Competition Bureau’s ruling on drip pricing is a warning for online vendors

On February 13 the Competition Bureau struck another blow against so-called “drip-pricing” ticket-selling tactics when it slammed the deceptive online advertising, marketing and selling practices of StubHub Canada Ltd. and StubHub Inc. for failing to display the real price of the entertainment and sporting events tickets they sold upfront, instead augmenting prices through the addition of quasi-hidden mandatory fees.

The companies ultimately agreed to pay a $1.3 million administrative monetary penalty to the Commissioner of Competition as part of a Consent Agreement (“Agreement”) following the Bureau’s investigation and determination by the Commissioner of Competition/Competition Tribunal that the companies had made representations to the public that were false and misleading in a material respect and that they had engaged in conduct reviewable under the Competition Act (Canada).

As described in The Commissioner of Competition v. StubHub Inc., Stubhub Canada Ltd. (CT-2020-002), the Commissioner reviewed StubHub’s pricing for tickets advertised on its public websites, mobile applications and in promotional emails. The Commissioner concluded that StubHub promoted prices for tickets that were not attainable, and that consumers could not actually buy tickets at advertised prices because of the “non-optional” fees in addition to the prices advertised. These fees included “service fees,” “transactional fees,” “fulfillment fees,” “delivery fees,” “additional fees,” and other fees that were added to the prices described on checkout pages before the consumers could purchase the tickets. In fact, the prices shown on the checkout pages were often 28 per cent higher than the advertised price because of these fees.

Interestingly, while StubHub had given consumers an option to click or tap to “show prices with estimated fees," the Commissioner found that even when consumers chose to see these fees by turning the toggle on, they were still sometimes required to pay more than the price represented as inclusive of all estimated fees.

Significantly, the Commissioner concluded that even if StubHub had disclosed the amount of the “non-optional” fees later in the purchasing process (i.e., on the checkout page), such action did not mitigate StubHub’s earlier practices or prevent the sellers from engaging in “reviewable conduct” under the Competition Act. Overall, StubHub’s practices were found to be in contravention of paragraph 74.01(1)(a) of the Act, which states that a person engages in reviewable conduct if they, for the purpose of promoting, directly or indirectly, the supply or use of a product or for the purpose of promoting, directly or indirectly, any business interest, by any means whatever, including making a representation to the public that is false or misleading in a material respect.

StubHub was also found to have used email to engage in reviewable conduct, contrary to Section 74.011 of the Act, in sending misleading promotional email messages to consumers to promote their ticket sales, including making (i) a false or misleading representation in the sender information or subject matter information of an electronic message; and (ii) a representation that is false or misleading in a material respect. It should be noted that the Act does not care whether the electronic address to which an electronic message is sent exists or whether an electronic message reaches its intended destination; it’s the fact that StubHub sent the email messages that counted.

StubHub ultimately cooperated with the Commissioner and did not contest the Bureau’s and Commissioner’s findings (in exchange for more favorable terms). The company agreed to execute a Consent Agreement which once registered has the same force and effect as an order of the Competition Tribunal. In the Consent Agreement, StubHub agreed to make all necessary changes with their Canadian websites, mobile applications and email to ensure that consumers were shown complete prices inclusive of all non-optional/mandatory fees the first time that they were shown a price. StubHub was also required to intercept users identifiable as Canadians and require them at the outset to be redirected to the Canadian stubhub.ca website when searching for tickets on stubhub.com.

Additionally, StubHub was required, within 90 days of its execution of the Consent Agreement, to establish a compliance program and implement new procedures to comply with the law and prevent advertising issues in the future. Senior management of both companies — including the chief executive officer, chief operating officer, chief administrative officer, chief financial officer, managing directors and others — who have responsibility for advertising and marketing tickets must acknowledge their commitment to the compliance program by signing commitment letters. All current and future employees who are materially involved or responsible for developing, implementing or overseeing ticket advertising or marketing will be given copies of the Agreement and are expected to sign statements acknowledging their compliance with its terms.

StubHub has 10 days to notify the Commissioner of any breach or possible breach of any of the terms of the Consent Agreement, providing details sufficient to describe the nature, date and effect of the breach or possible breach, and the steps the company has taken to correct the breach or possible breach. The Consent Agreement is binding on StubHub for a period of 10 years following its registration.

This investigation and decision is consistent with recent Competition Bureau action to resolve consumer concerns relating to advertising of unattainable online prices. As the Bureau’s website noted, various Canadian companies, including Ticketmaster and several car rental agencies, have paid a total of $11.25 million in penalties since 2016 in connection with hidden fees. On July 4, 2017 the Bureau expressly issued a warning to all ticket vendors to be upfront about the true cost of tickets they made available for purchase and make all necessary corrections to their existing business practices to be frank regarding any mandatory fees.

This decision serves as a costly reminder to Canadian vendors who conduct business online that not only is pricing transparency the hallmark of good business practice, it is also a legal requirement for doing business with Canadian consumers, regardless of the media channel. Deceptive marketing practices, including false or misleading drip pricing, will not be tolerated.

As evidenced in the StubHub Consent Agreement, it also appears that the Bureau expects pricing transparency to exist throughout the purchasing experience. StubHub was not saved from findings of false or misleading practices or reviewable conduct by disclosing the non-optional fees at the later stages of the purchasing process, including on the checkout page.

Vendors selling goods and services to Canadian consumers online would do well to review their marketing practices in light of this decision and take all necessary steps to bring themselves in compliance lest they risk significant penalties.

This article was originally published in Canadian Lawyer magazine.