Airlines: payment card surcharges investigation
Office of Fair Trading (OFT) closed consumer enforcement case.
Case information
Case Reference: Airline payment surcharges - CRE-E/27017
Complainant: Which? (Which? made a super-complaint to the OFT
regarding payment surcharges in the passenger transport sector on 30
March 2011)
Investigation into: Aer Arann, Aer Lingus Limited, BMI Baby
Limited, Eastern Airways Limited, easyJet plc, Flybe Group plc, German
Wings GmbH, Jet2.com Limited, Deutsche Lufthansa AG, Ryanair Limited,
Thomas Cook Airlines Limited, Thomson (TUI UK Limited), Vueling Airlines
S.A, Wizz Air Kft.
Issue
The OFT was concerned that consumers were being misled about the level and/or the existence of payment card surcharges. The airlines under investigation were charging consumers an additional fee for making a payment by debit card, which was not included in the headline price, and/or were not presenting their credit card charges in a clear and transparent manner. The OFT was concerned that these practices made it difficult for consumers to compare prices easily, damaged consumer confidence and impeded effective competition.
Relevant Legislation
The Enterprise Act 2002, the Consumer Protection from Unfair Trading Regulations 2008 ('CPRs') and the Air Services Regulation (EC Regulation 1008/2008) ('ASR').
Case description
On 28 June 2011 the OFT published its response to the Which? super-complaint, in July and August it monitored changes and in September 2011 the OFT opened an investigation into payment surcharges in the airline industry. The OFT focused on 14 airlines which had not made voluntary changes in line with the recommendations set out in the OFT's response to the Which? super-complaint.
The OFT was concerned that airlines' payment surcharges were a 'drip-fee' or 'price partitioning' device which concealed the true or genuine price of their services. This is because the average consumer was not in a position to pay by these payment cards which were presented by airlines as a free payment mechanism. The OFT was further concerned that there was no reasonable or legitimate reason for the airlines' failure to provide headline prices which included all unavoidable charges, such as any cost for paying by debit card
The OFT considers that the airlines under investigation were engaging in prohibited unfair commercial practices within the meaning of the CPRs, including misleading actions and misleading omissions (further to Regulations 5 and 6 of the CPRs), as well as committing breaches of professional diligence. The OFT further considers that the airlines were breaching the requirements of the ASR which requires all flight prices to be presented inclusive of all foreseeable and unavoidable charges and fees.
The OFT's objectives in taking enforcement action were to ensure that airlines:
- included debit card charges in all headline prices, whether on the airline's website and in its advertising
- presented optional credit card fees clearly and transparently.
In July 2012, the OFT closed its investigation. Most airlines gave formal undertakings to the OFT, and others made changes to their pricing practices and these changes were accepted in lieu of undertakings by the OFT. These changes, combined with those made voluntarily by other airlines before and during the investigation, mean that free payment by debit card will be the industry standard for UK passengers.
These changes are set out below:
| Airline | Status | Undertakings (all PDF files) |
|---|---|---|
| Aer Arann | No longer operates flights on its own behalf | |
| Aer Lingus | Aer Lingus has already made interim transparency changes on its website. It will include its admin fee in all advertised prices by 1 August 2012 and make final changes to its website by 30 September 2012. | |
| Aer Lingus | Update 26 October 2012: Final changes to the Aer Lingus website were made by 23 October 2012. | (90kb) |
| BMI Baby Ltd | BMI Baby's owner, IAG, has announced that it will no longer operate flights as of 10 September 2012. If it does continue to operate after that date, it will comply with the OFT's requirements as of that date. | |
| BMI Baby Ltd | Update 26 October 2012: BMI Baby ceased operating on 9 September 2012. | (110kb) |
| Eastern Airways Ltd | Eastern Airways did not surcharge for debit cards but has made changes to the way it presents its credit card charges. | (28kb) |
| easyJet plc | easyJet has made transparency changes to its website and advertising. It will make further changes to its website by 1 December 2012. | (606kb) |
| Flybe Group plc | Flybe no longer charges for debit cards and has made changes to the way it presents its credit card charges. | (271kb) |
| German Wings GmbH | German Wings no longer charges for debit cards and will be making further transparency changes to its website. | |
| German Wings GmbH | Update 26 October 2012: German Wings made further transparency changes to its website by 26 September 2012. | (320kb) |
| Jet2.com Ltd | Jet2 has provided an undertaking that from 1 August it will no longer surcharge for debit cards and will complete changes to its website by that date. | |
| Jet2.com Ltd | On 30 July Jet2 informed us that it had encountered some unforeseen difficulties which mean that it will be in a position to make changes to its website on 8 August, and not on 1 August as previously agreed with the OFT. | (172kb) |
| Lufthansa AG | Lufthansa no longer charges for debit cards and has made transparency changes to the way it presents its charges. | (777kb) |
| Ryanair Ltd | Ryanair has already made transparency changes to its website and from 1 August it will include its admin fee in all advertising and on its website. From 1 December it will no longer surcharge for payments made by debit cards. | (115kb) |
| Thomas Cook | Thomas Cook no longer charges for debit cards. | (25kb) |
| Thomson | Thomson no longer charges for debit cards and has made changes to the way it presents its charges. | (97kb) |
| Vueling | Vueling was referred to the Spanish Authorities via the Consumer Protection Cooperation Regulation for enforcement action under European legislation due to their relatively small UK market share. | |
| Wizz Air | Wizz Air no longer surcharge for debit cards. | (335kb) |
The OFT’s enforcement partners
As part of this investigation, the OFT has been cooperating closely with the AGCM (the Italian Competition and Markets Authority), which has also been challenging a number of airlines on their pricing practices.
The OFT is grateful to the Civil Aviation Authority, the Advertising Standards Authority, and the Irish National Consumer Agency for their assistance in the investigation.
The OFT’s recommendation to the Treasury
Following recommendations from the OFT in its response to the super-complaint last year, the Government has also announced plans to bring in legislation to ban excessive debit and credit card surcharges across the economy.
Related documents
- Press release Airlines to scrap debit card surcharges following OFT enforcement action (5 July 2012)
- Questions and answers
- Which? super-complaint
- Advertising of Prices market study