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Commission closes Air NZ credit card surcharge investigation

Commission closes Air New Zealand credit card surcharge investigation

19 December 2013

The Commerce Commission has concluded an investigation into credit card surcharging by Air New Zealand and found that the airline has not engaged in conduct likely to breach the Fair Trading Act (FTA).

The Commission investigated whether Air New Zealand’s conduct and representations about the card payment fee it charges to customers purchasing airfares by credit or debit card is false or misleading and in breach of the FTA. The Commission formed the opinion it was neither misleading nor liable to mislead the public.

“The information provided adequately conveys that Air New Zealand imposes a card payment fee to recover its operational costs in accepting payment by credit or debit card, both by fare category and across its business,” Commerce Commission Chairman Dr Mark Berry said.

“We don’t believe the statements Air New Zealand makes about the card payment fee would lead a customer to believe that the fee charged to an individual passenger recovers only the costs in relation to that particular transaction.”

The Commission also reviewed information provided by Air New Zealand about the revenue that it receives from card payment fees and the costs it incurs that are related to card payment. The analysis showed that Air New Zealand did not make a profit from the fee. The analysis by fare category showed there was a minor over-recovery from the domestic fee. However, given that the fee is set in advance in a dynamic market, this was not regarded as an issue in this instance.

“If the fee was described as being for cost recovery purposes, and was actually profit generating, we would have concerns that consumers might be misled,” said Dr Berry. “As a general rule, if a reason for a price is given, that reason needs to be accurate and not misleading. Otherwise there is a risk of breaching the Fair Trading Act.”

A range of New Zealand retailers and service providers impose a fee to process transactions paid by credit or debit cards. A retailer may attract the Commission’s scrutiny if it imposes a credit card processing fee, or similar, and describes that fee as recovering its costs in processing payments made by a credit or debit card when in fact the fee recovers other costs or generates a profit.

The Commission notes that if customers do not wish to pay a credit or debit card fee, Air New Zealand does offer them other ways in which to complete their transaction.

Background
In 2012 the Commission completed an investigation into Air New Zealand’s representations regarding its CPF. It concluded that Air New Zealand’s conduct and representations in relation to its CPF were unlikely to breach the FTA.

Since that date, credit card surcharges have continued to feature in the media and the Commission has continued to receive complaints about them. Given the on-going public interest, the Commission considered that updated and more detailed information was required from Air NZ about its CPF, and initiated a new investigation.

This investigation has now been completed.

ENDS

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