ACCC slams loyalty schemes

Status
Not open for further replies.

ajd

Active Member
Joined
Jan 17, 2014
Posts
550
Qantas
Silver
Virgin
Red
WIll be interesting to see where the ACCC focuses its attention, there seems to be a lot of discussion about privacy and data mining/sharing/selling that I'm not sure if its the focus of the ACCC, or maybe just how the media is interpreting and magnifying these concerns. I.e. stories about privacy and data matching seem get a lot more interest and make better headlines than a dry investigation into boring T&Cs. I think this might be a bit of a red herring as most consumers would know and expect how interested companies are in how consumers spend their money, that wouldn't be a surprise to anyone anymore.

For me, as an educated consumer who has a decent idea how to maximise point value, can keep their points from expiring, etc etc, the privacy and data mining aspect is hugely important.

I don't think it is at all obvious that most consumers know and expect companies to use their consumer data in the way that they do. Of course, the average person can tell you, vaguely, that companies "mine my data" or whatever, they can tell that certain marketing gets targeted. But they don't know much more than that.

Unlike most other aspects of loyalty programs where you can learn where you stand if you care to read the T&Cs carefully enough, the use of customer data is incredibly opaque - it's unclear what they collect and who has it. When GDPR forced many companies in the EU to release more information about their data collection practices it became clear that some major brands have literally dozens of marketing/advertising contractors, each of whom would have their own practices as to how they handle your data.

This is the area where I'd like the ACCC to take action more than anything else - but it's also not really the ACCC's remit to look at privacy; privacy merely comes up incidentally.

Re: the ACCC catering to the masses - good, at least up to a certain level. Consumer protection exists for the everyday person whose life does not revolve around researching a particular product or service in incredible detail, and I expect regulators to care about those people more than the tiny minority that makes it their hobby to understand a certain product.
 

eastwest101

Established Member
Joined
Oct 26, 2010
Posts
3,300
Qantas
Gold
Virgin
Gold
Here is a link to the actual report itself. Its an interesting read:


These are what they identified as the key issues:

The ACCC’s review of the major customer loyalty schemes in Australia focused on the
following key issues:

Consumer issues: whether consumers are properly informed and receive the benefits advertised by loyalty schemes.

Data practices: the collection, use and disclosure of consumer data by loyalty schemes and their partners.

Competition issues: the potential impact of loyalty schemes on competing firms, in particular on new entrants.


Its an interesting read - all 107 pages of it! :) There are numerous examples and discussions that could have been ripped right out of any AFF thread and from some of our knowlegable posters here. Want a good description of the psychological effects and the difference between the "Endowed Progress Effect" and the "Goal Gradient Effect" ? Its all in there!

As far as competition issues go, here is an interesting overseas regulatory example extracted from the ACCC report:

Norway

SAS operated the EuroBonus frequent flyer loyalty scheme in Norway. The market structure in Norway had comprised of two incumbents — SAS and Braathens —as well as a new entrant, Color Air, which offered a low - cost offering. In 1999, Color Air filed for bankruptcy. The failed entry by Color Air was in part attributed to its inability to attract business travellers due to its lack of an attractive frequent flyer program that could compete with SAS’s EuroBonus program. By 2001, an almost bankrupt Braathens was allowed to merge with SAS under the failing firm defence. SAS returned to a monopoly position with an approximate 98 per cent market share in the Norwegian domestic civil aviation market.

In 2002, the Norwegian Competition Authority introduced a ban on earning frequent flyer points on any domestic routes in Norway for a period of five years. The main arguments for the negative effects of the EuroBonus frequent flyer loyalty scheme on competition were based on loyalty effects locking in customers and the barriers to entry for new competitors. The Norwegian Competition Authority viewed the intervention as an essential step towards re-opening the Norwegian civil aviation market for competition.

In 2003, shortly after the introduction of the ban on earning frequent flyer points, Norwegian Air Shuttle (NAS) entered on four domestic routes in Norway. According to NAS, the ban on EuroBonus was decisive for its entry into the Norwegian market. In 2011, the Norwegian Competition Authority undertook an assessment to investigate whether there was a basis for a continued ban on earning frequent flyer points. It found that the loyalty- building effect of the frequent flyer program was still significant and continued to provide an incentive to collect all purchases from one airline. The Norwegian Competition Authority was concerned that competition could be weakened following a re-introduction of loyalty schemes in the Norwegian domestic airline sector as this would lead to business travellers choosing the airline with the most attractive loyalty scheme. NAS gradually expanded into a nationwide network and its market share on domestic routes grew from 12 per cent in 2003 to 36 per cent in 2011. NAS is now one of Europe’s leading low-cost airlines.

In 2013, the government removed the ban on frequent flyer programs on domestic air routes after reaching the view that competition in the domestic market was more robust than when the prohibition was introduced.











