03/11/2015 01:25 EDT | Updated 05/11/2015 05:59 EDT

Competition Bureau probes Avis, Budget over car rental fees

Canada's Competition Bureau says it is looking into what it calls "deceptive marketing practices" at car rental companies Avis and Budget. The bureau says they advertise prices for vehicle rentals that are much lower than the actual final price once all the other fees are included.

The bureau says it is seeking $30 million in administrative penalties from Avis, Budget, and their parent company, Avis Budget Group Inc., for the alleged false or misleading advertising.

"The bureau’s investigation found that Avis and Budget advertise prices for vehicle rentals and other associated products that are not attainable due to additional fees imposed during the rental process," the bureau said in a release.

"Furthermore, these fees are characterized as taxes, surcharges and fees that governments and agencies require Avis and Budget to collect from consumers. In fact, Avis and Budget impose these charges to recoup part of their own cost of doing business. As a result, consumers end up paying higher prices or receiving lower discounts than advertised."

Those fees increase the ultimate cost of the rental by as much as 35 per cent, and the companies have taken in $35 million from such surcharges in the past six years, the consumer watchdog says.

Consumer rebates are possible if the bureau's application with the Competition Tribunal proves successful.

Anti-spam implications

The bureau also says this case will be the first time it is challenging companies using new weapons at its disposal, as recent changes to the Competition Act include anti-spam legislation enacted last summer — and both Avis and Budget "used electronic messages to disseminate the alleged false or misleading representations," the bureau says.

The companies did not immediately respond to a request for comment from CBC News on this story.

But business professor Ken Wong of Queen's University in Kingston, Ont., says he isn't surprised to see the government taking action on an issue which has been a frequent complaint of consumers. 

"It's one thing to have charges added on to a base price, we see that all the time," in many industries, he said. "It's another thing … to give the impression they are caused by government regulation."

"It's a bait and switch," he said.

Wong says he doubts any possible consumer rebate would be large enough to satisfy an individual who went through with the process of applying, but it could be of great interest to companies that rent out hundreds of thousands of dollars worth of cars every year.

"The aggregate of those charges could be substantial," he says, adding that he suspects the regulator has been looking for an opportunity to use its new anti-spam tools in a high-profile case.