CT-2018-005 THE COMPETITION TRIBUNAL IN THE MATTER OF the Competition Act, R.S.C. 1985, c. C-34, as amended; AND IN THE MATTER OF an application by the Commissioner of Competition for orders pursuant to section 74.1 of the Competition Act regarding conduct reviewable pursuant to paragraph 74.01(1)(a) and section 74.05 of the Competition Act;
BETWEEN: THE COMMISSIONER OF COMPETITION Applicant – and – LIVE NATION ENTERTAINMENT, INC., LIVE NATION WORLDWIDE, INC., TICKETMASTER CANADA HOLDINGS ULC, TICKETMASTER CANADA LP, TICKETMASTER L.L.C., THE V.I.P. TOUR COMPANY, TICKETSNOW.COM, INC., and TNOW ENTERTAINMENT GROUP, INC.
Respondents Reply 1. The Commissioner repeats and relies upon the allegations in his Notice of Application and, except as hereinafter expressly admitted, denies the allegations in the Response. Unless otherwise indicated, defined terms in the Reply have the meaning ascribed to them in the Notice of Application.
I. OVERVIEW 2. The Response alleges that the “standard” is for e-commerce businesses to engage in the same behaviour that the Respondents engaged in, an assertion that is untrue. The Respondents also assert that consumers cannot be misled by their price representations because consumers know that the price offered is not the actual price of a ticket, but rather the price of a “unit” that is some component of the ticket they market and supply. This flies in the face of the plain meaning of the
- 2 - Price Representations. It also ignores the fact that consumers do not know the true cost of the tickets until the Respondents choose to reveal that information after consumers select their tickets and try to complete their purchase.
3. Moreover, the Response ignores how consumers actually respond to the Respondents’ Price Representations, even though the Respondents’ own records demonstrate that they are fully aware of the effect that their pricing practices have on these very consumers. The Respondents’ own records reveal that, when consumers are faced with lower prices and then face fees that are later dripped, consumers “remember the base price (don’t want to do the math)” and “will not rationally combine different prices to work out bundle costs”.
II. THE RESPONDENTS’ PRACTICES ARE NOT “STANDARD” IN E- COMMERCE
4. The Respondents’ practice of obscuring the “true” price of a product is not “standard” in e-commerce, as alleged in paragraph 1 and part 3(c) of the Response. To the contrary, many other e-commerce companies, when promoting other products to consumers, present prices that are in fact attainable as the first price consumers see.
5. Even some online ticket vendors, including some of the Respondents’ own competitors, have marketed and sold tickets using attainable prices inclusive of any mandatory fees. In fact, the Respondents and their affiliates themselves follow a very different pricing structure in some jurisdictions, including Quebec. The Respondents’ assertion that their deceptive pricing practices merely reflect “how e-commerce transactions are effected” is simply false and misleading.
6. In suggesting at paragraph 44 of the Response that the Respondents’ pricing practices are common because other merchants do not include shipping and handling as part of the price of the product, the Respondents conflate Non-Optional Fees, which form the subject-matter of the Commissioner’s Notice of Application, with delivery charges, which are optional in many cases, and variable in others (depending on the destination, choice of delivery method, etc.).
- 3 - 7. In doing so, the Respondents ignore the fact that the Commissioner’s case is founded on the assertion that their Price Representations are not attainable because they require consumers to pay additional Non-Optional Fees that they reveal only later in the purchasing process.
III. THE RESPONDENTS’ PRICE REPRESENTATIONS ARE FALSE OR MISLEADING
8. The Respondents disregard the general impression created by the Price Representations, and instead assert in paragraph 67 of the Response that these representations will not mislead consumers because they understand how “buy-flows” work in e-commerce. The general impression at issue in the Commissioner’s Application is a function of the Respondents’ Price Representations, not what others may or may not be doing in the marketplace. But even if it was a function of the marketplace at large, as already indicated, drip pricing in e-commerce is far from universal.
9. Contrary to paragraphs 1, 2, 5, 25, 39, 42, 49, 54 and 63 of the Response, the Respondents’ pricing practices are not transparent for consumers. The actual cost of the tickets is not known by consumers until such time as the Respondents choose to disclose the true cost to the consumer.
