Drips and traps: New laws to target dodgy online sales techniques

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The Albanese government is opening a new front in its battle to bring down costs for consumers and businesses, revealing plans for new laws that will force online retailers to reveal the full costs of their products and ways to end subscriptions.

Amid the biggest online shopping period of the year, Assistant Competition Minister Andrew Leigh on Monday will confirm the government will legislate next year new restrictions and fresh penalties for actions that leave shoppers trapped paying subscriptions or that misled over the true cost of a purchase.

The Albanese government will legislate new penalties aimed at protecting consumers from online sales techniques.

It follows growing research over the cost of practices such as “drip pricing” and subscription traps that critics say have become the strategy of some businesses. Subscription traps, under which a consumer finds it effectively impossible to end a subscription, are estimated to cost Australians $46 million a year.

Leigh will use a speech in Canberra on Monday to outline the new laws, which have won the support of state governments.

They will include an economy-wide ban on unfair trading practices that manipulate or distort consumer decision-making. Businesses will be required to disclose key consumer protection terms before buyers agree to purchases while also removing “unreasonable barriers” to cancellation.

It will also require that per-transaction fees, a key component of drip pricing, be disclosed prominently to ensure consumers are not surprised when they go to an online checkout.

Leigh will say the practices of some businesses hurt the economy, reduce competition and increase the costs facing consumers.

“They drain time and money, but they also erode trust. They shift advantage towards firms that design obstacles and away from those that invest in clear products and straightforward service,” he will say.

“Left unchecked, these practices make our economy less dynamic by discouraging people from exploring alternatives or trying new providers. A competitive system cannot thrive when confusion becomes a strategy and clarity becomes a disadvantage.

“This reform also helps shape the kind of economy we want. An economy where prices are what they seem, and where people can leave a service as easily as they join it. ”

Leigh will also reveal that the government will early next year look to expand protections from unfair trading practices to small businesses.

He said in food production, there were examples of retailers threatening to de-list suppliers in retaliation for seeking price increases.

“These practices can distort competition and erode trust. They force smaller operators to absorb risks and costs they did not agree to, undermining the principle that markets should reward merit rather than muscle,” he will say.

“Extending protections to thousands of small businesses, including in construction, agriculture and retail sectors, is essential to restore balance and integrity across the economy.”

The move on online retailers will not have an impact on the budget bottom line, which is forecast to show a deficit of $42.1 billion this financial year after a $10 billion shortfall in 2024-25.

Katy Gallagher and Jim Chalmers will release the mid-year budget update in the next fortnight.

There are signs the deficit will come in under forecasts as monthly official data show the budget $6.6 billion ahead of expectations to the end of October.

Treasurer Jim Chalmers and Finance Minister Katy Gallagher are expected to release the mid-year budget update within the next fortnight.

On Sunday, Gallagher said the monthly budget data had been affected by the timing of payments and various government programs.

But she said she and Chalmers were focused on trying to improve the budget bottom line in the face of increased pressures in areas such as defence, aged care, health, veterans support and the NDIS.

“We would like to bring the budget back into balance, and so some of our thinking about the reprioritising across the public service, how we manage some of those big growth programs, getting NDIS [growth] under 10 per cent is an area of focus,” she said.

Gallagher pushed back at suggestions that the government, which attacked the Coalition during the election campaign for its plan to cut the public service by 41,000, is about to reduce the federal bureaucracy, which now stands at almost 200,000.

She said the current public service was “largely the right size”, and that all ministers had been asked to look at ways of making budget savings that could then be re-invested in government programs.

“There’ll be some ups and downs in different departments as programs start and stop, but overall I think it’s about the right size,” she said.