ACCC v Jetstar Airways Pty Ltd [2015] FCA 1263: Court Finds Jetstar and Virgin Australia Engaged in Misleading “Drip Pricing” Practices

Friday 20 November 2015 @ 10.04 a.m. | Legal Research | Trade & Commerce

As reported in a recent ACCC Media Release, the Federal Court has found that Jetstar Airways Pty Ltd (Jetstar) and Virgin Australia Airlines Pty Ltd (Virgin) contravened the Australian Consumer Law (ACL) (namely ss 18(1), 29(1)(i), 29(1)(m), 48, 224, 232 and 246(2)(d)) [which is contained in Sch 2 to the Competition and Consumer Act 2010 (Cth)] by engaging in misleading and deceptive conduct and making false or misleading representations about the price of particular advertised airfares, in proceedings brought against each of the airlines by the Australian Competition and Consumer Commission (the ACCC).

Allegations made by the ACCC

The ACCC alleged in these proceedings that, in relation to specific advertised airfares, Jetstar and Virgin failed to adequately disclose an additional Booking and Service Fee ($8.50 and $7.70 respectively) which was charged on bookings paid using most credit cards or PayPal (and additionally in the case of Virgin, by debit card). The ACCC’s case was that the Booking and Service Fee was only disclosed to consumers once they had moved through a number of stages of the booking process.

Results of the Case

In relation to Jetstar, Foster J found that representations about specific advertised airfares made on its website in 2013, and its mobile site in 2014, were false or misleading. However, the Court held that the ACCC had not established that the alleged misleading representations were made by Jetstar on its 2014 website, nor in its promotional emails in 2014.

In relation to Virgin, his Honour found that representations made on its mobile site in 2014 about specific advertised airfares were false or misleading. The Court held that the ACCC had not established that the alleged misleading representations were made by Virgin on its website, nor in its promotional emails of 2014.

Commenting on the ruling, the ACCC Chairman Rod Sims said:

““While the Court found that the ACCC had not established all of the allegations against Jetstar and Virgin, the findings that some of their conduct was misleading are significant...it is encouraging that a number of businesses in the travel, accommodation and ticketing industries have adjusted their online pricing practices to improve disclosure of fees and charges since the ACCC began its work on drip pricing. This also has a positive effect on competition, allowing consumers to easily compare and choose the best price.””

What is Drip Pricing?

According to the ACCC, 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 (or “dripped”). This can result in paying a higher price than the advertised price or spending more than is realised.

How to avoid Drip Pricing

The ACCC suggests that when shopping online and following their tips, it is possible to reduce situations where you end up 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.

Previous action by the ACCC

On 13 October 2015, the ACCC accepted court enforceable undertakings from Airbnb Ireland (Airbnb) and Vacaciones eDreams, SL (eDreams) following concerns that the companies engaged in misleading and deceptive conduct and made misleading representations by failing to adequately disclose to consumers in Australia particular mandatory fees on key pages of one or more of their online booking platforms.

In late 2014, in response to concerns raised by the ACCC, Ticketek and Ticketmaster agreed to improve their online pricing practices. The ACCC had identified instances where it considered that these companies failed to state single minimum total prices. Both companies now include unavoidable fees earlier in the online booking process.

TimeBase is an independent, privately owned Australian legal publisher specialising in the online delivery of accurate, comprehensive and innovative legislation research tools including LawOne and unique Point-in-Time Products.

Sources:

Australian Competition and Consumer Commission v Jetstar Airways Pty Limited [2015] FCA 1263 (17 November 2015)

Court finds that Jetstar and Virgin Australia engaged in misleading ‘drip pricing’ practices – ACCC Release MR 225/15 

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