ACCC takes Jetstar and Virgin Australia to Federal Court alleging fees for payment are excessive

VIRGIN and Jetstar are in legal hot water over the “deceptive” way they suck you in with a low price, then stack on extra charges.

IF you’re infuriated by having to fork out as much as $17 for the privilege of simply paying for a flight, you’re not alone — this morning the consumer watchdog has begun legal action against Jetstar and Virgin Australia over allegedly excessive fees.

The Federal Court website this morning showed the Australian Competition and Consumer Commission has today lodged two separate proceedings, one against each airline.

COMMENT BELOW: Is the action justified?

Both actions relate to alleged “misleading or deceptive conduct”. The ACCC has since confirmed the moves.

The ACCC’s court actions come after the minister responsible for competition and consumer matters, Bruce Billson, told it to investigate “drip pricing” by airlines and others.

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Drip pricing involves baiting would-be customers with a low price only to slug them with additional fees and charges later in the booking process.

Slugged ... Virgin charges $7.70 for each passenger, per flight who books via credit and debit cards or PayPal.

For example, airlines have charged customers payment fees of up to $17 per passenger on return flights.

The fees are usually the same regardless of the fare, meaning families attempting to travel to a budget are hardest hit while business-class travellers least affected.

@FoxFM Considering I paid $17 per passenger when booking 6 tickets to Sydney on jetstar I'd say they have a point!

— Jakie Manevski (@Jakie_1993) June 19, 2014

Sub-type: comment CAPTION: @FoxFM Considering I paid $17 per passenger when booking 6 tickets to Sydney on jetstar I'd say they have a point!— Jakie Manevski (@Jakie_1993) June 19, 2014

Reserve Bank “guidance” issued in March last year was meant to stop airlines, hotels, ticketing agencies and others from slugging customers who pay with Visa, Mastercard or American Express more than the “reasonable cost”.

This should have brought down the credit card charge for booking a flight to as little as one per cent of the fare.

But almost nothing happened — the only reduction was by Qantas, from $7.70 to $7.00.

The lack of response led Mr Billson to set the consumer watchdog loose.

No escaping fees ... Jetstar charges customers $8.50 per passenger, per flight for payment by credit or debit cards and Paypal.

In a statement confirming today’s court actions, ACCC boss Rod Sims 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.

“Drip pricing practices, such as those alleged by the ACCC in these proceedings, have the potential to cause both competition and consumer detriment,” Mr Sims said.

Disgraceful!! And the $75 fee to re-book flights after a cancellation? @JetstarAirways @VirginAustralia @acccgovau http://t.co/yfdiCVN069

— Angie Wood (@AngieWood_) June 19, 2014

Sub-type: comment CAPTION: Disgraceful!! And the $75 fee to re-book flights after a cancellation? @JetstarAirways @VirginAustralia @acccgovau http://t.co/yfdiCVN069— Angie Wood (@AngieWood_) June 19, 2014

“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. The ACCC continues to investigate businesses in other industries in relation to their practices of incremental disclosure of fees and charges.”

Jetstar charges customers $8.50 per leg per person — so $17 for each return flight — for payment by credit cards or debit card other than its own. PayPal also attracts this surcharge.

Virgin’s fee is $7.70 for each passenger in a booking and hits users of credit and debit cards.

— More to come

Originally published as ACCC takes Jetstar and Virgin Australia to Federal Court alleging fees for payment are excessive