The Federal Court of Australia has found that Jetstar Airways Pty Ltd (Jetstar) and Virgin Australia Airlines Pty Ltd (Virgin) engaged in the practice of what the ACCC refers to as ‘drip pricing’.

A steady drip of enforcement action

As explained by ACCC Chairman Rod Sims, 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’)’. From a consumer protection perspective, drip pricing 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.

In the wake of this judgment, the ACCC has announced that it is sweeping a range of websites and mobile apps for ‘drip pricing’ conduct, as part of an international initiative of the International Consumer Protection and Enforcement Network (ICPEN) to target online pricing issues in the travel, tourism and leisure sectors. This follows on from other enforcement action by the ACCC regarding drip pricing, including:

  • court enforceable undertakings accepted by the ACCC in October 2015 from Airbnb Ireland and Vacaciones eDreams SL, following concerns that the companies were failing to disclose mandatory fees on key pages of booking platforms; and
  • Ticketek and Ticketmaster agreeing in late 2014 to include unavoidable fees earlier in their booking processes, in response to concerns raised by the ACCC.

Jetstar and Virgin

Jetstar’s and Virgin’s pricing practices were caught by sections 18 and 29 of the Australian Consumer Law as both misleading and deceptive conduct and false or misleading representations. Essentially, they had advertised airfares for sale at a headline price without adequately disclosing to potential customers that they would be required to pay a booking and service fee for payments made using one or more popular and commonly used payment methods, including paying by widely accepted debit cards and credit cards.

The ACCC alleged that the misleading representations were conveyed by advertisements, promotional activity, webpages and mobile sites and the structure/layout of online booking processes.

The case will be seen as a ‘win’ for the ACCC, which had identified drip pricing as a priority enforcement area in its 2014 Compliance and Enforcement Policy. However, it was not entirely successful in its case. The Court only found particular instances of representations by each of Jetstar and Virgin to be false or misleading. In Virgin’s case, the Court only found contraventions in respect of its mobile site.

The key element that distinguished the instances where the ACCC was successful from those where it was not, was the adequacy and timing of the disclosure of the relevant fees. The ACCC failed to make out its case in relation to representations where the airlines had taken appropriate steps to disclose the existence and amount of the fees early in the booking process.

The question of penalty will be subject to a subsequent hearing before the Court.

Lessons

While this was a case against two Australian airlines, businesses more broadly, and especially those that supply goods and services online, should take heed of the decision, and consider whether their advertising practices and online purchase/booking processes are compliant with the Australian Consumer Law. In particular, businesses should ensure that fees are adequately disclosed early in the booking/purchase process.

This is especially important in light of the ACCC’s participation in ICPEN’s online pricing sweep and a continuing focus on compliance with ‘single price requirements’.