May 16, 2024
On May 15, 2024, the Canadian Competition Bureau issued new guidance on drip pricing under the federal Competition Act (see: The Ambush of Hidden Fees).
In making the announcement, the Competition Bureau said:
“Saving money can be challenging these days. Especially when you are buying something you need, only to find that additional fees were tacked on. … Some companies offer low prices to attract consumers, but then add mandatory fees so that the prices are not attainable.”
DRIP PRICING UNDER
THE COMPETITION ACT
“Drip pricing” refers to the practice of when a product or service is marketed at a price that is unattainable because consumers must also pay additional charges or fees to buy the product or service that are not advertised upfront.
Sections 52(1.3) and 74.01(1.1) of the federal Competition Act, which are the standalone criminal and civil drip pricing provisions added to the Act as part of June 2022 amendments, prohibit offering a price for a product or service that a customer cannot actually attain because there are mandatory fixed additional (non-governmental) charges or fees that must be paid that are not advertised upfront.
In addition to the standalone drip pricing provisions of the Competition, the general criminal and civil misleading advertising provisions (sections 52 and 74.01) can also apply to drip pricing and other false or misleading product pricing practices.
Drip pricing has been a Competition Bureau enforcement priority in recent years, together with other advertising/marketing law related priorities including other types of false or misleading product price claims, ordinary selling price claims (e.g., in relation to product discounts and sales), product performance claims and false or misleading testimonials and endorsements.
NEW COMPETITION BUREAU
DRIP PRICING GUIDANCE
In its new guidance, the Competition Bureau describes the types of mandatory fees that, when not disclosed up front in advertising, can trigger the drip pricing provisions of the Competition Act or violate the general civil and criminal misleading advertising provisions (sections 52 and 74.01).
According to the Competition Bureau, mandatory fees can include, depending on the type of product/service being offered for sale, processing fees, booking fees, cleaning fees or administrative fees.
The Competition Bureau also provides consumers with the following signs of drip pricing (and encourages drip pricing related complaints to be filed):
1. The price you see is not the price you pay.
2. The true total cost of a product or service is not displayed upfront. You shouldn’t have to scroll down or read the fine print to find the total price of an item.
3. There are additional charges you weren’t expecting. The only mandatory fees you should pay are the ones imposed by the government, such as sales tax.
PROPOSED DRIP PRICING RELATED AMENDMENTS
UNDER BILL C-59
In addition to the above, significant amendments to the Competition Act are currently being proposed by the federal government under Bill C-59, which is currently working its way through Parliament and at the time of writing had passed the committee stage of review.
If passed, Bill C-59 would include drip pricing related amendments to strengthen the existing provisions of the Competition Act to provide that the only fixed and unavoidable amounts that can be excluded from upfront product/service price claims are the ones that are imposed directly on a purchaser by law (e.g., sales tax).
Currently, the criminal and civil drip pricing provisions of the Competition Act (sections 52(1.3) and 74.01(1.1)) do not stipulate on whom government fees must be imposed for the exemption to apply and, as such, the existing provisions are less restrictive than the revised drip pricing rules proposed under Bill C-59.
Following the June 23, 2022 Competition Act amendments, there has also been debate as to the scope of mandatory charges that are eligible for exemption from upfront price claims under the existing drip pricing provisions.
The proposed drip pricing related amendments under Bill C-59 would arguably require “all in” product/service pricing upfront in advertising/marketing, unless the limited exemption for government-imposed charges/fees applied.
Many of the drip pricing related challenges brought by the Competition Bureau in recent years, including in the event ticket and car rental sectors, as well as its drip pricing and product pricing related guidance generally, it has argued that advertising/marketing claims should state the total price of a product/service upfront. For more information, see: Drip Pricing and Price Claims.
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DRIP PRICING LAW RESOURCES
For more information about drip pricing and related Canadian misleading advertising laws, see: Drip Pricing, Disclaimers, General Impression Test, General Impression Test and Misleading Advertising.
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SERVICES AND CONTACT
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