 

lovetravellingoz

Enthusiast
Joined
Jul 13, 2006
Posts
12,619
What will you submit?

--

Being the over-analysing geek that I am - the general vibe I pick up from reading the full 107 pages is that the ACCC has already made up their mind on many of their proposed recommendations. The recommendations will have an adverse effect on airline loyalty programs, and that will flow on to consumers.

I posted a few of my initial take-aways on Linkedin: "The Australian Government ACCC Draft Report on Customer Loyalty Schemes released today."
Thanks.

Though
- A segment of the population don't take the time to learn the ins-and-outs of the program they sign-up to, and complain later when their expectations don't match what the program has offered.

I reckon that segment is actually the vast majority of the FF membership population. In particular I would believe that most who join FF Programs, and the QFF program in particular, in Australia probably slowly accumulate points with the vague idea of one day taking a flight, or family holiday, only to find out that in QFF that flights are hard to get and if you do that the fees (the punters will not realise it is the fuel charge) are substantial, and so that "free" flight was just a mirage.


With the flights being promoted as a reward, I think it is pretty fair. QFF in Australia has had it in particular way too easy and is a moral disgrace.

With Amex it is up to them whether or not to chop future point transfer in half, BUT the existing point value should have been protected.


Having said all that, I have done extremely well out of being on the right part of the bell-curve of knowledge in understanding of how to use and milk FF, and other, Award Programs and so I would expect that if the ACCC did actually lead to an overhaul where the average punter is always protected, that I would find it more difficult to extract really good value on the magnitude that I have in the past.
 
Last edited:
Get paid up to 25% in real cash from your everyday purchases from leading companies such as Virgin Australia, Booking.com, Coles, Apple, Microsoft and much more. Free to join and no catches!

AFF Supporters can remove this and all advertisements

Mattg

Enthusiast
Joined
Aug 21, 2011
Posts
11,795
Qantas
Gold
Virgin
Gold
Its an interesting read - all 107 pages of it! :) There are numerous examples and discussions that could have been ripped right out of any AFF thread and from some of our knowlegable posters here. Want a good description of the psychological effects and the difference between the "Endowed Progress Effect" and the "Goal Gradient Effect" ? Its all in there!

Interestingly, the Loyalty & Reward Co report actually does quote AFF when explaining the "goal gradient effect".

It's on page 21: https://www.accc.gov.au/system/files/Australian Loyalty Schemes - A Loyalty and Reward Co report for the ACCC.PDF
 

Zanzara

Member
Joined
Apr 30, 2005
Posts
183
About time this was looked at. But we shall see what eventuates - especially as they are often cash cows & the ACCC are a bit of a toothless or gutless tiger sometimes.

The marketing hype put out (particularly by QF) and the odds of securing a ‘classic’ reward seat (in a premium cabin) coupled with the exorbitant charges that lack any transparency and credibility are my main complaints.

I’ve done very well over the years, but only because I’ve invested the time to really understand how the schemes can operate to my advantage. This forum too has been invaluable and I’m incredibly grateful for it!

When I get the chance, I’m going to submit feedback & comments to the ACCC.
 

Kremmen

Member
Joined
Mar 25, 2007
Posts
133
I agree with the AFF response article, except for one detail about carrier surcharges: "We accept that these charges exist, however, more transparency about the existence and amount of these carrier charges is required."

These charges started off as fuel surcharges after massive fuel price rises. That they have remained is little short of fraudulent misrepresentation by the airlines and the fact that it has become common doesn't make it any more right. It performs the same action as component pricing, which is to obscure the true cost of a purchase. As such, it would be consistent for the ACCC to restrict it in a similar way to component pricing involving only money. (i.e. outlaw it)
 

agentgerko

Member
Joined
Jun 12, 2013
Posts
105
The two points I consider most important are as follows:

Existing points should never be devalued. They were accrued in good faith and any time an airline increases the number of points required for a flight reward, then existing points should be increased at a similar rate so that they maintain their spending ability. Imagine the outcry if you bought a Myers $100 Gift Card and a year later when you went to spend it were told the value had been reduced to $75?

The second point that AFF might not like is that as a TA I can definitely state that FF programs are anti-competitive. How else would you explain the often significant different in fares on QF codeshare routes between booking with a QF flight number and booking with the other carriers flight number? Take for instance SYD-TPE-SYD. The cheapest return Business fare on China Airlines, a non-Oneworld/Star Alliance carrier, is $3213.00 + taxes, which has no advance purchase restrictions, yet the cheapest unrestricted fare with a QF flight number is $3870.00 + taxes. Despite being $600+ or over 20% dearer, I constantly see business travellers making their company pay the higher fare simply so they can earn points. Worse still, from the experiences I have had with govt travel, I believe the govt travel bill, which is paid for by we taxpayers, could be reduced by millions of dollars if their travellersa were made to use all airlines and not just those belonging to Oneworld/Star Alliance.
 

