Chapter 3
Unit Pricing (Easy comparison of grocery prices) Bill 2008
Overview
3.1
The Unit Pricing (Easy comparison of grocery prices) Bill 2008
amends the National Measurement Act 1960 to require retailers of grocery
products to:
- display on the premises posters and pamphlets containing
information about unit pricing, for the use of consumers;
- indicate the selling price for all grocery products that are, or
may be, for sale to a consumer. Grocery products sold in bulk or advertisements
for a grocery product are exempt; and
- indicate an accurate unit price for all grocery products that
are, or may be, for sale to a consumer. Certain products and circumstances are
exempt from this requirement.
The Bill also:
- specifies the font size of unit price information on shelf
labels, its prominence in relation to other information, and the location of
such labels;
- specifies the manner in which the unit price is to be calculated
and the measurement units to be used; and
- outlines an enforcement regime, including: providing for the
appointment of unit pricing inspectors and detailing their powers, which
include search and seizure powers; providing for the issuing of infringement
notices; allowing the Secretary to publicise contraventions; and prescribing
civil penalties for failing to comply with the requirements set out in the
Bill.
Stakeholder views
3.2
The majority of submissions to the inquiry were supportive of the
policy underpinning the Bill, namely the introduction of a mandatory unit
pricing scheme in Australia (with the exception of groups such as the National
Association of Retail Grocers of Australia and Master Grocers Australia, who
indicated a preference for a voluntary scheme[1]).
However, there were mixed views about what such a scheme should entail, with
consumer groups largely supportive of the requirements set out in the Bill and
industry groups calling for a less prescriptive approach. For example, Mr Aylen
from Woolworths told the committee that
Our challenge as retailers is to keep our unit pricing system
simple and easy to understand for the customers. We have in excess of 25,000
items in our stores, so implementing unit pricing is no easy task, and we
believe that the key is flexibility. A national unit pricing scheme should be
sufficiently flexible to allow retailers to implement within current store
designs and technological platforms. This will enable us to introduce unit
pricing quickly. If the system is too prescriptive it could be difficult, time
consuming and costly to implement and hinder the benefits to our consumers.[2]
3.3
Both consumer and industry groups raised some concerns about
specific sections of the Bill, which are discussed below.
Proposed
new section 18ZZH – Interpretation
Stores to be exempt
3.4
Under proposed new sub-paragraph 18ZZK(3)(d)(i), single
premises shops are excluded from the requirement to provide unit pricing
information. Proposed new section 18ZZH defines a single premises shop
as the shop of a retailer that operates from only that unique location and
which has a relevant floor area not exceeding 200 square metres.
3.5
There appeared to be general agreement that some exemptions from
mandatory unit pricing should be provided for smaller stores. For example, Mr Ashton
from the Consumer Action Law Centre, in response to a question from Senator Bushby
about exemptions, noted that
as a matter of common sense and in the interests of smaller
businesses there do need to be exemptions. I think everybody would agree with
that.[3]
3.6
The criteria that should be used to determine eligibility for
exemptions was a matter for debate, however. Mr Cameron suggested that the
exemption provisions in the Bill would help to reduce the impact of the Bill on
small rural businesses, but raised concerns that in rural areas floor space is
much less costly than in cities, so the ‘arbitrary’ choice of 200 square metres
may ‘hinder growth of small businesses in lower floor space cost locations.’[4]
3.7
Metcash indicated that they would like to see exemptions for
stores with a relevant floor area not exceeding 1,200 square metres. Metcash's
Marketing and Commercial Manager, Mr McDonald, told the committee that
The reason for choosing 1,200 square metres is that we have
different tiers within our distribution system so that the large or first tier
is what you might see around as our super IGA supermarkets... [these]
supermarkets in many cases form part of the main shop or the primary shop per
week, and they certainly compete against the chains for customers’ businesses.
Below that we get into different branding, and the different branding is an
IGA—it used to be called IGA Everyday—or certainly IGA Express and smaller
stores. Those stores tend not to compete...directly against major supermarket
chains in that competitive environment...the cost impost on our smaller retailers
who fit below that super channel is a lot higher. They do not have the manpower
and, in general, the resources...I guess the exclusion from mandatory legislation
is something that we would like for those smaller stores.[5]
3.8
The ACCC acknowledged that floor space is one means of estimating
the size of a store, but noted that turnover is generally a good measure of the
size of a business and, along with other indicators, might provide an appropriate
means of identifying smaller stores where the cost of implementing unit pricing
may eclipse any benefits.
