of goods such as books, magazines
and others for which unit pricing would not be required. This listing is a
good starting point for the consideration of such exemptions. More specific
consultation will be undertaken with retailers to ascertain for which types of
products an exemption might be appropriate. Under the Queensland approach, in
the event that a product or category of products are found to be incompatible
with unit pricing the Minister or other decision maker could add these to a
list of excluded products. This would mean that new products or categories of
products offered for sale by retailers covered by the scheme are automatically
required to have a unit price if they were offered in a retailer subject to the
scheme unless the Minister or other decision makers determines it is
inappropriate.
An alternative to the
Queensland approach would be to prescribe the categories of products to which
unit pricing is to apply and then allow unit pricing on a voluntary basis in
respect of any other goods. This approach would be unlikely to provide
additional regulatory certainty to businesses but could jeopardise the national
consistency of approaches to unit pricing.
Specials
Regular product ‘specials’ are generally offered by grocery retailers
on different products. In the case of store-based retailers these are normally
computerised tickets placed on the shelf over the existing price label.
There does not appear to be any justification for excluding regular
specials as consumers should still be able to compare that product’s unit price
to similar products that are not on special.
Damaged goods and last minute
mark-downs
In addition to specials applied to a particular brand of product from
time to time, goods may also be marked-down due to damage or an imminent use-by
date. Unlike regular ‘specials’, such marked‑down goods are not directly
comparable to undamaged goods of the same type. As such the unit price is less
relevant as consumers.
There may also be
significant compliance costs of providing a unit price as most damaged products
would be of a small quantity and may often be hand-marked with the new price,
over a short period of time.
Because of the low
likelihood of unit pricing providing consumer benefits in respect of marked-down
damaged products and those approaching their use-by date, as well as the
compliance burden on business, such products should be excluded from a
mandatory unit pricing scheme.
Mixed bundles
Intuitively, unit pricing can only be applied easily to products whose
price can be divided into a single unit of measure. In the case of goods sold
in mixed bundles, the unit price would not be easily comparable to the unit
prices of the individual products that bundle may contain. As such the unit
price should not be required for products of this type.
Where an item contains
more than one type of product, for instance a taco ‘kit’ which includes
products such as tacos, salsa and seasoning, it may not be appropriate to
require a unit price to be displayed. This would not mean that any product
that had multiple ingredients should be excluded, rather those containing
individually packaged quantities of different products – as opposed to a
mixture.
Advertising
In addition to in‑store price labels, supermarkets often
advertise prices in other mediums, such as by distributing specials catalogues
or in-store advertising on posters or through television or radio
advertisements. In its report, the ACCC recommended that unit prices should be
displayed in print advertising.
Limiting unit pricing to print advertising only would be consistent
with the objectives of unit pricing, which is to allow consumers to compare
like products between brands, or even different sized offerings of the same
brand of product.
In the case of
television/radio (non-store) advertising, usually only a small number of items
are listed. Television and radio advertisements are also extremely short in
length (average time is 30 seconds) and therefore it is arguable if requiring
unit pricing in these mediums would be of any comparative use to consumers.
Printed advertising
material is more likely to be used by consumers to compare prices. Printed
catalogues of weekly or monthly specials are often distributed to consumers or
made available in store. The durable nature of these advertisements allows
consumers to compare the catalogues of alternative retailers. In addition, printed
advertisements can also be stored, which allows consumers to compare unit
prices over time. The ACCC found that consumers often react to changes in
prices over time when deciding which stores are giving the best value. Unit
pricing in advertising material may be an effective marketing tool for certain
products, and also help drive further price competition as it also communicates
pricing levels to other retailers.
In addition, unit pricing
in print advertising could help to raise awareness of unit pricing among
consumers. The unit price being displayed prominently in catalogues and other
print advertising would remind consumers that unit pricing is available at
those stores and can be used to help them save money on their grocery bills.
9.
NATURE OF DISCLOSURE
The requirements of the scheme setting out the form of the unit price
disclosure can have a significant impact on compliance costs for business. How
the unit price is disclosed can also have an effect on how useful it is for
consumers.
Form and
size of the unit price
To be useful, unit price displays must be unambiguous, legible and in
close proximity to the selling price. These types of broad objectives are
accepted by both retailers and consumer groups as a prerequisite for a
functional unit pricing scheme.
The draft Queensland
regulation suggests that the unit price should have a height of 10mm or 50 per
cent the size of the selling price, whichever is larger. Some submissions to
Treasury have argued that a minimum size or other prominence requirements
should be specified for unit price displays:
•
The Queensland Consumers Association supports the
Queensland approach for prescribing the size.
•
CHOICE suggested that the Queensland legislation is
‘a good starting point although … there are other ways to ensure the prominence
of the unit price’.
