The Australian Competition and Consumer Commission has brought legal proceedings against the operators of Abel Rent A Car, which is based in Brisbane.
The Abel business is owned by Nonchalant and the consumer watchdog claims the car rental company misled potential customers about the true cost of hiring some of its cars and trucks in online and print advertising.
The ACCC alleges Abel advertised a price to hire a car or truck when that price did not include additional mandatory fees that were charged in addition to the advertised price.
Those additional fees included what Abel referred to as an administration fee and a vehicle registration recovery fee.
SmartCompany contacted Abel but no response was available prior to publication.
“Businesses cannot advertise a price for their goods or services then later add additional mandatory fees and charges, which make the total cost more expensive than initially represented,” ACCC chairman Rod Sims said in a statement.
The watchdog is seeking declarations, penalties and costs. A directions hearing will be held on March 14 in the Federal Court in Brisbane.
Sally Scott, partner at law firm Hall and Wilcox, told SmartCompany undisclosed additional fees are a trap for a lot of businesses.
“Where an ad specifies a price, the implication and overall impression to consumers is usually that it is an all-inclusive price,” she says.
“If there are extra costs not included in the advertised price, then the advertisement could be misleading.”
Scott says the case raises a similar issue to that faced in relation to airline prices a few years ago, when heavily discounted prices would be advertised and then when consumers went to purchase the taxes were often more than the discounted airline price.
“If consumers all know that there is an extra cost above the advertised price and they know roughly what that price is, then an advertisement would often not be misleading as the overall impression of consumers would be that there are extra costs on top of an advertised price,” Scott says.
However, she says, this would be a relatively rare situation.
“Businesses should not assume that small print references to extra costs will save an advertisement from being misleading,” Scott says.
“The overall impression is what counts. If an asterisk refers to online terms and conditions, that usually won’t be enough to save an otherwise misleading advertisement.”
Scott says most people know that when you hire a car there will be an optional extra cost for insurance cover but it is unclear whether people know this who have never hired a car before.
“Do they know that there are administrative and other add-on fees?” she says.
“If not, then companies need to ensure that their advertisements makes it sufficiently clear that there are these types of add-on costs.”
Scott says a mere reference to online terms and conditions or to ‘extra costs apply’ will often not be sufficient.
“The more significant the extra costs, the more prominently they should be featured in the advertisement,” she says.
Cara Waters is a former SmartCompany editor. Previously, Cara was a senior reporter for the Financial Times’ website and worked for The Sunday Times in London.
