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Companies that mislead consumers about price increases may be in breach of the Fair Trading Act, the Commerce Commission warned today.
The warning comes ahead of the 2.5 percentage points increase in Goods and Services Tax (GST) which will come into effect in October and possible effects on electricity and fuel prices from the Emissions Trading Scheme (ETS) implemented tomorrow.
"Businesses are not required by law to give reasons when they raise prices. However, when a business does try to justify a price increase to its customers, the reasons they give must be accurate," said Commerce Commission enforcement manager Greg Allan.
A business must take care not to create the misleading impression that GST is the only reason for a price increase if the increase is more than the extra GST, he said.
The commission said it also believed consumers may be misled about the impact of the ETS on electricity and petrol prices.
Major oil companies BP, Shell and Mobil have already announced that petrol prices would rise 3c to 4c from tomorrow but independently owned Gull said it would wait until next week before making any changes.
Some power companies have signalled retail price increases after tomorrow.
The Government has admitted concern at estimated double-digit power price hikes. Prime Minister John Key said hikes should not be more than 5% and in most cases would be less than that.
The commission said it could take enforcement action if there was evidence of a breach of the Fair Trading Act but only the courts could decide if there had been a breach. Penalties could be up to $200,000 for a company and $60,000 for an individual.