10. To be clear, the true cost is unknown to consumers because the Respondents do not disclose the existence of their fees in some cases, and the amount of the fees and the total cost in others, until later. The true cost is unknowable to consumers because the various Non-Optional Fees are inherently variable in nature and are the result of the Respondents’ individualized arrangements with third parties, such as venues, promoters, sports teams and leagues. As such, any bald suggestion that consumers would somehow be able to divine the actual cost of tickets before the Respondents choose to reveal them is simply incorrect.
11. Further, the Respondents’ assertion that the general impression created by the Price Representations is that the prices represented are “unit prices” (referred to at paragraphs 2, 3, 20, 23, 32, 41, 43, 44, 52, 66, 68, 69, 72, 79 and 80) and “face
- 4 - value” (referred to at paragraphs 6, 20, 53, 55, 57, 58 and 81) flies in the face of the plain meaning of the representations at issue. Instead, the language used, such as “price”, “tickets”, “buy on map” and “buy tickets”, furthers the unambiguous general impression for consumers that the Price Representations represent the price for tickets, not the price for a “unit”, whatever that means.
12. The Respondents also assert in paragraphs 2, 52, 53, 54, 55, 58, 66 and 71 of the Response that consumers will not be misled by the Price Representations because there are what they call “Obvious Fee Signals”. Nothing about the Respondents’ Non-Optional Fees is “obvious”. This is clearly demonstrated in the example at paragraphs 47-51 of the Commissioner’s Notice of Application. Some Price Representations contain absolutely no indication at all that the price for the ticket is not the total price. Other Price Representations are, at best, accompanied by a fine print disclaimer, which by its very nature is the opposite of “obvious”.
13. Moreover, even if some consumers are fortunate enough to see and process the disclaimers, some are so simply ambiguous the consumer is yet again misled. Further, none of the disclaimers disclose the actual cost of the ticket, or even the amount of the fees. In the instances where there is a somewhat more prominent disclosure of the existence of fees, there remains no disclosure of the amount of those fees, nor of the actual cost of the ticket.
14. The examples the Respondents use in their Response (which reflect their revised website) help the Commissioner to illustrate the latter point. Specifically, at paragraph 57 of the Response, the Respondents provide a number of Price Representations as displayed to consumers. There is absolutely no disclosure of the fact that the Price Representations do not reflect the actual cost of the ticket. Further, there is no disclosure of the actual cost of the ticket, no disclosure of the amount of any additional fees, or even the very existence of additional fees. Conversely, the Price Representations say: “CA $9.05 ea.”. Simply put, even the Respondents’ own example provides no fee signals, obvious or otherwise.
- 5 - 15. Consumers who responded to the Price Representations provided in the example in paragraph 57 would then see the representations in paragraph 58 of the Response. But, prior to September 2017, there would have been no “fee signal” at all. Since September 2017, the Respondents have made some additional reference to the existence of fees earlier in the process. However, there is no disclosure of the actual amount of the fees, whether optional or not, or what the actual cost of the ticket will ultimately be to the consumer.
16. Contrary to the Respondents’ allegation in paragraph 44 of the Response, consumers do not have control over the Non-Optional Fees that the Respondents require them to pay in order to obtain tickets to sports and entertainment events. Interestingly, the Respondents seek to conceal this fact by conflating Non-Optional Fees with:
a. optional fees that consumers choose (paragraphs 23 and 30); b. fees that can be avoided by paying at a box office (paragraph 24); c. shipping options, where a merchant does not know the shipping destination until a consumer provides it and a consumer can choose amongst various delivery options (paragraphs 44 and 46);
d. promotions (paragraph 46); and e. sales taxes whose rates are common to transactions within a jurisdiction but may not be known to a merchant until a consumer provides information to the merchant about the applicable jurisdiction (paragraph 77).
17. The Respondents treat Non-Optional Fees and the myriad of fees described above as if they were one and the same. They disingenuously argue that consumers treat them that way as well, which is unsubstantiated.
- 6 - IV. THE RESPONSE MISCHARACTERISES CONSUMERS AND HOW THEY BEHAVE
18. The Commissioner admits that the issue of who is the relevant hypothetical consumer and consumer behaviour when faced with representations such as Price Representations is relevant to this matter. However, in paragraph 67 of the Response, the Respondents have misdescribed the appropriate test as being the “average consumer who is interested in the product”.
19. In fact, the appropriate test for the hypothetical consumer is the consumer who is “credulous” and “inexperienced”. This is the appropriate test because the “credulous and inexperienced” consumer is prepared to trust merchants on the basis of the general impression conveyed to him or her by the representations at issue, and is inexperienced at detecting subtleties and falsehoods in commercial representations.
