Pricing practices under the microscope

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.

Also read: Supermarkets, airlines and power companies are charging ‘exploitative’ prices

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Written by Andrew Gigacz

Andrew has developed knowledge of the retirement landscape, including retirement income and government entitlements, as well as issues affecting older Australians moving into or living in retirement. He's an accomplished writer with a passion for health and human stories.

5 Comments

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  1. It’s not just the shopping advertisements that are misleading because of the psychological game of it. The staff play on it as well. For example they use distraction to swipe the same item more than once or an extra swipe for multiples of a particular item. Too late if you don’t catch them on the act. Another one is when the prices on the shelves show it is discounted and the check out doesn’t recognise it and customer disputes it. There’s no apology and another staff declares “no that’s for something else” especially when you don’t walk with them to the ial and point it out so they can see it for themselves. The staff can lie and work together within their own crimal activities. Customers need to take time and think carefully for themselves. Don’t let businesses and staff persuade you of esentially stealing your money. Know your rights.

    • I don’t think that happens very much but may do in particular stores.
      The employees are usually more on the side of the customer, in my experience.
      It’s more the deceptive advertising of prices that annoys me and management is responsible for that.

    • This is a dreadful list of unfounded defamatory accusations against retail staff. Where there is human involvement in an action or process there will inevitably be mistakes. After all, there was only one person deemed perfect and he lived 2000+ years ago. Staff on checkouts will occasionally make mistakes in scanning and this can be rectified on the spot. Likewise pricing on shelf tickets may occasionally be out of sync with the till price and again this can and will be rectified on the spot. It is highly unlikely that staff are somehow in collusion to overcharge customers and it is quite wrong to accuse staff of doing so. After all the floor staff have no part to play in the pricing of goods and would not benefit from the actions you claim.

  2. I cannot agree with Homosapien at all. We use the three main supermarkets and find the staff in all of them generally very polite, helpful and honest. What’s in it for a checkout worker to double charge you?
    Do some basic maths on the so called and claimed excess profits. If you divide the net profit by total sales you will find that both Coles and Woolies make around two cents per dollar of sales. Check out some of the non essential, non perishable item retailers to compare their profits.

    I was bought up in Europe during and after WW2 and remember the depleted shelves and extremely limited choices. I later lived for years in Eastern Europe as the Berlin Wall came down and experienced severely limited choices and unreliable availability. I don’t want to experience that in Australia because retailers have such severe cash flow problems that they can’t maintain supplies.
    If you think Coles or Woolies are profiteering from high prices, their shares are readily available on the stock market. Buy yourself a bundle and if you are right, you should soon become rich!

  3. As included in the article, the pump price of petrol (and diesel) seems to be in another universe.
    I can recall when the international price for a barrel of Crude was over $220 and the bowser price was less than $1.50/litre. Now according to the nightly news, it is under $100/barrel but the pump price is over $2/litre!
    I’m in SE Qld and know that nearly all of the local fuels come from the one source at Port of Brisbane. All of the independents and even the main brands all draw their supplies from the same dispenser at Fishermans Island. Adjustments are made at the refinery/importer at midnight every night and no sales or dispensing is done at that time.
    I believe that the blended ethanol is brewed locally but where it is added I’m not sure.
    There is a refinery in western Queensland that supplies diesel and AvTur into a number of regional points (the RFDS planes here are all running on Queensland AvTur).
    I have been told by a person who was a retailer that the Brisbane supplier has their buyers over a barrel in pricing and the retailer either toes the line or finds that their fuel prices vary greatly compared to other local distributors.
    Within 50 kilometres of my home, the prices of all grades of petrol can vary by over 0.20c/litre. Diesel which had been hovering around $2.20/litre for over a year has suddenly slipped below $2.00/litre in the recent week. (No good to me as I’m a 98 user.)
    At least we can be confident that with the continuing demand at all Service Stations, there won’t be much stale petroleum waiting in the tanks below.

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