Competition Bureau Resolves Two Drip Pricing Cases
February 26, 2018
The Canadian Competition Bureau (Bureau) has recently reached settlements with Leon’s Furniture Limited (Leon’s) and The Brick Ltd. (The Brick) and Enterprise Rent-A-Car Canada Company (Enterprise), addressing marketing practices related to disclosure of fees.
Companies should expect the Bureau will continue to ensure that advertised prices reflect all mandatory fees and surcharges.
- The Bureau, federal government and various provincial governments have prioritized fee disclosure in price advertising. Significant penalties may be imposed for practices that mislead customers regarding the final price of a product.
- Companies should disclose all mandatory fees in manner that is compliant with the Competition Act. Fees that the customer will be required to pay should not be hidden in fine print or disclosed later in the purchasing process.
- Fees imposed by companies to cover the cost of doing business should not be presented to consumers as government-mandated taxes or surcharges in a manner that is misleading to consumers.
FEE DISCLOSURE A PRIORITY AREA FOR THE BUREAU
The Bureau has stated that misleading advertising will be one of its top priorities in 2018. In particular, the Bureau’s 2017-2018 Annual Plan lists “high-impact enforcement cases against deceptive marketing practices” in the digital economy as a top priority. In addition to targeting companies that do not properly disclose mandatory fees, the Bureau will continue to target companies that engage in online “astroturfing”, where employees pose as customers and provide positive reviews of their company’s products and use hidden terms and conditions such as “subscription traps.”
The settlement with Leon’s and The Brick relates to actions commenced by the Bureau in 2013 regarding the use of hidden fees by these retailers. The companies offered “buy now, pay later” options, which required customers to pay upfront fees, despite the “pay later” promotion. These upfront fees appeared only in the fine print and ultimately led to the price of a product being higher than the advertised price for consumers who opted for the deferred payment option.
Enterprise, like other rental companies sued by the Bureau, advertised in a way that implied that certain fees were mandatory taxes or surcharges imposed by the government, when, in fact, they were imposed by the company as additional mandatory fees to cover the cost of doing business.
In January 2018, the Bureau filed an application alleging that Ticketmaster LLC and its parent company, Live Nation Entertainment Inc., engaged in similar conduct. The Bureau has alleged that customers paid more than the advertised price as a result of additional mandatory fees, such as service fees, facility charges or order processing fees that were not included in the advertised price. This application follows a warning issued by the Bureau in 2017 calling on all sporting and entertainment ticket vendors to display the real price of tickets upfront. For more information, please see our January 2018 Blakes Bulletin: Competition Bureau Files Application Alleging Misleading Ticket Pricing.
To date, the Bureau has collected C$16.3-million in administrative monetary penalties from companies that have engaged in these practices.
In addition to enforcement actions by the Bureau, the federal government and various provincial governments have introduced legislation aimed to ensure the advertised price reflects the ultimate price that consumers will pay. In January 2017, the Ontario government introduced consumer protection legislation aimed to enforce “all-in pricing” in the travel industry, requiring companies to display the total cost of a product, including all taxes and fees in travel advertising. The airline industry has been required to display final prices inclusive of extra charges since 2012. As well, most provinces require all-in pricing to be displayed by auto dealerships. In Quebec, consumer protection laws require that merchants cannot sell their products for prices higher than the advertised price.
If you have any questions regarding these developments, please do not hesitate to contact your usual Blakes contact or any member of the Blakes Competition & Antitrust or Marketing & Health Regulatory groups.
Blakes and Blakes Business Class communications are intended for informational purposes only and do not constitute legal advice or an opinion on any issue.
We would be pleased to provide additional details or advice about specific situations if desired.
For permission to reprint articles, please contact the Blakes Client Relations & Marketing Department at firstname.lastname@example.org. © 2019 Blake, Cassels & Graydon LLP