Virgin and Jetstar to Pay Penalties for Drip Pricing
7th Mar 2017
"Drip pricing" is a big no-no in aviation business and two Australian carriers felt this on their own skin. Namely, for their use of "misleading and deceptive" pricing tactics, Virgin Australia and Jetstar were ordered by the Federal Court this Tuesday to pay a fine of $200,000 (Virgin) and $545,000 (Jetstar).
Speaking about the decision, Rod Simms, Chairman of the Australian Competition and Consumer Commission (ACCC) said:
"I think this is a very big deal. Consumers have been complaining about drip pricing for a long time? and this penalty sends out a very important message to airlines. The good news is, the airlines have largely changed their behaviour now."
In 2014, the Federal Court found Virgin Australia to be advertising Brisbane-Sydney flights for $85 per person, but didn't disclose additional booking and service fee of $7.70. Instead, the passengers only learned about it at the end of the booking process.
A spokeswoman for VA said:
"Since the matter was heard, the Reserve Bank of Australia introduced changes to the regulation of credit card surcharges and Virgin Australia's card payment fees were updated in accordance with these changes."
Meanwhile, Jetstar advertised on its website flights from Melbourne to Brisbane for $109 per person and between Brisbane and Melbourne from $139 person, but failed to disclose the additional booking and service fee of $8.50.
A spokesman for this carrier said they made changes to the website since then:
"On 1st September, 2016 we removed the Booking and Service Fee on domestic and international flights from Australia and we continue to offer a number of fee-free payment options for our customers who prefer not to pay with a credit card."
The ACCC Commissioner Simms said that both Virgin's and Jestar's penalty were in line with what ACCC asked for last year. However, he also called for a change in the law, saying:
"Given what we plead and the current law, this is a great penalty. However, we want the law to change."
He also said:
"In competition cases we have the law as we want; penalties of up to $10 million per breach, or 10 per cent of the turnover of the company. But this is a consumer matter, and right now the penalties are only up to $1.1 million. Given we had a narrow case of specific evidence, today is a great outcome. But what we are pushing for is a change in the law that has penalties the same for consumer as for competition."