Drip pricing involves offering a product or service at a price that is unattainable because consumers must also pay additional charges or fees to buy the product or service. Drip pricing is considered to be false or misleading under the law, unless the additional fixed charges or fees are imposed by the government, such as sales tax.
General impression test
When deciding whether a pricing representation raises concerns under the Competition Act, the court considers both the literal meaning of the information and the general impression it makes. This is known as the “general impression test.”
Penalties and remedies for non-compliance
The consequences associated with being found to have engaged in deceptive marketing practices depend on whether the conduct falls under the civil or criminal provisions of the Competition Act.
Civil provision: If a person engages in conduct contrary to subsection 74.01(1)(a) of the Competition Act, the court may order the person to stop engaging in such conduct, to publish a corrective notice, and/or pay an administrative monetary penalty.
For individuals, the penalty for first-time violations is up to the greater of:
- $750,000 ($1 million for each subsequent violation); and
- three times the value of the benefit derived from the deceptive conduct, if that amount can be reasonably determined.
For corporations, the penalty for a first-time violation is up to the greater of:
- $10 million ($15 million for each subsequent violation); and
- three times the value of the benefit derived from the deceptive conduct, or, if that amount cannot be reasonably determined, 3% of the corporation’s annual worldwide gross revenue.
The court may also make an order for restitution that requires the person to compensate consumers who bought such products and, in certain cases, may issue an interim injunction to freeze assets.
Criminal provision: Knowingly or recklessly making a false or misleading representation contrary to section 52 of the Competition Act.
- Summary conviction: Fine of up to $200,000 and/or imprisonment for up to one year.
- Conviction on indictment: Fines are at the discretion of the court and imprisonment can be for up to 14 years.
Having a credible and effective compliance program can provide benefits in dealing with the Competition Bureau to resolve a violation of one of the legislation it enforces. A compliance program can also help:
- reduce the risk of potentially illegal conduct
- protect your brand and reputation
- detect instances of potentially illegal conduct at an early stage
- identify when others might put you at risk
To find out more information on written opinions under section 124.1 of the Competition Act, contact the Bureau’s Information Centre toll-free at 1-800-348-5358 or online. If a written opinion is provided by the Commissioner, a fee will apply based upon the section of the Act the proposed conduct or practice applies to. A written opinion is binding on the Commissioner as long as the facts submitted are accurate, and it remains binding if the facts on which the opinion is based remain substantially unchanged and your conduct or practice is carried out as proposed. All fees and service standards for written opinions are set out in the Competition Bureau Fee and Service Standards Policy.