Genuine or fake sales? Review of regulatory frameworks in Canada

Transcription

Genuine or fake sales?
Review of regulatory frameworks in Canada
and abroad and data collection study in the
Canadian retail market
Report presented to Industry Canada’s Office of Consumer Affairs
Option consommateurs
September 21, 2011
Genuine or fake sales? Review of regulatory frameworks in Canada and abroad
and data collection study in the Canadian retail market
MISSION
Option consommateurs is a not-for-profit association whose mission is to
defend the rights and interests of consumers and to ensure that they are
respected.
HISTORY
Option consommateurs has been in existence since 1983, when it arose from
the Associations coopératives d’économie familial movement, more
specifically, the Montreal ACEF. In 1999 it joined forces with the Association
des consommateurs du Québec (ACQ), which had already pursued a similar
mission for over 50 years
PRINCIPAL ACTIVITIES
Options consommateurs has a team of some 30 employees working in five
departments: Budgeting, Energy Efficiency, Legal Affairs, Press Room, and
Research and Representation. Over the years, Option consommateurs has
developed special expertise in the areas of commercial practices, financial
services, health, agrifood, energy, travel, access to justice, indebtedness, and
the protection of privacy. The association has conducted several major
investigations including one on deceptive business practices in the electronic
market and another showing that Canadians were paying more than the
Americans, for the same products, even though the two currencies were at
parity. Every year, we reach 7,000–10,000 consumers directly, conduct
numerous interviews in the media, participate in working groups, sit on boards
of directors, carry out large-scale projects with key partners, and produce
research reports, policy papers and buyers’ guides, including the annual Toy
Guide in Protégez-vous magazine.
MEMBERSHIP
In its quest to bring about change, Option consommateurs is active on many
fronts: conducting research, organizing class action suits, and applying pressure
on companies and government authorities. You can help us do more for you by
becoming a member of Option consommateurs at www.optionconsommateurs.org
Research Report
 Option consommateurs
2011
ii
Acknowledgments
This report was funded by Industry Canada’s Office of Consumer Affairs, under
the Contributions Program for Non-Profit Consumer and Voluntary
Organizations. The opinions expressed herein are not those of Industry Canada
or the Government of Canada.
The research was conducted by Mr. Jean-Francois Vinet, who also wrote this
report. The field investigation was coordinated by Mr. Vinet in collaboration
with Maryse Guénette and François-Décary Gilardeau. Guylène De Mascureau
made the linguistic revision of the report and it was translated in English
mainly by Roy Cartlidge.
Option consommateurs received funding from Industry Canada’s Contributions
Program for Non-profit Consumer and Voluntary Organizations. The views
expressed in this report are not necessarily those of Industry Canada or of the
Government of Canada.
Reproduction of this document is permitted, provided that the source is cited.
Any reproduction or allusion to its contents for advertising or lucrative
purposes is strictly prohibited, however.
Legal Deposit
Bibliothèque nationale du Québec
National Library of Canada
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Montreal (Québec) H2K 1C3
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From 1 October 2011, we move to:
50 rue Ste-Catherine West, Suite 440
Montreal (Quebec) H2X 3V4
Telephone numbers remain the same.
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2011
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EXECUTIVE SUMMARY
In a market economy marked by fierce competition, one way to attract
customers is through sales. However, the hunger for profit sometimes
translates into dishonest practices. Indeed, certain retailers may regularly
advertise the same items as being on sale. In other word, they advertise false
discounts.
This misleading trade practice is not new. In fact, it is regulated by the
governments of most economically advanced countries, for two main reasons.
First, the practice harms competition because dishonest retailers attract
custom at the expense of honest ones. Second, the practice harms consumers
as they tend to shop around less when an item is advertised on sale, even when
the discount is a fake. The practice of advertising with the use of false
discounts is so damaging to the economy that it has been designated a criminal
offence in Canada.
In light of our data collection conducted every two weeks over a one-year
period in 16 stores in the Montreal and Ottawa regions, we have noted several
business practices that appear to us as misleading. Advertising the same items
on sale over very long periods seems to be the practice the most commonly
found in our data collection. The authorities have an obligation to ensure that
Canada’s consumer protection laws are enforced more strictly.
