ACCC cracks down on misleading ‘drip pricing’ practices

Misleading and deceptive conduct is often thought of in relation to giving false information about prices or processes. But the Australian Competition and Consumer Commission’s (ACCC) recent pursuits of drip pricing practices demonstrates that this conduct can also involve omitting information.

In November, the Federal Court found that Jetstar Airways and Virgin Australian Airlines had engaged in misleading and deceptive conduct and about the price of advertised airfares. The Court will determine penalties against the airlines at a later date.

The ACCC, which successfully brought the case, argued that the two airline companies had misled consumers about the true price of the plane tickets by failing to adequately disclose additional booking and services fees until late into the payment process.

This process – known as ‘drip pricing’ – gives consumers the impression that a product costs lower than it really does. It does so by excluding administrative charges from the product’s nominal sale price. The cost of additional service and handling fees are then revealed after the online transaction process has already commenced.

ACCC Chairman Rod Sims contends that ‘drip pricing’ distorts information and misleads consumers: “[It] can result in consumers paying a higher price than the advertised price, spending more than they realise and making it more difficult to compare offers.”

“The ACCC’s concern with drip pricing has always been to ensure that consumers are not misled and that businesses are not unfairly disadvantaged by misleading practices,” he said.

Earlier this year, the ACCC accepted enforceable undertakings from emerging online companies Airnbnb and Vacaciones eDreams. In these cases, the companies admitted that they had failed to adequately disclose mandatory service and cleaning fees on their online booking platforms.

Airnbnb agreed to establish and maintain a consumer law compliance program within the company, while eDreams submitted that it would ensure its staff received appropriate compliance training on key aspects of Australian consumer law.

Drip pricing was a priority area for the ACCC in 2014 and, as these cases demonstrate, remains a focus for the competition and consumer watchdog.

If your company engages in online sales or multi-stage payment practices it is essential to adequately disclose all relevant pricing information to potential customers.

Contact GRC Solutions today for more information about our competition and consumer law training courses.

Source: ACCC