Context

Recently, The Centre has warned customers against  the deceptive practice known as “drip pricing.”

• Objective: To educate consumers about the potential risks associated with this strategy.
  • This pricing strategy can lead to unexpected charges due to “hidden charges” beyond a product’s listed Maximum Retail Price (MRP).

What is drip pricing?

• Drip pricing is a deceptive pricing strategy. 
  • Breaking of price into different components: This pricing strategy  involves breaking down the complete price of a product or service into different components, like the base price, taxes, fees, and charges for optional features or services.
    • Disclosure of price of a part: Initially, businesses may advertise only the base price or a discounted rate,
    • The full amount of an item is disclosed later during the purchase process by adding on extra fees or charges as customers move through the buying process.
• Withdrawal of essential fees: This method often involves withholding essential fees or omitting necessary add-ons.  
  • The charges associated with drip pricing may include withholding crucial fees such as local taxes or booking charges, or omitting necessary add-ons like internet access or amenities essential for product or service usage.

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Impact of Drip Pricing

• For Consumers:
  • Misleading Pricing Practices: Drip pricing can deceive consumers by hiding  the true cost of a product or service.
    • It makes it challenging for them to make well-informed purchasing decisions and leaves them feeling misled.
  • Comparison Shopping Hurdles: The lack of upfront disclosure of the full price makes it hard for consumers to compare prices across different vendors.
    • It reduces market competition and potentially results in consumers overpaying.
  • Customer Dissatisfaction: Unexpected additional fees revealed at checkout can provoke frustration and dissatisfaction among consumers, tarnishing their overall purchase experience.
• For Businesses:
  • Short-Term Gain, Long-Term Consequence: While drip pricing may initially attract customers with lower advertised prices, it can ultimately harm a company’s reputation and erode customer trust and loyalty over time.
  • Disadvantage for Transparent Sellers: Businesses that maintain transparent pricing structures may find themselves at a disadvantage compared to competitors using drip pricing tactics.
    • Despite offering fair upfront prices, they may appear less appealing initially, potentially impacting their market competitiveness.

Laws and Regulations for the Safety of Consumers in India

• National Consumer Helpline: The Department of Consumer Affairs has provided helpline number NCH 1915 for assistance” to customers to get assistance in case of facing any drip pricing practice.  
• Guidelines for Prevention and Regulation of Dark Patterns, 2023:  In 2023, The Central Consumer Protection Authority (CCPA) has released guidelines for the prevention of dark patterns.
  • These guidelines serve to safeguard consumer interests, promote  transparency and fair practices in online transactions. These guidelines prohibit 
    • False Urgency: This involves falsely creating a sense of urgency or scarcity to prompt immediate purchases, including manipulating product popularity or falsely limiting product quantities.
      • Examples include presenting misleading data on product demand or describing a sale as exclusive and time-bound.
    • Basket Sneaking: This refers to adding extra items, payments, or donations to a user’s checkout without their consent.
      • It results  in a higher total payment than intended.
    • Confirm Shaming: Utilizing fear, shame, or guilt to coerce users into purchasing products or continuing subscriptions, with the primary aim of commercial gain by influencing consumer choice.
    • Forced Action: Imposing actions on users that necessitate additional purchases or subscriptions unrelated to their original intent.
    • Bait and Switch: Advertising a specific outcome based on user actions but delivering a different outcome, deceiving users and undermining their trust.
    • Use of “Trick Question”: It refers to the intentional use of unclear or ambiguous language, such as confusing phrasing or double negatives, with the aim of misleading or diverting a user from taking the intended action