ACCC’s first big case under new component pricing laws catches Fitness First

Australia’s consumer watchdog has claimed its first scalp under new component pricing laws, which requires companies to include the total cost of goods or services in a single advertised price, with Fitness First under fire for a special discounting joining fee promotion.

The Fitness First “gold coin to join” promotion, which ran during January and February of 2010, said that gym customers could pay a “gold coin” and a special administrative fee to join the gym network, instead of the usual joining fee.

However, the posters used to advertise the promotion only focussed on the joining fee discount and did not include a single, total price for a membership.

Under the component pricing laws introduced in July 2009, businesses are required to show a single price for their goods or services, including all taxes, duties, fees and other mandatory charges.

In the case of a gym membership, which may be paid on a periodic basis (such as a weekly or monthly payment), a single price for a specific period can be displayed more prominently than the single price over the life of the contract – but the total price must be displayed.

“The component pricing laws have been in place for more than 12 months, businesses that do not comply with the requirement to prominently specify a single price for their goods or services risk enforcement action being taken against them by the ACCC,” the watchdog’s chairman Graeme Samuel said in a statement.

Under a rather unique deal reached with Fitness First, the ACCC has asked the gym chain to extend a special promotion designed to help combat teenage obesity until the end of November.

The move will cost Fitness First $225,000. The company will also be required to publish corrective ads on its website and its in-house magazine. The company will also run a Trade Practices compliance program.

An ACCC spokesman confirmed to SmartCompany this morning that the Fitness First case is the first prominent case under the component pricing laws.

Other prominent examples of component pricing breaches that the ACCC has previously said it will target include:

• Restaurants must now clearly print the total extra charges for public holidays and weekends.
• Travel agents organising packaged holidays must now display the total cost of a package, as opposed to advertising “packages starting from $X”.
• Companies requiring a number of payments over several weeks for a product must display the final cost.
• Car rental groups advertising a rental price but also requiring a charge per kilometre driven must clearly display the full charges.
• Companies selling concert and events tickets must include any booking fee within the total price.

Under the component pricing laws, the ACCC can take court action and seek fines of up to $6,600 for companies and $1,320 for individuals.