The Federal Trade Commission has been discussing clear pricing rules for the United States. See for example here.
These rules are good idea. In 2010, Australia adopted clear pricing rules as part of the Australian Consumer Law. (The relevant law is below). Despite some initial complaining from business, these rules appear to have created little regulatory burden but have improved the ability for consumers to compare competitive price offerings.
For example, automotive dealers now advertise drive away prices rather than advertising a price which excludes numerous fees and charges. Restaurants now make it clear if they charge different prices on weekends than on weekdays, rather than hiding a 10 or 15% surcharge in the fine print on the menu. I don’t think there has been formal empirical work on these reforms that they appear to have been successful.
So my advice for the US FTC – go for it! Clear pricing rules help consumers and make markets work better.
That said, Australia can go further. Mobile phone advertising, for example, is still allowed in ‘funny money’ terms. Phone companies advertise in terms of “dollars of free calls” without making it clear what those dollars translate to in terms of minutes. As a result, it is difficult if not impossible to compare mobile contracts between different providers. It is as if they all provide a price in a different currency without giving you a clear exchange rate.
Nick Stace from Choice comments on this in the Fairfax press today:
”When it comes to mobile phone plans, we call it a confuse-opoly,” Nick Stace says. ”Often phone companies talk in terms of units, not minutes. They’ll say, ‘You get 300 free units.’ But what is a unit? How on earth can an individual make the right decision?”
So my advice to Australian politicians – how about we fix some anomalies in our own ‘clear pricing’ laws, and the mobile phone sector is a good place to start.
Australia’s clear pricing laws in s.48 of the Australian Consumer Law:
(1) A corporation must not, in trade or commerce . . . make a representation with respect to an amount that, if paid, would constitute a part of the consideration for the supply of the goods or services unless the corporation also:
(c) specifies, in a prominent way and as a single figure, the single price for the goods or services; . . .
(5) For the purposes of subsection (1), the corporation is taken not to have specified a single price for the goods or services in a prominent way unless the single price is at least as prominent as the most prominent of the parts of the consideration for the supply.