Car rental companies Aviscar Inc. (Avis) and Budgetcar Inc. (Budget) have agreed to pay a $3 million
administrative monetary penalty to settle allegations by the
Competition Bureau that they misled consumers into thinking that
their rental car prices were lower than they actually were through
what is commonly termed "drip pricing". Avis and Budget also agreed
to pay $250,000 towards the Bureau's investigative costs and to
implement a corporate compliance program.
The application focussed on "Non-Optional Fees" that
Avis and Budget added to the advertised prices. These fees could
increase the cost of a car rental by 5% to 20% above the original
advertised price, depending on the rental location and vehicle
type. Avis and Budget also described these fees in a way that made
them seem like they were taxes, when in fact they were not required
by the government.
Stopping the drip
In the Consent Agreement, Avis and Budget agreed that they will
not make any representation that creates a materially false or
misleading general impression that:
consumers can rent cars or related
products at prices or percentage-off discounts that are not in fact
attainable because of non-optional fees
any non-optional fees are taxes or
fees required to be charged by any government.
These rules apply to any representation made in any medium
including websites, mobile applications, and any email, flyer,
television commercial, or newspaper advertisement.
Avis and Budget also agreed to develop a compliance program
within 120 days. Current and future members of Avis and
Budget's senior management must certify to the Commissioner of
Competition that they will take an active and visible role in the
program. All current and future marketing staff must also be given
a copy of the Consent Agreement and sign an acknowledgment that
they have read and understood it.
The Consent Agreement will remain in force for 10 years.
Takeaways for Businesses
While the Consent Agreement only governs Avis and Budget, it is
clear that the Bureau expects all businesses to abide by the rule
that the price that the consumer first sees on a website or
elsewhere should be a price that the consumer can actually get. All
fees imposed by the merchant must be included. Advertised prices do
not have to include taxes, however.
Avis and Budget's websites no longer display per-day rental
prices on their main web pages. Now, a consumer has to perform a
search, after which time an estimated total price appears including
(actual) taxes and non-optional fees. Unless optional items are
selected, such as a GPS unit or a child seat, the price that
appears once a search is performed is usually the price to be
Nevertheless, this rule will create difficulties for businesses,
like car rental companies, that base their pricing on a mix of
variable and fixed non-optional fees. Car rental companies
typically charge a per day rate plus fees that are charged per
rental, not per day. The longer the rental, the lower the impact of
the fixed fees on the total price. Car rental businesses and other
businesses with these pricing models will have to develop a way to
advertise prices that takes into account the mix of both the
variable and fixed price components.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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