Wednesday, August 13, 2008

Sneaky, Unfair Price Increases

CNN published an article about how Northwest has just announced an increase to the fuel surcharge it will be imposing on its passengers. I thought that this would be a good opportunity to discuss sneaky, unfair price increases - these so-called "fees" and "surcharges".

Why are companies levying such sneaky fees and surcharges instead of simply raising the price? I mean, at first airlines charged you for checking in luggage. They charge you for snacks that used to be free. Some have started charging you for pillows and blankets. Now, all the charges that I listed above are all fair game. After all, if a passenger doesn't use a pillow, why should he pay for one in the price of his ticket? Why should a passenger with a small carry-on be charged for the luggage sorting infrastructure? I am OK with the a-la-carte approach to services. This is a perfectly legitimate business and pricing strategy.

However, a fuel surcharge is a different kind of animal. There is nothing about it that is fair or legitimate. Let's call it by name - a fuel or energy surcharge is nothing but an unfair price increase. The reason such charges are unfair is that they apply to all tickets. There is no way for you to avoid paying the fee - unlike in the case of luggage, pillow, snack or headphones, if you are on the plane, you are paying the "surcharge".

So, why is it that airlines and other businesses are adding "surcharges" instead of simply increasing the price? The reason is simple: businesses are consciously trying to mislead consumers. Businesses expect consumers to make their purchasing decisions on the basis of the advertised price, and not take into account additional fees that are often disclosed after the decision has already been made. It is their intention to mislead, to bait and switch, and this is why such practices are unfair.

Such practices should be banned. The dividing line should be this: if a consumer has a realistic way of avoiding the fee during the normal course of purchasing, the fee is legitimate. On the other hand, if a fee applies to virtually all customers who make a purchase, it should be illegal. That's not to say that the company will not be able to recover its increasing costs. It should simply be required to raise its prices, fair and square, and not be permitted to hide this increase from consumers.

This is not unlike the sneaky increase in the price of Yogurt which I wrote about a couple of weeks ago. If you let them, businesses will do everything in their power, fair or not, to get your penny.


TFB said...

Before you blame Northwest you should see if the fuel surcharge is included in the price when you search for flights on Northwest's website or on travel sites like Expedia or Travelocity, or if it's a separate line item only displayed when you are about to make a purchase. In this case I think it's included in the price up front. Then it doesn't matter what they call it.

Shadox said...

If the fee or surcharge is included in the upfront price - including in such search engines as Travelocity and Expedia - then I have no complaint. And I am not singling out Northwest, this is something that I have had done to me by numerous companies over the years - a fee added at the time of purchase - and in the case of hotels, sometimes even only upon check out...