Larger-sized unit price
may be more obvious to consumers, however the unit price should not be so large
that it can be mistaken for the selling price. This would be particularly
likely to happen if the selling price and unit price were similar – for example
where the unit price was per litre and the item was 950ml.
Similarly, the marginal consumer benefits of requiring a 5mm or 10mm
high unit price over a 3mm high unit price, which might be a likely result of
not prescribing the size, are likely to be incredibly small.
Prescription of a minimum size requirement for shelf price displays
appear to be one of the key determinants of the compliance cost impact on
businesses. Larger minimum size requirements may mean that not only do shelf
labels have to be altered for the unit pricing scheme, but the edges of the
shelves themselves may need to be changed. This has been identified by
retailers as a major driver of compliance costs. Increased compliance costs
for business would in turn be passed on to consumers in the form of higher
prices. A number of retailers have suggested that if a minimum size is
prescribed this would result in a very large increase in costs, which would be
passed on through higher prices:
•
Metcash suggested that such a requirement would
‘dramatically increase the cost of implementation and compliance’.
•
ALDI asserted that ‘overly-prescribing the
presentation runs the risk of imposing substantial additional costs on
retailers which, in turn, could be passed on to consumers in the form of higher
prices’.
•
A confidential submission from a retailer which
preferred no prescription of the size, suggested that if the size were
prescribed that 5mm would be acceptable.
In the absence of evidence as to the benefits of prescriptive font
requirements, a principles-based approach with prominence requirements but no
minimum size would appear to be more appropriate. It is most likely that
retailers will provide clear unit prices, if for no other reason than to ensure
consumers are not annoyed by that retailer’s system. However, if experience
indicates that unit prices are displayed in an unusable manner, the regulation
could be amended in future.
Units of measure
A critical component of achieving national consistency in unit pricing
is to prescribe standardised units of measure that are to be applied. In its
report, the ACCC noted that the most appropriate unit of measure may vary
between different types of products however, if it were to vary between
retailers in relation to the same products this would greatly diminish
consumers’ ability to compare prices across stores.
Two approaches are possible: to prescribe one unit of measure for each
type of measurement (volume, weight, length, area, count) with variations from
this general rule to be explicitly prescribed for classes of products; or prescribe
sliding scales for each type of measurement, to be applied to products on the
basis of size or price thresholds. The latter approach is adopted in the draft
Queensland regulation, but there have been a range of views raised in
submissions.
•
CHOICE and the Queensland Consumers’ Association support
Queensland’s sliding-scale approach to the unit of measure.
•
A confidential submission suggested that where the
products in a range are typically: less than 100ml/g the unit of measure
should be per 10ml/g; between 100ml/g and 1L/Kg the unit of measure should be
per 100ml/g; and more than 1L/Kg the unit of measure should be per L/Kg.
•
ALDI currently provides unit pricing using the
general rule of 100ml/100g, with exceptions for very small or very large
products. ALDI also contents that this is supported by the fact that the fast
majority of packaged grocery items are sold in formats between 100g and 500g.
•
Metcash suggested that ‘standard measures such as
the kilogram and litre should be adopted as with the EU legislation’.
–
The EU Directive states that ‘unit price shall mean
the final price, including VAT and all other taxes, for one kilogram, one
litre, one metre, one square metre or one cubic metre or a different unit of a
single unit of quantity which is widely or customarily used in the Member State
concerned in the marketing of specific products’.
•
ANRA recommends that apart from some
category-specific exceptions, the units of measure should be 100ml/100g/metre/each.
It also suggests that model suggested in the Queensland draft regulation could
be ‘unduly complex’ in certain circumstances.
To be of use unit pricing information should meet at least two
criteria:
•
it should be expressed at least in whole cents, as
this would be readily understood by consumers; and
•
the unit price provided as a result of the scheme
should be an amount which is useful and meaningful for comparative purposes.
Using a single unit of measure depending on the nature of the product,
for example per 100g for items measured by weight, would be the simplest
measure, delivering benefits both in terms of less prescriptive drafting of the
provision and also for subsequent business compliance. However, a potential
drawback of using non-graduated units of measure is that for some very
expensive products the unit price could end up being quite high and for some
large products the unit price could be quite low.
One confidential
submission from a retailer noted that certain outlying examples might provide
excessively large unit prices. It gave the examples of how a 100g standard
would provide odd unit prices such as saffron selling at $6.57 for 0.5g giving
a unit price of $1314 per 100g, or 4g of lip balm selling for $9.95 having a
unit price of $249 per 100g. However, in the case of a 10Kg bag of rice with a
selling price of $21.00 the unit price would still be $0.21 per 100g. This is
still a reasonable and useable unit price, suggesting that very low unit prices
are less of a concern.
