Canada's Spring Cleaning: 2024 Federal Budget Targets Junk (Fees) And Other Cleanup Efforts

On April 16, 2024, Chrystia Freeland, Canada's Deputy Prime Minister and Minister of Finance, presented the federal government's 2024 budget (the "Budget"). Since (and even before) the Budget was released, many of its items have received significant promotion, media attention and commentary.

Others, however, appear to have flown somewhat under the radar. Of particular interest are the Budget's implications for advertisers and businesses catering to consumers.

For merchants engaging with Canadian consumers, the main takeaway is the government is intensifying its efforts to tackle "junk fees" – i.e. hidden charges or fees for goods and services that surprise customers at checkout. The Budget report emphasizes, "[t]ransparency on all fees up-front is essential so that businesses do not deceptively advertise lower prices than what Canadians will actually pay."

To tackle junk fees head-on, the federal government has identified the various areas for regulatory action, including notably:

Broadening the prohibition on drip pricing in the Competition Act

The government intends to take action against drip pricing (the practice by which certain fees or charges are excluded from an advertised price, and incrementally revealed during the purchasing process, "dripping" into the final price) via Bill C-59 "by strengthening prohibitions against the digital marketing of unattainable prices without the inclusion of mandatory fees."

Since 2022, the Competition Act has explicitly prohibited drip pricing. Bill C-59, to which the government refers in the Budget, is not new – it underwent its first reading in the House of Commons in November 2023, and is currently in pre-study by the Senate. If adopted, it would add a provision to section 74.011 of the Competition Act (which prohibits false or misleading representations in electronic messages), clarifying that drip pricing is a form of misrepresentation.

This would parallel the current structure of section 74.01, which prohibits misrepresentation in promoting business interests more generally, and clarifies that drip pricing is a form of misrepresentation. Thus, readers should exercise caution – the Competition Act as it currently stands broadly prohibits drip pricing, and the proposal in Bill C-59 would appear to clarify, rather than introduce such a prohibition.

Increased private enforcement risks for businesses

The Budget also notes that the government intends to allow "Canadians to bring deceptive marketing claims directly to the Competition Tribunal."

If adopted, Bill C-59 would create what amounts to a form of private right of action akin to a class action (without the existing certification process for class actions) by allowing the Competition Tribunal to grant leave for a private action in respect of the deceptive marketing provisions where the Tribunal deems it "in the public interest to do so." An award for payment not exceeding the value of the benefit derived from the conduct that is the subject of the order, would be distributed among the applicant and any other person affected by the conduct.

Increasing transparency in airline fees

The government intends to foster better transparency in fees charged by airlines to consumers for optional services – such as seat selection, checked and carry-on baggage, meals and in-flight entertainment.

The Budget states the government will do so "by working with the Canadian Transportation Agency and airlines to ensure these fees are clearly laid out," but does not elaborate on how this will be done, what will be required of airlines or whether legislation will be adopted in this regard.

We note that the aim does not appear to be prohibiting airlines from charging fees for these services, but rather to ensure that they are set out in a way that offers "full transparency about the full cost of [a] flight."

Implementing new rules governing telecommunication providers

The government intends to amend the Telecommunications Act to allow more liberty to Canadian consumers in renewing or switching between home internet, home phone and cell phone plan providers by:

• Prohibiting carriers from charging consumers extra fees to switch carriers.
• Requiring that carriers help consumers identify plans, which may include lower-cost plans, in advance of the end of a contract.
• Requiring that carriers provide a "self-service option," such as an online portal, for customers to easily switch between or end plans with a provider.

The Budget further notes that the Canadian Radio-television and Telecommunications Commission (CRTC) will be tasked with implementing these measures and "will consult on specific requirements." No further details are provided regarding whether the aforementioned CRTC consultations will seek input from Canadian telecommunications providers when implementing these measures or what these measures will require in practice.

Restricting bank fees

The Budget also announced several new restrictions on the fees that banks will be permitted to charge. These include, notably, the intent to cap non-sufficient funds fees ("NSF fees") at $10 per instance. The government also intends to require banks to alert consumers when an NSF fee is about to be charged, and to provide a grace period during which consumers can deposit the requisite funds to avoid the charge.

The government also announced its intention to prevent banks from charging multiple NSF fees when the same transaction reoccurs, and to limit them to charging one NSF fee per 72-hour period.

