Competition watchdog cites concerns over price transparency in online travel booking sector

Competition watchdog cites concerns over price transparency in online travel booking sector

SINGAPORE: Singapore's competition watchdog has proposed guidelines on price transparency following a market study on the online travel booking sector in the country.

In its first such market study released on Monday (Sept 30), the Competition and Consumer Commission of Singapore (CCCS) sets out recommendations “to encourage online travel booking providers to adopt transparent pricing practices" and to avoid "misleading consumers".

Singapore consumers are increasingly going online to make their travel bookings, CCCS said, adding that it conducted the study to look at the online provision of bookings for flights and hotels.

Through information gathered from interviews, surveys and a website sweep, the study identified four “common practices” of online travel booking providers that CCCS said gave rise to consumer protection concerns: 

  • Drip pricing, which involves non-disclosure of both mandatory and optional charges upfront, can lure consumers into making a purchase based on incomplete price information. 
  • Pre-ticked boxes, which can result in consumers buying unwanted add-on products, as a result of failing to opt-out by unchecking the pre-ticked boxes. 
  • Strikethrough pricingthat can mislead consumers into making a purchase (or paying a higher price) should the comparison between a current and a crossed-out price be false or misleading. 
  • Pressure selling using false or misleading claims which can create a false sense of urgency for consumers to make a purchase based on inaccurate information.

"Price, being an important factor for most consumers and required for comparing between alternatives, is essential to consumers making well-informed purchasing decisions," CCCS said. 

"In the absence of clear disclosure on prices and pricing practices, consumers may be misled and hence suffer harm."

DRIP PRICING

In its report, CCCS detailed recommendations to address consumer concerns and avoid deceptive or misleading practices that may infringe the Consumer Protection (Fair Trading) Act (CPFTA).

In relation to drip pricing, which it said made it harder for consumers to compare prices, CCCS proposed that companies should ensure that any unavoidable or mandatory fees are included in the total headline price.

Any optional add-ons, such as travel insurance, should be clearly indicated to consumers. Terms and conditions, qualifiers and charges should also be properly disclosed.

“From the industry interviews, some airlines – especially low-cost carriers – appear to engage in optional drip pricing routinely. Optional fees added at a later stage of the buying process frequently include checked baggage or meals,” the report said.

The commission also proposed that online travel booking providers that display prices only in Singapore dollars but process payments abroad should clearly indicate that the transaction is a cross-border one that may involve additional fees associated with currency conversion.

PRE-TICKED BOXES

Addressing the issues surrounding pre-ticked boxes, the report called for companies to adopt "good practice" and to avoid the opt-out approach, such as using pre-ticked boxes to automatically include add-ons.

Under the opt-out approach, pre-ticked boxes can result in “adverse consumer outcomes” if customers fail to uncheck or unselect such options, CCCS said.

The types of add-ons that can be included automatically in flight or hotel bookings include car rentals, travel insurance and sightseeing packages, according to the report.

“Pre-ticked boxes can also cause consumer harm if it nudges consumers to purchase the additional products, without comparing or searching for alternatives,” CCCS said.

CCCS said that optional add-ons should be made prominent and noticeable for consumers.

STRIKETHROUGH PRICING

The study also found that strikethrough pricing appeared to be a fairly common practice by hotels, airlines, online travel agencies and metasearch engines, with greater prevalence among the latter two.

“There appears to be a range of approaches adopted by online travel booking providers in how the strikethrough price is determined, including approaches where the strikethrough price may not match all features of the flight or hotel room the consumer is viewing,” CCCS said.

It added that despite the general lack of information provided to consumers on the crossed-out price, the method has been “somewhat effective in encouraging consumers to make a travel booking”.

The commission recommended that when displaying comparisons to previous prices in offering discounts, booking companies should use an actual previous price “that provides a legitimate basis for the comparison”.  

This is to ensure customers are not misled about the savings they may achieve from purchasing the discounted product, the watchdog added.

PRESSURE SELLING

The commission also warned against pressure selling techniques and using false and misleading claims such as "sale" or "special price for a limited period" when the price would actually be available beyond that time.

“The use of false or misleading claims to pressure a consumer into making a purchase has been identified as a consumer protection concern in several jurisdictions, including Australia, the EU and the UK,” the report added.

Pressure selling appeared to be a common practice for hotels, airlines, online travel agencies and metasearch engines to alert consumers when the supply of a room or flight is low or limited, or when a price discount is valid only for a limited period, the commission found in its study.

“When using the term ‘free’, suppliers should ensure that any representation that the price is $0 or ‘free’ is not false or misleading and any qualifiers, terms and conditions as well as subsequent/deferred charges should be stated upfront clearly and prominently,” CCCS added.

The watchdog said the proposed guidelines will help consumers to make informed choices and allow businesses to compete on a level playing field.

RECOMMENDATIONS ENHANCE TRANSPARENCY

Replying to CNA's queries, the Consumers Association of Singapore (CASE) said that in general, it supports the recommendations put forward by CCCS. 

"We believe that these recommendations are positive steps forward as they enhance transparency and disclosure on the part of the vendor," said CASE executive director Loy York Jiun. 

CASE does not support the practice of pre-ticked boxes, said Mr Loy, as consumers may overlook them during transactions. 

He cited complaints made to CASE last year by several Singapore Airlines (SIA) customers regarding the auto-inclusion of travel insurance when booking their air tickets.

"We are of the view that the opt-in or opt-neutral options are fairer to consumers, as these options require consumers to consciously agree to the purchase of goods and services, rather than them overlooking the options and pay for them when they did not intend to," Mr Loy said.

"Notwithstanding the above, CASE continues to advise consumers to look out for pre-ticked boxes when they shop online. 

"Consumers should also remember to thoroughly check through their online bookings or shopping carts for extra charges before making any payment." ​​​​​​​

Interested members of the public can send their feedback on the guidelines by Oct 21, 2019.

Source: CNA/mn(mi)/ad

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