Thursday, June 19, 2014

Virgin, Qantas Face Pricing Allegations: Airlines Accused of 'Drip Pricing' by Consumer Watchdog

The Wall Street Journal

By Robb M. Stewart

June 19, 2014 2:44 a.m. ET

MELBOURNE, Australia— Virgin Australia Holdings Ltd. and Qantas Airways Ltd.'s Jetstar unit are due to appear in a federal court in August to face allegations by Australia's consumer watchdog that they misled consumers with their pricing of certain fares.

The airlines separately engaged in "drip pricing," a tactic whereby additional fees and charges that may be unavoidable are incrementally disclosed on top of the initial price given for an online purchase, the Australian Competition and Consumer Commission alleged in a statement Thursday.

It alleged Jetstar and Virgin each claimed online that certain domestic fares were available at specific prices despite those prices only being available if payment was made using particular methods. If customers used a credit card or PayPal, each passenger was hit with a fee, the commission said.

"Drip pricing practices…have the potential to cause both competition and consumer detriment," said Rod Sims, ACCC chairman. "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."

Jetstar said it would defend the action brought by the ACCC, while Virgin said it would consider its options.

"The booking and service fee is clearly disclosed and the total price that people pay is shown before they finalize their purchase. Our customers have the option to choose one of four fee-free payment methods, and that is how a large number of them book," a Jetstar spokesman said.

Jacqui Abbott, a spokeswoman for Virgin, said it was the long-standing practice of all airlines in the country to charge a separate booking and service fee and that Virgin also offered fee-free payment options.

The commission is also investigating businesses in other industry regarding the incremental disclosure of fees and charges, Mr. Sims said.

Jetstar is due to appear in a Sydney court Aug. 6 and Virgin on Aug. 13. The commission said it is seeking penalties, corrective advertising and costs, among other things, against the airlines.


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