European Commission Challenges Differential Pricing by Car Rental Companies
04 September 2014
The European Commission has challenged the practice by car rental companies of using consumers’ countries of origin and IP addresses to determine the price that they are charged, alleging that this constitutes a form of discrimination.
In general terms, each computer or device on the internet is assigned an Internet Protocol or “IP” address. Due to the way in which IP addresses are assigned, one can usually work out the location of a customer from his or her IP address.
In a public letter to Europcar, Hertz and Avis, dated 23 July 2014, the Commission called on the companies to cease the practice of automatic rerouting of customers following identification of the customers’ IP addresses. In addition to discriminatory rerouting, the tracking of IP addresses by car rental companies has been used to prevent consumers from completing certain bookings online. In circumstances where no automatic IP rerouting has taken place, some customers were given different prices for car rental services when they entered their country of residence on the website of the car rental company concerned.
In one recent incident, the Commission stated that a German consumer, having been asked to enter his country of residence, was quoted a price 100% greater than the original estimate provided for car rental in the United Kingdom.
The use of IT systems to facilitate such pricing differences is a significant concern for the Commission and the Commission believes that it is difficult for car rental companies to justify charging different prices to consumers based in different Member States. This is especially the case where these differences are applied to the same service taking place in the same location and by the same provider.
In its letter to the relevant car rental agencies, the Commission alleged that their current practices contravene the EU Services Directive and constitute unjustified discrimination against citizens of certain Member States. Article 20(2) of the Services Directive requires Member States to ensure that service providers do not discriminate against consumers on the basis of their nationality or place of residence. The letter goes onto state that the use of automatic rerouting following IP identification and the apparent policy of applying different prices based on a customer’s residence prevents consumers from getting the best price possible for their car rentals.
The action represents an attempt by the Commission to use the Services Directive to challenge the practice of charging consumers in different Member States different prices. It is somewhat unusual as the enforcement of rules adopted on foot of a directive usually falls to the EU Member States rather than the Commission. It will be interesting to see the outcome of this approach taken by the Commission.
The content of this article is provided for information purposes only and does not constitute legal or other advice. Mason Hayes & Curran (www.mhc.ie) is a leading business law firm with offices in Dublin, London and New York.