A sliding scale of units
of measure would mean that when a certain size was reached, or the unit price
was higher than a certain value, the next unit of measure would be used. For
instance if a product is generally sold in quantities less than 1Kg the unit
price would be per 100g but if it is generally sold in quantities greater than
1Kg the unit price would be per kg. Alternatively the units used could be per
kg unless the unit price was greater than $99, in which case it would be 100g.
This is the method used in the Queensland Government’s proposed Regulation.
The difficulty with this
sort of sliding scale is one of thresholds. Such a scale could mean that for
one brand of a particular product the smaller sizes would be unit priced per
100g and the larger sizes per kg. While the mathematics required to compare
them is not difficult, multiplying or dividing by a factor of ten, the result
of a sliding scale is that these threshold issues will occur and may be
confusing for the consumer.
Another issue is that unit
prices are likely to be more intuitive if they are determined with reference to
the physical quantities usually associated with a product, rather than monetary
amounts. This would reduce the need to revisit the regulation over time to
reflect changes in general price levels generally. It would also tie the
threshold to a characteristic with universal application to a class of product
and minimise threshold issues arising between brands of the same product.
While the threshold issues associated with the sliding scales are not
large, they are perhaps just as confusing or even more so than the occasional
high or low unit prices that could result from a standard unit of measure.
As the costs and benefits of either system are not significant, using a
standard unit of measure for all like goods remains the simpler option and for
both consumer information and business compliance, the simpler option of
pricing all products per count, 100mL or 100g is likely to be the most
appropriate measure for a range of products.
As more grocery products
are sold at or below 1Kg and 1L than significantly above that amount, 100g or
100mL would be a more appropriate standard unit of measure and would avoid very
small unit prices for the majority of products which are provided in smaller
sizes.
While a base measure is
to be preferred for simplicity, there may need to be some exceptions made for
products which the base measure is truly inappropriate and would provide irrelevant
or confusing unit prices. In these cases the scheme may need to allow a
different unit of measure may need to be used. For example, herbs and spices
are relatively expensive by measure and are often sold in quantities of less
than 10g.
10.
EDUCATION AND INFORMATION
A nationally consistent
unit pricing system will benefit from a nationally consistent education
program. Implementing a unit pricing scheme under the TPA would allow the ACCC
to oversee the introduction of the scheme along with its broader
responsibilities for educating consumers and supermarket retailers about the
consumer law.
While there is already significant support for unit pricing from
consumer advocates, the effective use of unit pricing information by different
groups of consumers may vary. Information and education campaigns to support
the introduction of unit pricing would assist to ensure that unit pricing information
is useful to as wide a range of consumers as possible.
Education initiatives
should include announcement of the unit pricing regime, information on what
unit pricing is, how it operates and how it can be of benefit to consumers in
their supermarket shopping. Education and information initiatives could
include printed material such as brochures and posters, including sample price
labels with appropriate explanations, and print and television advertisements.
The Government would take primary responsibility for consumer and retailer education
initiatives, in consultation with consumer and industry representatives.
11. ENFORCEMENT AND PENALTIES
A benefit of implementing
unit pricing through an industry code under the TPA is that there is a well established
enforcement regime that would apply in the event of a breach.
Breaches of a prescribed code
of conduct are breaches of the TPA and subject to court enforceable civil remedies
(including corrective advertising and injunctions). There is no criminal
sanction for a breach of an applicable industry code. However,
criminal prosecution would be unlikely to be appropriate for a breach of a unit
pricing regulation.
12.
SUMMARY OF IMPACT ANALYSIS
The costs and benefits of
each of the elements of the proposed unit pricing scheme are presented as
qualitative arguments in the table below.
The potential benefits of
the scheme cannot be quantified at this stage. Clearly, the benefits are
sensitive to how consumers use unit pricing information. A report by Insight
Partners and Citi Investment Research
found that the implementation of unit pricing could lead to savings for
consumers of approximately $810 million per year. The report cited past
overseas research, which had established that consumers, on average, reduce
their spending by one per cent in the presence of unit price information. This
equates to a saving of approximately $100 for an average Australian family per
year. These estimates are indicative only, however savings of this magnitude
would imply that unit pricing can provide a net benefit to Australian
consumers.
The costs of initial
implementation for the major retailers collectively are significantly lower
than the amount to be gained by consumers even in the introductory year. After
the introduction period costs of maintaining a unit pricing system for
retailers decreases significantly. Cost estimates provided during the ACCC
inquiry by Metcash show the annual ongoing costs to be roughly 4 per cent of
the initial implementation cost. When viewed over a long-term period the net
gains provided by a unit pricing scheme would increase after the first year of
implementation.
|
SUMMARY TABLE OF COST-BENEFIT
ANALYSIS
|
|
ELEMENT
|
BENEFITS
|
COSTS
|
|
Mandatory industry code
under Part IVB of the TPA.
|
Creates a nationally
consistent unit pricing regime.
