Component pricing – dishing up the total cost

It’s quite common in cafés or restaurants to see a percentage surcharge applicable on public holidays or weekends. However, these types of businesses may need to change their menus and serve up the whole cost in one portion due to a recent change in component pricing rules.

Component pricing is where a business splits up the cost of a good or service rather than just giving an overall amount. For example; a bold statement such as ‘a meal for $15*’ is made but in fine print underneath it specifies a condition next to an asterisk, like ‘*with every glass of wine purchased’. This would now be illegal, unless the cost of the glass of wine was included and each statement was equally obvious.

It all comes down to a new section of the Trade Practices Act 1974 that came into force in May this year. The legislation places a stronger focus on the need for consumers to be provided with a prominent single total price, including all the non-optional extras, when it is simple enough to quantify the overall dollar amount of a good or service.

This does not just apply to menus or signs; it also needs to be adhered to in advertisements, whatever the medium. Probably the most high profile effect has been on the way travel agents and airlines advertise air fares. Prior to the law change they were putting low cost amounts in bold with a list of extras like baggage handling and taxes in small print. Consumers now benefit from an obvious total price being displayed, which makes it easier to choose the most competitive travel deal.

In the case of a café or restaurant, if the venue charges 10 per cent extra on certain days, they must now create a separate price list with the 10 per cent added to the cost of individual food and drink items. So if a meal is usually $30, below that price, in the same size print, the menu could say ‘or $33 on public holidays and weekends’. A note about the charge on the menu and applying it at the end of the total bill is no longer permitted because the prices listed next to items on the menu could mislead or deceive customers.

When it comes to B.Y.O., corkage charges vary depending upon how many bottles are drunk; therefore the amount cannot be incorporated in to the total cost of each food item. Menus must clearly state the corkage fee e.g. $6 per bottle so that consumers are aware, before they begin drinking.

In regard to percentage surcharges for all credit card transactions the only time this must be included within the price of all individual menu items is if there is no other option for payment like cash or EFTPOS. Otherwise an obvious note on the bill and a verbal reminder from staff before a credit card is used will suffice.

Another exception to the component pricing rule is when a café or restaurant receives a bill from a caterer, which has a price and then GST separately at the bottom. This is not breaking the law because business to business transactions are exempt from the legislation, and for accounting reasons firms actually benefit from this cost separation.

For more information on component pricing log onto the Australian Competition and Consumer Commission website. For specific concerns regarding premises in WA you can call the Consumer Protection help line on 1300 30 40 54.