Hidden digital costs, unsubstantiated weight loss claims, and drip pricing the focus of the Competition Bureau’s newest Deceptive Marketing Practices Digest

March 12, 2020 | Kelly Harris, Paul Nicholas Dimerin

The Competition Bureau of Canada (the “Bureau”) recently released the fifth volume of its Deceptive Marketing Practices Digest. In this latest edition, the Bureau has again focused on issues affecting consumers in the online marketplace, including deceptive privacy practices, unsubstantiated weight loss claims and the practice of “drip” pricing in the car rental industry.

Deceptive privacy practices

Continuing its recent interest in the intersection of deceptive marketing and privacy, the Bureau has set out its perspective on the collection of consumer data in non-monetary transactions that could create a false or misleading impression. At issue in particular are representations regarding whether consumer data will be collected, what data will be collected, how often data will be collected, why the data is collected and the purposes for which it will be used, whether the data will be sold to or otherwise shared with third-parties, whether consumer data will be retained, and how it will be maintained and deleted.

The rules relating to the advertising of non-monetary transactions, such as the advertising of free digital products and services, apply in the same way that they do to more traditional advertising. In the new digest, the Bureau re-affirms its position that the exchange of money or tangible products is not necessary for a representation to raise an issue under Canada’s Competition Act. Representations may be false or misleading if they lead consumers to give companies access to data that they would not otherwise provide, or acquire digital products or services they might not otherwise select.

Companies that produce free digital products and services must ensure they do not mislead consumers about the real cost of their products or services. This cost often factors in the data that is being collected as well as how this data is used and maintained. Whether and how a company collects, uses, handles and shares consumer data has the potential to be a material factor in a consumer’s decision-making process.

Weight loss claims

We have all seen them – miraculous product claims that consumers can get rid of unwanted fat, quickly and easily, and achieve their weight loss goals by merely using the advertised product. These products continue to be on the Bureau’s enforcement radar, and in the new digest, the Bureau restates that aggressive product claims require substantiation with adequate and proper testing.

As with all claims, it is important to determine the general impression that weight loss representations and advertisements convey. For example, does the claim create the general impression that the product will result in minor weight loss, or does it suggest that weight loss will be substantial, or lead to a significant transformation? The testing conducted will then need to substantiate those claims. With this in mind, it is not enough to have test results that show modest weight loss if the general impression of the representation suggests that using the product will yield significant results. Companies that produce and advertise weight loss products must ensure that claims about the performance of their products must be properly substantiated.

“Drip” pricing

Following its string of consent agreements with car rental companies, the Bureau has addressed its view of “drip” pricing practices in the new issue of the digest. This refers to the practice of advertising prices that are unattainable due to additional mandatory fees that are only disclosed later on during checkout. These additional costs are “dripped” on top of the initial advertised price.

In the Bureau’s view, the advertising of unattainable prices is misleading to consumers. Recently, the Bureau took enforcement action against a number of car rental companies regarding price representations that were unattainable because consumers were required to pay additional non-optional fees. These non-optional fees would increase the cost of the rental by 10% to 57%. Also at issue in these cases were the descriptions of these fees, which the Bureau concluded gave the false impression that the charges were government levies or taxes.

“Drip” pricing is not limited to the car rental industry. The Bureau has recently taken action against online sporting and entertainment ticket vendors for misleading online ticket pricing claims.

Advertisers must be mindful of these marketing practices, as they continue to be a high enforcement priority for the Bureau. If you have any questions about the collection of consumer data in non-monetary transactions, or product claims in advertising, reach out to Miller Thomson’s Marketing, Advertising & Product Compliance Group.

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