Drip pricing practices prohibited under Canada’s Competition Act

October 18, 2022 | Reema Mahbubani, Eric Dufour

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.

Should you have any questions regarding this bulletin or require further information, please do not hesitate to contact the authors of this article.

This Miller Thomson publication provides a general overview of the subject matter and is to be used for educational and/or non-commercial purposes only. This publication is current as of the date of publication, but with the passage of time and new legal developments, the information provided above may no longer be relevant. Any information, insights or guidance provided in this publication does not constitute legal advice. If you require legal advice, please contact a member of the Competition / Antitrust Group.