“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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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.
The June 2022 amendments also included new civil and criminal prohibitions on drip pricing (i.e., failing to disclose the full price of a product or service until later in the purchase process or product checkout).
Drip Pricing Prohibitions
The June 2022 amendments to the Competition Act added a new criminal drip pricing offence (section 52(1.3)) and civil deceptive marketing practice (section 74.01(1.1)), which deems drip pricing to be one type of false or misleading representation.
Drip pricing has been one of the Competition Bureau’s (Bureau) deceptive marketing enforcement priorities over the past several years, together with false or misleading performance claims, ordinary selling price (OSP) claims and misleading endorsements/testimonials.
In its recommendations for Competition Act reform, the 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 Bureau and private plaintiffs with an additional avenue to enforce this specific type of price related advertising practice.
The Bureau has commenced drip pricing enforcement in a number of industries, including online event tickets and online car rentals (see discussion below).
These Competition Act amendments, among others, follow the Bureau’s submission on Examining the Competition Act in the Digital Era on February 8, 2022 and mark the most significant amendments since the last major overhaul of the Competition Act in 2009.
Potential Penalties
Some of the potential penalties for violating the civil deceptive marketing practices provisions under Part VII.1 of the Competition Act, including drip pricing, which is deemed under section 74.01(1.1) of the Act to be a false or misleading representation, include Competition Tribunal or court orders to stop the conduct, publish a corrective notice, pay restitution to consumers and administrative monetary penalties (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 if that amount can be reasonably determined; and (ii) for corporations, up to the greater of $10 million ($15 million for each subsequent order), 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.
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 the 2022 amendments to the Competition Act, see: Sweeping Canadian Competition Act Amendments Passed.
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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We are a Toronto based Canadian competition and advertising law firm that helps clients in Toronto, Canada and the United States practically navigate Canada’s advertising and marketing laws and offers Canadian advertising/marketing law services in relation to print, online, new media, social media and e-mail marketing.
Our Canadian advertising/marketing law services include advice in relation to anti-spam legislation (CASL), Competition Bureau complaints, the general misleading advertising provisions of the federal Competition Act, Internet, new media and social media advertising and marketing, promotional contests (sweepstakes) and sales and promotions. We also provide advice relating to specific types of advertising issues, including performance claims, testimonials, disclaimers, drip pricing, astroturfing and native advertising.
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