Virgin, Jetstar are the baddies in ACCC action

Regular travellers will be mystified that the Australian Competition and Consumer Commission has singled out only two airlines for allegedly trying to trick consumers with their air fare pricing regimes.

Jetstar and Virgin Australia will be dragged before the Federal Court in August on charges of engaging in misleading or deceptive conduct and making false or misleading representations about their air fares.

High up in the charge sheet, "in relation to specific advertised airfares, the ACCC alleges that each airline failed to adequately disclose an additional booking and service fee.

"In particular, it is alleged that: "Jetstar charged a booking and service fee of $8.50 per passenger, per domestic flight if payment was made by a credit card (other than a Jetstar branded credit card) or PayPal; and "Virgin charged a booking and service fee of $7.70 per passenger, per booking if payment was made by a credit or debit card or PayPal."

Well, those charges are the mirror image of what is being charged by their competitors: Jetstar simply matched Tigerair's booking charge of $8.50 per person per sector unless you use a credit card specified by Tiger and Qantas's $7.70-per-booking charge has been copied by Virgin Australia.

So Jetstar and Virgin have to wear the odium, facing charges for alleged trickery being used throughout the industry.

ACCC chairman Rod Sims told the Australian Financial Review other airlines' disclosure of fees were on the commission's radar, but Virgin and Jetstar were the worst offenders and had the most complaints.

He said Virgin and Jetstar inadequately disclosed the fees on their website, there was a lack of an opt-out clause and the fee in some instances was well above a standard one per cent credit card surcharge.

Some $85 flights charged a 10 per cent fee.


"I hope this action sends a message to others," Mr Sims said.

"If we are successful in this challenge we will look to have the practices change across the industry and into other industries."

Virgin Australia questioned why only two airlines were being targeted, when the "drip-pricing" method and the separate booking and service fee were part of a "long-standing" practice among "all" Australian airlines.

"We welcome an industry-wide approach to booking and service fees to ensure consistency across all airlines," a spokeswoman told Fairfax Media.

"We are currently reviewing the proceedings commenced by the ACCC and will be considering all options."

The "long-standing" practice is no such thing. About two years ago, the airlines changed the name of what they had until them called a "credit card" fee.

This was and is a charge for absolutely nothing that the airlines feel they can get away with because, until now, there has been no-one to police price-gouging on credit card fees.

Finally, the ACCC has stepped up to the plate to simply stop businesses from trying to hide the real cost their customers face whenever they buy an airline ticket.

"Drip-pricing" is the currently fashionable device to get customers inside the door of the airline emporium before subjecting them to a series of boxes you have to untick to avoid being charged extras. 

In fact, as the charges suggest, the ACCC is simply trying to stop businesses effectively lying to their customers and to be upfront about the charges they are facing.

If the ACCC succeeds in holding airlines to a higher standard than at present, I can see only benefits and no harm: there will be no crippling compliance cost to the airlines; they will simply have to start being upfront about the cost of what they're selling.

The airlines could face up to $1.1 million fines for each breach of the Australian Consumer Law – the former Trade Practices Act.

Separately, Rod Sims is looking at the effect of government privatisations on competition and, in particular, the sale of Sydney airport in 2001, which contained a clause that gave the Sydney airport monopoly's owners the right of first refusal over management of the new airport now in the planning at Badgery's Creek – a potential disaster for consumers.

He says he will raise concerns over the possibility that the same monopoly may be allowed to run both airports, echoing comments he made to Travellers' Check earlier this year.

"Imagine the benefit to Sydney to having two airports competing for your traffic," he told the AFR.

"The focus is on success as maximum proceeds, which of course it is for the private sector, but for the public sector you really should be doing this for the efficiency gains of your country or state, that's really why you should be privatising.

"That's where getting the market structure right is the number one objective, then once you've got that right you can try and maximise the proceeds."

Does Mr Sims have it right? Are Jetstar and Virgin hiding optional fees more than Qantas and Tigerair? Do you support forcing the airlines to declare optional charges upfront?