Jetstar and Virgin Australia breached Australian Consumer Law with drip pricing conduct

The Federal Court ruled yesterday, on 17 November 2015, that airlines Jetstar and Virgin Australia had engaged in misleading and deceptive conduct with ‘drip pricing’ behaviour. 

Drip pricing, according to the Australian Competition and Consumer Commission, is “where a headline price is advertised at the beginning of an online purchasing process and additional fees and charges which may be unavoidable are then incrementally disclosed (or ‘dripped’).”

The ACCC's case concerned payment fees applied by the airlines for using a credit card.
The ACCC’s case concerned payment fees applied by the airlines for using a credit card.

This is recognised as a type of behaviour that is misleading and deceptive under the Australian Consumer Law.

The Federal Court’s findings related to advertisements on the airlines’ websites in 2013 and 2014, with some of the proven instances involving the “mobile” version of the relevant website.

The core contention of the ACCC was that “Jetstar and Virgin failed to adequately disclose an additional Booking and Service Fee ($8.50 and $7.70 respectively) which was charged on bookings paid using most credit cards or PayPal (and additionally in the case of Virgin, by debit card).”

Credit card surcharges and fees are often a sore point for consumers, given these are unavoidable for the average person’s internet purchase. There are calls for the government to regulate them.

In the meantime, businesses must take care to prominently disclose the full price payable for their products or services at outset. They should avoid adding unexpected charges or price components to the total at the end of the shopping process. As a practical matter, merchants may need to check all their sales channels (“mobile” version websites etc.) for compliance.

While not all the allegations were upheld, the ACCC has found encouragement in the findings and an apparently greater awareness of the issue.

ACCC Chairman Rod Sims noted “that a number of businesses in the travel, accommodation and ticketing industries have adjusted their online pricing practices to improve disclosure of fees and charges since the ACCC began its work on drip pricing.”

This has “a positive effect on competition, allowing consumers to easily compare and choose the best price”, Mr Sims said.