Competition Bureau Sues Cineplex For Misleading Ticket Prices, Firm Says Case Has “No Merit”
Cineplex (TSX: CGX) is being sued by the Competition Bureau for advertising movie tickets at a lower price than many consumers actually have to pay. The bureau claims that the theater operator is breaching the law by charging an extra fee for online ticket purchases.
“A Bureau investigation found that many consumers cannot buy tickets on Cineplex’s website or mobile app at advertised prices because it adds a mandatory $1.50 online booking fee to the price of a ticket,” the bureau said.
The bureau claims that Cineplex’s online booking cost is an example of deceptive drip pricing (also known as a garbage fee). The bureau estimates that since Cineplex introduced the online booking fee in June 2022, it has been generating significant revenues for the company, allegedly nearly $17 million in revenues in the nine months since its implementation.
The agency explained that drip pricing of required charges or fees is clearly recognized as a damaging business practice in recent modifications to the Competition Act. Drip pricing is considered dishonest or misleading under the law, unless the government imposes additional fixed taxes or penalties, like as sales tax.
“After consumers select the number of Movie Tickets they want, they are invited to proceed with the purchase. A non-refundable fixed Online Booking Fee of $1.50 per Movie Ticket is subsequently added to the cost of the purchase,” the bureau said in its suit, adding this is where Cineplex makes its “unattainable price representations.”
Consumers with a Scene+ membership (Cineplex’s rewards program) receive a $0.50 discount off the online booking fee. But regular moviegoers who are not Scene+ or CineClub members must pay the full amount of the obligatory online booking fee, according to the bureau.
Only CineClub members, who pay to join that program, have the online booking fee waived in its entirety.
The bureau calls the move materially false or misleading as the online booking fee is not revealed by Cineplex when presenting consumers with the prices on its website.
“The ‘Tickets’ page is both the first time that consumers are presented with any pricing information, and where Cineplex makes its Unattainable Price Representations,” the bureau added.
Source: Competition Bureau
The bureau is asking the Competition Tribunal for Cineplex to “stop the deceptive advertising, pay a penalty, and issue restitution to affected consumers who purchased tickets through Cineplex’s website or app.”
“Consumers expect to pay the advertised price. We’re taking action against Cineplex because misleading tactics like drip pricing only serve to deceive and harm consumers. For years, we have urged businesses, including ticket vendors, to display the full price of their products upfront,” said Commissioner of Competition Matthew Boswell.
“No merit”
In response, the theater operator said it is “disappointed by the statements made” by the bureau, refuting the claims that its prices are misleading.
“Our online booking fee is not misleading and fully complies with the spirit and letter of the law. There is no merit to the Bureau’s allegation,” Cineplex said in a statement.
The Toronto-based firm also said that the online booking charge is completely optional, although it does allow the convenience of prior seat selection, adding that all of this information is readily available on the website.
Comparing to other ticketed venues where online booking fees may exist, Cineplex said that “guests can buy their tickets at their local theatre without paying this modest fee.”
“We have been working with the Bureau, since late 2022, in an open and transparent manner… We will seek an early determination and expect this suit to be dismissed quickly as it has no merit,” the firm added.
The film exhibitor introduced the new $1.50 booking fee that applies to each ticket purchased through its mobile app and website back in June 2022. The decision comes as a Cineplex spokesperson Sarah Van Lange said the firm plans to “further invest and evolve our digital infrastructure,” including website upgrades.
Service fees are a long-standing practice in the entertainment sector, where concerts, live theater, and sporting events all include some type of “convenience fee” to raise income.
Cineplex charged a comparable processing fee for each ticket when it initially began online ticket sales years ago. It eventually dropped the fee at the same time it started encouraging moviegoers to buy tickets in advance rather than waiting in line at the box office.
Fellow theater chain operator AMC Entertainment (NYSE: AMC) announced earlier this year tiered seating prices to be implemented in AMC theaters in New York, Chicago and Kansas City. The move, announced to much criticism, is set to make seats in its auditorium classed as Value Sightline (lower price), Standard Sightline (standard pricing), and Preferred Sightline (higher price).
“With Sightline seating, as you know, if you saw the release, we are charging a slight premium for the most popular seats in an auditorium, but discounting the prices of less popular seats closer to the screen upfront,” CEO Adam Aron said in an earnings call defending the move, drawing parallel from other business models for “live theater, for concerts, [and] for sporting events.”
“We are in inflationary times, and inflationary times cause costs to rise. Under the pre-Sightline structure of the industry, if we wanted to raise the price in a theater, the only choice we had was to raise the price on all the seats in the theater,” he added.
Cineplex however struggles to put audiences back to the theater seats. In January, the firm indicated that the month of December saw its box office revenue figures achieve just 65% of what it mustered in December 2019.
Box office revenues for the month of December totaled just $48 million, down dramatically from the $74.9 million record in December 2019. While an improvement from the $38.0 million recorded in November, November 2022 saw 73% of the revenues exhibited in the comparable 2019 period.
The Competition Bureau is also encouraging anyone who feels a corporation or individual is making false marketing claims to report it to the agency.
Cineplex last traded at $10.03 on the TSX, up 25% year-to-date.
Information for this briefing was found via Sedar and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
