Dirty pricing tricks getting flamed is long overdue

It’s been a good week for commonsense government approaches to tackling the cost of living crisis.

On Tuesday, Prime Minister Anthony Albanese and Treasurer Jim Chalmers announced their plan to ban surcharges on debit cards, and just one day later, they added a bonus announcement, promising to crack down on dodgy pricing practices.

As someone who loves a two-for-one deal, this speaks joy for my no-nonsense financial sensibilities.

Grouped within the catch-all term of “dodgy pricing” are practices like drip pricing (where businesses lure us in by a low price only to then tack on additional fees throughout the transaction), dynamic pricing (where prices yoyo based on who else wants exactly what you want), fake warnings of limited stock (hello, incessant ‘Only two items left!’ spam emails), being forced to set up an account to make a purchase, and confusing subscription cancellation processes.

Consumers have to deal with a host of dodgy pricing tricks every time they shop online. Credit: iStock

We can all agree (and swap war stories about our experiences) that these trading practices are at best annoying and at worst intentionally deceptive. While thankfully they’re not as commonplace in Australia as they were a few years ago, they still aren’t formally banned under Australian consumer law.

As it stands, these “industry hacks” aimed at getting more money from us sit outside this, despite this very same law covering things such as consumer rights, lay-bys, product safety and contracts. Under the new plan, though, these deeply infuriating practices will be banned.

According to Statista, Australians spend an average of $55 a month on subscription services such as Netflix, Spotify and Amazon. But 2024 Q1 data from NAB shows that more and more are cancelling services due to cost of living pressures, and in the process, people are keeping an extra $670 in their accounts.

That’s a big old money win if ever I saw one. But, to save this money, it’s essential that cancelling subscriptions is actually easy to do.

Anyone who has ever tried to cancel a subscription or gym membership, only to be forced to call a phone number, bounce around to different operators until you find the right area, sit on hold for 45 minutes while call-waiting music slowly eats at your sanity and makes you wonder if you’re better off just losing the $16 a month for the rest of your life will be pleased about these proposed changes.

And it seems I’m not the only one who feels these gripes deeply. Following the government’s announcements, a poll by The Sydney Morning Herald and The Age showed over 3200 readers find subscription traps to be the most annoying practice (40 per cent), followed by mandatory account set-ups for purchases, businesses being difficult to contact, drip pricing, dynamic pricing and deceptive practices to overwhelm shoppers or to create a false sense of urgency.

While dynamic pricing, where the price of an item is allowed to vary based on demand, might not be the gold-class winner on the list of annoying experiences, it can be the dodgy practice that ends up costing us the most.

Unlike monthly subscriptions that rob you of an extra $12 a go, the one-off blow from this practice is seriously steep.

Take, for example, this year’s Australian Open, where under dynamic pricing, single tickets to the men’s final sold for almost $6000 a pop because of demand.

Tickets for marquee sporting events, like the Australian Open, are often subject to dynamic pricing.Credit: Chris Hopkins

Britain’s competition watchdog has announced an urgent review into the practice after Ticketmaster, using dynamic pricing for Oasis tickets, bumped up an expected price of about $285 to almost $700.

But perhaps the most pernicious of all of these practices is drip pricing. The airfare sale email arrives and suddenly, you’re texting your friend about a trip to Japan that’ll only set you back $600 return. Except then, you have to add a fee for luggage, a fee for seat allocation, a fee for meals and in-flight entertainment, a mandatory processing fee and a card fee. Suddenly, those oh-so-cheap $600 return airfares are actually $875.

In 2015, the Australian Competition and Consumer Commission won a court case against Virgin and Jetstar airlines over drip pricing, where it found the addition of service fees and booking fees meant advertised prices had misled consumers. Virgin was ordered to pay $200,000 in penalties. Jetstar was fined $545,000.

In Britain, it’s estimated that drip pricing alone costs consumers more than $4.2 billion. In Canada, where the government took a cinema chain to task over a fixed booking fee it applied to movie tickets being booked online, those couple of extra dollars amounted to over $42 million in extra money in their account.

As Chalmers said as he announced the proposed changes:

“Most businesses do the right thing by Australians and they’ve got nothing to worry about.” But as consumers, it’s less about worry and more about what we have to look forward to. Aside from how much we stand to save in this legislation change, the good news is that these hair-pullingly annoying practices are relatively new to consumer culture.

It was only in 2012 that the US Federal Trade Commission began researching drip pricing as it was a relatively new problem that blossomed as more and more people began to shop online.

And the good thing about new problems is that they’re easier to fix, not just because those in charge of regulating such things can nip them in the bud, but because they haven’t yet had the chance to fully become the norm for us.

Most of us remember a time when this wasn’t the norm, when it wasn’t this hard, when it didn’t feel like we were being lied to every time we pulled out our credit card.

So for as long as we have those memories, we can push back against these pernicious practices and get back to a world where we don’t have to swear a blood oath to cancel a gym membership or name our firstborn after a Marvel character just to cancel a streaming subscription, and get back to having more of our money where we need it; in our pockets.

Victoria Devine is an award-winning retired financial adviser, a best-selling author and host of Australia’s No.1 finance podcast, She’s on the Money. Victoria is also the founder and co-director of Zella Money.

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

Expert tips on how to save, invest and make the most of your money delivered to your inbox every Sunday. Sign up for our Real Money newsletter.