The Commerce Commission has concluded its investigation into complaints received from consumers when KLM Royal Dutch Airlines declined to honour very cheap airfares booked via KLM's website. In the Commission's view, KLM is at risk of having breached the Fair Trading Act.

On Friday 26 September 2008 consumers were able to purchase, via KLM's New Zealand website, airfares to various European destinations for as little as $50 plus taxes. The previous day KLM had advised the travel industry that it was increasing its airfares by $50 (economy class) and $100 (business class). However a data inputting error in Amsterdam resulted in the intended price increases becoming the total fare prices on the KLM website and travel fare databases.

When the error was discovered, KLM notified the travel industry of the mistake, took steps to remove the offer from its website and the travel fare databases, and subsequently cancelled bookings and began issuing refunds. However during the several hours it took for the problem to be rectified, KLM sold 649 tickets through its website at the incorrect prices.

"The Commission is concerned that KLM did not have better systems in place to deal with a situation such as this. The fact it took KLM more than four hours to take the offending price off its website is not acceptable," said Commerce Commission Director of Fair Trading, Adrian Sparrow. "However, the Commission accepts that the price listing was caused by a genuine mistake on KLM's behalf."

"The travel industry was notified of the mistake and there is evidence to suggest that many of those who purchased tickets had a connection with the travel industry and made the booking after notification of the mistake. Likewise, the Commission also notes that those consumers who purchased airfares via the KLM site are likely to have seen the correct fare of $2399 before they purchased their tickets and because the price they actually paid was extremely low some consumers may not have been misled, but instead knew or suspected they were taking advantage of an error," said Mr Sparrow.

As a result, the Commission has sent KLM a warning letter and advised KLM that it needs to ensure that it puts measures in place to avoid similar errors in future. The Commission notes that KLM has subsequently implemented measures to ensure the correct air fares are shown.

"Although the Commission will not be taking any further action against KLM, consumers can take private action under the Fair Trading Act or by going through the Disputes Tribunal should they wish to do so," said Mr Sparrow.

Background

The Commerce Commission has a role in enforcing specific legislation, including the Fair Trading Act, that promotes competition in New Zealand markets and prohibits misleading and deceptive conduct by traders.

Only the courts can decide if a representation has breached the Fair Trading Act.