On June 5, 2024, the Competition Bureau (the "Bureau") announced that they had come to an agreement with Sirius XM Canada, a Canadian broadcasting company which distributes the American satellite radio provider Sirius XM's services in Canada ("Sirius"), with respect to price representations and more specifically, "drip pricing".1
About drip pricing
Drip pricing is a practice where a representation is made about a price, but this price is not actually correct because there are other fixed obligatory charges or fees that the consumer must pay.2 This constitutes a false or misleading representation (unless the mandatory charges or fees are imposed by an act of Parliament or the legislature of a province), contrary to the Competition Act3(the "Act").
Indicators of drip pricing include:
- The price that consumers see is not what they ultimately will pay;
- The actual total cost of a product or service is not straightforwardly indicated;
- There are additional unexpected charges for a good or service 4.
About Sirius' practices
In this case, Sirius had advertised and promoted outside of Quebec, their satellite radio and streaming subscription plans at specific prices which were not actually available because subscribers would also have to pay an extra mandatory fee, namely, a music royalty and administrative fee. This additional fee (which was not imposed by law directly on consumers) increased the advertised subscription price by 10% to 20% more per month.5
Following an investigation, the Bureau concluded that these practices contravene the Act. In particular, the Bureau was of the view that Sirius' representations created a materially false or misleading impression that consumers could purchase their subscription services at the price represented, whereas consumers were also required to pay the music royalty and administrative fee, an additional obligatory non-governmental fee.
Although Sirius did not agree with the Bureau's conclusions, it nonetheless agreed to a Consent Agreement with the Bureau to resolve the concerns identified by the Bureau. As part of this agreement, Sirius agreed to: (i) pay a $3.3 million penalty and an additional $30,000 for the costs of the Bureau's investigation; (ii) not engage in drip pricing, nor promote subscription plans at prices that are not attainable; and (iii) enhance its compliance program and implement new procedures to comply with the law.
Key takeaways
Drip pricing is an issue that has not only affected Sirius. It has also led the Bureau to take action against this practice in various industries including the car rental, online sporting and entertainment ticketing industries.6 The penalty enforcement on Sirius XM's practices indicates that drip pricing is an issue that the Bureau aims to take seriously.
We will be following developments on "drip pricing" practices closely. Please do not hesitate to contact members of our Advertising and Marketing Law team if you have any questions regarding "drip pricing" and the Competition Act more generally.
Footnotes
*Caroline Jonnaert is a lawyer, trademark agent and principal at ROBIC. Samantha Spector is an articling student at ROBIC.
2 Competition Act, R.S.C., 1985, c. C-34.
3 Id.
4 Competition Bureau Canada, "The ambush of hidden fees" (May 15, 2024)
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