September 25, 2024
On September 23, 2024, Canada’s Competition Bureau announced that the federal Competition Tribunal had found that Cineplex Inc. (Cineplex), a Canadian theatre chain, had engaged in drip pricing by adding a mandatory and insufficiently disclosed $1.50 online booking fee (see: Competition Bureau wins deceptive marketing case against Cineplex).
The Competition Tribunal ordered Cineplex to pay an administrative monetary penalty of more than $38.9 million and legal costs. This penalty is equivalent to the amount that Cineplex collected from theatre consumers from the time of the introduction of the online booking fee in June 2022 until December 2023.
In making its announcement, the Competition Bureau said:
“The Tribunal’s decision in the Cineplex case is a resounding win for Canadians. It sends a strong message that businesses should not engage in drip pricing and need to display their full prices upfront. Businesses that fail to comply with the law risk significant financial penalties.”
This decision is the first contested drip pricing decision that the Competition Tribunal has decided since the Competition Act was amended in June 2022 to add standalone drip pricing prohibitions. For more information about these amendments, as well as two other rounds of major amendments in the last two years under bills C-59 and C-59, see: Competition Act Amendments.
The June 2022 amendments to the Competition Act 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).
These new 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).
Canada’s 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 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 give the Competition Bureau and private parties (private access to the Competition Tribunal for civil deceptive marketing practices will be available as of June 20 2025) 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. For more information about drip pricing under Canada’s Competition Act, see: Drip Pricing.
While the Competition Tribunal has not yet issued its full redacted decision in this case, it released an Information Note which outlined the Competition Bureau’s case as follows:
“In the application, the Commissioner alleged that Cineplex engaged in reviewable conduct by making representations to the public that were false or misleading in a material respect. According to the Commissioner, starting in June 2022, Cineplex made false or misleading representations about the price of movie tickets on its website and its mobile application, because consumers who buy tickets in those channels must pay a fixed obligatory fee – the Online Booking Fee – on top of the prices Cineplex represents for movie tickets. As its name suggests, the Online Booking Fee does not apply to tickets purchased in-person at a Cineplex theatre.”
According to the Competition Tribunal, drip pricing means “making a representation about the price of a product or service that is not attainable due to fixed obligatory charges or fees that the consumer must pay in addition to the represented price. The provision excludes obligatory charges or fees that represent only an amount imposed by or under federal or provincial legislation.”
In this case, the Competition Tribunal concluded that Cineplex engaged in reviewable conduct under the civil drip pricing provision of the Competition Act (section 74.01(1.1)) and the general civil deceptive marketing provision (section 74.01(1)(a)).
More specifically, the Competition Tribunal found that, based on the evidence, Cineplex’s price representations on its tickets page and mobile applications met the criteria for drip pricing under section 74.01(1.1), namely that the ticket prices represented by Cineplex were not attainable on its website or its mobile application due to the requirement to pay its mandatory online booking fees.
In addition, the Competition Tribunal, in rather strong words regarding its conclusion of deception, also found that Cineplex’s movie ticket prices violated the general civil deceptive marketing provision of the Competition Act (section 74.01(1)(a)):
“[B]ecause more must be paid, in the form of the Online Booking Fees, than Cineplex initially represented. The consumer is deceived or led astray by the contradictory and incomplete information on Cineplex’s tickets page, which obfuscates the existence and quantum of the Online Booking Fee.”
This important decision, which is the first that has interpreted Canada’s new standalone drip pricing provisions under the Competition Act, means that companies must take care to ensure that they disclose the full cost of their products or services upfront (other than mandatory government fees, such as sales taxes).
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