Floor size is just an indicator. Turnover and the size of the
business are generally good indicators of their ability to do some of these
things and to minimise the costs and to spread especially some of the fixed
costs that you might incur with the IT system over a greater range of products
and revenue. So turnover is generally a good size that you would start from,
and floor size is an indicator of—[6]
3.9
Mr Jarrett advised the committee that various criteria are used
to provide exemptions from unit pricing overseas. For example, the Irish system
exempts stores that do not have the technology to automatically produce shelf
labels.[7]
While the Consumer Action Law Centre advised that the European Union provides
exemptions for stores with less than 280 square metres of floor space.[8]
Stores to be included
3.10
Proposed new section 18ZZK requires that a retailer who
indicates that any grocery product is or may be for sale to a customer must
indicate the unit price of that grocery product (with some specified
exemptions). Proposed new section 18ZZH defines grocery products as
products sold by any retail grocery store and include but are
not limited to staple foods such as meats, fruit and vegetable produce, baked
goods and dairy products, canned and packaged goods, snacks and confectionary,
non‑alcoholic beverages, household goods (tissues, paper towels, food
wraps, bin liners, light bulbs, batteries, and similar products),
pharmaceutical products, cosmetic products, make-up products, toiletries, baby supplies
such as nappies, haberdashery, tobacco and tobacco products, household cleaning
products, pet supplies and other household supplies, and alcoholic beverages
when such beverages are sold by a retailer of grocery products but exclude
clothing, newspapers, magazines, greetings cards, compact discs, video and audio
tapes, toys, plants, flowers, electrical appliances, kitchen hardware,
gardening equipment and books and grocery product means any one
of them.
3.11
In their submission, Woolworths suggested that, as currently
drafted, the Bill would apply to stores such as Big W, Dan Murphys and some of Woolworths’
petrol outlets, as well as to their supermarkets,[9]
as all of these stores sell some of the goods included in the definition of grocery
products.
3.12
The Queensland Consumers Association also raised this issue,
indicating that it was unclear whether the Bill was meant to apply only to
those retailers who sell a range of grocery products, or to retailers who sell any
grocery product.[10]
For example, the list of items considered to be grocery products includes
pet supplies and cosmetic and pharmaceutical products, so the Bill may be
interpreted as applying to pet shops and pharmacies, who also sell these
products. The Association drew the committee's attention to a provision in the
Regulatory Impact Statement for the proposed Queensland unit pricing
legislation, suggesting that a similar provision should be included in this Bill.
The provision states that
...retailers of grocery products will only be captured by the unit
pricing scheme if they sell a range of the items identified above, but part of
the range must include staple foods. It is not intended to extend the unit
pricing scheme to specialty stores such as hardware, pharmacies and pet stores.[11]
Units of measure
3.13
Proposed new section 18ZZH defines unit price as meaning:
the final price, including GST and all other taxes, for one
kilogram, one litre, one metre, one square metre or one cubic metre of a
grocery product except in respect of grocery products sold by number, where
unit price means the final price including GST and all other taxes for an
individual item of the grocery product.
3.14
ALDI, who have already implemented unit pricing in its Australian
stores, indicated that they believe that a unit of measure smaller than that
proposed in the Bill is likely to be more practicable and easier to understand
for consumers. They indicated that many grocery items are less than the unit
descriptions proposed and that, in these cases, the unit price would be more
effectively displayed as price per 100 grams or per 100 ml. ALDI provided an example
of a 5 gram pack of herbs, where the unit price per kilogram would be extremely
large and fairly meaningless to customers. In this instance, they suggested a
unit price per 10 grams would be a more appropriate measure.[12]
3.15
As outlined by ALDI's Group Buying Director, Mr Davis, at the Melbourne
hearing, ALDI's current unit pricing system is based on the UK model, with
graduated unit prices according to the size of the product.
