In brief
The ACCC has been given powers to monitor and enforce compliance with new laws prohibiting merchants from charging excessive payment surcharges. Partner Carolyn Oddie, Associate Theodore Souris and Lawyer Emma Gorrie report.
How does it affect you?
- Businesses will need to review their payment surcharges to ensure that they are not 'excessive' and can be substantiated.
- The ACCC has been given powers to issue a 'surcharge information notice' to investigate compliance with new provisions prohibiting excessive payment surcharges.
- Businesses should review their payment surcharging practices and associated marketing to ensure that their costs can be substantiated and statements made about surcharges, 'booking fees', 'service fees' or 'transaction fees' are appropriate.
The payment surcharges amendments
New amendments that came into effect on 25 February 2016 insert a new Part IVC (Payment Surcharges) into the Competition and Consumer Act 2010 (Cth). These provisions prohibit merchants from charging a payment surcharge that is 'excessive'. The provisions will apply to surcharges of a kind covered by a Reserve Bank standard or regulations, which are yet to be made. A payment surcharge will be excessive if it exceeds the permitted surcharge referred to in the Reserve Bank standard or the regulations. While the amendments are already in effect, the substance of the restriction does not commence until the Reserve Bank standard or regulations are made. A Reserve Bank standard is expected soon.
Businesses will not be able to get around the ban simply by calling their surcharges another name. The definition of 'payment surcharge' looks to substance over form. 'Booking fees', 'service fees' and 'transaction fees' will be caught where they are actually a fee associated with choosing to use one payment method over another.
Reason for the change
These provisions represent a change from the previous situation, where there was no direct prohibition on merchants. Any limitations on merchants were imposed by payment system providers, such as Visa and MasterCard.
There has been recent scrutiny of some practices associated with surcharging, including the fact that, in a small number of cases in particular industries, surcharging levels appeared to be in excess of merchants' likely acceptance costs. These provisions are designed to ensure that payment surcharges are not excessive and that they reflect the cost of using the payment methods for which they are charged, so as to send appropriate pricing signals. This means that merchants still should be able to recover their costs of processing the payment method that the customer has chosen.
The ACCC's powers
The ACCC has been given the power to issue 'surcharge information notices'. This allows it to require a participant to give to the ACCC information or documents evidencing the amount of a payment surcharge, and the cost of processing a payment in relation to which a payment surcharge was paid.
These provisions will potentially apply to a wide range of businesses across most sectors, from small clothing operators who accept credit cards, to large businesses that offer online sales and to bricks-and-mortar businesses.
The ACCC has had similar price monitoring roles and powers before. When the GST was introduced, it requested pricing information directly from businesses. The repeal of the carbon tax saw the ACCC writing to a number of organisations and issuing 'substantiation notices', which required businesses to provide a detailed breakdown of their costs and how the reductions from the carbon tax removal affected their prices. The ACCC issued 250 of these notices in one week in 2014 alone. It also took action for misleading statements made in association with the introduction of the carbon tax. For example, the Federal Court ordered that Actrol Parts Pty Ltd pay a penalty for attributing part of price increases in refrigerant gas to the introduction of the carbon tax, when it had actually increased its margins.
Unlike the GST and the carbon tax repeal, which arose out of one-off expected changes in prices, the payment surcharge amendments will give the ACCC an ongoing monitoring role. This will require businesses to remain vigilant and ensure that they are regularly assessing whether their payment surcharges are excessive, based on their costs.
The ACCC has the power to issue infringement notices and may commence court proceedings for pecuniary penalties for contraventions.
Next steps
To ensure compliance with the new laws, businesses should review their payment surcharging practices, and any associated policies, agreements and marketing. Businesses should watch for the release of the new RBA standard and be prepared to substantiate that their payment surcharges are appropriate. Some businesses may find that their practices are already consistent with the new laws. Others may have to make some changes to how they operate.