Would be flexible enough
to allow technical amendments in future. Hence, would be more responsive to
any changes in the grocery retail industry.
Mitigates chance of
future inconsistent unit pricing regulation between Australian jurisdictions.
Allows for exempt
stores to voluntarily operate within the code’s requirement.
|
Enforcement and education
costs to be borne by government.
Initial mandatory business
implementation costs and ongoing compliance costs.
|
|
Store-size threshold of
1000m2.
|
Captures the majority
of packaged goods transactions.
No compliance costs for
smaller retailers.
|
May capture single
stores with small turnover but large floor size (due to cheaper rent) in
rural and regional areas.
Creates an artificial
cost barrier in the retail grocery market (although impact on competition
would be negligible as larger retailers can easily absorb compliance costs).
Consumers cannot
utilise unit pricing in all supermarkets.
|
|
Application to online
retailers.
|
Applies unit pricing
regulation in a technology neutral way.
|
|
|
Principles-based presentation
requirements for unit pricing information.
|
Reduces compliance
costs by allowing retailers some flexibility in how the scheme will be
applied.
Caters for changes in technology
and industry practice with respect to in‑store price displays.
|
Creates potential for
differences in presentation of unit pricing information between retailers.
This may reduce consumer use of unit price information.
|
|
Units of measure: general
rule with prescribed exceptions.
|
Units of measure are
intuitive to consumers if expressed in terms in terms of sizes of the same
magnitude that the good would usually be sold in.
Avoids uncertainty
about the appropriate treatment where goods are sold across a wide range of
package sizes.
|
List of prescribed
exemptions must be maintained over time to accommodate new products.
|
|
Government sponsored
consumer education campaign.
|
Ensures consistent
educational measures are provided to consumers.
Encourages greater
usage of unit pricing by consumers.
|
Imposes additional
financial and resource burden on the government.
Retailers will incur
compliance costs in having to cooperate with government education initiatives
(ie by making copies of educational materials available in-store).
|
|
Application to print advertising
only
|
Promotes the provision
of unit pricing information in all situations where it would be useful to
consumers.
|
Imposes additional
compliance costs on affected retailers.
|
|
Excluded goods
|
Reduces compliance
burdens on retailers by ensuring that unit price information does not have to
be applied to ad hoc price changes (such as goods on sale due to their
perishable nature).
Ensures that consumers
are not misled by confusing or irrelevant unit price information (such as
mixed bundles).
|
Increases regulatory
complexity compared to universal application of unit pricing information.
|
PART D CONSULTATION
Following its announcement of 5 August 2008, the Government released an
issues paper on 12 September 2008 calling for comment on the design of a
unit pricing scheme. To date, Treasury has received 19 submissions from a
range of industry, consumer groups and governmental stakeholders. Submissions
are av ailable on the Treasury website.
In addition, unit pricing has been subject to a number of public
consultation processes recently, commencing with the ACCC grocery inquiry,
which reported in July 2008. This Regulation Impact Statement draws on the
public comments made to those various inquiry processes, as well as the reports
of those inquiry processes.
Previous consultation processes
On 22 January 2008 the
Assistant Treasurer directed the ACCC to hold a public inquiry into the
competitiveness of retail prices for standard groceries. The ACCC conducted
the inquiry between January and July 2008. The ACCC’s first round of
consultation drew 118 submissions in total, of which 27 submissions addressed
the practice of unit pricing. A second round of consultation received 66
submissions, of which 13 raised unit pricing.
•
Arguments in favour of unit pricing submitted to
the ACCC included: ease for consumers to make purchasing comparison; aiding
consumers with low financial and numeracy skills; and the fact that consumers
have some experience with unit pricing concepts in meat, fruit and vegetables
and therefore mandatory measures could simply be extended into more product
categories.
•
Arguments against unit pricing submitted to the
ACCC included: regulation of unit pricing may increase prices for consumers;
enforcement and education costs; and similar practices already exist, such as
the voluntary introduction of unit pricing at Aldi, and the trialling of the
practice at Woolworths‑Safeway.
On 26 July 2008, the
Queensland Government released Regulation Impact Statement seeking comment on
the implementation of a unit pricing regime in that state. Queensland
subsequently prepared a draft Regulation to implement a unit pricing scheme.
On 17 June 2008, the
Senate referred a private Member’s Bill, Unit Pricing (Easy comparison of
grocery prices) Bill 2008, introduced by Senator Fielding, to the Senate
Standing Committee on Economics for inquiry and report by 2 September 2008.
The Committee invited written submissions and held two public hearings. The
Committee received 12 submissions including those from ALDI, Woolworths, the
National Association of Retail Grocers of Australia, Metcash, CHOICE, the
Consumer Action Law Centre and the Queensland Consumers Association.
