Hidden costs are still here

The following article was recently published by the Toronto Star and written by Michael J. Armstrong. I have decided to post it word for word in my blog because Mr. Armstrong has hit the nail squarely on the head. This is what he wrote;

“Governments generally should let businesses make their own decisions, but when companies like Air Canada and Bell can’t be open with consumers about something as basic as product prices, it’s time to intervene.

Imagine this example: you’re in a grocery store. You see a can of stew priced at $3 and put it in your cart. But when you go to check out, the cashier charges you $6.

Why? You’re told there’s an added $1 “potato surcharge” because ingredients are expensive today. Plus a $1 “meat safety fee” because the beef was government inspected. And the original price assumed you’d also buy milk today — but since you didn’t, another $1 is added on.You’d be upset if that actually happened to you.

Quebec’s Office of Consumer Protection is certainly upset, but not with an imaginary grocer. They have officially accused Air Canada of charging more than its advertised prices for tickets. The airline has until April 15 to respond.

For example, Air Canada’s website listed a Toronto-to-Ottawa flight for just $69.But after clicking to the payment screen, the price jumped by $58.83 in added “taxes, fees, charges and surcharges”.

It’s not easy to find out what that includes, but it seems that just $14.71 was for sales tax. The rest included a $3 insurance surcharge, a $7.12 air traveler security charge, a $9 NAV Canada fee, and a $25 airport improvement fee.

So the real cost, before sales tax, was $113.12. That’s 64 per cent higher than the $69 originally displayed.

Quebec officials think the advertised price should include all the extras. They want consumers to receive clear and complete information. And they’re absolutely right.

But the problem is not just with Air Canada, because other companies also engage in this practice.

Look at Bell’s website. Can you figure out the monthly cost of residential phone service in Ontario?

You’ll see an advertised price of $14.95 “for the first 6 months in the Bell Bundle”. A few mouse clicks reveal that this price includes a $5 discount for 6 months. But it also assumes a $5 “bundling discount” that you get only if you buy another service, like internet. And it fails to mention two other fees: $2.80 for Touch Tone and $0.17 for 911.

Bell openly displays those last two “extras” for Quebec customers, presumably to satisfy that province’s laws, but in Ontario they are buried in fine print on another web page.

So if you simply want phone service, the advertised $14.95 package will actually cost at least $22.95. And this was just a simple landline. Good luck trying to calculate the full cost of cell phones with long distance and data downloads. Now, those add-ons may represent legitimate costs of doing business. But if, like other business costs, those “extras” are mandatory, why not build them into the price?

In fairness, businesses do face a dilemma here. To provide good quality service, they should make their pricing easy for customers to understand — laying out road maps, not minefields. But if even one firm omits “extra” fees from their advertised prices, then all its competitors are tempted to do the same or their products will seem too expensive.

This is a case where a little regulation could go a long way. If posted prices were legally required to be “all-inclusive” — as in Quebec — then all companies would be on a level playing field and it would be easier for consumers to understand their prices.

Now is a perfect time to address this issue for federally regulated firms. With a national election campaign in full swing, any party that adds this small regulatory plank to their platform will look mighty principled in the eyes of millions of Canadian consumers.

And provincially, it’s a chance for Mr. McGuinty (Ontario’s premier) to prepare for Ontario’s fall election: Introduce legislation to require all businesses to clearly state the full price. The province already requires all-inclusive pricing at travel agents (but not airlines) and car dealers (but not auto manufacturers); simply extend this to everyone else.

This would give consumers clearer information and businesses cleaner consciences. That sounds like a win-win proposition.” unquote

Many years ago, I wrote the Toronto Star a scathing letter about their Travel Section permitting their advertisers to publish misleading particulars about the prices of their services. For example, they would say that a week in a resort would only cost $200.00. They didn’t at that time have anything in the page stating what the real costs were because the extras were considerably higher than the actual cost of the trip advertised in the paper. For example, the actual week at the resort could be as high as $700 and not simply $200.

Years later, the Toronto Star eventually stopped that practice and for sometime now, they have included the extra costs with the ads.

The trouble is that the extra costs are in much smaller type than the eye-catching initial cost of the trip shown on the page.

Here are some examples published in the Travel Section of the Toronto Star on April 7, 2011.

Air fares

London $99 and with taxes and fees that are $482, the total is $581
Paris $264 and with taxes and fees that are $434, the total is $698
Stockholm $499 and with taxes and fees that are $500, the total is $999

The print with respect to the taxes and fees are so small; you actually need a magnifying glass to read the figures.

All-inclusive vacations

Puerto Vallarta 7 nights 4-star: $388 and with taxes and fees that are $343, the total is $731.

Varadero 7 nights 4 star: $415 and with taxes and fees that are $280, the total is $695.

Barbados 7 nights 4 star: $1,520 and with taxes and fees that are only $10, the total is $1,530. I am however convinced that the real taxes and fees are hidden in the initial costs of $1,520.

Family specials

Orlando Air + 7 nights: $159 and with taxes and fees that are $280,the total is $439.

Are you ready for this? In the same Travel Section, the price listed for one night in a hotel in Niagara Falls and a water park pass was listed as $59 and that includes the taxes and fees.

This the way it should be done. This is the way we buy gasoline at the pump. Of course, this would require a big step in the direction of advertising. And when that day finally comes, the shopping public can paraphrase Neil Armstrong when he first stepped onto the surface of the moon. “This is one small step for advertisers, one giant leap for all of mankind.”