Hot water over pricing as ticket agencies fix the drip

Published On 12/02/2015 | By Susan Zhuang | Consumer protection, Enforcement

Although not a new phenomenon, “drip pricing” tactics have been targeted as part of the ACCC’s consumer protection enforcement agenda. As we previously blogged, drip pricing involves the incremental addition of further fees above the headline price advertised to customers throughout the booking process.  Attention on drip pricing has previously focussed on the single price obligation in section 48 of the Australian Consumer Law (ACL), but the ACCC’s current drip pricing action only alleges misleading or deceptive conduct and false or misleading representations.  This might suggest that the ACCC has concerns about whether the single price provision is applicable, or sufficient to address the issue, in these circumstances.

Last year, the ACCC took action against Jetstar and Virgin over booking and service fees payable for certain payment methods, and secured cooperation from Ticketek and Ticketmaster to provide greater clarity on additional ticketing fees on their websites. Although the ACCC’s investigations have focussed on airlines and ticket agencies thus far, Chairman Rod Sims warned that the ACCC’s action against Jetstar and Virgin should send a message to other online vendors such as hotel booking and car rental sites.  The ACCC has also been actively approaching other companies regarding their  pricing practices.

Ticketmaster and Ticketek agree to clearer disclosure of ticketing fees on their websites

In October 2014, the ACCC announced that Ticketek and Ticketmaster had cooperated with the ACCC’s drip pricing investigation into various ticketing fees charged throughout the ticketing process, and agreed to clarify certain ticketing fees. Unlike the Jetstar/Virgin fees, some of the ticketing fees were unavoidable regardless of payment method.

To address the ACCC’s concerns, Ticketek and Ticketmaster agreed to incorporate minimum Payment Processing Fees into the single ticket prices displayed on websites, being a fee for payment by credit or debit card. Each company also agreed to incorporate further charges associated with delivery or handling into the total price as soon as the customer decided variables such as ticket number and delivery method. Accordingly, certain additional fees may still be payable on top of the headline advertised price of tickets. Regardless, ACCC Deputy Chair Delia Rickard was satisfied that these measures should “give consumers more clarity up front about the total cost of buying tickets”.

Judgment reserved in the ACCC’s case against Virgin and Jetstar over booking and service fees

In June 2014, the ACCC launched separate proceedings against Jetstar and Virgin regarding “drip pricing” on their online sites in the form of booking and service fees payable for certain payment methods.  As summarised in our previous post, the ACCC’s action relies on misleading or deceptive conduct, and false or misleading representations, rather than the single price provision of the ACL, which requires a single price  to be displayed where it is feasible. This may be because  the booking and service fees were optional, and could be avoided if customers chose a different payment method.

Although booking fees associated with credit card payment methods are also charged by other airlines, ACCC Chairman Rod Sims explained that Virgin and Jetstar were targeted due to the high number of complaints.

On 1 and 2 December 2014, Justice Foster heard the ACCC’s applications against Jetstar and Virgin concurrently, with judgment currently reserved.

Jetstar now displays a prominent message on the first page of its booking process stating that a Booking and Service Fee of $8.50 may apply. The Jetstar message also states that some products and services have been “pre-selected for your convenience”, referring to “opt-out” charges. Virgin similarly displays a message at the start of its booking process informing customers that quoted prices include taxes and fees except for the booking and service fee of $7.70, and explains the circumstances in which it is charged.

Interestingly, “opt-out” charges of this nature are under review in New Zealand at the moment, with the NZCC considering a number of consumer complaints.

Pricing scrutiny likely to continue

The ACCC’s investigations into drip pricing and the NZCC’s interest in opt-out charges demonstrate that regulators are closely scrutinising online booking processes and pricing tactics. These investigations, and any follow-on enforcement action over drip pricing and/or opt-out fees would no doubt be closely followed by airlines, ticket agencies and other online vendors such as hotel booking and car rental sites. For example, Jetstar pre-selects seat bookings and baggage options for its customers, and Virgin customers must opt-out of Ticket & Baggage Protection insurance.

The recent Financial System Inquiry, led by David Murray, also examined credit card surcharges.  The Inquiry received thousands of submissions against surcharging as part of a campaign directed at Jetstar’s booking fees.  The Inquiry’s Final Report recommended that the RBA Payment System Board improve their surcharging regulation, namely by:

  • banning surcharges for low-cost payment methods (such as debit cards);
  • setting surcharge limits for medium-cost payment methods (such as Visa and Mastercard); and
  • applying existing “reasonable cost recovery” rules to higher-cost methods (such Diners Club) and requiring this to be disclosed to customers.

There is some overlap between the ACCC’s focus on potential misleading or deceptive conduct, and the Murray Inquiry’s focus on accurate surcharging.

As always, we will keep you posted with any further developments.

Image credit: Raymond Shobe / flickr /CC BY-SA 2.0

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About The Author

is a solicitor in the Competition and Regulatory team of King & Wood Mallesons, based in the Sydney office. As an avid online shopper, she takes a keen interest in consumer protection issues.

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