Fels takes aim at price-gouging practices of big business

An inquiry into corporate price gouging has revealed that unfair prices are fuelling cost-of-living pressures for many Australians.

Led by former Australian Competition and Consumer Commission (ACCC) chair Allan Fels, the investigation claims that banks, supermarkets, aviation and energy companies, among others, have been engaging in “exploitative business pricing practices” which have significantly added to inflation, and that new government policy is required to remedy the situation.

Almost half of the public submissions to the inquiry related to supermarket prices and practices.

“Australians are paying prices that are too high, too often,” Professor Fels told the National Press Club after the release of the report on February 7.      

Commissioned by the Australian Council of Trade Unions (ACTU), the 80-page report contends that some businesses have too much power over their customers, their supply chain and their workers, while a range of sectors are insufficiently competitive or regulated, leading to poor consumer outcomes and higher prices. It identifies multiple forms of price practices, including:

  • loyalty taxes (when prices are initially set low for products and services, but then rise sharply over the years as it becomes more difficult for consumers to detect the changes or renegotiate terms)
  • drip pricing (when a company advertises only part of a product’s price, with more charges added as customers progress through the buying process)
  • excuseflation (when companies use general inflation as a cover for bumping up prices)
  • rockets and feathers strategies (when costs rise, they go up like a rocket, but when they fall, they drift down slowly like a feather)
  • confusion pricing (when companies engage in complex pricing structures and plans to perplex a consumer and make it difficult for them to compare rival products).

ACTU Secretary Sally McManus welcomed Professor Fels’ findings and commented:

“The gaming of the system in the wholesale energy market is particularly concerning. Generation makes up 30 per cent of our household bills and Fels asserts there is gouging in the system which is causing workers to pay too much. Action here could have an immediate effect on our cost of living.”

Professor Fels has made 35 recommendations, including following the European Union in outlawing excessive pricing, and recommending that there should be more naming and shaming of businesses that overcharge. He has also proposed the establishment of an independent National Competition and Prices Commission.

To read the full report by Professor Fels, click here.

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