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Competition bureau goes after Avis and Budget for misleading advertising

competitionbureauThe Competition Bureau (the “Bureau”) announced in March 2015 that it has initiated proceedings against Aviscar, Budget and their parent company, Avis Budget Group Inc. (collectively, the “Companies”). The Bureau alleges that the Companies engaged in false or misleading advertising in that they advertised misleading prices to consumers. The Bureau’s application seeks, among other remedies, a total of $30 million in administrative monetary penalties (“AMPs”) and refunds to affected customers.

Overview

In its application to the Competition Tribunal (the “Tribunal”), the Bureau alleges that the Companies made false or misleading representations to the public regarding the prices consumers must pay to rent vehicles and associated products in Canada. Specifically, the Bureau alleges that the Companies required consumers to pay additional “non-optional fees,” which they represented as being taxes, surcharges and/or fees mandated by third parties despite the fact that the Companies chose to pass these costs on to consumers to recoup part of their own cost of doing business. According to the Bureau, these “non-optional fees” increased the cost of a car rental by up to 35% – in other words, the advertised price was not attainable given these “non-optional fees.”

The materials filed by the Bureau include multiple examples of advertising by the Companies across a variety of platforms including newspapers, flyers, websites, mobile applications, oral representations (e.g., at rental locations and customer service scripts), television commercials, and electronic messages (e.g., e-mails).

The Bureau also notes several aggravating factors:

  1. The national reach of the Companies’ conduct;
  2. The Companies made the same or similar representations frequently and over an extended period of time;
  3. The Companies’ representations were material to consumer purchasing decisions;
  4. Self-correction is unlikely to remedy adequately or at all the Companies’ conduct; and
  5. The Companies have collected more than $35 million in “non-optional fees” from their customers since March 2009.

Key takeaways

This case is noteworthy for several reasons. First, it signals that misleading advertising continues to be a priority enforcement area for the Bureau. Second, as evidenced from the AMPs being sought, the Bureau will seek to impose significant financial consequences against businesses it believes have engaged in misleading advertising (in addition to reputational harm). Third, businesses need to ensure that the pricing information disclosed to consumers is clear, including with respect to additional/mandatory fees that will be applied at the time of purchase.

Additionally, the Bureau scrutinized the Companies’ allegedly misleading advertising representations on multiple advertising channels (i.e., print, digital, etc.) – this should encourage businesses to take a holistic approach when assessing compliance with applicable Canadian laws (i.e., Competition Act, CASL, privacy laws, consumer protection).

For a copy of the Bureau’s press release regarding the threshold, please click here.
For a link to the Bureau’s application to the Competition Tribunal, please click here.

Imran Ahmad, Chris Hersh, Cassels Brock & Blackwell LLP

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