Price gouging, due to carbon price, could lead to class action litigations

Law firm Maddocks has warned that businesses that try to price gouge - or improperly inflate prices - following the introduction of the carbon price in July could be opening the door to a new wave of consumer class actions.

The Australian Consumer Law allows the ACCC to bring a class action on behalf of consumers who have been misled about the cause of the increased prices for goods or services.

An ACCC class action can be run without individual consumers having to opt in to the litigation. These class actions could potentially involve hundreds of thousands of customers who do not need to opt in but who, if the action is successful, will receive a proportion of any compensation award.

Class actions could be run against a range of businesses, large and small, public and private, regardless of whether the misrepresentation was deliberate or inadvertent.

Essentially, the message from the ACCC to business is, if you are claiming a price rise is linked to the carbon scheme, the claim must be truthful and based on information that is relevant to your business.

If the ACCC has any concerns, the first step they will take is to issue a notice requiring a business to provide all documents which substantiate their carbon price claims. If the ACCC’s concerns are not adequately dealt with at this stage, they may issue infringement notices or take court action against the business.

Along with new legal powers, the Australian Government has given the ACCC an extra $12.8 million to monitor carbon price increases, with businesses that make misleading claims facing fines of up to $1.1 million for each breach.

On 18 June 2012, the ACCC launched the Carbon Price Claims Hotline (1300 303 609) and an online complaint form, to make it easier for consumers and small business to alert the ACCC and lodge complaints about potentially false and misleading carbon price claims.

ACCC chair Rod Sims says that provided a business is not subject to price regulation they are generally free to raise and lower prices as they see fit. What they can’t do is mislead people that a price hike is due to the carbon scheme.

Another risk for business is making inaccurate or exaggerated claims about the impact of the carbon scheme during commercial negotiations. In that situation, a misled business may be able to sue for damages as a result of the misleading and deceptive conduct.

Maddocks noted that when the carbon price is introduced on 1 July 2012, the effects are likely to be felt by all organisations, large and small. But businesses need to be very careful about the claims they make regarding the price impact of the carbon scheme and need to be able to justify price increases if the ACCC or disgruntled customers come calling.