CANADA – Allegations of “Add-on pricing”, or “drip pricing”, have become a hot topic in recent years as consumers have moved towards making more purchases online. Drip pricing can be thought of as the incremental disclosure of additional fees. Bit-by-bit, these add-ons can cause a discrepancy between the final price of an item and the original listed price. One common example is the addition of airline baggage fees, which can dramatically increase total airfare prices. Other examples of drip pricing include:
- delivery fees for event tickets;
- municipal taxes charged by hotels;
- rental car insurance fees; and
- bank withdrawal fees.
While the concept of drip pricing has existed for some time, the advent of e-commerce has given rise to increased litigation and regulatory risk for businesses selling online services and products. Website interface design allows businesses to be more flexible in how they display and structure their pricing, however, the same flexibility can lead to pitfalls, prompting consumers to respond with class proceedings based on allegations of deceptive marketing practices.
Recently, in Finkel v Coast Capital Savings Credit Union, the British Columbia Court of Appeal upheld the certification of a class action brought on behalf of consumers who were subjected to undisclosed fees. In the Finkel litigation, the plaintiff is claiming that foreign currency charges on withdrawals outside of Canada offend the province’s consumer protection legislation. This decision follows a number of other certification orders in British Columbia for similar consumer and competition class actions, making the province a popular location for plaintiffs’ counsel looking to commence a national proceeding. While Canadian “undisclosed fee” class-actions have been most common in the financial services sector, other industries have been affected as well.
Drip pricing concerns have also given rise to regulatory proceedings and compliance issues. Businesses facing allegations of anti-competitive conduct relating to drip pricing may face scrutiny from the Canadian Competition Bureau. For example, in recent years, car-rental companies have agreed to pay administrative monetary penalties to settle prosecutions under the Competition Act. These penalties have been as high as $3 million and have been accompanied by the requirement of commitments to implement compliance procedures. The Competition Bureau has also taken aim at furniture retailers for deceptive marketing practices relating to ‘buy now, pay later’ options, which were accompanied by additional up-front fees.
Internationally, responses to drip pricing have been mixed. Australia in particular has become a hotspot for legal proceedings with plaintiff-side law firms considering actions against major airlines on the basis of hidden booking and service fees. The Australian Competition and Consumer Commission has also launched proceedings to stop the practice of incremental fee disclosure. In contrast, the EU and UK have approached the issue primarily through new legislative measures. In the US, the hospitality industry has come under fire, with the Federal Trade Commission warning hotels about drip pricing in relation to “resort fees” – a number of undisclosed fees class actions have also been commenced.
Businesses with an international presence must keep apprised of the advertising and pricing rules of the various jurisdictions in which they operate. Mounting civil litigation and regulatory risks call for appropriate compliance measures responsive to the needs of each jurisdiction, and thoughtful consideration of how e-commerce platforms display pricing to customers.