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16july drip pricing hero
16 March 2017

Opinion: The $68m sting

We're campaigning to get rid of sneaky fees.

They masquerade under various guises. The “booking fee”. The “service fee”. Even the “print your own ticket fee”. They’re the extra charges retailers, particularly online traders, are fond of adding to the advertised price of goods and services.

Our latest survey reveals more than two-thirds of consumers have been stung by these types of fees.

Unsurprisingly, they’re a nice little earner for retailers. We estimate traders could be banking as much as $68 million each year from fees charged on top of the advertised price.

The practice of tagging on extra fees has earned the title “drip pricing”. Companies use it because it makes consumers more likely to buy. By the time the add-ons are revealed, you’re more likely to be committed to the purchase and less likely to shop around.

This month, we’re launching a campaign to get rid of these sneaky fees. We’re calling for all-inclusive pricing rules to make companies disclose the full purchase price upfront.

While the Fair Trading Act prohibits misleading representations about price, the rules were written in the days before online traders hit their straps and haven’t proved a sufficient deterrent to drip pricing. Retailers continue to rely on small print and other disclaimers to claim extra purchase costs have been adequately disclosed.

Australian lawmakers have taken a tougher stand. Traders there are prohibited from advertising a component of a price without also clearly showing the total amount the consumer has to pay.

In 2012, when consumer law reforms were being considered by parliament here, officials advised against all-inclusive pricing rules because they didn’t think there was enough of a problem to justify intervention. That advice has proved way off the mark. If anything, the growth of online sales has made the problem worse.

A majority of Kiwi consumers share our view that similar rules to those across the ditch should apply here. Our survey found 68% think retailers should be required to make the full price clear upfront.

Retailers know price plays a major part in consumers’ purchasing decisions — marketing handbooks are full of pricing tricks to convince customers to part with their cash.

All-inclusive pricing rules would stop the fee creep and ensure consumers can easily identify the total price of a product before they make their buying decision.

You can help us get the law changed and make traders play fair by signing our online petition. Our guarantee: no hidden fees apply.

By Jessica Wilson
Head of Research

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