Jetstar, Virgin handed penalties for ‘drip pricing’ techniques
AFR. Pic of Rod Sims head of ACCC photographed in his office in Pitt St Sydney. pic for story by Jenny Wiggins. Pic by Nic Walker. Date 27th September 2013. Photo: Nic Walker???
Jetstar and Virgin will pay penalties of hundreds of thousands of dollars for their use of “misleading and deceptive” pricing tactics.
The fines, which amount to $200,000 for Virgin and $545,000 for Jetstar, were handed down in the Federal Court on Tuesday, following its finding in November 2015 that their use of “drip pricing” techniques was in contravention of n consumer law.
“I think this is a very big deal,” said Rod Sims, chairman of the n Competition and Consumer Commission.
“Consumers have been complaining about drip pricing for a long time … and this penalty sends out a very important message to airlines. The good news is, the airlines have largely changed their behaviour now.”
Drip pricing occurs when an advertised price becomes unavoidably higher as an online transaction progresses.
The ACCC brought its action against Jetstar and Virgin after it found they utilised drip pricing when advertising specific airfares without disclosing additional booking and service fees until late in the sale process.
In relation to Jetstar, the court found that specific advertised airfares displayed on its website in 2013, and its mobile site in 2014, were false or misleading.
For example, in 2013 Jetstar advertised flights on its website from Brisbane to Melbourne from $139 per person, and from Melbourne (Tullamarine Airport) to Brisbane from $109 per person, without adequately disclosing the additional charge of an $8.50 booking and service fee, for each flight.
A Jetstar spokesman said it accepted the court’s decision, and had responded in 2014 with changes to its website that were found to be “satisfactory by the Federal Court”.
“On 1 September 2016 we removed the Booking and Service Fee on domestic and international flights from and we continue to offer a number of fee-free payment options for our customers who prefer not to pay with a credit card.”
The court also found Virgin had used the same technique in 2014 on its mobile site, on advertised flights of $85 per person from Brisbane to Sydney, which did not disclose an additional booking and service fee of $7.70 until the end of the booking process.
A Virgin spokeswoman said the court’s judgment was “consistent with the airline and the ACCC’s joint submission on penalties”.
“Since the matter was heard, the Reserve Bank of introduced changes to the regulation of credit card surcharges and Virgin ‘s card payment fees were updated in accordance with these changes.”
Mr Sims said both penalties were in line with the sums sought by the ACCC last year, and reflected the regulator’s “narrow case” of “just a few instances” of drip pricing.
“Given what we plead, and the current law, this is a great penalty. However, we want the law to change,” he said.
Mr Sims added that he remained committed to bringing consumer penalties into line with competition penalties.
“In competition cases we have the law as we want; penalties of up to $10 million per breach, or 10 per cent of the turnover of the company. But this is a consumer matter, and right now the penalties are only up to $1.1 million,” he said.
“Given we had a narrow case of specific evidence, [today] is a great outcome. But what we are pushing for is a change in the law that has penalties the same for consumer as for competition.”
Mr Sims said the airline’s penalties “would have been 10 times as much,” had new penalty provisions been in place.
???”We are now turning our attention to consumer guarantees in the airline industry.”
The penalty announcement follows a call last year from consumer group Choice for the ACCC to respond to evidence of excessive cancellation fees of up to $550 per ticket, widespread use of “no refund” signs, and a lack of compensation for the airlines’ mistakes. Interact with us on Facebook – Savvy ConsumerLatest consumer news