New report unveils jaw-dropping extent of price gouging
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In an era where the cost of living is skyrocketing, a new report has unveiled a disturbing trend: major Australian businesses are allegedly exploiting struggling households through unfair pricing practices.
This comes as a federal inquiry into price gouging revealed that major supermarket chains may be overcharging customers struggling with the high cost of living.
The report, commissioned by the Australian Council of Trade Unions (ACTU), has shed light on the alarming extent of ‘dodgy’ pricing practices.
Economist Professor Allan Fels, former Chair of the Australian Competition and Consumer Commission (ACCC), has pointed out that rising prices are not merely a result of inflation but are also driven by corporate gouging and ‘profit pushing’.
Unfortunately, the cost of these unfair prices to the Australian public reached a staggering $100 billion per year.
'Australians are paying prices that are too high, too often,' Professor Fels said.
‘A significant part of the cost-of-living crisis has been caused by companies in uncompetitive markets taking advantage of their market power and relying on gaps in government policy to squeeze consumers and often suppliers to breaking point,’ he continued.
Professor Fels emphasised: ‘Reform to curb this is urgent.’
The report revealed that grocery prices across Australia have surged by 20 per cent since 2020, a stark contrast to the 8 per cent increase recorded over the decade prior.
This indicates that prices across Australia are rising far quicker than they fall, adding to the financial burden on households.
The report has also identified various ways in which businesses extract additional money from their customers.
One example is ‘loyalty tax pricing’, in which initial prices are low and then gradually increase over a longer period of time, without customers being aware of it.
Another common pricing strategy is 'drip pricing', where a part of the total price is hidden. This tactic is observed in flight tickets, hotels, homestays, phone charges, and medical procedures.
Professor Fels explained that businesses are also utilising algorithms to increase prices.
He stated: ‘This can sometimes operate like a cartel, especially if the algorithms are programmed to cooperate with the prices of competitors.’
In his report, Professor Fels singled out airline giant Qantas as a major culprit of price gouging.
He pointed out that airfare increases over the last three months of 2022 were significant enough to contribute to overall inflation in the travel industry.
‘A quarter of the inflation that month was mainly due to Qantas aggressively raising airfares, although Virgin may have also contributed,’ Professor Fels shared.
Last year, the ACCC filed a legal action against the national carrier for allegedly selling cancelled tickets to customers.
Additionally, Professor Fels suggested a major review of the national energy sector, citing a dramatic increase in electricity prices in recent years.
‘The electricity industry is riddled with questionable prices,’ he said.
‘This is not surprising. It is concentrated at all levels and includes also a higher degree of vertical integration between generators and retailers. There is regular price gouging according to the regulators themselves,’ he added.
Professor Fels received numerous concerns and submissions regarding supermarket prices, according to his inquiry.
His report also noted the use of misleading price tags on normal grocery prices, which businesses often use to claim discounts.
‘Misleading price displays are illegal but despite this, there is no prescribed minimum period where a business must advertise,’ Professor Fels pointed out.
The ACCC has been tasked with conducting a 12-month inquiry into pricing and competition within the supermarket industry.
Public hearings are scheduled to take place over the next few weeks.
Professor Fels stated that the public would ‘deeply welcome’ more action on prices from the federal government.
‘I think we should have more probing by governments and shaming about higher prices,’ he said.
What are your thoughts on this new report, members? Share them in the comments below!
This comes as a federal inquiry into price gouging revealed that major supermarket chains may be overcharging customers struggling with the high cost of living.
The report, commissioned by the Australian Council of Trade Unions (ACTU), has shed light on the alarming extent of ‘dodgy’ pricing practices.
Economist Professor Allan Fels, former Chair of the Australian Competition and Consumer Commission (ACCC), has pointed out that rising prices are not merely a result of inflation but are also driven by corporate gouging and ‘profit pushing’.
A report commissioned by ACTU revealed the extent of price gouging. Image source: Marques Thomas/Unsplash
Unfortunately, the cost of these unfair prices to the Australian public reached a staggering $100 billion per year.
'Australians are paying prices that are too high, too often,' Professor Fels said.
‘A significant part of the cost-of-living crisis has been caused by companies in uncompetitive markets taking advantage of their market power and relying on gaps in government policy to squeeze consumers and often suppliers to breaking point,’ he continued.
Professor Fels emphasised: ‘Reform to curb this is urgent.’
The report revealed that grocery prices across Australia have surged by 20 per cent since 2020, a stark contrast to the 8 per cent increase recorded over the decade prior.
This indicates that prices across Australia are rising far quicker than they fall, adding to the financial burden on households.
The report has also identified various ways in which businesses extract additional money from their customers.
One example is ‘loyalty tax pricing’, in which initial prices are low and then gradually increase over a longer period of time, without customers being aware of it.
Another common pricing strategy is 'drip pricing', where a part of the total price is hidden. This tactic is observed in flight tickets, hotels, homestays, phone charges, and medical procedures.
Professor Fels explained that businesses are also utilising algorithms to increase prices.
He stated: ‘This can sometimes operate like a cartel, especially if the algorithms are programmed to cooperate with the prices of competitors.’
In his report, Professor Fels singled out airline giant Qantas as a major culprit of price gouging.
He pointed out that airfare increases over the last three months of 2022 were significant enough to contribute to overall inflation in the travel industry.
‘A quarter of the inflation that month was mainly due to Qantas aggressively raising airfares, although Virgin may have also contributed,’ Professor Fels shared.
Last year, the ACCC filed a legal action against the national carrier for allegedly selling cancelled tickets to customers.
Additionally, Professor Fels suggested a major review of the national energy sector, citing a dramatic increase in electricity prices in recent years.
‘The electricity industry is riddled with questionable prices,’ he said.
‘This is not surprising. It is concentrated at all levels and includes also a higher degree of vertical integration between generators and retailers. There is regular price gouging according to the regulators themselves,’ he added.
Professor Fels received numerous concerns and submissions regarding supermarket prices, according to his inquiry.
His report also noted the use of misleading price tags on normal grocery prices, which businesses often use to claim discounts.
‘Misleading price displays are illegal but despite this, there is no prescribed minimum period where a business must advertise,’ Professor Fels pointed out.
The ACCC has been tasked with conducting a 12-month inquiry into pricing and competition within the supermarket industry.
Public hearings are scheduled to take place over the next few weeks.
Professor Fels stated that the public would ‘deeply welcome’ more action on prices from the federal government.
‘I think we should have more probing by governments and shaming about higher prices,’ he said.
What are your thoughts on this new report, members? Share them in the comments below!
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