Those nagging fees and surcharges levied by Avis and Budget that help boost a $19.99 tab for a car rental above $30 represent misleading advertising, the federal Competition Bureau says.
Avis, Budget and parent company Avis Budget Group Inc. should be fined $30-million and refund money to consumers because the fees drive the cost of renting a vehicle up 35 per cent from advertised rates, the bureau said.
The fees are not required, even though fine print in the two companies' advertising materials online, in newspapers and in mobile apps convey the impression that the fees are required by governments.
"Rental car companies are not required to collect additional taxes and fees from consumers," the bureau's application said. "Avis rather chooses to charge consumers additional non-optional fees to recoup parts of its own cost of doing business."
The application cited an advertisement on the Avis website offering a vehicle for $19.99 on weekend days or at a 35-per-cent saving. "Avis's representation is false or misleading in a material respect because it is not possible for a consumer to rent a car for $19.99 per weekend day or save 35 per cent on his or her rental," the application said.
Eight separate charges introduced by Avis between 1998 and 2009 – including air conditioner excise taxes, premium location surcharges and tire management fees – send the cost soaring well above the advertised cost, the bureau said.
The rental car companies have collected more than $35-million from these fees since March, 2009, the bureau said in a news release.
"Rental car companies are not required to collect additional taxes and fees from consumers," the bureau's submission said. "Avis rather chooses to charge consumers additional non-optional fees to recoup parts of its own cost of doing business."
Avis Budget, which is based in Parsippany, N.J., said its marketing and advertising are intended to be honest and transparent, including how rates are presented.
"We look forward to the opportunity to set forth these facts to the authorities at the appropriate time," the company said in a statement.
The $30-million penalty the bureau is seeking is the maximum fine possible said Anita Banicevic, a lawyer with Davies Ward Phillips & Vineberg LLP, who acted for Rogers Communications Inc. in its recent successful battle over misleading advertising allegations.
The action against the rental car companies shows the bureau is serious about aggressively enforcing its calls for "all-in" pricing, Ms. Banicevic said. The bureau forced Bell Canada to agree to stop charging added fees and pay a $10-million penalty in 2011. In addition, the federal government has brought in legislation forcing airlines to provide more complete disclosure of the fees and surcharges that make up final air fares.
At issue is a practice by retailers known as "drip pricing" in which a good or service is promoted at a certain price, but additional costs are "dripped" on to consumers after they have made up their minds to make a purchase. The bureau launched an action against alleged "drip pricing" practices by discount furniture retailers Leon's and the Brick in 2013 over fees charged in their "buy now, pay later" promotions.
But in this case, Ms. Banicevic said, the bureau is breaking new ground by challenging rental-car companies whose interaction with consumers is often online, where it is easier for customers to simply abandon a purchase once they see added fees, compared with abandoning a lineup at a rental car counter at an airport, for example.
"It is a lot easier to just click away," Ms. Banicevic said, adding the case may address the question of "how does the concept of drip pricing relate to the online context."