Australia’s Federal Court has found that Jetstar and Virgin Australia have engaged in misleading and deceptive conduct though a practice colloquially known as ‘drip pricing’, which confuses consumers and slugs them with surprise booking and service fees when they buy tickets online.
The court found that Jetstar Airways Pty Ltd (Jetstar) and Virgin Australia Airlines Pty Ltd (Virgin) contravened the Australian Consumer Law (ACL) by engaging in misleading and deceptive conduct and making false or misleading representations about the price of particular advertised airfares.
In relation to Jetstar, the Court found that representations about specific advertised airfares made on its website in 2013, and its mobile site in 2014, were false or misleading. However, the Court held that the ACCC had not established that the alleged misleading representations were made by Jetstar on its 2014 website, nor in its promotional emails in 2014.
In relation to Virgin, the Court found that representations made on its mobile site in 2014 about specific advertised airfares were false or misleading.
The Court held that the ACCC had not established that the alleged misleading representations were made by Virgin on its website, nor in its promotional emails of 2014.
ACCC chairman Rod Sims said: “The conduct which was the subject of the ACCC’s allegations in both 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 or applied in most transactions) are then incrementally disclosed (or ‘dripped’).
“This can result in consumers paying a higher price than the advertised price, spending more than they realise and making it more difficult to compare offers.”
The ACCC alleged in these proceedings that, in relation to specific advertised airfares, Jetstar and Virgin failed to adequately disclose an additional Booking and Service Fee (AUD 8.50 and AUD 7.70 respectively) which was charged on bookings paid using most credit cards or PayPal (and additionally in the case of Virgin, by debit card).
The ACCC’s case was that the Booking and Service Fee was only disclosed to consumers once they had moved through a number of stages of the booking process.
“The ACCC’s concern with drip pricing has always been to ensure that consumers are not misled and that businesses are not unfairly disadvantaged by misleading practices,” Sims said.
“While the Court found that the ACCC had not established all of the allegations against Jetstar and Virgin, the findings that some of their conduct was misleading are significant.
“Separately I note that it is encouraging that a number of businesses in the travel, accommodation and ticketing industries have adjusted their online pricing practices to improve disclosure of fees and charges since the ACCC began its work on drip pricing. This also has a positive effect on competition, allowing consumers to easily compare and choose the best price.”
A hearing on relief will be held on a date to be fixed by the Court. The ACCC is considering the judgment.
Jetstar and Virgin Australia stressed after the court’s ruling that they are committed to ensuring Booking and Service Fees are fair and simple for consumers to understand.
Virgin Australia pointed out that the Federal Court had found in favour of the airline on five of the six claims made by the ACCC.
Virgin Australia was reviewing the judgment and considering its position on this aspect, a spokesman told the Australian.
Drip pricing conduct was a priority enforcement area in the ACCC’s 2014 Compliance and Enforcement Policy with the ACCC addressing identified behaviour across a number of industries. It remains a focus for the ACCC, as part of the ACCC’s current priority area of systemic consumer issues in the online marketplace.
On 13 October 2015 the ACCC accepted court enforceable undertakings from Airbnb Ireland (Airbnb) and Vacaciones eDreams, SL (eDreams) following concerns that the companies engaged in misleading and deceptive conduct and made misleading representations by failing to adequately disclose to consumers in Australia particular mandatory fees on key pages of one or more of their online booking platforms.
In late 2014, in response to concerns raised by the ACCC, Ticketek and Ticketmaster agreed to improve their online pricing practices. The ACCC had identified instances where it considered that these companies failed to state single minimum total prices. Both companies now include unavoidable fees earlier in the online booking process.
Edited by Peter Needham