Competition Act update offers much-needed clarity

Hey there, time traveller!
This article was published 09/05/2022 (1391 days ago), so information in it may no longer be current.

Planning a summer vacation, you peruse online sites and find good deals on plane fares, a rental car when you land, a hotel room and a special concert to cap off your holidays. The online deals seem within your budget, and you’re reaching for your credit card.

But wait. Dig a bit deeper into the websites, and the initial advertised prices swell considerably as the fine print discloses that the airline charges extra for baggage, the rental-car firm bills extra for insurance, the hotel has parking fees and the concert-ticket seller has various service charges.

It’s called drip pricing, a practice in which only part of the price of an item or a service is initially advertised with the aim of luring buyers. Bit by bit, drip by drip, like drops from a faucet, the unavoidable fees are revealed and the final total is only disclosed at the end of the buying process.

In a legislative initiative that will likely be welcomed by all consumers who feel they’ve been sucked in by deceptive advertisements that hide add-on fees, the federal government aims to stop the dripping. It has released draft amendments to update the Competition Act to include legal prohibitions on the incremental disclosure of additional fees.

Drip pricing has become increasingly common in the online world of e-commerce, where slick presentations of initial sale prices make an item seem less expensive than a competitor’s matching item, until the potential consumer goes deep into the process and finds buried fees for mandatory add-ons including “facility fees” and “service charges.”

The government’s goal to update the law to require businesses to inform customers up-front about total costs has not come without negative feedback.

Critics have pointed out that current advertisement laws are already adequate; they just need to be more diligently enforced. It’s true the Competition Bureau, Canada’s enforcement agency, has in recent years successfully secured settlements of millions of dollars from furniture retailers, ticket sellers such as Ticketmaster, and car-rental firms such as Avis and Budget.

But bureau spokespeople have said they need the tougher prohibitions in the strengthened Competition Act to make it easier to win drip-pricing cases without lengthy court cases in each instance.

What remains to be seen, and what many retail firms are awaiting, are the precise details of amendments to the act that could prohibit some current forms of advertising.

How can the “final price” be immediately advertised to consumers when add-on fees can vary, depending on factors such as whether delivery or installation is required, whether more than one item is being purchased, or whether the consumer is entitled to a discounted price through a loyalty account with the business?

Is the advertiser obliged to total up and display the “final price,” or will it be sufficient to display the different fees adjacent to the base price?

Why do the updates to the Competition Act provide an exemption for government fees, such as taxes? If the goal is to provide consumers with the full price of goods and services at first glance, why are the government taxes on goods such a shoes or bicycles not revealed until the consumer is at the till? Shouldn’t government taxes be included in initial price, as they are when purchasing gasoline?

While many details remain to be worked out, the direction of the draft amendments remains commendable: give consumers more complete information at first glance. Canadians deserve to know the prices they see online are the prices they will pay.