The Virgin and Jetstar proceedings show that the ACCC is
following through on its announcement to crack down on so-called
drip pricing practices by online businesses.
The ACCC's court action against Jetstar Airways Pty Ltd and
Virgin Australia Airlines Pty Ltd, alleging that each airline
engaged in misleading or deceptive conduct and engaged in
"drip pricing" in relation to particular airfares is
intended to provide a strong deterrent message to all online
What is drip pricing?
The ACCC considers drip pricing to involve the incremental
disclosure of fees and charges over an online purchase process, to
the detriment of consumers who might end up paying more than they
Typically, drip pricing refers to instances where a
"headline" price is advertised at the beginning of the
booking process, and where additional fees and charges are added
throughout the online purchasing process. These additional fees and
charges, which may be unavoidable for consumers (eg. taxes), are
then incrementally disclosed (or "dripped"), so that
consumers end up paying more than the advertised headline price.
The ACCC considers that these practices are commonly encountered by
consumers in airline, ticketing, accommodation and vehicle rental
The ACCC's message is that although businesses can apply
various fees and charges for goods and services, they must clearly
inform consumers up front how much the goods would cost in total.
In other words, any additional unavoidable fees and charges must
clearly be disclosed at the beginning of the online purchasing
"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.
The ACCC's enforcement toolbox
The ACCC is pursuing Jetstar and Virgin under the general
misleading and deceptive conduct provisions of the Australian
Consumer Law (ACL) (contained in sections 18 and
29 ACL) using the principles underpinning, but not the specific
provision outlawing, component pricing under section 48 of the ACL.
Under the component pricing rules, if a business makes a
representation to consumers in any advertising medium about the
partial price of a good or service, the total price must also be
prominently displayed as a single figure (to the extent that it is
quantifiable) upfront. This total, single price must include any
tax, duty, fee, levy or other additional charges (eg. GST or
airport tax), to the extent those components are quantifiable.
Jetstar's and Virgin's alleged drip pricing
Each airline allegedly advertised airfares which the ACCC
alleges failed to adequately disclose an additional Booking and
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
about these pricing practices.
The ACCC is seeking pecuniary penalties, declarations,
injunctions, corrective advertising and costs against each
Key takeaways for online sellers
As part of the ACCC's Enforcement and Compliance Policy for
2014, announced in February this year, the ACCC is giving priority
consideration to emerging consumer issues in the online
marketplace, particularly those associated with comparator websites
and drip pricing. ACCC Chairman Rod Sims also foreshadowed upcoming
enforcement action in the area in a February speech to CEDA.
The proceedings also illustrate the ACCC's
commitment to active enforcement as a critical part of its
deterrence strategy. According to the ACCC Enforcement and
Compliance Policy for 2014, "sufficient court and other
enforcement action is an essential requirement for effective
compliance and education."
To avoid enforcement action by the ACCC, companies who
sell online (and not just those that provide booking services) will
need to ensure their online booking processes are transparent
Clayton Utz communications are intended to provide
commentary and general information. They should not be relied upon
as legal advice. Formal legal advice should be sought in particular
transactions or on matters of interest arising from this bulletin.
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