20. The Commissioner denies the characteristics which the Respondents attribute to the “relevant consumer”, including at paragraphs 3, 17, 39, 41, 47 and 67-68 of the Response. Further, even if one or more of the characteristics the Respondents identify, or aspects of them are possibly accurate, which the Commissioner does not admit and expressly denies, these aspects are not, at all, material to consumer perception and behaviour.
21. Consumers faced with many of the Price Representations will form the general impression that they represent the actual price of a ticket, rather than the price of a “unit”. Whether consumers recognize from bitter experience or otherwise that the Price Representations do not in fact reflect the actual cost of the ticket they select for purchase, the relevant consumer anchors on and is more influenced by numeric information he or she encounters first, being the Price Representation, and does not process, or does not fully process, Non-Optional Fees that the Respondents deliberately exclude from their prices. As indicated in paragraph 3, the Respondents are fully aware of this fact.
- 7 - V. THE DECEPTIVE REPRESENTATIONS CREATE COSTS FOR CONSUMERS 22. The Response suggests at paragraphs 48 and 50 of the Response that abandoning a purchase is costless for consumers. It is not. Tickets may often be scarce or subject to an impression of scarcity.
23. In addition and contrary to the Respondents’ allegation at paragraph 50 that “there is no material time or effort invested by the consumer in their selection of tickets prior to being advised of fees”, the Respondents impose material costs on consumers in terms of time and effort.
24. In particular but without limitation, because the Respondents never disclose the true cost of their tickets up front, the purchasing process requires consumers to expend substantial time and effort on a ticket-by-ticket basis to ultimately learn the “true” cost of his or her various options. This time and effort would be wasted whenever a consumer abandons one ticket purchase to consider another option.
25. Moreover, the Respondents’ assertions in paragraphs 48 and 50 ignore the fact that consumers invest significant time and effort into the purchase of tickets. Having done so, consumers think of the tickets they select as theirs, and at the price they were initially attracted to. When the Respondents reveal their Non-Optional Fees, the consumer realises for the first time, if at all, late in the process, that the initial price is not attainable. As the Commissioner has stated in his Notice of Application, this late disclosure does not cure the initial misleading impression to which the consumer has anchored. To the contrary, the process is likely to lead the consumer to make the decision to keep going and to make the purchase, which may have been outside their budget and financial means.
VI. THE COMMISSIONER’S APPROACH IS CONSISTENT WITH CONSUMER BEHAVIOUR
26. Contrary to the allegations at paragraphs 40, 41, 55, 66 and 69-72 of the Response, the first price that the Respondents present to consumers is both a Price Representation and an advertisement. This approach corresponds with how
- 8 - the relevant consumer experiences and responds to the prices the Respondents display. Contrary to allegations at paragraph 40 of the Response and as set out at paragraph 21 (above), the relevant consumer anchors on and is more influenced by the numeric information he or she encounters first and does not process or fully process Non-Optional Fees that the Respondents’ deliberately exclude from their prices.
VII. THE DECEPTIVE REPRESENTATIONS AT ISSUE FALL SQUARELY WITHIN THE DECEPTIVE MARKETING PRACTICES PROVISIONS OF THE ACT
27. The Respondents misconstrue the nature of the Act in their assertion that there is no provision related to “Drip Pricing”. Paragraph 74.01(1) (a) and section 74.05 of the Act are principle-based prohibitions that apply to a wide array of reviewable matters. The Respondents’ practices are accordingly false or misleading irrespective of whether they are characterized as “drip pricing” or by any other applicable label.
VIII. THE RESPONDENTS’ ADVERTISING IS CONTRARY TO SECTION 74.05 OF THE ACT
28. Contrary to the allegation at paragraph 80 of the Response, the Respondents supply tickets above the prices they advertise to consumers. The Response inappropriately seeks to read in criteria not found in section 74.05 of the Act to create a defence that does not exist. Contrary to paragraphs 75-79 of the Response, section 74.05 of the Act does not depend on whether an advertised price is distributed; and the guidance the Competition Bureau provides on its website includes no such requirement.
