ACCC cracks down on misleading ‘drip pricing’ practices

Misleading and deceptive conduct is often thought of in relation to giving false information about prices or processes. But the Australian Competition and Consumer Commission’s (ACCC) recent pursuits of drip pricing practices demonstrates that this conduct can also involve omitting information.

In November, the Federal Court found that Jetstar Airways and Virgin Australian Airlines had engaged in misleading and deceptive conduct and about the price of advertised airfares. The Court will determine penalties against the airlines at a later date.

The ACCC, which successfully brought the case, argued that the two airline companies had misled consumers about the true price of the plane tickets by failing to adequately disclose additional booking and services fees until late into the payment process.

This process – known as ‘drip pricing’ – gives consumers the impression that a product costs lower than it really does. It does so by excluding administrative charges from the product’s nominal sale price. The cost of additional service and handling fees are then revealed after the online transaction process has already commenced.

ACCC Chairman Rod Sims contends that ‘drip pricing’ distorts information and misleads consumers: “[It] can result in consumers paying a higher price than the advertised price, spending more than they realise and making it more difficult to compare offers.”

“The ACCC’s concern with drip pricing has always been to ensure that consumers are not misled and that businesses are not unfairly disadvantaged by misleading practices,” he said.

Earlier this year, the ACCC accepted enforceable undertakings from emerging online companies Airnbnb and Vacaciones eDreams. In these cases, the companies admitted that they had failed to adequately disclose mandatory service and cleaning fees on their online booking platforms.

Airnbnb agreed to establish and maintain a consumer law compliance program within the company, while eDreams submitted that it would ensure its staff received appropriate compliance training on key aspects of Australian consumer law.

Drip pricing was a priority area for the ACCC in 2014 and, as these cases demonstrate, remains a focus for the competition and consumer watchdog.

If your company engages in online sales or multi-stage payment practices it is essential to adequately disclose all relevant pricing information to potential customers.

Contact GRC Solutions today for more information about our competition and consumer law training courses.

Source: ACCC

Fisher & Paykel fined $200,000 for misleading and deceptive conduct

Appliance company Fisher & Paykel and its warranty provider, Domestic & General, have each been ordered to pay $200,000 for misleading and deceptive conduct involving extended warranties.

The Federal Court of Australia found Fisher & Paykel misled and deceived their customers into thinking they were had to purchase an extended warranty in order to protect their products from repair costs. Under Australian consumer law, customers can seek repairs, replacements or refunds, even after the manufacturer’s warranty has expired, if the product is of unacceptable quality or is affected by a “major failure”.

Customers who had purchased a dishwasher with a two-year warranty received letters from Fisher & Paykel stating that “your dishwasher is now a year old, which means you have 12 months remaining – after that your appliance won’t be protected against repair costs. Fisher & Paykel can help.” The letter then offered the option to purchase an extended two-year warranty in addition to the original warranty. According to the ACCC, 48,214 letters were sent out.

The Court found it was not enough for the letter to note that customers were “entitled to a replacement or refund for a major failure and compensation for any other reasonably foreseeable loss damage” since this was “in relatively fine print” on the back page of the letter.

After the legal proceedings commenced against the two companies, all 1326 consumers who bought the extended warranties were contacted and offered a full refund. However, only 107 actually claimed a full refund.
Justice Wigney of the Federal Court also ordered the two companies to pay $15,000 in costs.

Source: Sydney Morning Herald

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Competition and Consumer Protection: Red Bull may not give you wings after all

Coffee cup  

Red Bull is alleviating the effects of false advertising by agreeing to pay over $15 million.

Red Bull’s marketing tactics and advertising campaigns falsely claim to give consumers superpowers.

Competition and Consumer Protection laws are in place to ensure products on the market are being sold fairly and that consumers are not being misled.

In this case, the accuser believes that Red Bull’s slogan “Red Bull gives you wings” was misleading because they were not able to fly after a few sips.

The accuser who has been regularly consuming Red Bull energy drinks since 2002 has realised that the enhanced performance which the energy drink claims to give consumers is non-existent and hasn’t helped him become a better athlete in any shape or form. In fact their consistent marketing campaigns throughout print, TV and internet channels misrepresent the energy drink that has no greater benefits than drinking a cup of coffee.

The court agreed that Red Bull’s strong focus on being a superior source of ‘energy’ was inaccurate and unfairly deceiving consumers. The court found Red Bull guilty of deceptive and fraudulent practices.

So what are the consequences of breaching the Competition and Consumer Protection laws?
In the US, if the settlement is approved, all consumers who bought at least one can of Red Bull in the past 10 years will be reimbursed with either $10 or two free Red Bull products – bringing Red Bull down to $6.5 million in just a matter of days.

Does your organisation abide by competition and consumer protection laws when advertising its products and services?
What do you think of this case?


Bearings manufacturer fined $3m for price fixing

price fixing

Bearings manufacturer NSK Australia has been fined AUD$3 million for price fixing.

The Federal Court imposed the fine after the Australian Competition and Consumer Commission (ACCC) investigated the case.

NSK Australia holds around 10-13% of the $400 million Australia bearings market. Bearings are an essential component in mechanical items, including motor vehicles, mining conveyors, household electrical items and farm machinery.

According to the ACCC, bearings prices were hiked by four per cent in May 2008 and by 10 per cent in February 2009. The price fixing activity primarily affected aftermarket bearings customers – those who purchased bearings for maintenance and repair of motor vehicles, household and industrial machinery.

How it happened
Three senior Japanese executives from NSK Australia, Nachi Australia and Koyo Australia participated in the cartel conduct. They held regular group meetings in Sydney and Melbourne to discuss pricing plans during the nineties. This led to the formation of the Southern Cross Association cartel in 2000. The cartel remained undiscovered for over a decade.

“Cartels cheat customers and other businesses. The ACCC will continue to tackle cartel conduct with the full force of the law,” ACCC Chairman Rod Sims said.

Although the fine imposed on NSK Australia is significant, it reflects a discount that was granted after it cooperated with the ACCC’s investigation. Koyo Australia also faced a $2 million penalty in October last year. Nachi is yet to receive any penalties apart from significant reputational damage.

The Court also ordered NSK Australia to implement a competition and consumer law compliance training program throughout its organisation.

Contact us for more information on our Competition and Consumer Protection online training course.

Source: ACCC, $3 million penalty for bearings cartel conduct