PART E CONCLUSION AND RECOMMENDED
OPTION
Based on the analysis contained in Part C and the analysis undertaken
by the ACCC in its report, a mandatory nationally consistent unit pricing
scheme should have the following characteristics:
•
It should be a mandatory code of conduct under Part
IVB of the TPA. Future minor or technical amendments would be able to be made
more easily and quickly than would be the case with a new principal legislative
provision.
•
The scheme will apply to all food and non-food
grocery items sold by store-based and online supermarket retailers operating in
Australia.
•
To ensure the compliance costs for small business
are minimised while providing benefits for consumers, it is appropriate to
limit the scheme’s application in a number of ways:
–
In respect of store-based retailers, limiting the
application to supermarkets with floor space used for the retail display of
groceries that exceeds 1000m2, provided they offer for sale at least
a certain range of food grocery products.
–
In respect of online retailers, those that offer
for sale at least a certain range of food grocery products.
–
Should an otherwise exempt retailer choose to
provide unit prices for some or all of its grocery products, it must comply
with the mandatory scheme following an appropriate transition period.
•
The unit pricing scheme will require the display of
unit prices for all grocery products sold by a retailer that is covered by the
scheme, for which a selling price is displayed, unless the product is part of a
class of products that is prescribed to be excluded or application of unit
pricing would be inconsistent with other specific Commonwealth legislation.
•
Unit pricing must be displayed in printed
advertising material where selling prices are quoted, but need not be included
in non-print advertising.
•
Unit prices must be clearly identified as unit
prices and displayed prominently and in a legible manner.
•
In general, unit prices shall be displayed as a price,
rounded to the nearest whole cent, per 100g, 100ml, 1m, 1m2, or
(where sold by count) 1 unit of a product. Alternative unit of measure may be
prescribed for certain classes of product.
•
The ACCC, in consultation with industry, will
provide information and guidance to consumers and retailers about the use of
unit pricing.
PART F IMPLEMENTATION
AND REVIEW
Subject to further consultation with industry, a 6-12 month lead time
would be appropriate for implementation of a national unit pricing scheme.
Pending development of a draft code of conduct early in 2008, a final
code could be prescribed in the first half of 2009, with the substantive
obligations of the code to commence at the start of 2010. This transition
period would allow retailers to make the transition to the new system as part
of their regular price updating processes. This would also allow for technical
issues, such as the categories of products to be exempted or non-standard units
of measure, to be finalised. The ACCC would also use this time to commence its
industry and consumer education programs.
As an industry code of conduct, the operation of the unit pricing
scheme would be kept under constant review by the ACCC, in collaboration with
industry representatives. Key indicators that the scheme may need to be
reviewed would be if there are unusually high rates of non-compliance observed
by the ACCC or reported by consumers.
More formally, longer term review of the scheme after a five year
period should be undertaken by an independent body or eminent persons.
Particular areas for attention of this review would be:
•
Exemption criteria
–
Technology may have progressed and cheapened
sufficiently enough to include all retailers in the scheme.
•
Changes in the Market
–
Any changes in the structure of the market may need
to be addressed through the scheme details, i.e. a greater concentration of
online retailers. The general size of stores or the amount of stock keeping
units available may have also changed over time as retailers adapt to consumers
buying behaviour.
•
Awareness and education campaigns
–
It may be necessary to run new campaigns for a new
generation of consumers and immigrant populations. The review will also allow
the opportunity to rate the effectiveness of previous campaigns and analyse
whether they have been effective in reaching target audiences. Niche target
groups of consumers may be identified to tailor any education programmes and
create more effective reach and impact.
•
Enforcement
–
An enforcement review should examine whether
additional or different powers are needed to address non-compliance or act as a
deterrent and remain in proportion to the offences.
ATTACHMENT
A
Report of the ACCC inquiry into the competitiveness of retail
prices for standard groceries
Overview
- Unit pricing
As part of the inquiry, the ACCC was asked to investigate
the representation of grocery prices to consumers. Unit pricing is the practice
of displaying the price by unit of measure (for example, per litre or kilogram)
along with the total sale price for each item. Unit pricing can assist
consumers by enabling them to readily compare prices between different sizes of
the same product, between different branded products and also between stores.
The ACCC recommends that a mandatory, nationally-consistent
unit pricing regime be introduced for standard grocery items both on in-store
price labels and in print advertising.
The ACCC recommends that the unit pricing regime apply to
significant supermarkets, including Coles, Woolworths, ALDI and large
independent supermarkets. Smaller supermarkets will face higher implementation
costs relative to turnover compared to larger supermarkets. The ACCC therefore
considers that before unit pricing is introduced a detailed cost–benefit
analysis should be undertaken to determine which supermarkets mandatory unit
pricing should apply to. Grocery outlets not required to comply
with the unit pricing regime should be allowed to display unit prices on a
voluntary basis. If they choose to do so, they should be required to comply
with the mandatory requirements.
