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Jetstar agrees to end "opt-out" pricing following Commerce Commission probe

March 17, 2016

Contacts

Partners Anne Callinan, James Craig

Competition law (inc cartels)

Jetstar has agreed with the Commerce Commission to end its practice of preselecting optional extras, such as luggage, seat selection and travel insurance, during its online booking process. The Commission has taken the view that preselecting optional extra services, which requires a customer to then opt-out of a charge, can mislead consumers over the price they are paying for a service, and might cause consumers to inadvertently buy something. Jetstar agreed to give the Commission court enforceable undertakings to stop its opt-out pricing.

The agreement with Jetstar is part of a wider focus by the Commerce Commission on "drip pricing" (the practice of advertising a headline price, and then incrementally disclosing additional fees and charges throughout the purchase process). Drip pricing was identified as a "high risk" issue in the Commission's Consumer Issues Report released in September 2015. In the same year the Commission investigated a number of businesses for their drip pricing practices. Following that investigation, Air New Zealand, House of Travel, Dash Tickets, Ticket Direct and Naked Bus all agreed to stop drip pricing.

Drip pricing and opt-out charges continue to attract the attention of consumer regulators on both sides of the Tasman. The Federal Court of Australia recently found that Jetstar's use of drip pricing breached Australian Consumer Law. That decision was the subject of a previous FYI.

In its press release, the Commission warns that "traders can be assured [the Commission] will take enforcement action to stop this type of conduct in the future".

To avoid unwanted attention from the Commerce Commission, businesses engaged in any form of online selling should ensure that all fees and charges are adequately disclosed at the beginning of the online purchase process.

The text of the Commerce Commission's media release can be viewed here.

Contributors johanna.mcdavitt@simpsongrierson.com