On 17 November 2015 the Federal Court delivered its decision in the Australian Competition & Consumer Commission’s (ACCC) test cases regarding alleged “drip pricing” by Jetstar Airways Pty Limited (Jetstar) and Virgin Australia Airlines Pty Ltd (Virgin).   

Drip pricing is the practice of advertising a headline price at the beginning of an online purchasing process but disclosing additional fees incrementally throughout that process (which may result in a consumer paying a higher final price than the headline advertised price). In effect, consumers are tempted to buy goods or services with the offer of a lower base price and enter a “web of negotiation” with the supplier on that basis.

This type of conduct has been an issue of high priority for the ACCC over the past 12 months and reflects a global interest in the way prices are “framed” online. For example, the ACCC recently announced it was sweeping a range of websites and mobile apps offering online bookings for services such as flights, accommodation, car parking and entertainment ticketing to identify drip pricing conduct. The web surveillance is part of the International Consumer Protection and Enforcement Network (ICPEN)’s annual internet sweep, involving over 50 consumer protection agencies around the world: http://www.accc.gov.au/media-release/accc-joins-international-drip-pricing-sweep

In this case, the additional charge was a booking and service fee for payments made with certain debit and credit cards. The ACCC argued that later disclosure of the booking and service fee in the online purchasing process, before the customer entered into a legal obligation to purchase airfares from the respective airlines, did not correct the original impression. As a result, Jetstar and Virgin allegedly engaged in misleading or deceptive conduct and made false or misleading representations. Jetstar and Virgin argued there was no misleading conduct and in any event, there was adequate disclosure of the existence and terms of the booking and service fee.

While the majority of allegations were dismissed by the Court, three particular examples were distinguished. In each case the Court found there had been a contravention because the existence and quantum of the booking and service fee was not disclosed until the consumer reached the “payments” page of the website.

The Federal Court decision makes it clear that if you have an online purchasing function where additional fees may apply on top of the headline price, you can minimise your risk of contravening the Australian Consumer Law (misleading or deceptive conduct or false representations as to price) by:

  • disclosing the existence and quantum of the additional fees as early as possible in that process and whenever the headline price is advertised during that process; and
  • using the word “from” when advertising the headline price (assuming that a consumer can in fact purchase your goods/services for that price without additional fees).

We note for completeness that the judgment does not amend the position in relation to single pricing laws – since, importantly, Jetstar and Virgin’s booking and service fees could be avoided by selecting certain “fee free” payment methods. It remains the case that any advertised prices must include all mandatory charges applicable to the good or service or the advertisement will contravene the Australian Consumer Law.

Johnson Winter & Slattery acted for Jetstar in these proceedings.