Government to consult on punishments for breaking online air fare rules

Out-Law News | 11 Jan 2010 | 2:59 pm | 2 min. read

The Government will consult within weeks on new penalties for airlines that employ hidden charges to mislead consumers. The action will close a loophole by which airlines can avoid penalties for breaking the law.

OUT-LAW.COM can reveal that the Department of Transport will begin a consultation within weeks on the penalties companies will suffer if they flout the European Union's Air Services Regulations.

While the Regulations have carried the force of law since 2008 there is no penalty for breaking them. A Department of Transport spokesman said that this would soon be rectified.

"We will consult on sanctions shortly, within the next couple of months," he said.

The Regulations demand that airlines be upfront about their pricing and refrain from 'drip pricing' charges into quotations late on in an online booking process.

"The final price to be paid shall at all times be indicated and shall include the applicable air fare or air rate as well as all applicable taxes, and charges, surcharges and fees which are unavoidable and foreseeable at the time of publication," it says.

"Optional price supplements shall be communicated in a clear, transparent and unambiguous way at the start of any booking process and their acceptance by the customer shall be on an ‘opt-in’ basis," it says.

In 2008 Ryanair changed its practices to comply with the Regulations by stopping its practice of automatically including travel insurance with flight bookings. However, customers need to opt out if they do not wish to check in luggage. The site adds £15 to the cost of a one-way flight for checking in one piece of luggage, unless the customer opts out. EasyJet still automatically includes insurance, forcing users to opt out or pay the levy. It also adds £18 for checking in luggage, unless the customer opts out.

The Department of Transport spokesman said that the delay in implementing sanctions was due to the Government's desire to create a more flexible system of penalties for those found to be breaking the Regulations.

"This was because we wanted to implement a slightly more sophisticated system than just relying on criminal penalties," he said.

Ryanair came under attack from consumer protection boss John Fingleton last week over some of its online pricing practices.

Fingleton, chief executive of the Office of Fair Trading (OFT), labelled as 'puerile' Ryanair's £5 booking fee charges for all payment methods except one. The airline retaliated by launching a series of 'Fingleton fares'.

The OFT is investigating online 'drip pricing' strategies, by which companies add cost at each stage of the booking process so that final prices paid by consumers are much higher than initial advertised prices.

In an interview with The Independent newspaper, Fingleton said that Ryanair's insistence on charging fees for using any card except a pre-paid MasterCard, as "puerile, almost childish" behaviour.

"We've certainly tackled a lot of those issues with airline pricing, by having the prices up-front," he said. But Ryanair has retained that charge.

Last summer the OFT announced that it would conduct a wide-ranging investigation into the pricing strategies used by airlines and other e-commerce sales sites. It said it would conduct a study into misleading advertising and pricing to use as the basis of future action.

"The study will look at the current consumer law surrounding advertising and pricing," said an OFT statement in July. "It will evaluate which advertising and pricing practices are most detrimental to consumers, taking into account the growth of the use of the internet for online shopping, information provision and advertising."

The OFT has previously gained agreement from Ryanair on pricing and advertising issues. Last year the airline said that it would provide clear information about its pricing structures and has said that it will give more prominence to additional costs, such as those for checked in baggage, in communications with customers.

Ryanair had been referred to the OFT by the Advertising Standards Aurhtority (ASA) after it had breached the ASA's Code a number of times.

Fingleton's comments drew a barbed response from Ryanair. It launched one million £4 'Fingleton's fares' in defiance of his comments.