Le Clair

Junior Member
Joined
Apr 2, 2014
Posts
47
Qantas
LT Gold
Virgin
Red
Given the amount of work that all at AFF will clearly be putting into their submission, if I got no more value from my gold membership this year than that submission, I will believe that I have received EXCELLENT value for my money. Thanks AFF.
I'll be putting my own in, of course.
 

samh004

Enthusiast
Joined
Apr 1, 2009
Posts
19,435
Qantas
Platinum
Virgin
Red
Existing points should never be devalued. They were accrued in good faith and any time an airline increases the number of points required for a flight reward, then existing points should be increased at a similar rate so that they maintain their spending ability. Imagine the outcry if you bought a Myers $100 Gift Card and a year later when you went to spend it were told the value had been reduced to $75?
What if you buy a Myer $100 gift card because a shirt from xyz company is $50 (at the time) – so you can buy two when a nice design comes out; but by the time that happens, the shirts are $55 because the cost to manufacture or the importance of the artist has increased in value? It's the same for any industry really, over time the value of money becomes less – inflation. I'm not sure it would be sound monetary policy to say that's not allowed to happen.
 

tdimdad

Member
Joined
May 25, 2013
Posts
318
How about before consumer hits "pay" button they see details of frequent flyer points AND status credits earned for the flight/s.
But at least QF routinely shows incorrect numbers there. Say, I wanted to book a QF to London and connect to another European destination (and return). QF Y Saver fare yields 95 SC + the connection 15 SC. Still, more often than not, QF booking summary page shows 190 SC instead of 220 SC as the tally, and the same probably goes for the points earned (haven't confirmed that but presuming the same calculation applies).
And what if I wanted to credit the trip to another program? To confirm the earn to that, I would need to know the booking class before paying.
 

Melburnian1

Enthusiast
Joined
Jun 7, 2013
Posts
21,714
Mattg deserves enormous credit for his research and for stating AFF will submit its thoughts.

My only standout disagreement with Mattg would be 'why is AFF not concerned by FF points having an expiry date?'

When we give our (or our company's/govt agency's) money to an airline for a flight, that transfer of funds doesn't suddenly "expire" - i.e. it never reverts back to you or I, because a service has been provided.

So if FF points are part of the lure to get us to book with airline X and not with a competitor (or in Australia, drive or go by train/ferry/bus where practical), why should they ever expire (assuming the airline remains in business)?

It's the 'gift card' argument. I believe one well known retailer of books has as part of its business model that around 30 per cent of gift cards will never be redeemed because they expire 12 months from date of issue.

I hope AFF (looking at you, Mattg) changes its collective mind on this issue.
 

Melburnian1

Enthusiast
Joined
Jun 7, 2013
Posts
21,714
... I constantly see business travellers making their company pay the higher fare simply so they can earn points. Worse still, from the experiences I have had with govt travel, I believe the govt travel bill, which is paid for by we taxpayers, could be reduced by millions of dollars if their travellers were made to use all airlines and not just those belonging to Oneworld/Star Alliance.

Don't want to go OT for too long, but the last point is 100 per cent correct. Government travel contracts are a joke and bypassed so often. Many public servants are inventive! Completely illogical that some international airlines are excluded from such travel arrangements.
 

LindaMary

Newbie
Joined
Feb 13, 2019
Posts
1
The ACCC today released a draft report expressing "significant concerns" about loyalty programs in Australia. Concerns include the expiry of points, loyalty programs making unilateral changes such as reducing the rate at which points are earned or redeemed, carrier charges on frequent flyer award bookings and privacy issues.

The ACCC has invited comments on the draft report until 3 October.

On several flights on Qatar I have been diisappointed to find out post - flights that the flight was not eligible for QFF points.
Transparency at the booking site - and a quote for a different fare that will earn points, would be an honest and customer friendly approach.

It’s sad that I am second guessing and wondering what the catch is for most bookings, including on Qantas on anything bigger than a direct flight e.g. Melbourne to Bali.

It’s like going into battle every time.

As for Velocity - one day I’m Silver - next day I’m Red - and I only found out at check-in.

User-friendly transparency please
And for goodness sake what is the agenda behind the fine print - make it normal size so we can read it, and make informed decisions.
 

Melburnian1

Enthusiast
Joined
Jun 7, 2013
Posts
21,714
...User-friendly transparency please
And for goodness sake what is the agenda behind the fine print - make it normal size so we can read it, and make informed decisions.

Welcome to AFF. Terrific initial post. Clearly you're a traveller who is (and who wants to be) informed, and is prepared to invest a reasonable amount of time to achieve this.