The ACCC has heard evidence that implementation costs of
unit pricing will vary depending on the time allowed for implementation. The
ACCC considers that a six- to 12-month implementation period will sufficiently
reduce costs, while ensuring that unit pricing is implemented in a timely
manner. The ACCC recommends that the relevant administrative body, or the
Australian Government, consult with industry participants and examine how costs
will vary depending on the implementation timeframe.
The ACCC recommends that any legislative mechanisms
implemented should also be sufficiently flexible to enable the agency
responsible for the unit pricing regime to issue legislative instruments. These
legislative instruments should clearly delineate which supermarkets and
products are included in the unit pricing regime and allow for appropriate compliance
monitoring and enforcement.
The ACCC also recommends that a public education campaign
be established to ensure that unit pricing is fully understood by consumers and
has the greatest possible impact.
Recommendation
The
ACCC recommends that a mandatory, nationally-consistent unit pricing regime be
introduced for standard grocery items both on in-store price labels and in
print advertising, for significant supermarket stores.
ATTACHMENT B
Queensland
Fair Trading Amendment Regulation
(No...) 2008
Subordinate Legislation 2008 No.
...
made under the
Fair Trading Act 1989
1 Short title
This
regulation may be cited as the Fair Trading Amendment Regulation
(No. ..) 2008.
2 Commencement
This
regulation commences on 1 July 2009.
3 Regulation amended
This
regulation amends the Fair Trading Regulation
2001.
4 Insertion of new pt 2, div 1 hdg
After
part 2, heading—
insert—
‘Division 1 Information
standards for specified kinds of goods’.
5 Insertion of new pt 2, div 2 hdg
After
section 8—
insert—
‘Division 2 Commonwealth
consumer product information standards’.
6 Insertion of new pt 2, div 3
Part 2, after section 9—
insert—
‘Division 3 Information standard
for supply of
grocery products
‘Subdivision 1 Preliminary
‘9AA Definitions for div 3
‘In
this division—
character includes a letter,
figure and symbol.
consumer includes prospective
consumer.
damaged product means a grocery product
that is supplied to consumers by a grocery retailer with a selling price that
is less than the selling price at which the product is ordinarily supplied by
the grocery retailer because the product or any package containing the product
is damaged.
Example—a can of baked beans that is
dented
excluded product means—
(a) a
product mentioned in schedule 3A; or
(b) a
damaged product; or
(b) a
last-minute markdown; or
(c) a
mixed pack; or
(d) a
multi-buy discount offer; or
(e) a
product sold in bulk.
final price, of a grocery product,
means the price at which the product is supplied by a grocery retailer to
consumers including GST and all other taxes.
grocery product means any product, other
than an excluded product, supplied by a grocery retailer to consumers.
Examples—
• food,
including, for example, bread, breakfast cereals, butter, confectionary, eggs,
flour, fresh fruit and vegetables, meat, milk, non-alcoholic beverages,
packaged foods, snacks and sugar
• baby
supplies, including, for example, nappies and baby wipes
•
cosmetic products and toiletries
•
haberdashery
•
household cleaning products
•
household goods, including, for example, batteries, bin liners, food wraps,
light bulbs, paper towels, pet supplies and tissues
•
pharmaceutical products
grocery retailer see section 9AB.
in-store retailer see section 9AB(a).
last-minute markdown means a product that is
supplied to consumers by a grocery retailer with a selling price that is less than
the selling price at which the product is ordinarily supplied by the grocery
retailer because the product is likely to deteriorate if it is not used before
a particular date.
Example— milk supplied at a lower
selling price the day before its use-by date
mixed pack means a pack—
(a)
containing 2 or more products of different classes each of which is separately
packed in its own package; and
(b)
that is supplied to consumers with 1 selling price.
Examples—
• a
Christmas hamper
• a
pack containing a coffee maker and a promotional package of ground coffee
multi-buy discount offer means 2 or more products
of the same kind that are supplied to consumers with 1 selling price if the
products are not packed together in a single package and the unit price for 1
of the products is less than the unit price for 1 of the products when supplied
as a single item.
