May 19, 2023
On May 18, 2023, the Competition Bureau announced that it was suing Cineplex Inc. (Cineplex) for allegedly advertising misleading ticket prices (see: Competition Bureau sues Cineplex for allegedly advertising misleading ticket prices).
The Bureau has alleged, in its civil application to the Competition Tribunal (Tribunal) under sections 74.01(1(a) and 74.01(1.1) of the Competition Act, that Cineplex has engaged in unlawful drip pricing by failing to disclose upfront an additional mandatory $1.50 “online booking fee” added to the price of its movie tickets.
While failing to adequately disclose the full cost of a product or service upfront can be challenged as either literally false or misleading under the general misleading advertising provisions of the Competition Act, express civil and criminal drip pricing provisions were recently added to the Competition Act as part of significant amendments passed in June 2022. For more information, see: Sweeping Canadian Competition Act Amendments Passed. The criminal drip pricing offence, under section 52 of the Competition Act, will come into force on June 23, 2023.
In making its announcement, the Bureau said:
“Consumers expect to pay the advertised price. We’re taking action against Cineplex because misleading tactics like drip pricing only serve to deceive and harm consumers. For years, we have urged businesses, including ticket vendors, to display the full price of their products upfront. I remind all businesses to review their pricing claims to make sure they do not mislead consumers.”
In its Notice of Application to the Tribunal, the Bureau alleges that Cineplex has violated both the general civil misleading advertising provision under section 74.01(1)(a) of the Competition Act, as well as the recently added express civil drip pricing provision (section 74.01(1.1)).
More specifically, the Bureau alleges that Cineplex does not disclose its “booking fee” or its amount when it makes its initial movie price claims, but then later incorporates it into the fee when the subtotal is displayed at checkout using small print in a floating ribbon on the checkout page.
According to the Bureau, Cineplex’s additional “booking fee” has generated around $17 million in additional revenues for the company since it was introduced in June 2022.
The Bureau also takes issue with so-called urgency cues used by Cineplex, such as a countdown timer displayed on screen at each stage of the purchase process, which, according to the Bureau, increases the pressure on consumers to complete their purchases as quickly as possible and may inhibit them from noticing the increased total cost of their tickets.
The Bureau is seeking remedies, which include a declaration that Cineplex has violated the civil misleading advertising and drip pricing provisions of the Competition Act, an order stopping Cineplex from engaging in this conduct for ten years, an administrative monetary penalty in the discretion of the Tribunal and restitution to affected consumers for the alleged overcharge.
With respect to the potential penalties for civil misleading advertising in Canada, as a result of the recent June 2022 amendments they now include an administrative monetary penalties (essentially civil fines): (i) for individuals up 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 the greater of $10 million ($15 million for each subsequent order), three times the value of the benefit obtained from the deceptive conduct or, if the latter amount cannot be reasonably determined, 3% of the company’s annual worldwide gross revenues.
For more information about penalties for false and misleading advertising in Canada, see: here
Drip pricing has consistently been one of the Bureau’s deceptive marketing related enforcement priorities over the past several years, in addition to other top enforcement priorities including false or misleading performance claims, ordinary selling price (OSP) claims and misleading endorsements/testimonials
The Bureau has commenced drip pricing enforcement in a number of major online consumer related sectors, including online event tickets and online car rentals.
For more information about drip pricing, see: Canadian Competition Act Amendments (2022): New Drip Pricing Advertising/Marketing Prohibitions, 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, $1.25 Million Settlement in Car Rental Drip Pricing Case, Deceptive Marketing-Related Developments Under the Competition Act and Sweeping Canadian Competition Act Amendments Passed.
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