Airbnb is one of two companies to enter enforceable undertakings after the corporate watchdog found the accommodation site may have breached Australian Consumer Law for “drip pricing”.
Drip pricing refers to a practice whereby businesses do not disclose the full price of a product or service initially but instead drip feed the consumer the overall price bit by bit.
The Australian Competition and Consumer Commission began a crackdown on “drip pricing” last year.
The ACCC said today it has accepted enforceable undertakings from Airbnb Ireland and a competitor, Vacaciones eDreams, for allegedly engaging in misleading and deceptive conduct by failing to disclose mandatory fees prominently on their platforms.
The watchdog believes both companies may be in breach of Australian Consumer Law because of the alleged conduct, which took place between November 2012 and November last year.
The breaches relate to occasions on both websites where service and cleaning fees were not displayed on certain pages of the website where they should have been.
ACCC chairman Rod Sims said in a statement the issue is a concerning one from both a competition and consumer perspective.
“Drip feeding consumers with information about charges can cause detriment to competition and result in consumers paying a higher price than the advertised price or spending more than they realise,” he said.
“The law does not prevent traders from charging fees. However, it does require that fees are disclosed clearly to avoid consumers being misled.”
Both companies have acknowledged the ACCC’s concerns and agreed to enter into consumer law compliance programs as a result of the undertakings.
“We’ve taken note of the ACCC’s concerns and we’ll be working to make sure our platform addresses those concerns,” a spokesperson for Airbnb told SmartCompany this morning.
Ian Ramsay, professor of commercial law at Melbourne University, told SmartCompany enforceable undertakings are a popular method by which the ACCC attempts to improve compliance.
“Rather than just to punish companies, we see methods to improve compliance to protect consumers,” he says.
“And indeed other regulators use this a lot.”
But Ramsay says the action will likely come as a surprise to the companies concerned.
He says the lesson for other businesses is to check how product pricing is displayed on their websites and to make sure they don’t engage in drip pricing.
“This is because enforcement action from the ACCC comes at a cost to the reputation of the company, even if an enforceable undertaking means there is no fine imposed by the regulator,” he says.
“It might also mean consumers heading to competitors who haven’t been the subject of enforcement action.”
SmartCompany was unable to contact Vacaciones eDreams prior to publication.