[2017] TLQ 27 VIRGIN, JETSTAR AND TIGER AGREE TO AN ‘OPT IN’ MODEL FOR ONLINE BOOKING PLATFORMS

2nd March 2017 by Anthony Cordato

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[2017] TLQ 27

Anthony J Cordato

This is the first of two articles related to airline pricing – a problem which is of general concern in the world of travel. In this article the author looks at the efforts made by the Australian Competition and Consumer Commission and the New Zealand Commerce Commission to curb the pernicious practices that airlines indulge in of adding in little extras to the cost of a flight by various clever, or even deceptive, tricks on their websites. The second article looks at the equally disreputable practice of passengers trying to take advantage of obvious pricing mistakes on airline websites.

The Australian Competition & Consumer Commission (ACCC) has succeeded in its quest for greater price transparency for domestic airfares booked by consumers using online booking platforms.

The ACCC has obtained the agreement of Virgin Australia, Jetstar Airways and Tiger Australia to change from a pre-selected (opt out) to a selected (opt in) model for extra charges for baggage, seats and travel insurance in the online booking process. Note that Qantas Airways was not involved because it does not have pre-selected optional extras on its online booking platforms.

This article examines how Virgin Australia and Jetstar Airways airlines display online booking charges for extras; the ACCC’s concerns; the New Zealand Commerce Commission’s success; and how the ACCC will continue to pursue price transparency for airfares booked on online booking platforms.

How do airlines display an ‘opt in’ and ‘opt out’ choices for extras?

Virgin Australia has adopted a completely ‘opt in’ model for extras.

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Booking a flight online with Virgin Australia:

• In step 5 of 7, these extras are available for purchase: Extra checked baggage, Carbon Offset and Add a Car. They are added to the fare by a [Select] button.
• In step 7 of 7, travel insurance is available for purchase. This is added by a [Select] button.

Jetstar Airways has promised to change to a fully ‘opt in’ model for extras from 1 July 2017. Until then, its booking process contains both ‘opt in’ and ‘opt out’ choices:

Booking a flight online with Jetstar Airways:

• In step 2 of 5, baggage is pre-selected in this way: 20kg checked baggage AUD $17 per passenger – the [√ Added] button is highlighted. This is an ‘opt out’ choice because the extra charge is added unless the [Remove X] button is clicked. There is an ‘opt in’ meal choice which is added by a [Select] button.
• In step 4 of 5, it states: “We have pre-selected optional insurance for you. Select “Remove” if you do not want to be covered”. This is an ‘opt out’ choice. There are Off-Airport parking, hotels, rental cars, and airport transfers which can be pre-purchased for additional cost. These are ‘opt in’ choices which are added by a [Select] button.
• In step 5 of 5, a carbon offset charge is a mandatory field – the consumer must either click [yes] or click [no] before proceeding with the booking. A charitable donation of $2 is pre-selected – an ‘opt out’ choice.

What are the ACCC’s concerns with the pre-selection (the ‘opt out’) model?

The ACCC’s concerns with pre-selection have built upon their successful pursuit of Jetstar Airways and Virgin Australia for ‘drip pricing’. Drip pricing is the practice where payment fees and charges are not adequately disclosed as early as possible in the online booking processes.

The particular fees and charges which cause concern are compulsory booking fees and credit card surcharges, which were not disclosed until the payment stage of the online

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booking process. The Federal Court found this practice to be misleading and deceptive in breach of the Australian Consumer Law.

The ACCC’s concerns with pre-selection are based on the fact that disclosure such as ‘Some products and services throughout our booking process have been pre-selected for your convenience’ on the Jetstar booking process is misleading by its lack of price transparency for consumers, who find extras added to their airfares, at various stages in the booking process.

The successful action taken by the Commerce Commission New Zealand to eradicate the ‘opt out’ model

The ACCC’s success follows upon the proactive lead by the Commerce Commission New Zealand, which in March 2015 successfully obtained the agreement of Air New Zealand to ‘scrap the use of ‘opt out’ pricing’ which ended the practice of pre-selecting travel insurance for customers when selling tickets online.

It indicated that the use of a mandatory field would be acceptable as an ‘opt in’ field:

“Consumers are perfectly capable of deciding for themselves whether they want to pay for additional products or services. If a company is concerned that its customers need insurance then a suitable approach is to require them to tick ‘yes’ or ‘no’ in a mandatory field and leave it in their hands.”

In March 2016, Jetstar Airways undertook to end its pre-selection practices for luggage, seat selection and travel insurance.

In September 2016, Air Asia agreed to end its pre-selection of a checked baggage allowance (at extra cost) in the online booking process.

The Commerce Commission is intent on eradicating ‘opt out’ pricing by airlines:

“Since we began investigating opt out pricing last year we have now seen seven companies put an end to this practice, which is great for consumers. We have made our position very

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clear on this issue and expect businesses to stick to an ‘opt in’ sales approach to avoid any possibility of breaching the Fair Trading Act.” (5 September 2016)

How will the ACCC will enforce ‘opt in’ pricing for online air travel bookings?

‘Opt in’ pricing will be required for all airlines operating in Australia. In the Jetstar Media Release, ACCC Chairman Rod Sims said:

“The ACCC will continue to engage with the remaining domestic airlines that still pre-select extras, and urge them to follow suit. The ACCC will also turn its attention to international airlines operating within Australia which continue to pre-select extras.”

Does the ‘opt in’ model include mandatory fields?

The ACCC has not given guidance as to whether a mandatory fields model is acceptable, as an alternative to the [Select] button for the ‘opt in’ model.

Some guidance can be derived from the use of the expression ‘pre-select’ by the ACCC. It implies that the ‘mandatory field’ model as used by Jetstar uses for carbon offsets where the consumer must click either [yes] or [no] is acceptable, in addition to the default model which necessitates the consumer to click the [Accept] button if they wish to ‘opt in’.

This interpretation would be in line with the views of the Commerce Commission New Zealand which are set out above.

Anthony J Cordato is Senior Partner with Cordato Partners, Sydney. He can be contacted at: ajc@businesslawyer.com.au