Bill will prevent the likes of airlines and ticket firms from adding painful extra charges at the checkout.
Sneaky ‘drip pricing’ employed by airlines, among others, is set to be banned by the Government.
In this week’s King’s Speech, the Government confirmed that it plans to introduce a Digital Markets, Competition and Consumers Bill which will include a host of new consumer protections.
And chief among them will be banning ‘drip pricing’, the practice of advertising an initial price and then adding further charges leaving the product or service far more expensive to purchase once you reach the check-out.
How big an issue is drip pricing?
Most of us will have had some experience with drip pricing.
Airlines are perhaps the most common example here ‒ sure that airline is advertising flights starting at £29, but once you go through the process of trying to arrange one you’ll soon be staring down the barrel of a costlier flight since you could be charged extra from luggage or being able to select your seat.
In reality, however, it’s much more prevalent than simply being an airline issue.
A study by the Government into the issue centred on firms involved in retail, hospitality, entertainment, and transport & communication, and almost half of the firms involved in its research sample included at least one dripped fee in their checkout process.
The Government went into the study with certain definitions of when a dripped fee would be deemed harmful.
It could be that they were mandatory and so couldn’t be considered as such, or that they were optional but pre-selected in the checkout process.
Other criteria for being defined as harmful were that they were presented past the halfway point of the checkout process, that they cost more than 25% of the product price, or that there were three or more dripped fees.
In the study around 41% of providers included fees that met more than one criterion of harm, a pretty damning indictment of just how widely employed these sneaky charges are.
Across the various sectors, service fees ‒ those charges you have to pay simply in order to receive or purchase a service, such as booking fees for concert tickets ‒ tended to meet the most criteria of harm.
There is a real financial impact from this approach too ‒ it’s not just a bit frustrating.
The Government’s analysis suggests that it is pushing shoppers into spending an additional £595 million each and every year.
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The potential downside of eliminating drip pricing
It’s worth noting that there have been warnings that getting rid of drip pricing will actually push up prices overall.
According to the Government’s own assessments, by bringing these charges forward it could mean that airline tickets, for example, are £80 more expensive. That’s based on the median costs for adding extra luggage and selecting specific seats.
In effect, because the retailer has to be upfront about charges, it hits everyone with the same pricing. Now, for those people who would have ended up paying the extra for those additional features, there won’t be a difference.
But there will be some who would have opted against coughing up that cash for features like being able to select their seat, and so end up paying more overall.
What will this mean for me?
First and foremost, the Government needs to get this legislation through Parliament.
And while it’s the sort of thing that will likely attract support from other parties, it would be a mistake to assume that it will end up on the statute book swiftly.
Only time will tell how effective the legislation proves in practice, too. After all, we already have regulations in place that are supposed to protect shoppers from questionable practices from retailers, and yet it has not been able to prevent drip feeding becoming such a prevalent problem.
We simply don’t know yet how efficient it will be at plugging those gaps, nor how retailers will react and whether it will simply mean that they stick all of the charges onto those headline prices.
However, greater transparency over costs is unquestionably a good thing.
The economic challenges of the last couple of years have put all of our finances under pressure, and so having clear and reliable information over precisely what goods or services are going to cost us from the outset needs to be the minimum standard rather than the exception.
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