Jetstar and Virgin Australia have both been fined for misleading ‘drip pricing’ practices that saw consumers tempted into cheap online airfares before being hit with extra fees and charges.
In action brought by the Australia Competition and Consumer Commission (ACCC), the Federal Court has ordered Jetstar to pay a $545,000 penalty and Virgin Australia to pay $200,000 for breaches of Australian Consumer Law.
In November 2015, both Jetstar and Virgin were found to have made false or misleading representations about specific advertised airfares published on their websites. In imposing the penalty against Jetstar, Justice Foster commented upon the importance of the concept of general deterrence in the imposition of penalties, and noted that the penalty imposed is designed to discourage similar behaviour by others.
“The ACCC was concerned that Jetstar and Virgin’s ‘drip pricing’ conduct drew consumers into an online purchase process with a headline price, but failed to provide adequate disclosure of additional fees and charges that are likely to apply,” ACCC Chairman Rod Sims said.
“As a result of the ACCC’s enforcement and compliance actions, businesses across several industries, including ticketing and accommodation, have now improved their online booking practices to provide adequate disclosure of additional fees and charges that are likely to apply.”
‘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 for consumers) are then incrementally disclosed (or ‘dripped’). This can result in consumers paying a higher price than the advertised price or spending more than they realise.
The penalty imposed on Virgin was ordered following joint submissions to the Court by Virgin and the ACCC.