ACCC takes action against Jetstar and Virgin for drip pricing practices

19 June 2014

The Australian Competition and Consumer Commission has instituted separate proceedings in the Federal Court against Jetstar Airways Pty Ltd (Jetstar) and Virgin Australia Airlines Pty Ltd (Virgin), alleging that each airline engaged in misleading or deceptive conduct and made false or misleading representations in relation to particular airfares.

The conduct which is the subject of the ACCC’s allegations in each of these proceedings is an example of what is often referred to as ‘drip pricing’. 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 for consumers) are then incrementally disclosed (or ‘dripped’). This can result in consumers paying a higher price than the advertised price or spending more than they realise.

The ACCC alleges that Jetstar and Virgin each made representations on their websites and mobile sites that certain domestic airfares were available for purchase at specific prices, when in fact those prices were only available if payment was made using particular methods.

In relation to specific advertised airfares, the ACCC alleges that each airline failed to adequately disclose an additional Booking and Service Fee. In particular, it is alleged that:
 

  • Jetstar charged a Booking and Service Fee of $8.50 per passenger, per domestic flight if payment was made by a credit card (other than a Jetstar branded credit card) or PayPal; and
  • Virgin charged a Booking and Service Fee of $7.70 per passenger, per booking if payment was made by a credit or debit card or PayPal.


The ACCC alleges that these fees applied to the substantial majority of online bookings and should have been disclosed upfront and prominently with or within headline prices.  While both airlines made some adjustments to the disclosure of these fees during the period of the ACCC’s investigation, the ACCC remains concerned with these pricing practices.

“The ACCC is concerned about advertising that draws consumers into an online purchase process but fails to provide sufficient upfront disclosure of additional fees and charges that are likely to apply,” ACCC Chairman Rod Sims said.

“Drip pricing practices, such as those alleged by the ACCC in these proceedings, have the potential to cause both competition and consumer detriment. Not only can this practice lead to consumers potentially being misled, it may also make it difficult for businesses with more transparent pricing practices to compete on a level playing field.  The ACCC continues to investigate businesses in other industries in relation to their practices of incremental disclosure of fees and charges,” Mr Sims said.

In the ACCC Compliance and Enforcement Policy for 2014, the ACCC announced that it is giving priority consideration to emerging consumer issues in the online marketplace, particularly those associated with drip pricing.

The ACCC is seeking pecuniary penalties, declarations, injunctions, corrective advertising and costs against each airline.

Scheduling conferences are listed at:

6 August 2014 at Federal Court, Sydney before Justice Perry (Jetstar) 
13 August 2014 at Federal Court, Sydney before Justice Gleeson (Virgin) 

Consumers can follow these tips to avoid paying more than initially expected:

  • Be aware of misleading drip pricing practices when shopping online for services in the airline, ticketing, accommodation and vehicle rental sectors.
  • Shop around and be aware that you may need to pay more than what was advertised. Add ALL the charges together. Don’t just focus on the advertised price – the cheapest advertised price may not be the cheapest final price.
  • Be prepared to back out of the transaction, especially when you start to encounter additional charges.
  • Look out for pre-selections and make sure you deselect anything you do not want to purchase.  Thoroughly check your booking before you make any final payments.

Further consumer advice is available at http://www.accc.gov.au/consumers/online-shopping/drip-pricing

Release number: 
MR 156/14
Media enquiries: 
Media team - 1300 138 917

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