Carbon care is needed

Yesterday’s revelation that bakery franchise Brumby’s told franchisees to bump up prices and blame the increases on the carbon tax sparked a range of reactions from our readers.

Labor’s decision to implement a carbon tax in the first place was attacked. The ACCC received the colourful and silly description of the carbon tax Gestapo. A few readers even welcomed the carbon tax and pointed to the environmental good it would do.

But the prevailing attitude was clear: Brumby’s wording wasn’t good, but what did they do wrong? You’re allowed to lift prices under the carbon tax aren’t you?

You certainly are, as the ACCC has made clear consistently in the last 12 months.

But the Brumby’s episode shows that there is a right way to do it and a wrong way. And it is all about transparency.

Brumby’s was well within its rights to suggest that franchisees bring its prices in line with the recommended retail prices that exist across the network. And it is certainly entitled to raise its prices in line with inflation (or even higher, if they think the market will bear it) whenever they like.

But what they cannot do is lift prices for these legitimate reasons and then blame the rises on the carbon tax without justification.

Now, that is not to say that Brumby’s franchisees couldn’t raise their prices in response to the carbon tax. But if they want to “blame” the price rises on the tax when they explain the hikes to customers, they need to be able to justify it.

They need to be able to say, for example: Our energy costs are up X%, our transport costs are up X%, our raw materials costs are up X%, so we are putting prices up by X% due to the carbon price and X% due to inflation.

Of course businesses can raise their prices due to the carbon price – that’s the point of the bloody thing and the reason why the Federal Government has handed compensation to households.

But when you communicate that price rise, you have to do more than just pick your words carefully. You have to be able to justify the price rise for customers (and potentially for the ACCC) with some actual research.

James Thomson is a former editor of BRW’s Rich 200 and the publisher of SmartCompany and LeadingCompany.