The consumer watchdog wants Jetstar to pay a $1.95 million penalty for misleading some customers over their right to a refund.

The Australian Competition and Consumer Commission has launched Federal Court proceedings against the Qantas-owned budget carrier, which has admitted that its website said some fares were not refundable, and that consumers could only get a refund with a more expensive fare.

The Federal Court will now decide whether to approve a joint submission by the ACCC and Jetstar that the carrier should pay the $1.95 million penalty and contribute to the watchdog’s costs.

Jetstar also admitted it suggested consumer guarantees under the Australian Consumer Law did not apply to its flight services.

‘No matter how cheap the fares are, airlines cannot make blanket statements to consumers that flights are non-refundable,’ ACCC chair Rod Sims said on Monday.

Services such as flights are in fact automatically guaranteed and, if a flight is cancelled or significantly delayed for a reason within the airline’s control, passengers may be entitled to a refund.

‘It’s frustrating for travellers when they have difficulty getting a refund for flights when they are entitled to one,’ Mr Sims said.

‘This case is important not only for holding Jetstar to account, but sending a wider message that businesses cannot exclude or limit consumers’ rights under the Australian Consumer Law.

Jetstar, Tigerair, Qantas and Virgin Australia have all agreed to review their refund policies, compliance programs, websites and booking systems as part of court-enforceable undertakings in response to ACCC concerns each had made false or misleading representations about consumer rights.

The airlines have already made improvements, the ACCC said, adding that Jetstar, Qantas and Virgin Australia will also review some complaints and offer refunds or other remedies to those who missed out.

‘Passengers will now be offered refunds or other remedies by these airlines when there has been a failure to supply the service within a reasonable time,’ Mr Sims said.