Drip Pricing and Misleading Representations: Lessons from Cineplex v. Commissioner of Competition

Generally, advertising law in Canada is governed by the Federal Competition Act. The purpose of the Act is to maintain and encourage competition in Canada so as to promote the efficiency and adaptability of the Canadian economy. The provisions of the Act directed at misleading representations aim to improve the quality and accuracy of marketplace information and discourage deceptive marketing practices. The Act applies to all kinds of advertising including online representations. A recent decision of the Federal Court of Appeal, which confirmed a penalty of more than $38,000,000, may cause interested parties to take compliance more seriously, particularly concerning the pricing practices. Cineplex Inc. v. Commissioner of Competition 2026 FCA 10

The Facts

Moviegoers who want to see a film at a theatre operated by Cineplex Inc. have two options: they can purchase a ticket at the theatre, or they can purchase their ticket online through Cineplex’s website or mobile application. If the moviegoer chooses to purchase their ticket online, they may be subject to an “Online Booking Fee”. The amount of the Online Booking Fee has not changed since it was introduced in 2022. The Online Booking Fee generated just under $11.7 million in revenue for Cineplex in 2022 and $27.3 million in 2023, being the period under review in this case.

The Decision of the Tribunal

The Commissioner of Competition filed an application with the Competition Tribunal alleging that Cineplex had engaged in reviewable conduct by making pricing representations to the public that were false or misleading in a material respect. Cineplex promoted movie tickets to the public on its website and on its mobile app at prices that were not attainable because consumers purchasing tickets online had to pay the Online Booking Fee in addition to the represented ticket price. The Commissioner alleged Cineplex’s conduct breached the prohibition on false or misleading representations contained in the Competition Act, as well as the prohibition dealing with “drip” pricing.

The Competition Tribunal said that it should not adopt the “credulous and inexperienced” consumer standard espoused in Richard v. Time Inc., 2012 SCC 8 (a case brought under provincial consumer protection legislation) as the legal standard to be used for the general impression test under section 74.01 and subsection 74.03(5) of the Competition Act. After considering the objectives of the Competition Act and the purposes of the deceptive marketing provisions the Tribunal concluded that “[t]he legal perspective for the general impression test should remain that of the ordinary consumer of the product or service, which may be refined according to the nature of the representation at issue, the characteristics of the members of the public to whom the representation was made, directed or targeted, the nature of the product or service involved, and the particular circumstances of the case”.

In careful and detailed reasons, the Competition Tribunal found that Cineplex had misled consumers with respect to the price of movie tickets by adding a fixed obligatory fee to tickets sold online, contrary to the drip pricing provisions of the Competition Act. The Tribunal further found that representations with respect to ticket prices appearing on Cineplex’s website and app were false or misleading in a material respect, again contrary to the Competition Act. The Tribunal allowed the Commissioner’s application and ordered that Cineplex cease engaging in its reviewable conduct for a period of 10 years. The Tribunal ordered that Cineplex pay an administrative monetary penalty in the amount of $38,978,000.00 within 30 days of its order, and that it pay the Commissioner’s costs of the Tribunal proceeding.

The Appeal to the Federal Court of Appeal

Cineplex appealed from the Competition Tribunal’s order, submitting that the Tribunal erred in its assessment of the general impression conveyed by, and the literal meaning of the representations made by Cineplex on its website and mobile app. Cineplex also argued that the Tribunal erred in concluding that Cineplex’s representations were false and misleading, and in its interpretation of the drip pricing provisions of the Act. Finally, Cineplex asserted that the Tribunal’s remedy was inconsistent with the text and purpose of the Act, and that it was punitive, disproportionate and unprecedented.

 The normal appellate standard of review applied to the appeal. The standard is correctness for questions of law or questions of mixed fact and law where there is an extricable question of law. Questions of fact and questions of mixed fact and law where no question of law is extricable are reviewable on the palpable and overriding error standard of review. An error is palpable when it is plainly seen and overriding when it affects the result. 

The Competition Act provides that

74.01 (1) A person engages in reviewable conduct who, 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,

(a) makes a representation to the public that is false or misleading in a material respect; [...]

(1.1) For greater certainty, the making of a representation of a price that is not attainable due to fixed obligatory charges or fees constitutes a false or misleading representation, unless the obligatory charges or fees represent only an amount imposed on a purchaser of the product referred to in subsection (1) by or under an Act of Parliament or the legislature of a province.

