SINGAPORE - Some travellers using online travel booking sites have ended up paying more than they bargained for because of the non-transparent pricing and marketing practices used on these sites, said the competition watchdog.
The Competition and Consumer Commission of Singapore (CCCS) flagged this concern on Monday (Sept 30) when it released the findings of a nine month-long market study on the online travel booking sector in Singapore.
To tackle such practices in the industry and beyond, it is proposing guidelines on price transparency for all consumer-facing businesses. The guidelines will provide more clarity on what constitutes an infringement of consumer protection laws, and set out the factors and circumstances that the commission may consider in assessing if advertised prices and related practices are potentially misleading.
Under the Consumer Protection (Fair Trading) Act (CPFTA), the CCCS is empowered to investigate errant businesses and file an injunction application against them. If they do not cease the unfair practice, they can be charged with contempt of court, which carries a fine of up to $10,000 or up to a year’s imprisonment or both.
The commission flagged four common pricing and marketing practices that could mislead consumers: Drip pricing, pre-ticked boxes, strikethrough pricing and pressure selling.
1. Drip pricing
This refers to the practice of adding mandatory or optional fees during a transaction or payment process, resulting in a final price that is higher than advertised. This can lure consumers into making a purchase based on incomplete price information, and restrict competition by making it harder for consumers to compare product offerings across suppliers. One common practice is displaying prices without including booking and credit card fees, and add-ons such as insurance.
Of the more than 500 consumers surveyed, over 80 per cent reported facing a higher price than advertised at checkout for flight and hotel room bookings, largely for fees that were mandatory. Low-cost airlines were identified as engaging in optional drip pricing, with the additional revenue from the add-ons forming a part of their business model to offer low prices for a basic flight. Some airlines present these as opt-out charges.
About 40 per cent of consumers who booked flight tickets and 36 per cent of those who booked hotel accommodations said they would pay for the mandatory extras even if they objected to a higher price than expected, citing a lack of time to start a new search, among other reasons.
CCCS' recommendation: Suppliers should ensure that any unavoidable or mandatory fees or charges are included in the total headline price. Where any mandatory fees or charges cannot be reasonably calculated in advance, the existence of such fees should be clearly indicated upfront. Add-ons should be prominent and clearly indicated as optional.
2. Pre-ticked boxes
These are checkboxes to purchase additional products or services that suppliers have pre-selected for consumers. They can lead to consumers buying unwanted add-on products as a result of failing to opt-out. They can also make the consumer less likely to search for alternative providers and compare prices. Examples include car rentals and sightseeing packages.
Of the hotels, airlines, metasearch engines as well as online and traditional travel agents surveyed that bundle products or services on their booking site, between 38 per cent and 41 per cent indicated that the additional products and services are added automatically and must be opted out of.
Nearly a third of consumers who observed differences between the headline and final prices said they ended up purchasing additional items as they missed opting out of add-ons.
CCCS' recommendation: Suppliers should avoid using pre-ticked boxes to automatically include add-ons. If such boxes are used, suppliers must provide proper disclosures of the goods or services offered in a clear and prominent manner. The cost of pre-ticked add-ons must be added to the upfront price.
3. Strikethrough pricing
This refers to the practice of representing a discount on a product where the original price is crossed out adjacent to the sale price. It can mislead consumers into making a purchase or paying a higher price if the comparison between a current and a crossed-out price is false or misleading, conveying a false sense of savings.
Of the hotels and airlines that use this technique, 35 and 39 per cent respectively disclosed that the strikethrough price may match only some features of the product and thus does not reflect its true pricing.
CCCS' recommendation: When a discount or comparison with a previous price are made to represent a price benefit, merchants should include a bona fide previous price so that consumers are not misled about the savings they may achieve.
4. Pressure selling techniques
They can create a false sense of urgency for consumers to make a purchase based on inaccurate information. Examples include promoting a temporary "sale" or "special" price for a limited period when the price will still be available beyond the limited period.
Nearly eight in 10 consumers said they would be more likely to book air tickets and hotel rooms if these were marked as having limited availability, the study found. But more than 40 per cent of those who did so reported regretting the decision and said they made the purchase under pressure.
CCCS' recommendation: False or misleading claims that create unwarranted pressure or a sense of urgency for consumers to make an immediate purchase should not be made. Additionally, when using the term "free", suppliers should ensure that this representation is not false or misleading. Any qualifiers or terms and conditions should be stated upfront clearly and prominently.
Two other areas - misleading user reviews and the transparency of search rankings and affiliated services - were raised as having potential consumer protection concerns, but found not to have sufficient evidence to warrant intervention.
No significant competition concerns were uncovered in commercial practices and arrangements by online travel booking providers.
According to the study, the most common online travel agencies used by Singapore consumers are Expedia, Booking.com, and Agoda for the booking of hotel accommodations and air tickets. Popular metasearch engines include TripAdvisor, Skyscanner and Trivago.
The Commission said the in-depth study was conducted between July last year and April this year amid growing use of online travel booking platforms. It looked at the practices of 38 online travel websites, including online travel agents, metasearch engines and traditional travel agents with an online presence. Interviews and surveys with about 750 industry members, such as airlines and hotels, were also conducted.
This is the first market study by the Commission to examine competition and consumer protection issues, since the competition watchdog took on the additional function of administering the CPFTA in April last year.
The full 60-page report, published on its website, details the online travel booking ecosystem and the practices that the Commission said can raise concerns about consumer protection and fair competition.
The Commission is seeking public feedback on the proposed guidelines on price transparency until Oct 21.