Why Car Rentals Cost More Than Advertised: Avis and Budget Taken To Task By Competition Bureau
March 11th, 2015
Canada’s Competition Bureau is accusing Avis and Budget of misleading consumers into thinking their rental car prices are lower than they actually are. The Bureau claims that prices are much higher because Avis and Budget require payment of “Non-Optional Fees” that are made to seem like they are taxes when they are not in fact required by the government. In an application filed with the Competition Tribunal, the Bureau is seeking an order prohibiting Avis and Budget from making misrepresentations about rental car prices, $10 million in administrative monetary penalties, and an order requiring Avis and Budget to reimburse its clients from March 2009 for that conduct. Aviscar Inc. and Budgetcar Inc./Budgetauto Inc. are private Canadian corporations owned by Avis Budget Group, Inc., a publicly-traded company registered in Delaware.
The allegation is that Avis and Budget promote their car rentals at prices or discounts that are simply not attainable. The addition of “Non-Optional Fees” benefit Avis and Budget by up to 35% above the advertised prices for its rental cars according to the Bureau. Some of the Non-Optional Fees charged by Avis include: Concession Recovery Fee, Premium Location Surcharge, Vehicle License Fee, AC Excise Tax, Energy Recovery Fee, Parking Surcharge, Ontario Environmental Fee and a dubious sounding “Tire Management Fee.”
Worse, the Competition Bureau alleges that Avis and Budget’s representations create the general impression that their Non-Optional Fees are taxes, surcharges or fees that governments and authorized agencies require rental car companies to collect from consumers when they are not. Rather, Avis’ Non-Optional Fees are charges that Avis itself chooses to impose on consumers to recoup part of its own cost of doing business. In an email on the topic, Budget wrote: “Please be aware that in addition to the base car rental rate customers are required to pay taxes, surcharges, and other rental related fees, which are mandated by the government and other authorized agencies. All rental companies, including Budget, must collect them in order to continue to provide the appropriate services to our customers.” These explanations by Avis and Budget – in fine print or otherwise – did not seem to help alleviate the concern that the Non-Optional Fees were not taxes.
As a result, advertisements such as one from Avis in 2001 that promised a two-day weekend rental for $55 plus $21 for additional days was allegedly false or misleading in a material respect because it was not possible for a consumer to obtain a that rate as a result of the Non-Optional Fees. The same alleged misrepresentations were made on the Avis and Budget websites, on mobile applications (apps), and in television advertising.
The Competition Bureau is also alleging that there are aggravating factors are the length of time of the alleged misrepresentations, the considerable size of Avis and Budget business in Canada, and the $35 million collected by Avis and Budget in Non-Optional Fees since 2009.
In a similar case, Bell Canada agreed to pay a $10 million fine on the basis that since December 2007, Bell charged higher prices than advertised for many of its services, including home phone, Internet, satellite TV and wireless. The advertised prices were not in fact available, as additional mandatory fees, such as those related to TouchTone, modem rental and digital television services, were hidden from consumers in fine-print disclaimers.
Canada’s Competition Law on False or Misleading Representations
The Competition Act contains provisions addressing false or misleading representations and deceptive marketing practices. If a representation could influence a consumer to buy or use the product or service advertised, it is material using the “general impression” it conveys.
The Act provides two adjudicative regimes to address false or misleading representations and deceptive marketing practices: one criminal and the other civil. In this case, the Competition Bureau is proceeding under the civil regime. Under that regime, the general provision prohibits all materially false or misleading representations. Other provisions specifically prohibit performance representations that are not based on adequate and proper tests, misleading warranties and guarantees, false or misleading ordinary selling price representations, untrue, misleading or unauthorized use of tests and testimonials, bait and switch selling, and the sale of a product above its advertised price. The promotional contest provisions prohibit contests that do not disclose required information.
The Bureau says that false or misleading representations and deceptive marketing practices can have serious economic consequences, especially when directed toward large audiences or when they take place over a long period of time. They can affect both business competitors who are engaging in honest promotional efforts, and consumers.