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ACCC hits Jetstar, Virgin with ‘drip pricing’ charges


Issues & Trends – June 2014

ACCC hits Jetstar, Virgin with ‘drip pricing’ charges

JETSTAR and Virgin Australia have learned that Australian Competition and Consumer Commission chairman Rod Sims was deadly serious earlier this year when he foreshadowed court action against “drip pricing” tactics in online selling of airfares.

The ACCC this month hit the two carriers with separate Federal Court proceedings alleging they have engaged in misleading or deceptive conduct and made false or misleading representations in relation to particular airfares. Both deny this.

Addressing the Committee for Economic Development of Australia (CEDA) in February, Sims spelled out that “drip pricing” is a priority for the ACCC in 2014 and warned of looming enforcement action.

Singling out the sale of airfares (along with tickets to sporting events), Sims told CEDA drip pricing involves the incremental disclosure of fees and charges over an online booking process. “It causes both competition and consumer detriment,” he said.

“Consumers sees a ‘headline’ price advertised at the beginning of the booking process but when they pro-gress to the payment phase, additional fees and charges have been added.

“Drip pricing involves a lack of transparency which may mislead consumers and it can also make it difficult for businesses to compete on a level playing field.”

The ACCC’s announcement of court action alleges 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 – $8.50 per passenger, per domestic Jetstar flight if payment was made by a credit card (other than a Jetstar branded credit card) or PayPal, and $7.70 per passenger, per Virgin Australia booking if payment was made by a credit or debit card or PayPal.

These fees should have been disclosed “upfront and prominently with or within headline prices”, the ACCC maintains.

“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 seeking pecuniary penalties, declarations, injunctions, corrective advertising and costs against each airline.

Indicating they intend to mount robust defences, Jetstar and Virgin Australia spokespeople have asserted the airlines clearly display both fees and total prices prior to finalisation of purchase and fee-free payment methods are available.

 

 

 

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