Canadian COMPETITION LAW

April 17, 2023

On April 17, 2023 the Competition Bureau (Bureau) published a new edition of its Deceptive Marketing Practices Digest (Volume 6) (Marketing Digest).

The Bureau’s new Marketing Digest discusses three Canadian advertising/marketing law related topics: the use of scarcity cues (i.e., claims that an offering has limited availability), drip pricing and its recent presidency of the International Consumer Protection and Enforcement Network (ICPEN).

Overview of Drip Pricing Law in Canada

With respect to drip pricing, which is the practice of making upfront pricing claims that are unattainable because of additional mandatory charges, only to “drip” additional fees to the price during the online sales process, this conduct was recently added to the Competition Act as part of amendments that were passed in June 2022.

In this regard, these recent Competition Act amendments added new drip pricing provisions to both the criminal and civil provisions on false and misleading advertising under sections 52 and 74.01.

Drip pricing has been one of the Bureau’s deceptive marketing enforcement priorities, in addition to other misleading advertising related priorities including false or misleading performance claims, ordinary selling price (OSP) claims and sale claims and misleading endorsements and testimonials.

Before the amendments were enacted, the Bureau had cited challenges associated with the enforcement of drip pricing given the lack of specific prohibitions under the Competition Act and evidential burdens under the general misleading representations provisions (sections 52 and 74.01).

Prior to the amendments, drip pricing was (and still remains) reviewable under the general criminal and civil misleading advertising provisions of the Competition Act if a pricing claim is either literally false or misleading (e.g., a price claim omits a portion of the total price upfront, creating the general impression of a lower total price).

Also, in recent submissions relating to a potential further round of Competition Act amendments, the Bureau has also advocated for broadening the new drip pricing provisions to also prohibit instances where suppliers drip their own costs for complying with various laws when making pricing claims (see: Competition Bureau Publishes Sweeping Recommendations for Canadian Competition Law Reform).

For more information, see: Sweeping Canadian Competition Act Amendments Passed. See also: Drip Pricing and Misleading Advertising.

The Bureau’s New Drip Pricing Guidance

In general, the Bureau’s new drip pricing guidance describes the practice, its past enforcement efforts, past cases in the car rental and online ticket sales markets and the recent amendments to the Competition Act.

For more information about the Bureau’s past drip pricing enforcement, see: The Price, the Whole Price and Nothing But the Price: StubHub Pays $1.3 Million Penalty Following Bureau Drip Pricing Probe, Ticketmaster Entities Agree to $4 Million Penalty to Settle Drip Pricing Advertising Case and $1.25 Million Settlement in Car Rental Drip Pricing Case.

In issuing its new guidance, the Bureau said:

“It can be frustrating to decide to buy something because it’s a good price, only to find at the virtual checkout that additional fees were tacked on, and you have to pay more than what was advertised. This practice — offering something for sale at a price that is unattainable because of additional mandatory charges — is called drip pricing. Additional fees are ‘dripped’ onto the originally advertised price during the online purchase process. Consumers use the advertised price when comparing similar offerings and making purchase decisions, and if that price is false, it can lead to misinformed decisions by consumers and unfair outcomes for honest competitors.

Recent amendments to the Competition Act include new provisions that underline Parliament’s determination to target misleading drip pricing practices. These amendments have now passed into law, making it a good time to revisit the subject of drip pricing.”

More specifically, the Bureau states in its new drip pricing guidance, among other things, that:

1. It no longer needs to prove the deceptive nature of drip pricing, which had been the case when it commenced enforcement under the criminal and civil general misleading representations provisions of the Competition Act (sections 52 and 74.01).

2. The new express drip pricing provisions make enforcement easier for the Bureau.

3. Pricing related practices not expressly caught by the new drip pricing provisions can still be caught by the general misleading representations provisions (e.g., the failure to disclose non-mandatory additional charges or fees). In this regard, the new drip pricing provisions are like the existing ordinary selling price (OSP), performance claim and testimonials provisions of the Competition Act, in that all of these practices may be challenged either under the specific relevant standalone provisions or under the general misleading representation provisions of the Act. This may be the case for drip pricing if, for example, the general impression of an upfront or headline price claim is misleading (e.g., part of the price or additional fees are not disclosed upfront).

4. Businesses should strive to ensure that the full cost of products/services is stated upfront.

5. Businesses should be careful not to convey a false or misleading impression about the nature of any fees or charges (e.g., by implying that a fee is a government-imposed tax on consumers when, in fact, the fee is merely part of the cost of doing business).

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