Not Just a Drop in the Bucket: Competition Tribunal Orders Record-Breaking Penalty for Drip Pricing

By Jason Brisebois and Lauren Huxtable

On September 23, 2024, the Competition Tribunal ruled in favour of the Competition Bureau and found that Cineplex Inc. (“Cineplex”), the largest cinema chain in Canada, engaged in “drip pricing” by adding an online booking fee ranging from $1.00-$1.50 for tickets purchased online or through the Cineplex app. The fees were collected from June 2022 to December 31, 2023 (when the Competition Bureau initiated its investigation). The Competition Tribunal found that the online booking fee was misleading and contained drip pricing because the existence and the amount of the fee were not initially disclosed when consumers were making their purchases. Instead, it only became visible after the tickets were selected and the purchaser clicked to ‘proceed’ to the next screen.

Cineplex has been ordered to pay a record penalty of $38.5 million, equivalent to the amount it collected from consumers through the aforementioned $1.50 fee. Cineplex says it will appeal the decision to the Federal Court of Appeal.

What is drip pricing?

Drip pricing involves offering what appears to be low prices to attract consumers; but followed by the addition of further mandatory fees so that the original prices are unattainable. The mandatory fees can be for just about anything; including “processing fees”, “booking fees”, “cleaning fees”, and “administrative fees”, to name a few. The issue occurs when such fees are not disclosed to the consumer accurately and clearly, including by being excluded from the advertised price and then are incrementally revealed during the purchasing process – i.e. “dripping” into the final price.

This practice is against the Competition Act (the “Act”), unless the additional fixed charges or fees are imposed by the government on purchasers, such as sales tax. Amendments to the Act came into force on June 24, 2022, which explicitly recognize drip pricing as a harmful business practice.

The Takeaway

This ruling marks the first case in which the Competition Tribunal has applied the recently enacted drip pricing provisions, namely subsection 74.01(1.1) of the Act. It sends a strong message to Canadian businesses that it intends to enforce this new provision and the penalties for contravening it can be severe. To avoid potential drip pricing complaints and penalties, businesses should display their full prices upfront, including all incremental or additional fees.

If you have questions about your current advertising and marketing practices, in relation to drip pricing or any of the other recent additions to the Act, we’re happy to assist.

Jason Brisebois, Sotos LLP

Jason Brisebois is a partner in Sotos LLP’s corporate and franchise law groups. He has received multiple legal accolades, including being named in the “Ones to Watch” category by Best Lawyers in Canada. Additionally, he won the Lexology 2024 Client Choice Award for Franchising in Canada and was recognized as a “Legal Eagle” by Franchise Times Magazine. Jason can be reached directly at 416.572.7323 or jbrisebois@sotos.ca.

Lauren Huxtable, Sotos LLP

Lauren is an associate at Sotos LLP. She can be reached directly at 416.572.7318 or lhuxtable@sotos.ca.