As a result of the June 23, 2022 amendments (the "Amendments") to the Canadian Competition Act (the "Act"), drip pricing is now expressly recognized as a deceptive marketing practice and prohibited under the civil (subsection 74.01(1.1)) and criminal (subsection 52(1.3)) provisions of the Act.
Drip pricing is the practice of offering a product or service at an initial price that is ultimately unattainable due to (non-governmental-imposed) fixed fees and charges (e.g., booking fees, order processing fees, service fees, or facility charges) that are either hidden in fine print, inadequately disclosed, or added later in the purchasing process.
To date, the Competition Bureau (the "Bureau") has brought six enforcement actions in connection with drip pricing practices in the car rental, furniture, travel and online ticketing industries. These actions were brought under the civil deceptive marketing provisions of the Act on the basis that the initial price representation created a materially false or misleading general impression that consumers can buy the respective product or service for less than what they are ultimately charged. It is important to note that no one person needs to be deceived or misled in order for the representation created by the practice to be false or misleading.
A first-time violation of the civil drip pricing provision by a corporation carries a maximum administrative monetary penalty of CAD$10 million (CAD$15 million for each subsequent violation) or three times the value of the benefit obtained from drip pricing, whichever is greater. Further, if the value of the benefit obtained cannot be reasonably determined, the maximum penalty will be 3% of the corporation's annual worldwide gross revenues. In terms of individuals, a first-time violation of the civil drip pricing provision carries a maximum penalty of CAD$750,000 (CAD$1 million for each subsequent violation) or three times the value of the benefit derived from the deceptive conduct, if that amount can be reasonably determined.
For a drip pricing practice to be considered under the criminal deceptive marketing practices provision, it must be made knowingly or recklessly. Violation of the criminal drip pricing provision carries a fine of up to CAD$200,000 and/or imprisonment for up to one year on summary conviction, and if conviction on indictment, fines are at the discretion of the court and/or imprisonment for a period of 14 years.
It is also important to note that section 36 of the Act provides a right of action for damages to any person that has suffered loss or damages as a result of conduct contrary to Part VI of the Act, which now captures the new drip pricing provision. Further, the Bureau views private actions under section 36 of the Act as an additional and important enforcement mechanism separate and independent from its administration and enforcement of the Act.
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.
