“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.”
Competition Bureau
Deceptive Marketing Practices Digest (Volume 6) (2023)
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OVERVIEW OF DRIP PRICING
UNDER THE COMPETITION ACT
On June 23, 2022, Bill C-19 (the Budget Implementation Act, 2022, No.1) received royal assent, which introduced significant amendments to Canada’s federal Competition Act.
These amendments include significant increases to the civil and criminal penalties under the Competition Act, new wage fixing and no poach conspiracy offences and expanding the civil abuse of dominance provisions to include more types of anti-competitive acts and increasing the potential penalties for abuse of dominance. For more information about the 2022 amendments to the Competition Act, see: Sweeping Canadian Competition Act Amendments Passed.
DRIP PRICING PROHIBITIONS
The June 2022 amendments to the Competition Act also included new civil and criminal prohibitions on drip pricing (i.e., failing to disclose the full price of a product or service upfront with additional fees only disclosed, for example, in a long disclaimer or later in an online checkout process) (sections 52(1.3) and 74.01(1.1) of the Competition Act).
The drip pricing provisions were further strengthened on June 20, 2024 under amendments to the Competition Act (Bill C-59) that make it clear that the only additional fees that a seller can “drip” (i.e., not disclose upfront) are those imposed directly on a purchaser by provincial or federal legislation (e.g., sales taxes).
The Competition Act now defines drip pricing as follows: “… the making of a representation of a price that is not attainable due to fixed obligatory charges or fees … unless the obligatory charges or fees represent only an amount imposed on a purchaser of the product … by or under an Act of Parliament or the legislature of a province”.
Drip pricing has been one of the Competition Bureau’s deceptive marketing enforcement priorities over the past several years, together with false or misleading performance claims, ordinary selling price (OSP) claims and misleading testimonials/endorsements.
In its recommendations for Competition Act reform, the Competition Bureau had cited evidential challenges associated with the enforcement of drip pricing practices given the lack of specific prohibitions under the Competition Act.
In this regard, before the amendments in June 2022, drip pricing was only reviewable under the general criminal and civil misleading advertising provisions of the Competition Act (sections 52(1) and 74.01(1)) if a pricing claim was either literally false or misleading (e.g., a portion of the total price was omitted in a headline marketing claim or the claim suggested that the stated price was the complete price with no other charges or fees).
While these “general misleading advertising provisions” can still apply to drip pricing, the 2022 amendments provide the Competition Bureau and private parties (private access to the Competition Tribunal will be available as of June 20 2025 – see below) with an additional avenue to enforce this specific type of price related advertising practice.
The Competition Bureau has commenced drip pricing enforcement in a number of industries, including online event tickets, theatre tickets and car rentals (see below).
POTENTIAL PENALTIES
Some of the potential penalties for violating the civil deceptive marketing practices provisions under Part VII.1 of the Competition Act include Competition Tribunal or court orders to stop the conduct, publish a corrective notice, pay restitution to consumers and AMPs.
Following 2022 amendments to the Competition Act, the maximum AMPs for civil deceptive marketing increased: (i) for individuals, up to the greater of $750,000 ($1 million for each subsequent order) and three times the value of the benefit derived from the deceptive conduct; and (ii) for corporations, up to the greater of $10 million ($15 million for each subsequent order) or three times the value of the benefit derived from the deceptive conduct or, if the latter amount cannot be reasonably determined, 3% of the corporation’s annual worldwide gross revenues.
In addition, as a result of June 2024 amendments to the Competition Act (under Bill C-59), starting on June 20 2025, private parties will also be able to seek leave from the Competition Tribunal to commence proceedings under the civil deceptive marketing practices provisions (Part VII.1) with the only leave requirement for standing being that the proceedings are in the “public interest”.
The potential penalties for violating the general criminal misleading advertising section of the Competition Act (section 52(1)), as well as the standalone criminal drip-pricing offence (section 52(1.3)), include, on indictment, a fine in the discretion of the court and/or imprisonment for up to 14 years and, on summary conviction, a fine of up to $200,000 and/or imprisonment for up to one year.
For more information about drip pricing, see: Canadian Competition Act Amendments (2022): New Drip Pricing Advertising/Marketing Provisions, The Price, the Whole Price and Nothing But the Price: StubHub Pays $1.3 Million Penalty Following Bureau Drip Pricing Probe, Ticketmaster Agrees to Pay $4 Million Penalty to Settle Drip Pricing Case and $1.25 Million Settlement in Car Rental Drip Pricing Case.
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SERVICES AND CONTACT
We are a Toronto based competition and advertising law firm offering business and individual clients efficient and strategic advice in relation to competition/antitrust, advertising, Internet and new media law and contest law. We also offer competition and regulatory law compliance, education and policy services to companies, trade and professional associations and government agencies.
Our experience includes advising clients in Toronto, across Canada and the United States on the application of Canadian competition and regulatory laws and we have worked on hundreds of domestic and cross-border competition, advertising and marketing, promotional contest (sweepstakes), conspiracy (cartel), abuse of dominance, compliance, refusal to deal and pricing and distribution matters. For more information about our competition and advertising law services see: competition law services.
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For more information about our firm, visit our website: Competitionlawyer.ca
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