ACCC launches court action over Jetstar and Virgin 'drip pricing'

Updated

The consumer watchdog has launched legal action against two major airlines for misleading and deceptive conduct over the price of airfares.

The Australian Competition and Consumer Commission (ACCC) is taking action against Jetstar and Virgin Australia over the practice of 'drip pricing', where a headline price is advertised at the beginning of an online purchase price but then fees are incrementally disclosed.

The ACCC alleges booking and service fees charged by both airlines were not adequately disclosed.

It alleges Jetstar charged a booking and service fee of $8.50 per passenger per domestic flight if a payment was made by a credit card that was not a Jetstar branded card, or by PayPal.

The ACCC says Virgin charged a $7.70 booking and service fee for credit or debit cards and PayPal.

The watchdog alleges that the fees applied to a majority of online bookings and should have been disclosed upfront.

ACCC chairman Rod Sims says while both airlines made some adjustments to the disclosure of these fees during the ACCC's investigation, the commission 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," he 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."

More than 45,000 Australians have signed a change.org petition calling for Jetstar to drop its credit card surcharge fee.

Jetstar, Virgin defend fee practices

Jetstar says it will defend the action in relation to how the service fee is disclosed to passengers.

"The way low-cost carriers work is to offer customers a seat to a destination at the lowest price. There are optional extras that can be added – whether that's baggage or a fee for a particular way of booking – and conditions that apply," a spokesperson said in a statement.

"But the lowest advertised fare is available to customers who book using the fee-free payment channels.

"The booking and service fee is clearly disclosed and the total price that people pay is shown before they finalise their purchase. Our customers have the option to choose one of four fee-free payment methods, and that's how a large number of them book."

In a statement to the ABC, a spokesman for Virgin Australia said it has been "a long-standing practice of all Australian airlines to charge a separate booking and service fee".

"Virgin Australia offers its customers a number of fee-free payment options and remains committed to providing a choice of payment options for customers making bookings," he said.

"We welcome an industry-wide approach to booking and service fees to ensure consistency across all airlines. We are currently reviewing the proceedings commenced by the ACCC and will be considering all options."

The case will be heard in Sydney in August.

Do you know more on this story? Email investigations@abc.net.au

Topics: consumer-protection, business-economics-and-finance, air-transport, industry, australia

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