The UK model currently is the model that we have based all ours
on, and that is 10 grams as an exception on things like herbs and spices, 100
grams on most of the packaged goods, and one kilogram on obvious products like
cheese, fruit and vegetables, meat and those types of things.[13]
3.16
Similarly, Woolworths recommended that unit pricing be per 100ml
or
100 grams, which they state is consistent with nutritional information and is
therefore familiar to consumers. They too gave an example of saffron, which
would have a per kg price of $133,000 for a 0.1 gram package.[14]
3.17
In contrast Consumer groups were highly supportive of the unit
price information being presented per kilogram or per litre, arguing that
larger units of measure are preferable as:
- price per kilogram is the measure currently used for items such
as meat and cheese sold in random weight packages, and is therefore familiar to
consumers; and
- they maximise price differentials between products and therefore
provide more meaningful information to consumers. For example, a consumer is
more likely to take note of a price differential of $2.34 per kg rather than one
of 23.4 cents per 100 grams.[15]
3.18
The Consumer Action Law Centre noted that
In overseas jurisdictions you tend to see where they have gone through
this process that, when they have said, ‘Yes, we will do unit pricing’, the
retailers have pushed for the adoption of smaller units of measurement as the
base units. The reason for that is reasonably clear. The smaller the units, the
smaller the price difference between different products or different sizes and
the less it looks like there is a saving to be made to the consumer and the
less it drives the consumer to make a decision based on that information. The bigger
the units, the clearer the price differences are and the clearer the consumers
can see quickly that there is a different in price and can make a decision
based on that.[16]
3.19
The Queensland Consumers Association did, however, raise concerns
that the unit price for products sold by count should not be for an individual
item of the product, as specified in the Bill. Rather, because the number of
items in a pack may vary greatly, they stated a preference for unit prices to be
calculated on a sliding scale depending on the number of items in a pack. For
example for 1 to 9 items in the pack the unit could be per each, for 10 to 99
the unit could be per 10 and for 100 and over the unit could be per 100.[17]
3.20
The ACCC did not express a set view on what units of measure
would be the most appropriate for a unit pricing scheme in Australia, noting
only that the units chosen should be appropriate to the products, and that
there should be some scope to adjust the scheme as it is rolled out so that it
is responsive to any emerging problems.[18]
Proposed new section 18ZZJ –
display of selling price
3.21
Subsection 18ZZJ(1) requires retailers of grocery products to
indicate the selling price for all grocery products that are, or may be, for
sale to a consumer. Grocery products sold in bulk or advertisements for a grocery
product are exempt.
3.22
In their submission to the inquiry, NARGA indicated that this
provision ‘is the first time such a requirement has been introduced into
Australian law’ and asserts that the requirement is particularly difficult for
very small retailers, who currently do not price label all of their goods and
are not required to do so. In evidence to the inquiry, Mr Ashton of the
Consumer Action Law Centre also noted that
...apparently there is no legal requirement, certainly in
Victoria, to put any shelf label size or even put a price on shelves.[19]
3.23
While the Bill provides an exemption from providing unit price
information for single premise shops, no such exemption is provided for the
requirement to indicate the selling price.
Proposed new section 18ZZL
Labelling requirements
3.24
Proposed new subsection 18ZZL(2) requires a retailer to:
ensure that the font of the indication of the unit price on
shelf labels of a grocery product offered by the retailer to consumers or to
prospective consumers is the greater of:
(a) 10 millimetres; or
(b) 50 per cent of the size of the font of the indication of
the selling price.
3.25
This provision caused considerable consternation among witnesses
from the grocery industry. ALDI indicated that, in their view, a requirement that
unit price information be 50 per cent of the selling price was impractical and
would result in cluttered and confusing price tags.[20]
To meet this requirement, ALDI indicates that it would have to undergo a ‘full
re-design of its price displays incurring considerable and in our view,
unnecessary cost.’ They propose that the Bill instead prescribe a minimum size
unit price, allowing retailers the flexibility to manage price displays in line
with current practices.
The current 50 per cent of the greater of 10 millimetres or 50
per cent of the retail price we believe would start to become a little
confusing for customers... We have been working to try to make that unit price a
little bit larger. We do not have the capability to make it any larger as of
tomorrow, but we are working to make it slightly larger and I think we have
recommended a 10 millilitre (sic) minimum as a size that we could consider. I
think even that on the smaller price cards will start to look very large.[21]
3.26
Similarly, Woolworths indicated that the current size of their
supermarket labels accommodate sale price font sizes of between 5mm and 23mm.
Meeting the unit price font size obligations in the Bill would require them to
reduce the size of other items on the label, such as the product description,
unit of measure and the price of the product, possibly leading to confusion for
customers and taking considerable time and effort. For example, they indicate
that reconfiguring labels for the unit pricing trial that they are currently
undertaking has taken four months. Woolworths also asserted that a regulated
font size of a minimum 10mm
...will also cause issues for shelf displays and could ultimately
reduce shelf sizes and product ranges. This may have the unintended impact of
driving customers to private label or generic branded products, significantly
impacting manufacturers of branded products.[22]
3.27
In addition, Woolworths notes that there is other legislation
which specifies font size for labelling etc, which may be inconsistent with
this Bill, namely obligations under the Food Standards Code and under tobacco
regulations.