29. In addition and contrary to the assertion at paragraph 80 of the Response, the suggestion that the so-called “unit price” of a ticket is never supplied at a “higher price than initially displayed” is unfounded as the Respondents never supply only a “unit”. The unavailability of the so-called “unit” illustrates the absurdity of the position the Respondents advance at paragraph 80 of their Response.
- 9 - 30. In any event and irrespective of this, contrary to paragraph 81 of the Response, disclosure later in the purchasing process does not save the Respondents’ conduct from contravening section 74.05 of the Act and does not constitute a correction for the purposes of paragraph 74.05(2)(b) of the Act.
IX. THE DOCTRINE OF ESTOPPEL IS UNAVAILABLE 31. Contrary to the allegations contained in the Response, including paragraphs 82-86, the doctrine of estoppel is unavailable to the Respondents, as its application would interfere with the positive obligations set out in paragraph 74.01(1)(a) and section 74.05 of the Act.
32. In any event, the Respondents did not rely or did not rely reasonably on any action by the Commissioner to ground an estoppel. Instead, the Respondents continue to engage in the reviewable conduct based on their own independent business assessment and the benefits (financial and otherwise) that this conduct provides to them.
33. Further, the Respondents do not even plead any positive action on part of the Commissioner that could properly give rise to an estoppel; nor did they seek or obtain any advisory opinion as was open to them under section 124.1 of the Act.
X. THE RESPONDENTS DID NOT EXERCISE DUE DILIGENCE 34. The Respondents did not exercise due diligence to prevent the reviewable conduct from occurring during the period set out in the Commissioner’s Notice of Application. In particular, but without limitation, any steps taken by the Respondents to comply with provincial law are insufficient to amount to due diligence in respect of the Act, particularly when the Respondents chose to continue their reviewable conduct throughout the rest of Canada notwithstanding the changes they have made to their advertising in Quebec.
- 10 - 35. Due diligence requires a system that is designed to prevent the type of violation which is in issue. The Respondents’ Response makes no reference to any system to prevent the type of misleading advertising which occurred in this case.
XI. RELIEF UNDER PARAGRAPH 74.1(1)(D) ACT IS PROPER 36. Contrary to paragraphs 89-92 of the Response, relief is available to consumers pursuant to paragraph 74.1(1)(d) of the Act. Relief remains available when consumers have attended a sports or entertainment event.
37. Paragraph 74.1(1)(d) of the Act provides the Tribunal with broad discretion to order the Respondents to pay an amount to consumers affected by reviewable conduct. The only limit set out in the statute is that the amount of consumer payment does not exceed the total amounts paid to the Respondents for the tickets in respect of which the conduct was engaged in.
XII. PROCEDURAL MATTERS 38. The Commissioner maintains that Ottawa is the most appropriate venue for the hearing. The reviewable conduct has had effects on and continues to affect consumers across the country (except for one province noted above). Further, the Respondents engage in the reviewable conduct through Canadian and foreign corporations and have an Ottawa office. The Tribunal and the Commissioner are, of course, also headquartered in the National Capital Region of Canada.
- 11 - Wherefore the Commissioner joins issue on the Respondents’ Defences. DATED AT Gatineau, this 26 th day of March 2018.
“Matthew Boswell” for John Pecman Commissioner of Competition
- 12 - ATTORNEY GENERAL OF CANADA Department of Justice Canada Competition Bureau Legal Services Place du Portage, Phase 1 50 Victoria Street, 22nd Floor Gatineau, QC K1A 0C9 Fax: (819) 953-9267
François Joyal Tel: (514) 283-5880
Derek Leschinsky Tel: (819) 956-2842
Kenneth Jull Tel: (819) 953-3884
Ryan Caron Tel: (819) 953-3889
Counsel to the Commissioner of Competition
- 13 - TO: McMILLAN LLP Brookfield Place 181 Bay Street, Suite 4400 Toronto, Ontario M5J 2T3 Fax: (416) 865-7048
Mark Opashinov Tel: (416) 865-7873
David W. Kent Tel: (416) 865-7143
Guy Pinsonnault Tel: (613) 691-6125
Adam D.H. Chisholm Tel: (416) 307-4209
Joshua Chad Tel: (416) 865-7181
Lawyers to Live Nation Entertainment, Inc., Live Nation Worldwide, Inc., Ticketmaster Canada Holdings ULC, Ticketmaster Canada LP, Ticketmaster L.L.C., The V.I.P. Tour Company, Ticketsnow.Com, Inc., and TNOW Entertainment Group, Inc.