Bottom Line: In March of this year, the Quebec Superior Court authorized a class action by Quebec members of the Pharmaprix Optimum® Rewards Program. One by one, loyalty programs are being challenged in court for changing their program benets. (Please see the article on the Aeroplan program as well.)
The class action was filed by Option Consommateurs against Pharmaprix Inc., Shoppers Drug Mart Inc., Shoppers Drug Mart Corporation and 911979 Alberta Ltd. (collectively, "Shoppers Group"), for their decision to reduce the value of points accumulated in the Pharmaprix Optimum® Program (“Program”). The change, the plaintiffs contend, was made without prior notice and in a unilateral, illegal, abusive and retroactive manner.
It all goes back to July 1, 2010, when the Shoppers Group allegedly retroactively reduced the value of points accumulated by members when shopping at participating stores. By way of example, before the modification, it took only 7,000 points to receive a $10 discount on their purchases, while after the change, 8,000 points were needed.
Unless an agreement is reached between the parties, the proceedings before the Superior Court of Quebec in about two years will be quite interesting. Questions of fact and law, such as the following will have to be determined:
- Is the contract between the parties one of adhesion and/or a consumer contract?
Among other things, if the contract is found to be a consumer contract within the Consumer Protection Act (“CPA”), the plaintiffs will enjoy the CPA’s broader protection. If the CPA does not apply, article 1384 of the Civil Code of Quebec (“Civil Code”), which deals with consumer contracts, may be invoked. The Civil Code oers more limited protection than the CPA, as the Civil Code is rooted in the principle of freedom of contract where two parties have equal bargaining power, while the CPA addresses consumers who are sometimes on unequal footing in their relationships with merchants.
- Is the provision in the Program Terms and Conditions, which allows the Program managers to restrict, suspend or alter any aspect of the Program without notice (Clause 45), unreasonable?
- Does the Program managers’ use of Clause 45 to change the points system constitute an abuse of right or a breach of their duty of good faith?
- Did the change made by the Program managers breach the warranty of conformity under the CPA?
- If the Court recognizes the application of the CPA, Option Consommateurs could benefit from the CPA’s implied warranty that the goods or services provided will conform to their description in the contract. The Civil Code also contains this legal requirement in the context of the sale of goods, but that provided by the CPA is farther-reaching. Under the CPA, a contractual agreement is not limited to the content of the written contract; it includes all the representations which influenced the consumer’s decision (i.e., verbal statements made by the merchant or his representative, as well as advertising).
- Are the plaintiffs entitled to seek punitive damages?
THE PARTIES’ POSITIONS
Option Consommateurs argues that the contract between members and the Shoppers Group is both a consumer contract and a contract of adhesion with a fixed term ending December 31, 2016, allowing the exchange of points until March 31, 2017.
It submits that Clause 45 of the Program Terms and Conditions is abusive and that its use would constitute an abuse of right or a breach of the duty of good faith. It also believes that by reducing the value of points retroactively, the Shoppers Group breached the implied warranty under the CPA. In addition to having Clause 45 declared void, Option Consommateurs is seeking compensatory damages for loss of the value of the points and $50 as punitive damages for each member of the Program.
It appears that the Shoppers Group’s position is that since the Program’s points have no pecuniary value (they cannot be exchanged for money), the contract is not subject to the CPA because there is no provision for payment as essentially required by the de nition of a consumer contract in the CPA; and that there is therefore no foundation for the claim for compensatory damages.
LET ME OUT!
It is interesting to note, incidentally, that each of Shoppers Drug Mart Inc., Shoppers Drug Mart Corporation and 911979 Alberta Ltd. attempted to remove themselves from the class action by arguing that Option Consommateurs had no legal relationship with them – other than through Pharmaprix Inc. It is only the latter, they argued, that off ers the Program in Quebec. The Court could not conclude that there was no legal relationship, however, since the Program allows a member resident in Quebec to use his or her Optimum card at Shoppers Drug Mart stores outside Quebec. Moreover, the Court considered that all the companies may have been involved in the decisions and actions that led to the change in the value of points.