3.28
In contrast to the industry groups, consumer groups were strongly
supportive of the font size specifications in the Bill, arguing that
prominently displayed unit pricing information was essential to the success and
uptake of the system. For example, the Consumer Action Law Centre told the
committee that font size
is one of the factors that will make the difference between an
effective unit pricing scheme and a non-effective unit pricing scheme... It is
not going to be effective if it is too difficult for consumers to see, read or
understand the marking of the unit price. Certainly there is research overseas
in jurisdictions that have unit pricing that says the way in which the unit
pricing is displayed, how prominently it is displayed and so on does impact on
the use of unit pricing information by consumers. It is very important.[23]
3.29
The Queensland Consumers Association also advised the committee
that it is common practice for legislation in Australia to prescribe minimum
sizes for the presentation of consumer information.
For example, 3mm is the minimum size font for the presentation
of unit price information on the labels on random weight packages of meat and
some other foods. If the unit price is shown on a label not attached to the
package, for example on a shelf label, the minimum size font is 10mm. Also,
the Food Standards Code specifies minimum font sizes for the presentation of
warning and country of origin information on any type of label.[24]
3.30
While supportive of the provisions specifying font size for unit
pricing information, the Consumer Action Law Centre advised that the 'size of
print is only one of several presentational issues of critical importance to
consumers' and called on the federal government to commission
independent practical research with consumers to inform the
basis of the minimum standards of information presentation for a national unit
pricing system.[25]
Products packed in liquid
3.31
Proposed new subsection 18ZZL(4) requires that:
In the case of a pre-packaged solid food grocery product
presented in a liquid medium, the unit price refers to the net drained weight
of the grocery product. Where a unit price is also given with reference to the
net weight of the grocery product, it must be clearly indicated which unit
price relates to net drained weight and which to net weight.
3.32
In their submissions to the inquiry, ALDI and Woolworths both claimed
that this subsection introduces entirely new criteria for product weight, as no
grocery products in Australia currently display weight in this manner.[26]
According to Woolworths
If this becomes necessary, manufacturing process may be
significantly impacted to provide a consistent drained weight and include this
information on labels so retailers can calculate the unit price.[27]
3.33
In addition, both ALDI and Woolworths believe that this approach
will result in confusion for customers, who are not used to seeing product
weight expressed in this way.
Proposed new section 18ZZM
3.34
This section requires retailers, in calculating unit prices, to
express the unit price to the nearest 0.1 cent if the unit price is below $1
and to the nearest cent or 0.1 cent if the unit price is above $1. It also
provides rules for rounding up or down in specified circumstances.
3.35
Woolworths' submission indicated that the rounding provisions
have the potential to conflict with the Trade Practices Act and also with
proposed new subsection 18ZZK(2) of this bill, which requires that the unit
price indicated by the retailer must be accurate.[28]
3.36
The Queensland Consumers Association recommended that rounding
both above and below $1 should only be to the nearest cent, as rounding to the
nearest 0.1 cents is not consumer-friendly and will be difficult to read.[29]
Proposed new section 18ZZI
3.37
The Queensland Consumers Association noted that this section
appeared to require all retailers to provide consumers with information about
unit pricing. They recommended that such a requirement only apply to retailers
who are implementing unit pricing in their store (whether voluntarily or as
part of a mandatory scheme).[30]
National Measurements Act
3.38
In addition to the above mentioned concerns about specific
provisions of the Bill, the National Association of Retail Grocers of Australia
queried the appropriateness of seeking to introduce unit pricing through
amendments to the National Measurements Act 1960, suggesting that
pricing is outside the scope of the Act and that, as the Act appears to apply
to the measurement of products, it is unsuited to a requirement that relates to
the provision of information not attached to the product.[31]
3.39
Similar concerns were not raised by other witnesses. For example,
when asked by Senator Fielding whether the Bill provided a reasonable basis for
moving forward with a unit pricing system in Australia, Ms Rich from the
Consumer Action Law Centre replied
Yes, certainly. We think it is a sound basis. It is not
dissimilar to the legislation that is being proposed in Queensland. So it is
certainly a basis that we could work off for a national, uniform, mandatory
scheme.[32]
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