The Australian Competition and Consumer Commission has instituted separate proceedings in the Federal Court against Jetstar Airways Pty Ltd (Jetstar) and Virgin Australia Airlines Pty Ltd (Virgin), alleging that each airline engaged in misleading or deceptive conduct and made false or misleading representations in relation to particular airfares.
The conduct which is the subject of the ACCC’s allegations in each of these proceedings is an example of what is often referred to as ‘drip pricing’. Drip Pricing is where a headline price is advertised at the beginning of an online purchasing process and additional fees and charges (which may be unavoidable for consumers) are then incrementally disclosed (or ‘dripped’). This can result in consumers paying a higher price than the advertised price or spending more than they realise.
The ACCC alleges that Jetstar and Virgin each made representations on their websites and mobile sites that certain domestic airfares were available for purchase at specific prices, when in fact those prices were only available if payment was made using particular methods.
In relation to specific advertised airfares, the ACCC alleges that each airline failed to adequately disclose an additional Booking and Service Fee. In particular, it is alleged that:
- Jetstar charged a Booking and Service Fee of $8.50 per passenger, per domestic flight if payment was made by a credit card (other than a Jetstar branded credit card) or PayPal; and
- Virgin charged a Booking and Service Fee of $7.70 per passenger, per booking if payment was made by a credit or debit card or PayPal.
The ACCC alleges that these fees applied to the substantial majority of online bookings and should have been disclosed upfront and prominently with or within headline prices. While both airlines made some adjustments to the disclosure of these fees during the period of the ACCC’s investigation, the ACCC remains concerned with these pricing practices.
“The ACCC is concerned about advertising that draws consumers into an online purchase process but fails to provide sufficient upfront disclosure of additional fees and charges that are likely to apply,” ACCC Chairman Rod Sims said.
“Drip pricing practices, such as those alleged by the ACCC in these proceedings, have the potential to cause both competition and consumer detriment. Not only can this practice lead to consumers potentially being misled, it may also make it difficult for businesses with more transparent pricing practices to compete on a level playing field. The ACCC continues to investigate businesses in other industries in relation to their practices of incremental disclosure of fees and charges,” Mr Sims said.
In the ACCC Compliance and Enforcement Policy for 2014, the ACCC announced that it is giving priority consideration to emerging consumer issues in the online marketplace, particularly those associated with drip pricing.
The ACCC is seeking pecuniary penalties, declarations, injunctions, corrective advertising and costs against each airline.