Canadian COMPETITION LAW

October 7, 2024

On September 23, 2024, Canada’s Competition Bureau announced that the federal Competition Tribunal (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 for the online sale of movie tickets (see: Competition Bureau wins deceptive marketing case against Cineplex)

The 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 its online booking fee from 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.”

Overview of Canada’s New Standalone
Drip Pricing Provisions

The Cineplex decision is the first contested drip pricing decision that the 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, such as 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”.

Competition Bureau Enforcement
of Drip Pricing

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 June 2022 Competition Act amendments, 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.

The Competition Tribunal’s
Information Note In
the Cineplex Case

Before the Tribunal issued its full redacted decision in this case (discussed below), 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 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 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 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 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.”

The Competition Tribunal’s
Full Drip Pricing Decision

On October 4, 2024, the Tribunal released its full unredacted decision in the Cineplex drip pricing case. See: Canada (Commissioner of Competition) v. Cineplex Inc., 2024 Comp Trib 5.

In general, while the Tribunal was cautious not to make broad holdings as to how Canada’s new standalone civil drip pricing provision under the Competition Act may apply in all cases, given the wide variety of price related claims that are possible, it held that Cineplex violated both the standalone civil drip pricing provision (section 74.01(1.1)) and also the general civil misleading advertising provision (section 74.01(1)(a)).

Several key points from the Tribunal’s full decision include:

Cineplex’s online booking fee was a mandatory non-government fee. The Tribunal held that Cineplex’s online booking fee for movie tickets was a mandatory non-governmental fee given that it was determined in advance by Cineplex, did not vary and applied to all online movie ticket sales (as compared to in-person movie tickets, which were not subject to the booking fee).

Cineplex’s online movie ticket price claims were false. The Tribunal came to this conclusion because the stated ticket prices (both where ticket prices were first disclosed on Cineplex’s website and also during the checkout process) did not include the online booking fee. The Tribunal found that the booking fee was automatically added to the running checkout total for movie tickets booked online, but was not either included in the headline ticket prices themselves (when consumers first saw the price of movie tickets) nor clearly disclosed that it existed/applied prior to checkout (given that the booking fee was only disclosed by clicking an information icon “below the fold” as consumers moved through the checkout process for movie tickets purchased online). For more information about misleading advertising under the Competition Act, see: Misleading Advertising.

The Tribunal also held that Cineplex’s online movie ticket prices were false because the fact that a $1.50 mandatory online booking fee applied was not clearly disclosed with the ticket prices (but rather was only disclosed at the bottom of online pages “below the fold” as consumers moved through the checkout process for movie tickets purchased online, which was unlikely to be read by most consumers).

All-In Pricing: The Tribunal avoided the issue of whether the new civil drip pricing provision requires “all in pricing” in all cases (e.g., for a headline price claim in marketing to include all mandatory fees). However, the Tribunal concluded that in this case, Cineplex’s movie ticket price claims were false given that they did not themselves include the additional online booking fee nor was the additional booking fee adequately disclosed with the advertised ticket prices. For more information about drip-pricing, see: Drip Pricing.

Several of the Tribunal’s other key holdings in this case include:

Literal Meaning of Advertising Claims: The Tribunal affirmed the reasoning in the Quebec consumer protection law case Richard v. Time Inc. SCC 8, [2012] 1 SCR 265 (Richard) that the literal meaning of an advertising representation is conceptually uncontroversial: “it is what is says on its face interpreted in the ordinary sense.” For more information about misleading advertising under the Competition Act, see: Misleading Advertising.

Type of Consumer For the “General Impression Test”: The Tribunal held that for the general impression test under section 74.01 of the Competition Act, the test is that of the “ordinary citizen”. The type of consumer that should be considered to evaluate whether an advertising or marketing claim is false or misleading under the Competition Act has to date been unsettled (for example, whether the Tribunal or courts should consider an average consumer or some category of less sophisticated consumer). According to the Tribunal in this case, most cases this will be the ordinary consumer to whom a representation is made, directed or targeted. However, the Tribunal further held that, in this case, the Tribunal should not adopt the “credulous and inexperienced” consumer test from the Richard case but, as the Richard case contemplates, the legal standard should be appropriate for the objectives of the Competition Act and its deceptive marketing provisions. In this regard, the Tribunal held that the legal perspective for the general impression test should remain that of the ordinary consumer of the relevant product or service, which “may be refined according to the nature of the representation at issue, the characteristics of the members of the public to whom the representation was made, directed or targeted, the nature of the product or service involved, and the particular circumstances of the case.” In this regard, the Tribunal appears to have held that the bar for the type of “ordinary consumer” for determining whether deception has occurred under the Competition Act’s civil deceptive marketing provisions may move up or down depending on the circumstances. For more information about the general impression test, see: General Impression Test.

Key Drip Pricing Terms: The Tribunal intepreted several of the key terms in the Competition Act’s new drip pricing provisions. In this regard, the Tribunal held that if a price representation is not “attainable” due to fixed obligatory charges or fees, those charges or fees must inherently be added in some way to a represented price. The Tribunal further held that, on the facts of this case, Cineplex’s online booking fee was an “obligatory” charge or fee under section 74.01(1.1) given that it was required for all consumers completing the purchase of online movie tickets unless they were CineClub members. For more information about drip pricing, see: Drip Pricing.

All-In Pricing: The Tribunal held that it was not necessary to determine for all cases whether or not a form of “all-inclusive” price representation was an implicit requirement of the civil drip pricing provision (section 74.01(1.1)). There has been considerable debate both before and after the enactment of the standalone drip pricing provisions whether they impose a legal requirement for “all in pricing” in all cases. This issue remains outstanding following the Tribunal’s decision in Cineplex.

Whether Section 74.01(1.1) Is a Complete Code for Drip Pricing: The Tribunal held that the civil standalone drip pricing provision (section 74.01(1.1)) is not a complete code for drip pricing conduct nor does it preclude a review of drip pricing under the general civil deceptive marketing provision of the Competition Act (section 74.01(1)(a)). In this regard, the Tribunal held that in addition to the elements of the standalone drip pricing provision, the other required elements of section 74.01(1)(a) must also be met (given that drip pricing is only one example of misleading representations under section 74.01(1)(a)).

Whether a Representation Is False or Misleading in a “Material Respect”: The Tribunal affirmed the decision in Apotex Inc. v. Hoffman La-Roche Ltd. (2000), 195 DLR (4^th) 244 (Ont CA) that held that a representation is material under section 74.01(1)(a) of the Competition Act (the general civil deceptive marketing provision) if it is “so pertinent, germane or essential that it could affect the decision to purchase”. The Tribunal held that price representations will often be material and that they were so on the facts of this case.

Implications

This important decision, which is the first that has interpreted Canada’s new standalone drip pricing provisions under the Competition Act, means that it is more important than ever for companies and others that make pricing claims in their advertising to adequately disclose upfront any additional mandatory fees or charges, other than mandatory government fees, such as sales taxes, that will be charged to consumers.

Based on the Cineplex case, merely including an additional mandatory fee in a long disclaimer, information note (or hyperlink) or rolling product checkout price may well be inadequate disclosure.

It remains to be seen, however, whether Canada’s Tribunal or courts will hold that the drip pricing provisions require “all in pricing” in any cases (e.g., that headline price claims include any and all mandatory fees) or, alternatively, if additional fees can be disclosed in disclaimers in close proximity to headline price claims as long as they are likely to seen by consumers.

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