Online retailer fined for excessive payment surcharges

Internet Retailing

20th Nov 2017

Online retailer Red Balloon has paid penalties totalling $43,200 following the alleged breach of new laws related to excessive payment surcharges.

The new law stipulates that businesses can only pass on to customers what it costs them to process, or ‘accept’, a payment. For example, if the cost of acceptance for Visa credit is one per cent, a business can only add a surcharge of one per cent for customers that pay with Visa credit.

The law has applied to ‘large businesses’ like Red Balloon since 1 September 2016 and to all businesses since 1 September of this year.

However, the Australian Competition and Consumer Commission (ACCC) alleges that Red Balloon charged four consumers excessive payment surcharges on 31 March and 30 June 2017.

“Red Balloon was charging these customers more than allowed under the law prohibiting excessive payment surcharges on card transactions,” ACCC Deputy Chair Dr Michael Schaper said.

“This provides that businesses can only pass on to customers what it costs to accept the payment, including fees such as merchant service fees, and terminal rental and maintenance fees.”

The consumer watchdog noted in a statement that it can issue an infringement notice where it has reasonable grounds to believe that a person has contravened certain provisions of the Competition and Consumer Act 20110, but that payment of a penalty is not an admission of a contravention of the Act.

Red Balloon, an online trader that sells ‘experiences’ in Australia, such as skydiving jumps, wine tours, and cooking classes, has cooperated with the ACCC’s investigation and has since lowered its payment surcharges to the correct amounts.

“The excessive payment surcharges provisions now apply to all businesses, big and small, in Australia. Any business charging excessive surcharges on card transactions, whether intentional or not, risks ACCC enforcement action,” Dr Schaper said.

The watchdog noted that businesses are responsible for learning the cost of acceptance of the payment before imposing the surcharge onto customers. If a business is unsure what the cost of acceptance is for a particular payment method, it should contact its financial institution to obtain a copy of its annual statement.

In addition to its ongoing enforcement work, the ACCC has undertaken a wide range of other work to educate businesses and consumers about the new excessive payment surcharging laws. This includes publishing education materials on the ACCC website.

The ACCC has also engaged with many small businesses, sending out over 350 letters reminding them about compliance with the new laws. The ACCC continues to closely monitor surcharge complaints received each week.