Introduction
On October 2, 2024, the Competition Tribunal issued a decision in Commissioner of Competition v. Cineplex Inc., marking the first enforcement of the "drip pricing" provisions introduced by the amendments to Canada's Competition Act (the "Act"). We have previously written about the Cineplex case here, and the amendments to the misleading advertising provisions here.
The Tribunal examined Cineplex's online pricing representations for movie tickets, siding with the Commissioner in finding that Cineplex violated both the general misleading representations provisions and the newly introduced "drip pricing" provisions. Further, the Tribunal ordered Cineplex to pay a blockbuster administrative monetary penalty ("AMP") of C$38.9 million, the highest AMP imposed to date under the Act.
What is Drip Pricing?
Drip pricing, as defined in the recent amendments to the Act, is a practice where businesses advertise one price, and then at or before the time of sale introduce additional mandatory fees that make the initial price "unattainable". These fees can be characterized in various ways, such as "processing fees," "booking fees," "cleaning fees," or "administrative fees." The problem arises when these charges are not transparently or accurately disclosed to consumers upfront. Instead, they are omitted from the advertised price and are typically gradually revealed throughout the purchasing process, effectively "dripping" into the final cost.
Recent Amendments
In a of pair of amendments in June of 2022 and 2024, subsection 74.01 of the Act was amended to introduce a new provision which explicitly noted that drip pricing is false and misleading. The amendments provide that:
the making of a representation of a price that is not attainable due to fixed obligatory charges or fees constitutes a false or misleading representation, 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.
The amendments also increased the maximum penalty for deceptive marketing practices for corporations to the greater of:
- $10 million for an initial violation and $15 million for each subsequent violation; and
- Three times the value of the benefit derived from the conduct. If the benefit cannot be reasonably determined, three percent of annual global revenues.
The Case Against Cineplex
In May 2023, the Commissioner of Competition brought a case against Cineplex, arguing that the movie ticket prices displayed on Cineplex's website and app were deceptive because they did not include the mandatory online booking fee, which ranged from $1.00 to $1.50. The Commissioner argued that the disclosure of the fee, located at the bottom of the webpage in a "below the fold" section requiring users to scroll down to view it, was inadequate to address the issue.
Cineplex's purchase process offered visitors a per-ticket price. When a ticket was selected, a subtotal appeared on a "floating ribbon" at the bottom of the screen. While this subtotal included the online booking fee, it did not break it out explicitly. The ribbon located "above the fold" (visible without scrolling), featured a call-to-action button labeled "Proceed," argued by the Commissioner to encourage users to continue with the purchase without scrolling further.
The Commissioner argued that Cineplex's approach contravened both the general misleading representations provisions and the specific drip pricing rules under the Act, as it was likely to deceive consumers by presenting an incomplete and misleading representation of the total ticket price.
Tribunal Decision
The Tribunal concluded that Cineplex's price representations were materially false or misleading under both the general misleading representation provisions and the new drip pricing provisions of the Act.
General Impression
Under the general misleading representation provision, the Tribunal determined that Cineplex's initially displayed ticket prices were inaccurate, stating that consumers were misled by the contradictory and incomplete information on the Tickets Page. Key factors in this decision included:
- Cineplex's failure to disclose the online booking fee alongside the initial ticket price display.
- Providing a subtotal that included but did not separately identify the booking fee.
The Tribunal did not comment on whether the "alternative approaches" suggested by the Commissioner's expert, such as displaying the fee in a pop-up, would have been compliant.
The "Drip Pricing" Provision
Under the new drip pricing provisions, the Tribunal also ruled that Cineplex's price representations were false or misleading. It determined that the online booking fee qualified as a fixed and mandatory charge for a subset of consumers, even though not all consumers were required to pay it. Cineplex argued that the online booking fee was not mandatory because the advertised price was attainable if tickets were purchased in person and the online booking fee did not apply to members of Cineplex's CineClub. The Tribunal rejected Cineplex's argument and emphasized that consumers would reasonably expect prices displayed on Cineplex's website to be accurate for online purchases and noted the website failed to disclose that the booking fee would not apply to in-person transactions.
Remedies
The Tribunal has discretion to impose various remedies, including AMPs, disgorgement of benefits, and prohibition orders. In this case:
- AMPs: The Tribunal ordered Cineplex to pay an AMP of C$38.9 million, the highest AMP imposed to date under the Act. The penalty is equivalent to the amount Cineplex collected for the online booking fee from June 2022 until December 2023. While the Tribunal could impose a penalty up to three times the benefit derived (C$116.9 million), or more, as the fee applied beyond December 2023, it opted to limit the penalty to C$38.9 million, aligning with the total revenue earned from the booking fee. The Tribunal emphasized fairness, noting this was the first litigated case under the new provisions.
- Disgorgement: The Tribunal considered requiring Cineplex to issue refunds but found this impractical due to administrative challenges, such as the high cost of distributing numerous small refunds.
- Prohibition Order: The Tribunal imposed a 10-year prohibition order barring Cineplex from engaging in similar deceptive practices. Such orders, carry significant consequences if violated.1
Insights and Takeaways from the Decision
1. Ensure Proper Disclosure of Mandatory Fees
The Tribunal's decision in the Cineplex case underscores the importance of presenting all mandatory fees either as part of, or at minimum concurrently with the original advertised price. Best practice dictates that businesses should, at minimum, disclose any mandatory fees clearly on the same webpage, in the same size and prominence, "above the fold". Non-concurrent disclosure—such as revealing fees only after an initial price is shown—may well be deemed insufficient to remedy deceptive pricing practices.
2. Review Online Purchasing Flows and Website Design
Website design plays a critical role in compliance. Businesses should carefully evaluate whether their online sales portals are designed to make all relevant pricing information readily accessible. Features such as "floating ribbons," urgency cues like countdown timers, or call-to-action buttons must not mislead consumers or discourage them from viewing additional information. Any mandatory fees should be prominently displayed "above the fold" and broken out separately from subtotals.
3. Prepare for Larger AMPs and Disgorgement
Cineplex marks the first case where the Tribunal imposed a significant AMP, amounting to $38.9 million—the revenue Cineplex earned from the online booking fee until December 2023. Future penalties may also scale with the revenue generated from challenged conduct, making them far higher than in the past. Businesses should also note that applicants, including both the Commissioner and private parties, are likely to seek disgorgement remedies, although presumably they will have to present detailed plans for administering refunds to affected consumers to address logistical challenges.
4. Prepare for Expanded Private Rights of Action
Beginning in June 2025, private parties will gain the right to pursue civil claims under the Act with Tribunal approval. This expansion increases potential exposure for businesses engaging in practices that may be deemed deceptive.
Footnote
1 In January 2025, Cineplex was served with class action lawsuits in British Columbia and Quebec alleging that Cineplex's failure to disclose the online booking fee constituted false and misleading advertising.
The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.
© McMillan LLP 2025