I don't feel sorry for the bogans who are too lazy to read even a little of the Ts and Cs (hard as they might be to fully comprehend) but for individuals like you, one has to have empathy.
 

samh004

Enthusiast
Joined
Apr 1, 2009
Posts
19,435
Qantas
Platinum
Virgin
Red
On several flights on Qatar I have been diisappointed to find out post - flights that the flight was not eligible for QFF points.
Transparency at the booking site - and a quote for a different fare that will earn points, would be an honest and customer friendly approach.
It sounds like your issue is misplaced, it is with Qatar, not Qantas. Sure, Qantas sets the different earning rates for Qatar fares, but you booked a ticket with a partner, so you should have (if at all possible – and I realise sometimes it is hard) found out what fare class the ticket booked into before purchasing, and then headed to the Qantas Frequent Flyer website to make sure it was capable of earning.
As for Velocity - one day I’m Silver - next day I’m Red - and I only found out at check-in.
Had you logged into your account recently? Membership cards usually say when the benefits expire on them, even a credit card will have an expiry date. I expect you wouldn't go to a supermarket to buy groceries with an expired credit card... so why should checking your frequent flyer status expiry be any different?
User-friendly transparency please
And for goodness sake what is the agenda behind the fine print - make it normal size so we can read it, and make informed decisions.
As far as Qantas goes, before I book anything I head here. On this page I can type in my flights and the airline I am on. I can then look at the partner airline Fare Types to work out if my fare qualifies for earning, and at what rate.

For example, Qatar:
Qatar (QR)Discount
Economy
EconomyFlexible
Economy
Premium
Economy
BusinessFirst
KLMVBH Y- CDIJRAFP

Qantas:
Qantas (QF) InternationalEconomy SaleEconomy SaverEconomy FlexPremium Economy SalePremium Economy SaverPremium Economy FlexBusiness SaleBusiness SaverBusiness FlexFirst Sale / Saver / Flex
ENOQGKLMSVBHYT~RWIDCJAF
Qantas (QF) DomesticRed e-Deal -FlexDiscount Premium EconomyPremium Economy SaverPremium Economy Flex -Business Sale /
Business Saver
Business -
EGLNOQSV-BHKMYT~R W-DI CJ

You can see that Qatar has 15 earning fares with Qantas Frequent Flyer, but only 7 are in Economy classes. Meanwhile, Qantas has 22 earning fares with Qantas Frequent Flyer, with 13 of those fares in economy. From this you can see that the cheaper Qatar fares will not earn anything with QFF.

This morning I had a call from the ATO because I'd completely filled out my tax the wrong way and had to amend the whole thing. I'm by no means the smartest crayon in the box, but I do my research before booking flights so I don't get caught out. I fear this whole ACCC thing is going to end badly with a system that works being tinkered with so heavily that we all end up worse off, all so people don't have to do the required reading. I screwed up my tax, but I was happy to pay more because it was my mistake. Luckily, someone gave me a call and helped me out. This is what AFF is for really, pickup the keyboard and someone will talk you through it.
 
Last edited:

Le Clair

Junior Member
Joined
Apr 2, 2014
Posts
47
Qantas
LT Gold
Virgin
Red
I fear this whole ACCC thing is going to end badly with a system that works being tinkered with so heavily that we all end up worse off, all so people don't have to do the required reading.
Yes, remember when you used to be able to get up to 30c per litre fuel discounts if you did this and that and spent this and that at Coles and Woolies. Then the ACCC got involved and limited the maximum discount to 8c per litre because "the scheme was too difficult for some people to understand".
 

trippin_the_rift

Established Member
Joined
Apr 2, 2006
Posts
3,898
On several flights on Qatar I have been diisappointed to find out post - flights that the flight was not eligible for QFF points.
Transparency at the booking site - and a quote for a different fare that will earn points, would be an honest and customer friendly approach.

<snip>
I like the idea of being more transparent during the booking flow, so that you can see how many points/sc a flight will earn. But there are very few (if any?) non-airline loyalty programs which offer that degree of transparency. If forced on one loyalty program - it needs to be applied across the board, and, this would add significant overhead to programs when there is already a way for consumers to figure out the earn rates with an extra click or two.

Another consideration is that non-QF loyalty members also book via qantas website. Should Qantas show how many points/miles in the other program that member will earn? Technical challenges would be real.

However, given that Qantas dot com has (best guess), 30-40% penetration of total QF bookings - any online transparency in Loyalty earn still would not cover the majority of the population. In fact, those booking directly via qantas.com are probably more savvy, and more likely to understand the fare families and points earn tables.
 
Status
Not open for further replies.

Enhance your AFF viewing experience!

From just $6 we'll remove all advertisements so that you can enjoy a cleaner and uninterupted viewing experience.

And you'll be supporting us so that we can continue to provide this valuable resource :)


Sample AFF with no advertisements? More..
Top