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Table of Contents
EXECUTIVE SUMMARY..................................................................... iv
List of tables ...............................................................................x
Recommendations .........................................................................1
Introduction .............................................................................. 12
Chapter 1: Honest or misleading marketing ......................................... 14
The five price frames................................................................. 15
Quoting the regular price ............................................................ 17
A powerful marketing tool ........................................................ 18
False sales ........................................................................... 19
Disadvantages for consumers .................................................. 19
Disdavantages for the competition ........................................... 20
Conclusion.............................................................................. 20
Chapter 2: Laws and standards in Canada ........................................... 22
Canada’s Competition Bureau....................................................... 22
The Competition Act ................................................................. 23
Subsection 74.01 (3) ............................................................... 23
General criteria .................................................................. 25
The nature of the product ................................................... 26
Volume test .................................................................... 28
Time test ....................................................................... 28
Comments on these criteria.................................................... 29
Penalties .......................................................................... 31
Civil regime .................................................................... 32
Criminal regime ............................................................... 32
Companies found guilty of advertising false sales............................. 33
Sears............................................................................... 33
Evaluation of compliance .................................................... 34
Penalties ....................................................................... 37
The Forzani Group ............................................................... 38
Suzy Shier ......................................................................... 39
Examination of certain aspects of the Bureau’s activities ................... 40
The pamphlet on false or misleading representations distributed to
companies ........................................................................ 40
Complaint processing ........................................................... 42
The Website ...................................................................... 47
Conclusion ........................................................................... 48
Codes of practice ..................................................................... 49
The Advertising Code ........................................................... 50
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Examination of certain activities.............................................. 54
Publication of information................................................... 56
Composition of the Board of Directors..................................... 57
Advertising Standards Canada .................................................... 57
The Canadian Code of Advertising Standards................................ 58
Clause 3: Price Claims........................................................ 59
Examination of certain activities.............................................. 62
Penalties ....................................................................... 62
Decisions ....................................................................... 65
Composition of the Board of Directors..................................... 68
The Competition Bureau and the codes......................................... 68
Conclusion ........................................................................... 70
Retailers’ associations................................................................ 71
Retail Council of Canada .......................................................... 72
Conseil québécois du commerce de détail ..................................... 73
Canadian Federation of Independent Business................................. 75
Conclusion ........................................................................... 76
Provincial Legislation ................................................................. 76
Consumer Protection Act (Québec).............................................. 77
Provision 218 ..................................................................... 77
Provision 219 ..................................................................... 79
Provision 225 ..................................................................... 80
Provision 253 ..................................................................... 82
Jurisprudence ....................................................................... 83
Waterbeds Unlimited............................................................ 83
OPC “Advertising” pamphlet................................................... 83
Consumer Protection Act, 2002 (Ontario) ...................................... 85
Section 14: False, misleading or deceptive representation ............... 85
Conclusion.............................................................................. 86
Chapter 3: Federal laws abroad ....................................................... 89
United Kingdom: Consumer Protection from Unfair Trading Regulations..... 89
Prohibition of unfair commercial practices .................................... 90
Misleading Actions.................................................................. 90
Penalties............................................................................. 92
Civil Remedies ................................................................... 92
Criminal Remedies............................................................... 93
Jurisprudence: False discounts at Officers Club ............................... 93
USA: The Federal Trade Commission Act.......................................... 94
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Guides Against Misleading Pricing................................................ 95
Section 233.1: Former price comparisons.................................... 95
Penalties............................................................................. 97
The absence of judgments ........................................................ 98
Australia: the Trade Practices Act ................................................. 99
Part V: Consumer protection ....................................................100
Misleading Prices (Guide) ........................................................101
Penalties............................................................................102
Judgments ..........................................................................103
Image Blinds and Premier Blinds & Awnings ................................103
Yarrabee Investments Pty Ltd ................................................103
Carrerabenz Diamond Industries Pty Ltd ....................................104
Sleep City and Everyday Living ...............................................104
Ascot Four Pty Ltd. .............................................................104
Allans Music Group .............................................................105
Conclusion.............................................................................105
Chapter 4: Data Collection ............................................................107
Methodology ..........................................................................107
Selection of stores ................................................................108
The stores chosen .................................................................108
Data collection ....................................................................109
Duration of the investigation .................................................110
Frequency of data collection .................................................110
Day of data collection .........................................................110
Equipment used .................................................................111
