Virgin Australia and Jetstar face legal action over 'drip pricing'

The consumer watchdog has launched legal action against Virgin Australia and Jetstar over their use of “drip pricing”, alleging the tactic is misleading and deceptive.

Action on the sales technique, where an initial price for an airfare or concert ticket is advertised and then extra costs, such as booking or service fees, are incrementally added or “dripped”, was flagged earlier this year by the Australian Competition and Consumer Commission (ACCC).

The ACCC is alleging that Jetstar promoted an airfare on its website at a certain price, without revealing an $8.50 surcharge for paying via credit card or Paypal.

Virgin will be the target of a separate action over a $7.70 credit-card booking fee it failed to include in the headline price on its website.

These extra costs would have applied to the “substantial majority” of customers and should have been disclosed prominently and upfront, or included in the advertised price, the watchdog said.

“The ACCC is concerned about advertising that draws consumers into an online purchase process but fails to provide sufficient upfront disclosure of additional fees and charges that are likely to apply,” the ACCC chairman, Rod Sims, said.

“Drip pricing practices ... have the potential to cause both competition and consumer detriment. Not only can this practice lead to consumers potentially being misled, it may also make it difficult for businesses with more transparent pricing practices to compete on a level playing field,” Sims said.

The action was launched against the two airlines in response to specific complaints, but drip-pricing is a common tactic among industries that sell tickets online.

The consumer group Choice awarded Ticketek and Ticketmaster a “Shonky” award in 2012 for their drip-pricing on concert tickets, which included a service and delivery fee of up to $8 for tickets that customers printed themselves at home.

Hearings for both are scheduled for August. The ACCC will seek corrective advertising and costs against each airline.

Jetstar said in a statement that its advertised fare was always available to customers and that any additional fees were "clearly disclosed".

"There are optional extras that can be added – whether that’s baggage or a fee for a particular way of booking – and conditions that apply. But the lowest advertised fare is available to customers who book using the fee free payment channels," a spokesman said.

“The booking and service fee is clearly disclosed and the total price that people pay is shown before they finalise their purchase."

Virgin Australia said it was reviewing the ACCC's case and "considering all options".

"It has been a long-standing practice of all Australian airlines to charge a separate booking and service fee. Virgin Australia offers its customers a number of fee-free payment options and remains committed to providing a choice of payment options for customers making bookings," a spokeswoman said.

"We welcome an industry-wide approach to booking and service fees to ensure consistency across all airlines."