Aussie airlines targeted by competition watchdog for ‘drip pricing’

The Australian Competition and Consumer Commission has initiated separate proceedings against Jetstar and Virgin Australia in the Federal Court for allegedly engaging in misleading and deceptive conduct.

The ACCC alleges the airlines advertised on their websites that certain domestic airfares were available at specific prices, while at the same time failing to “adequately” disclose additional booking fees.

According to the competition watchdog, Jetstar charged a booking and service fee of $8.50 per passenger, per flight if the purchase was made with a non-Jetstar branded credit card or by PayPal. Similarly, the ACCC alleges Virgin charged an additional fee of $7.70 per passenger if payment was made by a credit card, debit card or PayPal.

ACCC chairman Rod Sims said in a statement the competition watchdog was concerned with the practice of separate fees and charges.

“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,” said Sims.

“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,” he said.  

Drip pricing is a term used to describe a business luring online customers with competitive prices, but then adding additional costs when the customer begins to process their payment.

In a statement, Jetstar said it would defend the action brought by the ACCC in the Federal Court.

“The booking and service fee is clearly disclosed and the total price that people pay is shown before they finalise their purchase,” said Jetstar. “Our customers have the option to choose one of four free payment methods, and that’s how a large number of them book.”

A spokesperson for Virgin Australia told SmartCompany separate booking and service fees have been a long-standing practice for all Australian airlines.  

“Virgin Australia offers its customers a number of fee-free payment options and remains committed to providing a choice of payment options for customers making bookings,” says the spokesperson.

“We welcome an industry-wide approach to booking and service fees to ensure consistency across all the airlines. We are currently reviewing the proceedings commended by the ACCC and will be considering all options.”

In its Compliance and Enforcement Priorities 2014, the ACCC said drip pricing was a key priority.