April 25, 2017
Yesterday the Competition Bureau announced that it had negotiated a $1.25 million settlement with two major Canadian car rental companies (Hertz Canada Limited and Dollar Thrifty) in relation to alleged “drip pricing” advertising practices.
In particular, the Bureau had taken the position that the two car rental companies had engaged in civil misleading advertising by advertising upfront prices that were not in fact attainable based on mandatory additional fees of between 10% and 57% that were not disclosed upfront. The Bureau had also been challenging the advertising of additional fees described as mandatory taxes or government surcharges when, according the Bureau, the fees were merely additional internal company costs.
Failing to disclose full prices upfront is sometimes referred to as “drip pricing” (i.e., the full price of a product or service is slowly disclosed like a dripping faucet).
As part of this settlement, in addition to the negotiated civil administrative monetary penalty, the car rental companies agreed to also stop advertising fees that are not available and implement compliance programs (see consent agreement).
Last year, Avis and Budget also agreed to pay $3 million to settle similar misleading price-related allegations made by the Bureau (see News Release: Avis and Budget to pay a $3 million penalty to resolve concerns over unattainable prices).
This case is noteworthy for several reasons. In general, it shows that enforcing the civil and criminal misleading advertising provisions of the Competition Act remains a Bureau priority. More specifically, the case illustrates that the Bureau continues to focus on digital media advertising practices (it specifically pointed to this aspect of the case in its release) and that clear upfront pricing remains important for the Bureau. Other current Bureau advertising priorities include fake endorsements, accurate and clear disclaimers, performance claims and ordinary pricing claims (e.g., in relation to sales).
The consent agreement itself also highlights that the general impression of advertisements remains important. In this respect, the Bureau took issue with the placement of some terms in combination with actual taxes, which it argued created the general impression of additional taxes when that was not the case. This is a reminder that when reviewing creative, advertisers should not only ensure that all claims are literally true but also that the overall general impression is not false or misleading.
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