There’s a lot going on in the world of price watching at the moment. The Albanese government has announced a 12-month ACCC probe into supermarket pricing practices, which consumers have welcomed.
As welcome as it is, it will be some time before we can expect any real consequences. The inquiry will provide an interim report in August, with a final report slated for February next year.
However, a separate report investigating pricing practices was published this week, exposing a number of questionable tactics. This report is the work of former Australian Consumer and Competition Commission (ACCC) head Professor Allan Fels.
Prof. Fels completed the report on behalf of the Australian Council of Trade Unions (ACTU), and identified several practices he said disadvantaged consumers.
Putting names to dubious pricing tactics
On the day the report was released, Prof. Fels did the ‘media rounds’, providing a summation of his findings. As luck would have it, I caught his radio interview with Ali Moore on ABC Melbourne while driving that afternoon.
What caught my ear were a number of terms that Prof. Fels used to describe different ways of adjusting pricing. These terms, explained in the report, included ‘drip pricing’, ‘rockets and feathers’, ‘confusion pricing’ and ‘excuse-flation’.
He explained each of these in detail, with several of his explanations causing my blood pressure to rise as I drove!
Devil in the detail
Let’s take a look at some of those pricing terms in detail.
Drip pricing: This is one practice that possibly gets my blood boiling more than any other. Prof. Fels describes this as “where firms only advertise part of a product’s price and reveal other prices later as the customer goes through the buying process”.
The report nominates airlines, accommodation, entertainment, prepaid phone charges and credit cards as examples of this. ‘Booking fees’ and ‘delivery fees’ for tickets is one that continues to annoy me, especially when tickets are ‘digital’.
Rockets and feathers: This was not a term I had heard before but it describes the practice well. It involves a sudden jump in price ostensibly to cover rising associated costs (the rocket).
But when those associated costs fall, the product price does not immediately revert. Instead, it drops slowly, as would a feather falling to earth. Prof. Fels cited petrol pricing as the perfect example of the practice, also known as asymmetric pricing.
Confusion pricing: Another one that raises my hackles. It involves confusing consumers with myriad complex price structures and plans.
This makes price comparisons difficult and dulls price competition, says Prof. Fels. It occurs more and more in areas such as telecommunications, financial or maintenance services and other fields.
One historical example I can recall is mortgages. Such a minefield was mortgage price comparison when I first bought a house that banks were mandated to publish a ‘comparison rate’ to help potential customers make a decision.
Excuse-flation: This is businesses using ‘general inflation’ as camouflage to raise prices without any real justification. Prof. Fels found the practice to be particularly prevalent in the current environment.
What now for pricing practices?
The title of Prof. Fels’ report does not mince words: Inquiry into Price Gouging and Unfair Pricing Practices. But will it drive any real change to some of these ‘dodgy’ tactics. The report makes a number of recommendations that would require government or ACCC action.
Whether these will be taken on board immediately or after the completion of the year-long government inquiry remains to be seen.
Have you been a victim of dubious pricing tactics? What action, if any, do you think the government should take to rein in such practices? Let us know via the comments section below.
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