To: The Hon. Francois-Philippe Champagne, Minister of Innovation, Science and Industry
From: Joshua Krane and James Musgrove
Date: May 3, 2022
Re: Drip Pricing Amendments to the Competition Act
Proposed amendments to sections 52(1.2) and 74.01(1.1) of the Competition Act would prohibit “drip pricing,” where consumers are shown one price, but end up facing higher prices after fees and other charges are included.
These amendments, and other significant changes to the Competition Act, only emerge at page 320 of the budget implementation bill. Consequently, they will not be the subject of thorough consultation and debate before Parliament or with interested and affected stakeholders. There is no legitimate reason to make consequential amendments to legislation that have nothing to do with budget issues in budget legislation. The evasion of parliamentary oversight is an entirely inappropriate use of budget bills.
Turning to the matter at hand, the Competition Act already prohibits the making of representations that are false or misleading in a material respect. While there has been no contested drip pricing case under the Competition Act, there have been many successful enforcement actions (from the Competition Bureau’s perspective at least) on the basis that the representations in issue were materially misleading.
The Bureau has succeeded in settling those challenges and has achieved sizable financial settlements along with changes to advertising practices in several industries including ticket resellers and rental car companies. This clearly suggests the Bureau already has the tools it needs to address concerns regarding misleading drip pricing practices.
There were no consultations regarding the proposed drip pricing amendments and they leave much to be desired in terms of clarity, and suggest that far from solving largely non-existent problems they are likely to create more confusion and new challenges in accurately communicating with consumers.
Here are a few issues that come to the fore:
- When does the “all-in price” need to be disclosed? Does it always have to be the very first time that a user sees the advertised price, or is the context and overall meaning relevant? Does the all-in price need to be disclosed in the same way throughout the purchasing process?
- Will an advertiser be permitted to advertise the component prices without an obligation to sum them up? Will it be sufficient for an advertiser to indicate that the item price is $X with ancillary fees ranging from $Y to $Z?
- Will the font size or prominence of the different fees matter?
- Will it be acceptable for an advertiser to allow the user to “toggle” between the base price and the all-in price? And if the toggle is set to the base price as a default, will this be a violation?
- What happens if the ancillary fees vary depending on customer-specific variables, e.g., how many units are being bought, or the delivery method or whether they already have some services?
- What about advertising of prices by sellers that do not sell the product but want to give the consumer a sense of ballpark cost? This is a live issue now in Quebec with automotive manufacturer advertising seeking to give consumers some sense of the manufacturer’s suggested retail price of their vehicles, even though dealers actually set prices and fees, and conclude the sale transactions.
Parliament should also consider the obligations on websites or physical media that are mere publishers of advertisers. Sections 60 and 74.07(1) immunize publishers from the application of certain misleading advertising sections of the Act. We encourage the government to consider whether the “publisher’s immunity” also should apply to price aggregator websites that do not actually set pricing on their sites or conclude a sale transaction, and that merely republish other companies’ prices.
Meanwhile, it will also be important to consider jurisdictional implications. For example, several provinces have enacted all-in pricing rules under their consumer protection laws. It is not clear that the regulation of drip pricing is, in substance, a matter of federal jurisdiction if it is not otherwise misleading – and if it is misleading we already have a law.
Similarly, it will be necessary to consider any extra-territorial effects. What if a consumer chooses to shop on a company’s .com or .uk site where the rules related to pricing disclosure might be different. Will Canada seek to punish foreign companies operating foreign websites that are available to Canadian customers?
Consistent enforcement of the existing provisions of the Competition Act that sets a level playing field across industries can be very effective in protecting competition, as demonstrated in the rental car, telecom and ticketing cases.
These issues and concerns require consultation with relevant stakeholders, which can only improve this proposed legislation and may help avoid unnecessary pitfalls.
Joshua Krane and James Musgrove are partners in the competition and antitrust group at McMillan LLP.
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The views expressed here are those of the authors. The C.D. Howe Institute does not take corporate positions on policy matters.