Airline drip-pricing misleading
The Australian Competition and Consumer Commission has launched legal action against Jetstar and Virgin over drip-pricing tactics. Nine News.PT1M43S http://www.canberratimes.com.au/action/externalEmbeddedPlayer?id=d-3agxd 620 349 June 19, 2014
The consumer regulator has launched legal action against Jetstar and Virgin, accusing the budget airlines of overcharging their online customers by stealth.
The Australian Competition and Consumer Commission says the airlines misled and deceived their customers by luring them with low airfares, only to make them pay more by "dripping" extra fees and charges during the booking process.
Prosecutors will allege the airlines failed to adequately disclose an extra booking and service fee, which for Jetstar customers was $8.50 on a one-way ticket, and for Virgin customers, $7.70.
Jetstar and Virgin are accused of concealing extra booking fees. Photo: Sean Callinan
"These fees applied to the substantial majority of online bookings and should have been disclosed upfront and prominently with or within headline prices," an ACCC spokesman said.
Virgin Australia questioned why only two airlines were being targeted, when the "drip-pricing" method and the separate booking and service fee were part of a "long-standing" practice among "all" Australian airlines.
"We welcome an industry-wide approach to booking and service fees to ensure consistency across all airlines," a spokeswoman said. "We are currently reviewing the proceedings commenced by the ACCC and will be considering all options."
But ACCC chairman Rod Sims defended the action, saying the majority of complaints were about Jetstar and Virgin.
"This is part of a broader investigation," he said., "We're looking into other industries as well in relation to drip pricing, but it's driven by what we perceive as the most egregious behaviour.
"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."
Drip pricing involves charging customers for extra comforts – Jetstar offers an additional 20 kilograms of baggage for $16.50, a seat with more leg room for $24 and travel insurance for $12.95. All these options are "pre-selected".
Even if the customer rejects the bells and whistles, Jetstar charges a booking and service fee of $8.50 per passenger per domestic flight if a payment is made using a non-Jetstar branded credit card or PayPal.
Virgin charges a booking and service fee of $7.70 per passenger for each booking if they choose to pay by credit card, debit card, or PayPal.
Jetstar rejected the accusations, saying the lowest advertised fare could be purchased by customers who used certain payment methods.
"The booking and service fee is clearly disclosed and the total price that people pay is shown before they finalise their purchase," a spokesman said. "Our customers have the option to choose one of four fee-free payment methods, and that's how a large number of them book."
Consumer behaviour authority Gary Mortimer, from the Queensland University of Technology, said drip-pricing was "no different than seeing a car advertised at a dealership for $29,990 + on roads. You pay registration, CTP, dealers' delivery fees, possibly paint protection, finance set-up fees, and a variety of other fees and charges, with the final cost being significantly more than the RRP [recommended retail price]."
The ACCC is seeking pecuniary penalties, declarations, injunctions, corrective advertising and costs against each airline.
Jetstar will face the federal court in Sydney on August 6, and Virgin, a week later.