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 are then incrementally disclosed (“dripped”), resulting in the consumer paying a higher price than advertised.
This may be unlawful if the conduct has the effect of misleading or deceiving consumers about the price they are required to pay for a good or service. Additional fees and charges must clearly be disclosed to consumers at the beginning of the online purchasing process. Certainly, a business can pass on its credit card processing costs, but it should not make a profit from such a charge.
The ACCC indicated for some time that it would be taking action in this area – and sure enough, it commenced proceedings this week against Jetstar and Virgin Australia alleging that each has engaged in the practice of drip pricing, in breach of the misleading and deceptive conduct laws. By way of example, Jetstar charges a “booking and service fee” of $8.50 per passenger per flight for credit card payments (unless a Jetstar credit card is used) and Paypal, and Virgin charges a $7.70 per passenger per booking if credit or debit cards are used.
For budget flights, this can add up to 20% on the total purchase price.
The ACCC is seeking monetary penalties, corrective advertising, injunctions and costs against each airline.
As stated by the ACCC Chairman, Mr Rod Sims:
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.
For more information on drip pricing, click here.