The Australian Competition and Consumer Commission has today filed proceedings against Virgin Australia and Jetstar in Federal Court over the airlines’ card payment fees.
Alleging “misleading or deceptive conduct”, the ACCC's action relates to ‘drip pricing’ – where customers are shown a low headline price but are later slugged with sometimes-unavoidable fees and charges later in the booking process.
The ACCC alleges that both Virgin and Jetstar advertised certain domestic airfares as being available for purchase at specific prices, when in fact those prices were only available if payment was made using certain methods.
In a statement released by the government body, it's suggested that "these fees applied to the substantial majority of online bookings and should have been disclosed upfront and prominently with or within headline prices."
The fee in question is the 'booking and service fee' levied by both Virgin Australia and Jetstar when paying for air travel by credit card or PayPal.
“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,” said ACCC Chairman Rod Sims.
On a return domestic trip and irrespective of the fare price, Virgin Australia's booking and service fee amounts to $7.70 per passenger, while Jetstar commands a staggering $17 per traveller.
These fees can only be avoided if redeeming a voucher or by using POLi or bank transfer (as available). Jetstar also waives the fee on certain credit card transactions, but only for Jetstar-branded MasterCards.
“The way low cost carriers work is to offer customers a seat to a destination at the lowest price," a Jetstar spokesperson explained to Australian Business Traveller.
"There are optional extras that can be added – whether that’s baggage or a fee for a particular way of booking ... but the lowest advertised fare is available to customers who book using the fee free payment channels."
Jetstar was also quick to point out that its booking and service fee is clearly displayed at the beginning of the booking process...
... and again on the payment screen:
A Virgin Australia spokesperson told Australian Business Traveller that "it has been a long-standing practice of all Australian airlines to charge a separate booking and service fee.
"Virgin Australia offers its customers a number of fee-free payment options ... (and) we are currently reviewing the proceedings commenced by the ACCC and will be considering all options."
The cost of accepting credit card payments
Typically appearing on the final page of the reservation process, the 'booking and service fees' – a credit card surcharge by any other name – are also seemingly misaligned with the cost of processing individual payments.
Based on a return trip at $79 per flight ($158 return), Virgin Australia’s booking and service fee would represent a 4.87% surcharge, while Jetstar's weighs in at an arguably outrageous 10.75%.
On international flights, which aren't discussed in the ACCC's filing, Jetstar charges between $17 and $25 on a return trip, while Virgin Australia bounces between $10 and $30, depending on the destination.
Credit card processing fees for merchants usually sit at around 1-3% of the transaction value, with American Express, Diners Club, business, corporate, international and ‘super premium’ cards on the higher end.
Merchants are also hit for a little extra on ‘card not present’ transactions (including those made online), although not by enough to push the cost of acceptance into double digits, as seen with Jetstar.
While transaction fees vary between businesses based on both transaction volume and fraud risk, most sole traders can accept credit cards through PayPal at just 2.4% + 30c per payment.
The vast difference between the surcharge levied and the cost likely incurred by the airlines has been one of contention for some time, with Qantas recently lowering its 'card payment fee' from $7.70 to $7 per passenger on domestic bookings.
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