Example—
3 cans
of baked beans supplied with 1 selling price if the 3 cans are not packed
together in a single package and the unit price for 1 can of baked beans is
less than the unit price for 1 can of baked beans supplied as a single item
online retailer see section 9AB(b).
online shop, of an online retailer,
means a website or websites by which the online retailer supplies to consumers
a range of grocery products.
price sign, for a grocery product,
means a sign that displays information about the selling price of the product
including a shelf label for the product, but not including a price label attached
to, or a price marking made on, the product or any package containing the
product.
product sold in bulk means a product that is
not pre-packaged and ordinarily weighed or measured at the request, and in the presence
of, the consumer of the product.
range, of grocery products,
means at least 7 of the following grocery products—
(a)
bread;
(b)
breakfast cereal;
(c)
butter;
(d)
eggs;
(e)
flour;
(f)
fresh fruit and vegetables;
(g)
fresh milk;
(h)
meat;
(i)
rice;
(j)
sugar;
(k)
packaged food, other than food mentioned in paragraphs
(a) to
(j).
retail premises means—
(a)
premises that have a contiguous internal floor area of at least 200m2
that
is used for the display of grocery products for supply to consumers in a way
that includes the use of computerised shelf labels and barcode scanners at the
checkout; or
(b)
premises that are used for the display of grocery products for supply to
consumers in a way that shows to consumers the unit price of more than half of
the grocery products displayed in the premises.
selling price, of a grocery product,
means the final price for 1 unit of the product, or for a particular quantity
of the product.
supply includes offer for
supply.
unit price means—
(a) for
a grocery product supplied by number to consumers—
(i) if
the product is supplied in lots of 1 to 9 units—the final price for 1 unit of
the product; or
(ii) if
the product is supplied in lots of 10 to 99 units—the final price for 10 units
of the product; or
(iii)
if the product is supplied in lots of 100 or more units—the final price for 100
units of the product; or
Examples of grocery products supplied by number—
batteries supplied in lots of 3 toilet paper supplied in lots of 100 sheets
(b) for
a grocery product supplied by mass or volume to consumers—
(i)
generally—the final price for each 1kg or 1L of the product; or
(ii) if
the final price for each 1kg or 1L of the product is more than $99—the final
price for each 100g or 100ml of the product; or
(iii)
if the final price for each 100g or 100ml of the product is more than $99—the
final price for each 10g or 10ml of the product; or
(iv) if
the final price for each 10g or 10ml of the product is more than $99—the final
price for each 1g or 1ml of the grocery product; or
Examples of grocery products supplied by mass or volume—
apples supplied in bags of 1.35 kg fruit juice supplied in containers of 675ml potato
chips supplied in packages of 25g
(c) for
a grocery product supplied by linear or cubic measurement to consumers—the
final price for 1m, 1m2 or 1m3
of
the product.
‘9AB Who is a grocery retailer
A grocery retailer is—
(a) a
person (an in-store
retailer) who supplies to consumers, in retail premises, a range of
grocery products; or
(b) a
person (an online
retailer) who supplies to consumers, by an online shop, a range of grocery
products.
‘Subdivision 2
Requirements to provide information
in retail premises and on online shops
‘9AC Requirement to provide
information about unit pricing
‘A
grocery retailer must give consumers information about unit pricing by—
(a) for
an in-store retailer—displaying posters and pamphlets about unit pricing in its
retail premises in compliance with sections 9AG and 9AH; or
(b) for
an online retailer—displaying information about unit pricing on its online shop
in compliance with section 9AI.
‘9AD Requirement to display
selling price
‘A
grocery retailer must show the selling price of a grocery product supplied by
the grocery retailer to consumers by—
(a) for
an in-store retailer—displaying the selling price in its retail premises in
compliance with section 9AJ; or
(b) for
an online retailer—displaying the selling price on its online shop in
compliance with section 9AJ.
‘9AE Requirement to display unit
price
‘(1) A
grocery retailer must show the unit price of a grocery product supplied by the
grocery retailer to consumers by—
(a) for
an in-store retailer—displaying the unit price on any price sign for the
grocery product in compliance with sections 9AJ and 9AK; or
(b) for
an online retailer—displaying the unit price on its online shop in compliance
with sections 9AJ and 9AK.
‘(2)
Subsection (1) does not apply if the grocery product is a single unit supplied
by the grocery retailer to consumers by number.
Example— a single light bulb
‘Subdivision 3
Requirement to provide information
in printed advertisements
‘9AF Requirement to display unit
price in particular printed advertisements
‘If a
person who supplies to consumers a range of grocery products publishes a
printed advertisement for a grocery product that displays the selling price of
the product, the person must also display the unit price for the product in the
advertisement in compliance with sections 9AJ and 9AK.
‘Subdivision 4
Ways of providing information
‘9AG Providing information in
posters
‘A
poster about unit pricing must—
(a) state
that—
(i)
unit prices are displayed for grocery products supplied in the retail premises;
and
(ii) a
pamphlet is available in the retail premises containing information about unit
pricing; and
(b) be
printed in a way that—
(i)
provides a distinct contrast between the colour of the characters on the poster
and the colour of the background of the poster; and
(ii) is
unambiguous, easily identifiable and clearly legible to consumers; and
(c) be
displayed—
(i) in
3 or more prominent locations in the retail premises, including at or near each
public entrance of the retail premises; and
(ii) in
a way that makes the characters on the poster clearly legible from a distance
of 4.5m away from the poster.
