From Box Office To Courtroom: Cineplex's FCA Appeal

In 2024, the Competition Tribunal released a blockbuster decision ordering Cineplex to pay a record penalty of over $38.9 million for false and misleading advertising, in particular, "drip pricing", contrary to the Competition Act.

In the highly anticipated sequel, the Federal Court of Appeal (FCA) affirmed the Competition Tribunal’s decision and upheld the record-setting penalty. The credits roll with a critical message: price clean, design clean, or risk a costly post-production edit.

Previously on…

As discussed in  Cineplex's pricey plot twist: $38.9 million penalty for hidden booking fees, Cineplex began charging consumers an online booking fee in 2022. This fee was not directly included in the price that was initially presented to consumers in the online checkout flow; rather, it was only disclosed to consumers near the bottom of the page, requiring them to scroll down to near the bottom of the page in order to see the information. The Competition Tribunal referred to this information as being “below the fold.”

In 2024, the Competition Tribunal ruled in favour of the Competition Bureau, finding that Cineplex engaged in “price dripping” by charging consumers an online booking fee that was only included in the price after the movie tickets were selected. The Competition Tribunal determined that, although the initial price advertised was a valid in-theatre price, the relevant price that must be attainable in Cineplex’s website and app purchase funnels is a price that includes the online booking fee.

The Competition Tribunal also found that the initial price representations were false and misleading in a material respect. It ordered Cineplex to pay an administrative monetary penalty (AMP) of $38,978,000 (representing disgorgement of the total online booking fees collected by Cineplex), plus legal costs. Very shortly after this decision, Cineplex announced its plan to appeal, setting the stage for our sequel.

The sequel

In its recently published decision, the FCA upheld the Competition Tribunal’s findings and the AMP. The decision, released at the end of January, impacts broad general advertising principles, notably as applied to a dynamic, web/app-based environment.

The general impression test

The Competition Act prohibits representations to the public that are false or misleading in a material respect. The analysis is not only a literal one; instead, courts apply the “general impression” test, which looks at the overall takeaway conveyed by an advertisement, including its context, visuals, and omissions. In Richard v. Time Inc., theSupreme Court of Canada held that under Quebec consumer protection law this assessment must be made from the perspective of the “credulous and inexperienced” consumer, not a skeptical or sophisticated one.

In Cineplex, the Competition Tribunal did not adopt the Richard v. Time credulous and inexperienced consumer standard; instead, it noted that the Competition Act is not consumer protection legislation and that the “legal standard should be appropriate in light of the objectives of the Competition Act  and the purposes of the deceptive marketing provisions in it.”

Ultimately, the Tribunal determined that under the Competition Act:

The FCA did not take issue with this approach, and this approach may be applied broadly to impugned representations under section 74.01 (i.e. not just in the context of alleged drip pricing).

Below the fold disclosures

An important issue before the FCA was whether the “below the fold” disclosures should be considered when determining the general impression of Cineplex’s price representations. In support of considering these representations, Cineplex pointed to “a long line of false and misleading advertising cases that have consistently held that a disclaimer is an “integral part” of an advertisement and must be considered in the general impression analysis.”

However, the FCA differentiated those decisions from the case at hand as the representations made by Cineplex were made in a dynamic online environment, while the precedents it pointed to largely involved printed advertisements.

Applied to digital advertisements, the FCA affirmed that the general impression test should focus on what typical users would take away at the moment of exposure. According to the FCA, if the design offers no clear cue to scroll—or actively discourages scrolling—then the general impression test should be limited to the general impression conveyed by the initial screen presented to consumers. 

It is important to note that the design of a page will matter. In Cineplex’s case, the FCA agreed that the on-screen countdown timer created false urgency cues and the “PROCEED” button created a “false floor” (in other words, masked the fact that more information lived on the page below) that discouraged consumers from considering information presented “below the fold.”

For advertisers and lawyers, this serves as a really important reminder: disclaimers and other disclosures that are not immediately visible will only be considered if a consumer is given a reason to consult these, and any encouragement away from this information will likely limit the general impression to the visible advertisement only.

Price dripping provision and misleading advertising under the Competition Act

As the prohibition against price dripping under section 74.01(1.1) of the Competition Act is a relatively new provision, the FCA also confirmed in its decision the Competition Tribunal’s view on the provision’s relationship to the broader prohibition on false or misleading representations under section 74.01(1)(a).

Specifically, the FCA affirmed that s. (1.1) is not a standalone reviewable practice, but a specific subcategory of s. (1)(a). Accordingly, if price dripping under s. (1.1) is established, then the misrepresentation element of s. (1)(a) will also be deemed to have been established.

How to avoid a spin-off

Very shortly after the FCA released its decision, Cineplex indicated that it intends to seek leave to appeal to the Supreme Court of Canada (can you say trilogy?). While an SCC appeal is far from guaranteed—leave is granted in only a small percentage of cases—the announcement signals that Cineplex is not ready to let the final credits roll just yet.

For now, audiences and businesses alike will be watching closely to see whether this dispute earns its way onto the Supreme Court’s docket, or whether Part II ultimately proves to be the final instalment after all.

But, in the meantime, below are a few key takeaways from this decision, to help you avoid starring in your own Competition Bureau investigation:

• Put the whole price up front in the same channel. If a non-tax, non-legislated fee is unavoidable online, don’t drip-bake it into the initial price display.
• Design for clarity, not conversion at all costs. Avoid “false floors,” urgency timers, or CTA placements that suppress scrolling when material price qualifiers sit below the fold.
• Treat “above the fold” as the ad’s four corners. If it’s essential to price, it belongs where the consumer lands-no scrolling required.
• Price to the channel of the claim. A price shown online must be the online price; theatre-only attainability doesn’t cure a web/app misrepresentation.
• Remember audience reality. The ordinary consumer uses common sense and limited attention-not specialized expertise. Draft and design accordingly.
• When in doubt, consult legal before going live.

Read the original article on GowlingWLG.com

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