Online providers have been warned that advertising the lowest price on a web landing page, then adding admin costs, insurance, booking fees and other expenses as you work through the booking process will be consider unfavourably by the Australian Competition and Consumer Commission (‘ACCC’).
Just ask Jetstar and Virgin. The ACCC has hit them with fines totalling over $750,000 for doing just that.
The ACCC first began openly tackling the issue of drip pricing in 2014. Drip pricing, according to the ACCC, is defined as the incremental disclosure of fees and charges over an online booking process.
Commonly, the conduct occurs when products advertised for one price are then automatically increased by taxes, credit card charges, booking and service fees, package and handling costs or postage fees later in the booking process. Such activity is deemed to be misleading and deceptive conduct.
The ACCC’s focus on drip pricing is reflective of the increased global interest in fair and accurate online pricing. Rob Sims, chairman of the ACCC, noted that the drip pricing was distinctly unfair as it ‘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 dangers of engaging in drip pricing have never been so evident, with recent action being taken against Jetstar and Virgin Australia.
In April this year, Virgin was fined $200,000 for engaging in drip pricing conduct on their mobile site, while Jetstar was fined $550,000 for engaging on both its mobile site and main website.
Both airlines were accused of misleading and deceptive conduct when advertising a specific fare to their customers, which was then increased as a result of unavoidable credit card booking fees. The ACCC argued that this late disclosure of additional fees did not adequately correct the customer's original interpretation of the price.
The Federal Court found that Jetstar and Virgin Australia had indeed engaged in misleading and deceptive conduct. While the majority of charges were dismissed, three situations were distinguished. In each of these three situations, the airlines were found to have engaged in misleading and deceptive conduct by not disclosing the true fee until the later stages of the booking process.
What we can learn from this is that, if any business intends on introducing additional and unavoidable fees, they cannot hidden or be included in an ‘ambush’ move as the booking process continues.
Importantly, the Federal Court specifically recognised two things that businesses should do if they want to avoid engaging in any misleading and deceptive conduct. First, businesses must at the earliest time in the process disclose the existence and total amount of the price. Second, if there are any optional extras, businesses should use the word ‘from’ when advertising their headline price.
While Virgin Australia has accepted their fine, Jetstar has objected its much larger penalty. The result of Jetstar’s objection will be known at a later date.