The competition watchdog is taking Virgin Australia and Jetstar to court, accusing them of slugging customers with hidden fees when buying cheap airfares online.
The airlines are alleged to have engaged in “drip pricing” where a headline price is advertised but extra fees and charges are introduced during the booking process.
The Australian Competition and Consumer Commission (ACCC) has launched separate Federal Court proceedings against Virgin and Jetstar, with the airlines facing hefty fines and orders to change their advertising practices.
Jetstar said it will defend the allegations, while Virgin is reviewing the ACCC’s proceedings and considering its options.
Jetstar is alleged to have failed to inform customers they would be charged a booking fee of $8.50 a passenger when they paid online with a credit card.
Virgin allegedly includes a booking fee of $7.70 for those paying with a credit card, debit card or via PayPal.
“The ACCC alleges 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 watchdog said.
Jetstar said it offers airline seats at the lowest price, and then optional extras – including fees for a particular way of booking.
“The booking and service fee is clearly disclosed and the total price that people pay is shown before they finalise their purchase,” a Jetstar spokesperson said.
“Our customers have the option to choose one of four fee-free payment methods, and that’s how a large number of them book.”
Virgin said all Australian airlines have long charged separate booking and service fees, and its customers are also offered fee-free payment options.
ACCC chairman Rod Sims said the watchdog was investigating similar `drip pricing’ behaviour by businesses in other industries.
The court proceedings against the airlines will begin in August.