‘9AH Providing information in
pamphlets
‘A
pamphlet about unit pricing must—
(a)
state—
(i) the
general purpose and function of unit pricing; and
(ii)
how the unit price of a grocery product relates to the selling price of the
grocery product; and
(iii)
how consumers can use unit pricing to compare the price per unit of different
brands, grocery products and sizes; and
(iv)
how consumers can use unit pricing to consider value for money; and
(v)
that the information is for the guidance of consumers only; and
(b) be
printed in a way that is unambiguous, easily identifiable and clearly legible
to consumers.
‘9AI Providing information on
websites
‘Information
about unit pricing on an online shop must—
(a)
include the information mentioned in section 9AH(a); and
(b) be
displayed—
(i) on
the home page, or on a page prominently linked to the home page, of the on-line
shop; and
(ii) in
a way that is unambiguous, easily identifiable and clearly legible to
consumers.
‘9AJ Displaying selling prices and
unit prices
‘A
selling price or unit price for a grocery product must be displayed—
(a) in
a form in which any unit of measurement is expressed in the way it is
ordinarily written in the English language; and
(b) in
a way that is unambiguous, easily identifiable and clearly legible to
consumers.
‘9AK Displaying unit prices
‘A unit
price for a grocery product must be displayed—
(a) in
a form in which the price is preceded by a dollar sign; and
(b) if
the unit price has a decimal sub-multiple—in a form in which the price is
preceded by a zero or other numeral; and
(c) in
a form in which any unit of measurement is preceded by the word ‘per’; and
Example of unit price for paragraphs (a) to (c)—
$0.76 per kg
(d) in
characters of a height that is—
(i) for
a unit price for a grocery product displayed on a price sign—the greater of
10mm or 50% of the height of the characters of any selling price displayed for
the grocery product on the price sign; or
(ii)
for a unit price for a grocery product displayed on an on-line shop or in a
printed advertisement—at least 50% of the height of the characters of any selling
price displayed for the grocery product on the on-line shop or in the printed
advertisement; and
(e) in
close proximity to any display of the selling price for the grocery product.
‘Subdivision 5 Miscellaneous
‘9AL Working out and rounding of
unit prices
‘The
unit price of a grocery product must be worked out to the nearest 1 cent
(rounding 0.5 cent upwards).
Example— If the approximate unit
price of a grocery product is 94.7c, the unit price is 95c.
‘9AM Interaction with trade
measurement legislation
‘(1)
This division applies in addition to the Trade
Measurement (Prepacked Articles) Regulation 1991.
‘(2) If
there is an inconsistency between this division and the Trade
Measurement (Prepacked Articles) Regulation 1991, this division prevails
to the extent of the inconsistency.’.
7 Insertion of new sch 3A
After
schedule 3—
insert—
‘Schedule 3A Excluded
products
section 9AA
audio
tapes
books
clothing
compact
discs
electrical
appliances
flowers
gardening
equipment
greeting
cards
kitchen
hardware
magazines
newspapers
plants
tobacco
and tobacco products
toys
video
tapes’.
8 Amendment of sch 6 (Dictionary)
Schedule
6—
insert—
‘character, for part 2, divison 3, see section 9AA.
consumer, for part 2, divison 3,
see section 9AA.
damaged product, for part 2, divison 3,
see section 9AA.
excluded product, for part 2, divison 3,
see section 9AA.
final price, for part 2, divison 3,
see section 9AA.
grocery product, for part 2, divison 3,
see section 9AA.
grocery retailer, for part 2, divison 3,
see section 9AB.
in-store retailer, for part 2, divison 3,
see section 9AB.
last-minute markdown, for part 2, divison 3,
see section 9AA.
mixed pack, for part 2, divison 3,
see section 9AA.
multi-buy discount offer, for part 2, divison 3,
see section 9AA.
online retailer, for part 2, divison 3,
see section 9AB.
online shop, for part 2, divison 3,
see section 9AA.
price sign, for part 2, divison 3,
see section 9AA.
product sold in bulk, for part 2, divison 3,
see section 9AA.
range, for part 2, divison 3,
see section 9AA.
retail premises, for part 2, divison 3,
see section 9AA.
selling price, for part 2, divison 3,
see section 9AA.
supply, for part 2, divison 3,
see section 9AA.
unit price, for part 2, divison 3,
see section 9AA.’.
ENDNOTES
1 Made by the Governor in Council on . . .
2 Notified in the gazette on . . .
3 Laid before the Legislative Assembly on . . .
4 The administering agency is the Department of Justice and Attorney-General.