The Budget states that draft NSF fee regulations will be released in the coming months. It is not, however, currently known whether these will include requirements beyond those stated above.

For additional information on how Budget 2024 will impact financial services, see our commentary here.

Working with provinces and territories to prohibit junk fees

The Budget notes that in addition to the above, junk fees often occur in areas under provincial jurisdiction. The federal government therefore intends to "cal[l] on all orders of government to do their part to cut junk fees," and work with provinces and territories to "identify and target" junk fees. It also states that the Federal Office of Consumer Affairs will work to "reveal deceptive junk fee practices — wherever they exist in Canada — by advancing research and advocacy projects."

It is unclear what form the above will take, or whether it will lead to changes to provincial legislation, a matter which is, of course, of provincial jurisdiction. Currently, Quebec is the only province that has adopted legislation similar to the federal drip pricing prohibition – though as above, we would note that: i) the existing federal prohibition on drip pricing applies nationwide, and ii) misleading representations, including misrepresentations as to price, are broadly prohibited nationwide.

Under Quebec's Consumer Protection Act, a merchant is explicitly prohibited from charging a price higher than that advertised, subject to very limited exceptions. In other words, Quebec effectively prohibits a merchant from excluding mandatory fees from advertised prices. It remains to be seen whether other provinces will follow suit, or what other measures will be implemented with regards to junk fees.

It is also currently unclear what the government considers to be a "junk fee" that is not already captured by the existing prohibition on "drip pricing" – which we stress is already in force nationwide.

Encouraging regulation of concert and sports ticket sales

In addition to the general undertaking above, the federal government states specifically that it will work with provinces and territories to encourage them to adopt best practices in the sale of concert and sports tickets (which falls under provincial, rather than federal, jurisdiction), notably prioritizing the three following goals:

• Transparency: Mainly achieved through upfront, all-inclusive pricing.
• Protection against excess fees: Notably, for timely refunds when events are cancelled.
• Regulation of fraudulent selling and reselling practices: Notably, unfairly driving up prices (which can be achieved by using bot technologies maliciously to buy and resell tickets).

Developing a right to repair framework for consumer devices and appliances

Moving away from fees, but still in the vein of protecting consumers, the Budget announces that in June 2024, the federal government intends to launch consultations aimed at developing a "right to repair framework" for home appliances and consumer electronics. This framework "will focus on durability, repairability, and interoperability".

It notes that further details on the right to repair framework will be announced in the coming months.

Last year, Quebec introduced similar legislation in the form of Bill 29, An Act to protect consumers from planned obsolescence and to promote the durability, repairability and maintenance of goods. This expansive Bill introduced, amongst other things, a statutory warranty of good working order applicable to many consumer goods (including, notably, appliances and consumer electronics) and a prohibition on planned obsolescence. In the Budget, the federal government refers to Quebec's Bill 29 as an example, and calls on other provinces to follow suit in adopting similar legislation.

One item that is notably absent from the Budget is a reference to the iZEV program offering incentives to purchasers of electric vehicles. In its budget last month, Quebec announced that it was phasing out its EV incentive program, leading to speculation on whether Ottawa would do the same. The Budget does not however, address the federal incentive program. That said, the federal program is currently set to run until the end of March 2025 (unless funds are depleted sooner); the government has not yet confirmed whether it intends to terminate the program at this time, or whether it will be extended.

Overall, Budget 2024 outlines numerous intentions and general priorities of the federal government, yet provides limited details on the substantive or practical implications of these areas. It remains to be seen how the government will proceed with the action items outlined, whether it will successfully persuade the provinces to enact changes in areas under provincial jurisdiction and what this will mean for businesses that advertise to or transact with Canadian consumers.

Gowling WLG continues to monitor the government's proposed action items, and we will provide relevant updates as they become available.

Consult our analysis of other aspects of Budget 2024:

• Federal Budget 2024: Tax measures for a changing voter demographic
• Embracing innovation, managing risk: How Budget 2024 may affect financial services and technology in Canada
• International trade bulletin: Key updates from Canada's Budget 2024
• Will the federal budget offer a glimpse into the future of financial services?
• The Canadian Mortgage Charter: A 2024 uplift
• Our North, Strong and Free: A Renewed Vision for Canada's Defence

Read the original article on GowlingWLG.com

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