Freyja McCarthy and Lauren Coloretti

Jetstar ordered to pay $545,000 and Virgin $200,000 for “drip pricing” conduct

Freyja McCarthy and Lauren Coloretti

20 March 2017

Competition and Consumer Law

Drip Pricing

Drip pricing conduct is a common issue with online transactions, particularly ticket purchases and travel bookings. “Drip pricing” refers to the incremental disclosure of fees and charges that make up the ultimate price payable by the consumer.

The Liability Judgment[i]
On 17 November 2015 Justice Foster of the Federal Court found that two of Australia’s major airlines, Jetstar Airways Pty Ltd (Jetstar) and Virgin Australia Airlines Pty Ltd (Virgin) had contravened the Australian Consumer Law (ACL) by engaging in drip pricing.

The allegations on which the ACCC succeeded were in relation to airfares advertised by Virgin on its mobile site and by Jetstar on both its website and mobile site. Other allegations made by the ACCC relating to Virgin’s website and a later version of Jetstar’s website, as well as promotional emails sent by both companies, were unsuccessful.

The Penalty Decisions

Separate judgments were delivered by Justice Foster on the remedies to be ordered against each airline. Jetstar has been ordered to pay $545,000 and Virgin has been ordered to pay $200,000.[[ii]]

The main reason for the discrepancy in the penalties is that Jetstar’s contraventions were found to involve two separate contraventions and it was therefore required to pay $295,000 in respect of the website conduct and $250,000 in respect of the mobile site conduct. The Virgin penalty was for a single contravention on its mobile site. Jetstar unsuccessfully argued that its contraventions were either “the same conduct” under section 224(4)(b) of the ACL, or that the Court should treat the contraventions as a single course of conduct. The Court rejected these arguments because the contraventions had occurred at different times (almost 12 months apart) and on different media.

Co-operation as a mitigating factor

The ACCC and Virgin had proposed consent orders in relation to the remedies to be awarded against Virgin and based on consideration of the relevant factors (including the mandatory factors required to be considered under section 224(2)) the Court held that the $200,000 penalty proposed by the parties was appropriate.

Although Jetstar contested the proceeding at the penalty stage, the penalties ultimately awarded by the Court were very close to those sought by the ACCC ($300,000 for the website conduct and $250,000 for the mobile site conduct).

An interesting aspect of the penalty decisions in these cases is the consideration given to the level of co-operation of each of the airlines. Cooperation by Jetstar in the investigative stage of the ACCC’s action against it was held to be a “slightly mitigating factor” (at paragraph 51), despite their being “no doubt that there has been no co-operation since the commencement of the proceeding” (at paragraph 50).

Virgin and the ACCC’s joint submissions in relation to assessment of Virgin’s co-operation as a factor in determining the appropriate penalty were accepted by Justice Foster. These submissions acknowledged Virgin’s co-operation during the investigative stage, noted that Virgin had contested liability but stated that no additional penalties are payable because of this, negated the need for injunctive relief by adding disclaimers to its website shortly after the decision on liability was handed down, and co-operated with the ACCC in the penalty phase of the proceeding. In relation to Virgin’s co-operation in the penalty phase the parties submitted that:

“this can be treated by the court as evidence of contrition and an acceptance of the responsibility by Virgin Australia. Virgin Australia’s willingness to agree penalties also indicates a willingness to facilitate the course of justice [citation omitted]. Virgin Australia is entitled to a discount for its cooperation in the penalty phase, although that discount will be lower than the discount which would have been available if Virgin Australia had also admitted liability.”

In both cases (as was consented to by the parties in the Virgin Case) the parties have been ordered to bear their own costs of both the liability and penalty aspects of the proceedings.

[i] ACCC v Jetstar Airways Pty Ltd [2015] FCA 1263. Although liability proceedings against the two airlines were commenced separately, they were heard together and a joint judgment was delivered.

[ii] Australian Competition and Consumer Commission v Jetstar Airways Pty Limited (No 2) [2017] FCA 205 and Australian Competition and Consumer Commission v Virgin Australia Airlines Pty Ltd (No 2) [2017] FCA 204.