Australia’s Consumer Law (the ACL) prohibits misleading or deceptive conduct. The ACL, which forms part of the Competition and Consumer Act 2010 (Cth), protects consumers from actions of businesses or individuals that may be unfair. In doing so, consumers can be confident that the business who they enter into a transaction with is not unfairly deceiving them. Drip pricing is misleading or deceptive conduct prohibited by Australian Consumer Law (ACL). This article will set out what exactly is drip pricing, how the Australian Competition and Consumer Commission enforce the rules around drip pricing, and what are our key takeaways for your business.
What is Drip Pricing?
Drip pricing is considered to be the ‘bit by bit’ disclosure of extra costs. Each progressive disclosure incrementally increases the price of an advertised good or service from the displayed headline price. Sections 29(1)(i) and 18 of the ACL prohibit drip pricing. It amounts to false or misleading representations about the price of goods or services, as well as misleading or deceptive conduct.
For example, an airline advertises a sale fare of $69 from Sydney to the Gold Coast, one way. After progressing through each stage of the process, refusing seating choices, insurance, and ‘jump the queue’ offers, it is finally revealed to the consumer that one cost is unavoidable: the booking fee. The booking fee of $7 increases your $69 fare to $76.
The ACCC’s Enforcement Toolbox
Businesses found contravening the ACL face significant monetary and non-monetary penalties. The ACCC can levy pecuniary penalties (a civil penalty) for:
- false or misleading conduct,
- pyramid selling, or
- unconscionable conduct.
The maximum penalty for this conduct is:
- For corporations – $1.1 million; and
- For individuals – $220 000.
The ACCC does not limit its enforcement and compliance options to pecuniary penalties. The ACCC can use enforceable undertakings, injunctions, criminal proceedings and compensation orders to penalise companies and individuals who have contravened the ACL.
Key Takeaways For Business
So, what do businesses need to remember? A person must not, in trade or commerce, in connection with the supply of goods or services make false or misleading representations about the price of goods or services (section 29(1)(i)). Conduct that is misleading or deceptive is also a breach of the Australian Consumer Law (section 18(1)).
Businesses, understandably, often advertise attractive prices to consumers. It’s good marketing. But they need to be aware that if advertising a low ‘headline price’ to consumers, which additional disclosures of extra fees inevitably erode, they may be contravening the ACL.
Businesses should be clear and transparent when advertising sale prices. Clearly disclose the total cost of a good or service if you intend to levy fees that the consumer cannot avoid.
In short, drip pricing is the display of a low headline price that the progressive disclosure of additional fees steadily erodes. The ACCC has a number of enforcement options, such as penalties, enforceable undertakings, and injunctions. Businesses should be transparent about prices advertised and if unsure, should contact an experienced advertising lawyer.
Questions? Please get in touch on 1300 544 755.