A Representation to the Public that Is False or Misleading in a Material Respect

The primary factual issue related to what information should be considered to be “the representation”. Should the Tribunal examine only the pricing information that would appear on a consumer’s screen when the consumer first arrived at the tickets page, without scrolling down, as the Commissioner contended or should the Tribunal have regard to the entire body of the webpage, including the text that the consumer would have to scroll down to reach, as Cineplex asserted.

Using language adopted from the newspaper business, the information appearing above the scroll point on a webpage was described as information appearing “above the fold”. Information only seen by scrolling down through the webpage was described as information appearing “below the fold”.

The Court has concluded that Tribunal made extensive factual findings with respect to the design and operation of the Cineplex website and mobile app that justified its conclusion that information appearing “below the fold” was hidden from consumers. This was the product of features that were deliberately designed by Cineplex to funnel consumers quickly towards the completion of the ticket purchase. These factual findings provided a clear and logical basis for the Tribunal’s conclusion that for the purposes of the general impression analysis, the four corners of “the representation” should be confined to the pricing representations appearing on the Tickets Page above the fold and without scrolling, and that the earlier jurisprudence dealing with print media (and the importance of the entire representation) was not applicable in modern dynamic digital environments.

The Court also concluded that the Tribunal did not err in finding that Cineplex had engaged in reviewable conduct, contrary to section 74.01(1)(a) of the Competition Act, by making a representation to the public that was false or misleading in a material respect.

Drip Pricing

Section 74.01(1.1) of the Competition Act creates a specific sub-category of false or misleading price representations and is aimed at pricing representations that have been divided into parts (or “partitioned”). Representations that are shown to satisfy the requirements of the section will be considered false or misleading, relieving the Commissioner of the burden of having to prove that this is so.

The Court concluded the Tribunal interpreted and applied section 74.01(1.1) in a manner that promoted market function, which is one of the purposes of the Competition Act. It carefully considered all of the evidence before it, as well as the context in which the representations were made—namely, the online setting. The Tribunal’s findings were, amply supported by numerous factual findings that it made, including its determination that the Tickets Page was designed to promote conversion to yield a ticket sale transaction online.

The Tribunal’s application of section 74.01(1.1) to the facts before it was careful and deliberate. It took all the evidence presented into account and provided a considered response to an issue of mixed fact and law. There is no palpable or overriding error in its analysis with the result that its finding with respect to drip pricing must stand.

The Administrative Monetary Penalty

After considering numerous factors set out in the Competition Act, the Tribunal imposed an administrative monetary penalty in the amount of $38,978,000. This amount was equivalent to the amount Cineplex collected from consumers from the introduction of the Online Booking Fees on June 15, 2022, until December 31, 2023.

The Court noted that that Cineplex continued to make the false or misleading price representations and to collect Online Booking Fees after December 31, 2023, right up to the time of the hearing before the Tribunal. There was also no suggestion at the hearing that Cineplex had stopped collecting Online Booking Fees, or that it would stop doing so after the hearing, and the evidence before the Tribunal justified the inference that these amounts would have been a significant sum.

The Competition Act authorizes the Tribunal to order that an individual or corporation that has engaged in reviewable conduct pay an administrative monetary penalty in any manner that the Tribunal specifies, subject to the monetary caps set out in the Act.

A review of the Tribunal’s reasons justifying the administrative monetary penalty that it imposed revealed that it carefully considered all of Cineplex’s submissions. It examined the factors favouring Cineplex, and those operating against it.

The Tribunal did not misdirect itself concerning the applicable law, and no palpable and overriding error on the part of the Tribunal was alleged. The Court was not prepared to substitute its exercise of discretion for that exercised by the Tribunal.

Comment

The decision emphasizes the importance of carefully reviewing pricing practices and related advertisements for compliance with the Competition Act before publishing them. This is particularly important for larger projects of a continuing nature especially when the involve “drip” pricing.

The decision is significant as reflected in the statement of Commissioner of Competition “The Tribunal’s decision in the Cineplex case is a resounding win for Canadians. It sends a strong message that businesses should not engage in drip pricing and need to display their full prices upfront. Businesses that fail to comply with the law risk significant financial penalties.”

If you have questions, please contact me at  jmckeown@LN.Law

John McKeown

Loopstra Nixon LLP.  

130 Adelaide St W Suite 2800Toronto, Ontario, M5H 3P5Canada

 jmckeown@LN.Law

437 290-5960

This article is of general nature and is not intended to provide specific legal advice as individual situations will differ. Specialist advice should be sought about your specific circumstances.