Data collected...................................................................111
Choice of products .............................................................111
Discontinued products .........................................................112
The scope of the data collection .............................................112
Methodology for clearance centres................................................112
Choice of data presented ...........................................................113
Results .................................................................................115
The Bay in Nepean, Ontario .....................................................116
Description of Retailer .........................................................116
Highlights ........................................................................117
Recommendation ...............................................................123
La Baie, Promenades St-Bruno ..................................................125
Highlights ........................................................................125
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Recommendation ...............................................................129
Brault & Martineau ................................................................131
Highlights ........................................................................131
Recommendations ..............................................................133
The Brick, Montréal ...............................................................135
Highlights ........................................................................136
The Brick Québec Flyers..........................................................142
Highlights ........................................................................142
The Brick in Nepean, Ontario....................................................149
Highlights ........................................................................150
Brick Clearance Centre in Laval.................................................154
Highlights ........................................................................155
Brick Clearance Centre in Nepean ..............................................172
Highlights ........................................................................173
Dormez-Vous? ......................................................................212
Highlights ........................................................................213
Recommendation ...............................................................214
Germain Larivière .................................................................215
Highlights ........................................................................215
Recommendation ...............................................................222
Leon’s Furniture in Ottawa ......................................................224
Highlights ........................................................................224
Leon in St-Hubert .................................................................233
Highlights ........................................................................233
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Mattress Mart, Ontario ...........................................................239
Highlights ........................................................................239
Review of electronic flyer ..................................................240
Review of in-store business practices.....................................247
Matelas Bonheur ...................................................................249
Highlights ........................................................................249
Sears in Ottawa ....................................................................251
Highlights ........................................................................251
Recommendation ...............................................................255
Sears in Brossard ..................................................................256
Highlights ........................................................................256
Recommendation ...............................................................258
SleepCountry .......................................................................260
Highlights ........................................................................260
Recommendation ...............................................................261
United Furniture Warehouse.....................................................263
Highlights ........................................................................263
Review of electronic flyers .................................................264
Review of in-store business practices.....................................265
Recommendation ...............................................................267
Conclusion.............................................................................267
General Conclusion .....................................................................271
Bibliography ................................................................................1
Appendix 1: Pricing Practices Guide ....................................................6
Appendix 2: VIP Certificate February 4, 2010 ....................................... 29
Appendix 3: VIP Certificate, April 16, 2010.......................................... 30
Appendix 4: VIP Certificate May 14, 2010............................................ 31
Appendix 5: VIP Certificate July 2, 2010 ............................................. 32
Appendix 6: VIP Certificate September 3, 2010..................................... 33
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List of tables
Table 1: Quantity of tires sold at the regular price by Sears in the 12 months
preceding the representations......................................................... 35
Table 2: List of Retailers ..............................................................109
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Recommendations
Below is a list of recommendations made to the following organizations: the
Competition Bureau, the federal government, the Quebec government, the
Office de la protection du consommateur du Québec, Québec’s Office de la
langue française, the Canadian Council of Better Business Bureau, Advertising
Standards Canada, the Retail Council of Canada, the Conseil québécois du
commerce de détail and the Canadian Federation of Independent Business.
The Competition Bureau
Option consommateurs recommends that the Competition Bureau amend the
Competition Act to state that a merchant must indicate, in every medium,
the current price of an item advertised on sale.
Option consommateurs recommends that the Competition Bureau examine, in
collaboration with consumer associations, whether the thresholds used to
evaluate merchants’ compliance with subsection 74.01(3) of the Competition
Act are adequate to protect consumers and the competition.
Option consommateurs recommends that the Competition Bureau produce a
more
exhaustive
informational
document
on
false
or
misleading
representations and misleading commercial practices. In order to do so, we
propose that the Competition Bureau seek inspiration in similar publications
by the Government of the United Kingdom.
Option consommateurs recommends that the Competition Bureau inform
consumers, by any appropriate means, of the existence of Section 9 of
Competition Act.
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Option consommateurs recommends that the Competition Bureau initiate
discussions with Canadian consumer associations aimed at improving
accessibility to Section 9 of the Competition Act.
Option consommateurs recommends that the Competition Bureau include a
tool on its website to provide information about merchants. This tool would
allow consumers to find out the number and kind of formal complaints the
Bureau has sent and received against a merchant.
Option consommateurs recommends that the Competition Bureau verify
whether the rules, in particular those framing reference to the regular price
found in the code of practice entitled BBB Code of Advertising managed by
Canadian Council of Better Business Bureaus, respect the Competition Act.
Option consommateurs recommends that the Competition Bureau design a
distinctive logo certifying that a code of conduct has been approved by the
Competition Bureau.
Option consommateurs recommends that the Competition Bureau publicize
on its website the principles on which it bases approval of codes of conduct.
Competition Act to require merchants to indicate, on the back of their price
tags, whenever possible, the prices and duration of sales advertised during
the previous six months.
