Get ready for more cases tackling misleading fees after Cineplex ruling, expert says

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This article was published 24/09/2024 (743 days ago), so information in it may no longer be current.

TORONTO – After Cineplex Inc. was charged a record $38.9-million fine late Monday, experts have a message for other companies adding fees to just about everything sold online: watch out.

The experts say Canada is likely to see regulators eye other businesses after the theatre operator was admonished by the Competition Tribunal for drip pricing, a practice where customers are drawn into a purchase without full disclosure of the final cost.

The Competition Bureau’s case against Cineplex related to a $1.50 charge many customers were forced to pay when purchasing movie tickets online, but Vass Bednar said the cinema owner, which is appealing the ruling, is far from the only company whose pricing practices could become fodder for the watchdog.

“There’s all these ways that consumers are exploited. It’s kind of like a death by 1,000 cuts online,” said Bednar, the executive director of McMaster University’s master of public policy program.

“We see an airline price or a train price or a bus ticket or a concert ticket advertised as being a certain amount that lures us in and then all these other fees … are added on and it’s just kind of really deflating.”

Consumers have long griped when they watch their final purchase price tick up because of fees added on during checkout, but over the last decade, the phenomenon has attracted increasing attention from regulators.

In the last few years, the Competition Bureau has taken action against several companies it alleged were engaged in drip pricing, including SiriusXM Canada, Discount Car & Truck Rentals Ltd. and TicketNetwork.

While some might think it’s “silly” for the bureau to pursue instances like the Cineplex case where people were charged such nominal fees, Bednar says it’s important to protect Canadians and signal to companies that the watchdog is “serious about enforcement.”

“I think it shows that there’s no issue too big or too small for the Competition Bureau to go after on behalf of Canadians,” she said.

The bureau’s efforts have been aided by amendments that were made to the Competition Act in June 2022 and designed to recognize drip pricing as a harmful business practice.

The ruling Monday marked the first case to be decided under the new version of the act, which upped the potential penalty for a first infraction from $10 million to three per cent of a company’s global revenue, said Kelly Harris, an advertising and marketing lawyer at Harris + Co.

The previous record for a civil penalty in a misleading advertising case was $10 million charged to Bell in 2011, and the largest administrative monetary penalty was an $8 million total Yellow Page Marketing and related companies had to pay in 2012, bureau spokesperson Marianne Blondin said Tuesday.

The $38.9-million administrative monetary fine assigned to Cineplex, which has maintained it has been upfront about fees, is equivalent to the amount the company collected from consumers through the $1.50 online booking fee between June 2022 and December 2023.

With fees so common in the course of business and digital avenues making it easier to calculate how much harm they create, Harris said, “I’m sure the business community is watching this (case) with great interest, including the appeal.”

If the federal court of appeal affirms the tribunal’s ruling, Slater Vecchio LLP partner Saro Turner said it will be “like the nail in the coffin.”

“There’s going to be a lot of price dripping cases,” he said, adding further changes to the Competition Act slated to come into effect in June would further boost the ability to bring deceptive marketing allegations forward.

Any more that are pursued would come on top of a wave the legal system and regulators are already facing.

Slater Vecchio alone is pursuing a class action against Cineplex over the same $1.50 online booking fee but has also pressed on with drip pricing allegations against florist Bloomex and travel site Omio.

To avoid a similar fate, Turner said other companies should take note of the Cineplex case and consider whether their fees or marketing practices could also run afoul of the act.

“If I were a vice-president of marketing or whatever in some big business, I would be asking my lawyer, ‘Hey, do we need to change this?'”

This report by The Canadian Press was first published Sept. 24, 2024.

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