On September 23, 2024, the Competition Tribunal ruled in favour of the Competition Bureau, finding that Cineplex had engaged in "drip pricing" contrary to the Competition Act. Cineplex has been ordered to pay a record penalty of over $38.9 million, as well as legal costs.
While the full decision has yet to be released, this article highlights key insights and outlines what organizations should take away from this landmark ruling
The online fees
In June 2022, Cineplex began to charge customers an online booking fee ranging from $1.00 to $1.50 for tickets purchased online or through the Cineplex app.
The amount varied depending on whether the customer was enrolled in Cineplex's Scene Plus loyalty program. Customers who were enrolled in CineClub did not have to pay the fee. Although the fees were not optional when tickets were booked online, consumers could avoid the charge by purchasing tickets at the box office.
The fees were collected from June 2022 to December 31, 2023 (when the Competition Bureau initiated its investigation).
"Drip" pricing
The Competition Bureau found that the online booking fee was not initially disclosed when consumers were making their purchase. Instead, it only became visible after the tickets were selected and the purchaser clicked to 'proceed' to the next screen.
The Competition Tribunal ruled this as reviewable conduct, as it involved advertising false and misleading ticket prices that were unattainable due to fixed obligatory charges and fees. Essentially, the initial ticket price displayed excluded a booking fee, making it $1.00 to $1.50 lower than the actual price consumers were required to pay.
This practice by which certain fees or charges are excluded from an advertised price, and incrementally revealed during the purchasing process – "dripping" into the final price – is known as "drip pricing."
Although such a practice was broadly prohibited under the general prohibitions against false and misleading representations contained in the Competition Act (the "Act"), the Act was amended in 2022 to explicitly recognize drip pricing as a harmful business practice. The amendment provided that price representations that are not attainable "due to fixed obligatory charges or fees" constitute a false or misleading representation – unless the "obligatory charges or fees represent only an amount imposed by or under an Act of Parliament or the legislature of a province" (section 74.01(1.1) of the Act).
This is not the first time an organization has been investigated and fined by the Competition Bureau for advertising unattainable prices. However, this is the first case in which the Competition Tribunal applied the recently enacted "drip pricing" provision.
Evidently the Competition Tribunal took this premiere seriously; in addition to having to pay the Competition Tribunal's legal costs, Cineplex was ordered to pay an administrative monetary penalty of $38,978,000 (an amount equal to the total online booking fees collected by Cineplex).
With Cineplex's appeal on the horizon, the e-commerce world will be gearing up to watch The Competition Bureau vs. Cineplex: The Appeal. Popcorn, anyone?
Key takeaways
So, how do you avoid co-starring in the regulator's next big feature?
Make sure all fees are disclosed upfront! All non-optional mandatory fees not imposed on the purchaser by legislation should be included in the total price of a product or service. And if you're uncertain, don't hesitate to reach out to your legal counsel for further guidance.
Read the original article on GowlingWLG.com
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