The Competition Bureau (the “Bureau”) recently released a new volume of its Deceptive Marketing Practices Digest (the “Digest”). The purpose of the Digest is to provide businesses with guidance on how to comply with the Competition Act (the “Act”) when marketing their products and services, and each volume focuses on a few specific types of advertising practices. This sixth edition of the Digest discusses two main topics: (i) the use of scarcity cues in online marketing and (ii) drip pricing and other types of variable fees.
Scarcity cues are claims or representations that suggest limited availability of a product or service. They are designed to create a sense of urgency in consumers and persuade them to make a quick decision before the offer is gone. Scarcity cues can take various forms, including, for example, claims that only a small amount of stock is left; claims that certain prices are available for a limited time; claims that a certain percentage of stock has already been purchased; and claims of how many other people are currently viewing or interested in the same product. Notably, the use of scarcity cues is not always harmful to consumers. In fact, when accurate and not misleading, such cues can provide consumers with important and helpful information.
While scarcity cues can be a useful marketing tool when used truthfully, the Digest highlights that some businesses use false or misleading scarcity cues. For example, businesses may use plug-ins that display remaining inventory to customers on popular online retailing websites. However, some of these inventory counters are not linked to inventory levels and instead generate random or arbitrary numbers that are entirely unrelated to actual inventory levels.
The Digest notes that businesses must ensure that their marketing practices comply with the Act and are not deceptive or misleading. In particular, with respect to scarcity cues, the Digest notes that while businesses can warn customers that a product or service is somehow limited, they should not do this if the information is not accurate. The Digest also highlights that even if a scarcity clue is technically true, it may still be misleading when considering the general impression.
The Digest goes on to emphasize that scarcity cues are likely to have a material impact on consumers’ purchasing decisions, and as such should be given careful consideration by businesses.
Drip Pricing and Variable Fees
Drip pricing involves advertising a price that is not attainable due to additional fees or mandatory charges. As discussed in our previous blog post, the recent amendments to the Act added provisions that deem drip pricing to be false or misleading representations, unless the obligatory charges or fees represent only an amount imposed by or under an Act of Parliament or the legislature of a province.
Notably, with these new provisions in effect, the Bureau no longer needs to prove that drip pricing is false or misleading, as it did previously when pursuing a case under the general false or misleading representations provisions of the Act.
The Digest highlights the new drip pricing provisions, and goes on to caution businesses with respect to other types of variable fees, which, while not specifically drip pricing, may similarly be considered false or misleading under the Act. The Digest warns that “it is crucial for businesses to remember that if the general impression conveyed by a price claim is false or misleading in a material respect due to the existence of variable fees, the conduct would still raise issues under the Act”. Similar to drip pricing, the general impression conveyed by a price claim could be false or misleading in a material respect due to the existence of variable fees.
The Digest provides examples of previous drip pricing investigations, including in the car rental industry in 2015, and the online sporting and entertainment ticketing industry in 2017.