The Australian Competition and Consumer Commission (ACCC) has warned companies that they will face substantial fines if they do not pass on the price benefits of the GST to consumers.
When the new tax is adopted on July 1 2000, the ACCC expects it will play the role of enforcer against price exploitation, issuing fines of up to $10 million for corporations and $50,000 for individuals who "deliberately rip off consumers".
Yet Phillip Tran, sales and marketing director of assembler Compucon, claimed the ACCC's concern and hardline stance is unwarranted. "The ACCC is just a bit paranoid because in the computer industry you would be stupid not to pass on any savings you can. Everyone takes whatever chances they are given to drop their prices."
The ACCC recognises this to an extent but it is still concerned that most businesses are unaware of their obligations under the new tax system. For this reason it is assuming responsibility for the education of businesses about the GST and their accountability under the Trade Practices Act 1994. "To fulfil its responsibilities, the ACCC's primary focus will be to promote compliance and good business practice in relation to the GST," said Professor Allan Fels, ACCC chairman.
Fels maintains that the ACCC's focus will be on prevention rather than punishment. "The ACCC believes that this focus, combined with the behaviour of competitive markets, will ameliorate the need for enforcement action. However, where there is evidence of blatant price exploitation, the ACCC will not hesitate to act."
The ACCC is particularly targeting small businesses with its education campaign as it is under the impression that many of them are not yet even thinking of the consequences of the GST, only 11 months away.
"Education is always a good thing," agreed Tran. "But if the ACCC demands that companies have to pass on the full savings from the GST, that's price fixing."
The specifics of ACCC's GST strategy were announced in April in the ACCC's Preliminary Draft Pricing Guidelines and were subject to industry comment, which was delivered last week. The result of this meeting will be a detailed report on what the ACCC considers price exploitation and how it will investigate acts of subversion.
The ACCC's GST operations group, dedicated specifically to monitoring prices, will aid in the establishment of price figures to allow businesses to determine where they stand under the GST.