ACCC puts businesses on notice over use of 'drip pricing' to boost prices in online bookings
Updated
The consumer watchdog has warned it is likely to take legal action against companies who use so-called "drip pricing" to boost prices.
The Australian Competition and Consumer Commission (ACCC) defines drip pricing as the "incremental disclosure of fees and charges over an online booking process".
Anyone who has booked an airline ticket recently would be familiar with the system, with charges added as the consumer moves through the various stages of securing a flight.
The ACCC is particularly concerned about the travel industry and also event tickets.
ACCC chairman Rod Sims says the practice causes "both competition and consumer detriment".
"Drip pricing is where the price you end up paying is very different from the price that enticed you to begin the transaction," he told the ABC.
"Typically you can get on a website, it says you can get a product for say $20, you find when you get into it that the only real way to buy the product is to pay $30 or $40."
Drip pricing is where the price you end up paying is very different from the price that enticed you to begin the transaction.
ACCC chairman Rod Sims
Mr Sims says the problems are two-fold.
"One is that consumers get enticed into a transaction they wouldn't have otherwise done because they invest a lot of time in it, and that at the end of the day they say 'well I've come this far, I'll pay', but they wouldn't have done that had they been in a more rational decision-making framework," he said.
"The second separate problem is those competitors who are honestly advertising their price are losing out.
"So somebody who might have been advertising that price for $28 gets beaten by somebody who advertised at $20 only to find the real cost was $40."
Mr Sims will speak on the issue in his 2014 Compliance and Enforcement Policy speech at the Committee for Economic Development of Australia (CEDA) conference in Sydney.
Your say:
It is bad ecommerce practice not to reveal costs upfront. I've ended quite a few transaction, or just left websites, because things like transaction costs or postage were not clear upfront...
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He says the ACCC has been investigating drip pricing in response to complaints and the behaviour the commission has seen in the marketplace.
"We will probably be taking action in the Federal Court reasonably soon, dealing with some of this behaviour," he said.
"I'm afraid I can't tell you which companies, but we are at an advanced stage of investigating some of this behaviour."
More complaints about fuel dockets
Late last year, Woolworths and Coles reached an agreement with the ACCC to limit fuel discounts, amid concerns the businesses were affecting competition by cross subsidising the discounts from other areas of their business.
Mr Sims says he has received complaints that the offers out in the market do not comply with the court enforceable undertaking the ACCC was given.
"And so naturally we're looking at that to see whether that is the case, that is probably all I can say at this stage, but we are looking at those offers to see if they comply with the undertaking that was given," he said.
At his CEDA speech today, Mr Sims will outline nine consumer protection priorities for 2014:
- Activity in the telecommunications and energy sectors including door to door selling and telemarketing, with a particular focus on savings representations, also referred to as "discounts off what?"
- Emerging consumer issues in the online marketplace, particularly drip-pricing and comparator websites.
- Competition and consumer issues in highly concentrated sectors, in particular in the supermarket and fuel sectors.
- The disruption of scams that rely on building deceptive relationships and which cause severe and widespread consumer or small business detriment.
- Complexity and unfairness in consumer or small business contracts.
- Credence claims, particularly those with the potential to adversely impact the competitive process and small businesses.
- Misleading carbon pricing representations.
- The ACL consumer guarantees regime, particularly in the context of the sale of extended warranties.
- Consumer protection issues impacting on Indigenous consumers.
Do you know more? Email investigations@abc.net.au
Topics: consumer-protection, business-economics-and-finance, australia
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