The Federal Government should strengthen action on unfair pricing practices and gouging, Professor Allan Fels has recommended after an inquiry triggered by surging costs facing consumers in areas including insurance, energy and transport. 

The former Australian Competition and Consumer Commission (ACCC) chairman says the commission focuses on unlawful anti-competitive agreements, but avenues are needed to investigate and address excessive prices. 

“There’s no part of the government you go to about high prices, unless there’s collusion,” he told the National Press Club in Canberra yesterday. “There is a big gap.” 

The inquiry, chaired by Professor Fels and commissioned by the Australian Council of Trade Unions, has resulted in 35 recommendations, with six on prices, four on mergers and divestiture, and five on competition policy. It includes 20 related to specific industries, focusing on energy, banking, early childhood education and the care sector. 

Professor Fels proposes a new independent national competition and prices commission, and says the ACCC should be able to initiate price and market studies. The ACCC should also be able to name businesses and industries that overcharge, in a return to rules implemented after the goods and services tax started. 

Practices identified in which business may extract “more than their fair share of the consumer dollar” include loyalty taxes and schemes, drip pricing, asymmetric pricing, confusion pricing, algorithmic pricing and price discrimination. 

At the Press Club, Professor Fels highlighted the impact of rising costs on a nurse, Danielle, whose collective bills had risen $8700 in one year while her wage had increased $102. 

“She was looking to get a second job to pay her bills, which had skyrocketed,” he said. “She’d had a 40% increase in insurance, which is not unusual these days, and despite that she’d never made a claim on insurance.” 

The inquiry’s report says people at hearings in Cairns noted high insurance costs in the disaster-prone region were exacerbating the cost-of-living crisis. 

Loyalty taxes have been identified as an issue in general insurance, where a new customer is offered a low initial price that then increases in subsequent years, Professor Fels says. 

“We need better pre-disclosure,” he told the Press Club. “Insurers in recent times, despite their stiff resistance to it, have been required to tell us not only what you are paying this year, but what you paid last year, so you know what the increase is.” 

The report says there has been much discussion about inflation and causes including monetary and fiscal policy, international factors, wages, supply chain disruptions and war, but hardly any discussion about the processes by which prices are set. 

General inflation can provide a camouflage for price increases, and Professor Fels took aim at the “rockets and feathers” effect. 

“When costs rise, business prices rise fast, like a rocket. When costs fall, business prices fall slowly to the ground, like a feather. It is very profitable to delay price falls. As inflation starts to fall, I am concerned that there may be a ‘rockets and feathers’ effect on prices.” 

The inquiry conducted five public hearings and received more than 750 submissions. The report, titled Inquiry into Price Gouging and Unfair Pricing Practices, is available here.