ACCC threatens to fine companies if repealed Carbon Tax savings not passed on

Posted by AFN Staff Writers on 21st July 2014
ACCC threatens to fine companies if repealed Carbon Tax savings not passed on
ACCC threatens to fine companies if repealed Carbon Tax savings not passed on

The Australian Food and Grocery Council (AFGC) has welcomed the Australian Senate’s vote to repeal the Carbon Tax.

Meanwhile, the Australian Competition and Consumer Commission (ACCC) has warned that businesses that supply regulated goods, such as electricity and refrigeration, will be obliged to pass on cost reduction savings attributed to the Carbon Tax repeal.

Carbon Tax repeal good news for food manufacturing, AFGC

AFGC CEO Gary Dawson said the speedy pass through of savings by electricity, gas and refrigerant gas suppliers to their customers would help ease the severe cost pressures on manufacturers.

“I congratulate the government for holding its nerve and seeing through its key election promise, delivered today with the repeal of the carbon tax,” Mr Dawson said.

“For a trade-exposed sector like food and grocery manufacturing the carbon tax was a direct hit to the competitiveness of companies putting them at a disadvantage to international competitors who were not subject to the tax,” Mr Dawson said.

“Industry surveys found that food and grocery manufacturers had little or no ability to pass through the higher costs flowing from the tax and therefore took a direct hit to their viability,” Mr Dawson said. “A number even considered moving production offshore as a result,” he said.

AFGC urges energy suppliers to pass savings on quickly

Mr Dawson said the AFGC urged energy and refrigerant gas suppliers to quickly pass through the savings from the removal of the tax.

“Food and grocery manufacturing has never been under such intense competitive pressure from high costs and retail price deflation and urgently need some relief from high utility costs,” Mr Dawson said.

Mr Dawson said the food and grocery manufacturing sector remained “committed to the environment and has demonstrated that through initiatives such the AFGC’s Sustainability Commitment”. The Commitment has set targets including a ten percent reduction in energy and 20 percent reduction in carbon emissions by 2020

ACCC puts businesses on notice about Carbon Tax Price Reduction Obligation

Meanwhile, the ACCC has announced it will have new powers to take action against businesses that supply regulated goods which fail to pass through all cost savings attributable to the carbon tax repeal.

Businesses which supply regulated goods – electricity, natural gas, synthetic greenhouse gases (typically refrigerant gases) or synthetic greenhouse gas equipment (such as refrigerators and air-conditioners) will be required to pass through all of the cost savings, direct and indirect, that are attributable to the carbon tax repeal.

“When the new law takes effect and the carbon tax is repealed, these businesses must pass through all cost savings from the carbon tax repeal,” said Rod Sims, ACCC Chairman Rod Sims. “If they fail to do so, the ACCC will take enforcement action against them and seek serious penalties from the courts,” he said.

A supplier of regulated goods that fails to pass through all cost savings attributable to the carbon tax repeal will breach the carbon tax price reduction obligation and may face court imposed penalties of up to $1.1 million per contravention for corporations or $220,000 per contravention for an individual. The court can also issue injunctions or declarations, make compensation orders or orders setting the maximum price of a regulated good or requiring the supplier to pay refunds to consumers.

Suppliers in the key areas of electricity, natural gas or a bulk importer of synthetic greenhouse gas that engage in price exploitation will also be subject to a penalty equal to 250 per cent of the cost savings that were not passed through.

“The ACCC will be keeping a close eye on prices to make sure that all cost savings go to consumers,” Mr Sims said.

Businesses required to prove they have passed on cost savings

Businesses that retail electricity and natural gas, produce electricity and sell into wholesale markets or bulk import synthetic greenhouse gas will be required to provide evidence to the ACCC to show that they have passed on the cost savings.

“These businesses will be required to explain how the carbon tax repeal affected their input costs and how they are passing through the savings,” Mr Sims said. “These powers are in addition to the ACCC’s existing investigative powers and will ensure that businesses engaging in price exploitation are identified and enforcement action is taken against them,” he said.

“If suppliers of regulated goods put their prices up due to the carbon tax, these prices must similarly come down on repeal,” Mr Sims said. “If these businesses don’t do that, they will be looking at serious court action from the ACCC and significant monetary penalties,” he said.

ACCC has power to address misleading representations about repeal

The ACCC said the new provisions also enhance the its capacity to address any misleading representations about the impact of the repeal.

If a consumer or a business is concerned that one of their suppliers is engaging in price exploitation, they should contact the supplier to obtain information on the effect of the carbon tax repeal on the supplier’s prices. If they remain concerned, they can contact the ACCC. Information about price exploitation for suppliers of regulated goods, other businesses and consumers will be published on the ACCC website.