‘Drip pricing’ is a disgraceful way to raise consumers’ costs
By Chloe May, Research & Campaigns Volunteer
‘Drip pricing’ is when traders introduce hidden fees after the consumer has started the purchasing process. It’s a disgraceful way to mislead consumers into paying more than they expect.
You’re buying a flight or cinema ticket online. Right before finalising payment the seller introduces a booking fee. Suddenly the total price is a lot higher than you thought. What to do? You can groan, carry on to checkout and pay up. Or start over with a different supplier, cursing the time you’ve wasted.
The government wants this underhand practice stopped and so do we.
According to research* prepared for the Department for Business and Trade this year, median mandatory ‘dripped’ fees were 6% of base advertised prices. These chunky add-ons harm consumers but also fair competition by helping sellers willing to mislead buyers.
Underlining the point, the researchers found almost 75% of dripped prices appeared late in the checkout process (over halfway through). By then, consumers have input a lot of personal details and many won’t want to restart the process. They shop around less as a result and end up spending more.
Sometimes ‘drip pricing’ can be fair. For example when someone buying a mobile phone contract asks for more data it’s reasonable for the price to increase. However in most cases mandatory fees come on top of the initial price.
In December 2022 Citizens Advice published a report** on the many ways the design of online retail platforms causes consumer harm. They called on government to:
“review online design practices which are likely to be manipulative and move to ban these…(and)… ensure that BEIS has the necessary powers to swiftly ban through secondary legislation design practices which in most cases lead to consumer harm”.
So in September we were pleased that the Department for Business and Trade opened a consultation*** on smarter regulation of retail transparency. Among much else and echoing the Citizens Advice work, they revealed the implications of drip pricing:
- Lack of price transparency for consumers
- Consumers being “baited” into buying a product because of its lower base price and eventually paying more than necessary
- Customers being discouraged from starting the search process over again once they have started one and new fees are introduced
- Price competition for traders is limited because they compete on artificially low headline prices rather than the actual price of the product.
The report estimated that drip pricing causes UK consumers to spend an additional £595 million to £3.5 billion each year.
This is clearly unsustainable and a massive issue in a cost of living crisis. When people can’t afford essentials, they definitely can’t afford to be ‘baited’ into over-spending on products or services.
The consultation ends on 15 October and the government promises a response before the end of the year. We hope ministers will act to stop online retailers using tactics such as drip pricing to deceive consumers. They could for example require traders to include all fixed fees in their up-front price to increase price transparency for consumers.
* Drip Pricing Research – Estimating the prevalence and impact of drip pricing, Alma Economics, June 2023.
** Tricks of the trade – How online customer journeys create consumer harm and what to do about it, Citizens Advice, 01/12/22
*** Smarter regulation: improving price transparency and product information for consumers, Department for Business and Trade, 04/09/23