Reading time: 3 minutes

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.

Conclusion

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. 

Webinars

Day in Court: What Happens When Your Business Goes to Court

Thursday 2 June | 11:00 - 11:45am

Online
If your business is going to court, then you need to understand the process. Our free webinar will explain.
Register Now

How to Manage a Construction Dispute

Thursday 9 June | 11:00 - 11:45am

Online
Protect your construction firm from disputes. To understand how, join our free webinar.
Register Now

Startup Financing: Venture Debt 101

Thursday 23 June | 11:00 - 11:45am

Online
Learn how venture debt can help take your startup to the next level. Register for our free webinar today.
Register Now

About LegalVision: LegalVision is a commercial law firm that provides businesses with affordable and ongoing legal assistance through our industry-first membership.

By becoming a member, you'll have an experienced legal team ready to answer your questions, draft and review your contracts, and resolve your disputes. All the legal assistance your business needs, for a low monthly fee.

Learn more about our membership

Need Legal Help? Submit an Enquiry

If you would like to get in touch with our team and learn more about how our membership can help your business, fill out the form below.

Our Awards

  • 2020 Innovation Award 2020 Excellence in Technology & Innovation Finalist – Australasian Law Awards
  • 2020 Employer of Choice Award 2020 Employer of Choice Winner – Australasian Lawyer
  • 2020 Financial Times Award 2021 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review
  • 2021 Law Firm of the Year Award 2021 Law Firm of the Year - Australasian Law Awards
  • 2022 Law Firm of the Year Winner 2022 Law Firm of the Year - Australasian Law Awards