ACCC sues Jetstar/ Virgin for drip-feed pricing

In Australian Cultural Exports, Australian Domestic Tourism, Government, Harmonisation, National Headlines, Transport
From The Australian, 19th June 2014

Jetstar and Virgin’s ‘drip pricing’ under legal challenge from ACCC

THE competition regulator is suing Jetstar and Virgin Australia, accusing the airlines of misleading and deceptive conduct for charging customers more than the advertised price of fares by adding extra costs such as “booking” fees after a purchase has commenced.

The Australian Competition and Consumer Commission has taken action in the Federal Court against the airlines over “drip pricing”, where charges are incrementally disclosed after a customer begins a purchase, lifting the final fare above the advertised price.

Jetstar charges a “booking and service fee” of $8.50 per passenger per flight for credit card payments — unless a Jetstar-branded card is used — while Virgin charges a booking and service fee of $7.70 per passenger per booking if credit cards or debit cards are used.

None of these charges are included in upfront advertised prices and, on some budget fares, can add up to as much as 20 per cent on top of the cost of a ticket.

“The ACCC alleges that Jetstar and Virgin each made representations on their websites and mobile sites that contain 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,” the ACCC said.

The regulator is seeking monetary penalties, corrective advertising, injunctions and costs against each airline.

The highest statutory penalty for each offence is $1.1 million.

The ACCC said drip pricing stymied competition and made it more difficult for those companies which disclosed all charges upfront.

“Not only can (drip pricing) 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.

Under the current law, airlines are required to provide consumers with reasonable options to pay for tickets without extra charge, if those fees and charges are not advertised at the beginning of the purchase.

In response the carriers offer a very limited avenue for payments to be made free with cards, with Jetstar offering charge-free transactions on “Visa debit mastercards” or its own branded credit cards.

The airlines have argued they are operating within the law because they offer these alternatives.

However the ACCC argues they are insufficient to meet their legal obligations.

Comment was being sought from Jetstar and Virgin.

The airlines also surprise customers with additional charges such as “seat selection”. While such offers can be bypassed, both deliberately obfuscate the bypassing option, with options presented on small, difficult to find, tabs on the websites, it’s alleged.

Airlines in trouble for drip pricing

From choice.com.au, 19th June 2014

Girl using computer looking confused

Jetstar and Virgin will face the federal court on charges of engaging in misleading or deceptive conduct and making false or misleading representations relating to allegations of drip pricing made by the Australian Competition and Consumer Commission (ACCC).

The ACCC’s allegations relate to the airlines’ practice of advertising a headline rate for a flight at the beginning of an online booking process, then disclosing fees and charges (which may be unavoidable for consumers) as a consumer gets further into their purchase. This can result in consumers paying a higher price than the advertised price or spending more than they intended. Under the Australian Consumer Law, you’re entitled to see the total price, inclusive of any additional fees, charges or taxes.

The practice of drip pricing by the airlines was recently highlighted by CHOICE.

The ACCC alleges that Jetstar and Virgin each advertised domestic airfares at certain prices only available if payment was made using particular methods. Specifically, the ACCC has taken issue with the airlines’ failure to disclose additional booking and service fees. It found 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 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 says.

“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,” Sims says. “The ACCC continues to investigate businesses in other industries in relation to their practices of incremental disclosure of fees and charges.”

The federal court will be hearing the case in August this year.

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