The Competition Bureau, according to our data collection
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whether the sales of mattress / boxspring sets examined by our organization
during the data collection, especially those listed in this report that were
advertised by the retail store The Bay, located at 100 Bayshore Drive,
Ottawa, are likely to mislead consumers.
whether the sales advertised by the retailer The Bay at 800, boulevard des
Promenades à St-Bruno-de-Montarville, Québec, on all the mattress /
boxspring sets examined by Option consommateurs during its data collection,
especially those listed in this report, are likely to mislead consumers.
whether the sales advertised by the retailer Brault & Martineau located at
9500, boulevard Taschereau in Brossard, Québec, which were examined by
Option consommateurs in this report, are likely to mislead consumers.
whether the sales examined by Option consommateurs in this report, in
which the retailer Brault & Martineau located at 9500 Taschereau Boulevard,
Brossard, Québec seems to have increased the price of a mattress when
offering a boxspring “free,” are likely to mislead consumers.
Option consommateurs recommends that the Competition Bureau encourage
the retailer The Brick (Québec) not to refer to the price of a set when items
are sold separately when advertising a sale on the set, but to refer to the
current price of the set.
whether the sales advertised in the flyers distributed in Québec by the
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retailer The Brick that Option consommateurs has reviewed in this report are
in compliance with the Ordinary Price Provisions of the Competition Act.
the retailer The Brick to clearly display, in every medium, the current price
of items advertised on sale.
Option consommateurs recommends that the Competition Bureau determine
whether, from September 2009 to September 2010, the retailer The Brick,
located at 565 West Hunt Club Road Nepean, Ontario, was in compliance with
the Ordinary Price Provisions of the Competition Act on most of the products
offered in the store.
the Brick retail outlets concerned to clearly display, in every medium, the
current price of items advertised on sale.
whether the items advertised as being liquidated at the Brick Clearance
Centre located at 1001 Boul. Curé-Labelle in Québec that were reviewed by
Option consommateurs in this report are likely to mislead consumers.
Option consommateurs recommends that the Competition Bureau examine
whether the Brick Clearance Centre located at 1001 Boul. Curé-Labelle,
Québec, whose trade name contains the word “Clearance” may sell
merchandise that is not being liquidated without misleading consumers or
harming competition.
Option consommateurs recommends that the Competition Bureau regulate
the use of the terms “Clearance Centre” and “Centre de Liquidation.”
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whether the items advertised by the retailer as being in liquidation at the
Brick Clearance Centre located at 350 West Hunt Club Road Nepean, Ontario
that were reviewed by Option consommateurs in this report are likely to
mislead consumers.
whether the banner displayed on the front of the Brick Clearance Centre
located at 350 West Hunt Club Road Nepean, Ontario that announces the
Brick Clearance Centre could mislead consumers about the actual surface
area of the clearance centre.
whether the use of the term “introductory price” by the retailer Dormezvous? located at 9181 boul. De l'Acadie in Montreal on the products reviewed
by Option consommateurs in this report is likely to mislead consumers.
whether the reference to the current price made by retailer Germain
Larivière, located at 2900 Avenue Jacques-Bureau in Montreal, that appears
on all the products reviewed by Option consommateurs during its
investigation, is likely to mislead consumers.
whether the sales advertised on the website of the retailer Leon’s, which
were examined by Option consommateurs in this report, are likely to mislead
consumers.
the retailer Leon to clearly display, in every medium, the current price of
items advertised on sale and the duration of promotion.
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whether the items advertised on sale by the retailer Leon’s located at 1909
rue F.X. Sabourin in Saint-Hubert, Québec, which were reviewed by Option
consommateurs in this report, are likely to mislead consumers.
whether the sales advertised by the retailer Mattress Mart in its e-flyer,
which were reviewed by Option consommateurs in this report, are likely to
mislead consumers.
whether the use of the words “Save” and “Extra Price Cut” that appear on
the price tags of products advertised on sale by the retailer Mattress Mart,
located at 1654 Carling Avenue, Ottawa, is likely to mislead consumers.
the retailer Mattress Mart to clearly state the current price of items
advertised on sale and the duration of the promotion.
whether the sales advertised by the retailer Sears, located at 8505 boul.
Taschereau in Brossard, on all the products reviewed by Option
whether the sales advertised by the retailer Sears, located at 2165 Carling
Avenue in Ottawa, on all the products reviewed by Option consommateurs in
this report, are likely to mislead consumers.
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the retailer SleepCountry to clearly indicate, in any medium, the current
price of an item advertised on sale and the duration of the promotion.
the retailer United Furniture Warehouse to clearly indicate, in every
medium, the current price of an item advertised on sale and the duration of
the promotion.
The federal government
Option consommateurs recommends that the federal government amend the
Competition Act in order to allow the Competition Bureau to inform
complainants regularly about the status of their complaints.
Competition Act to ensure that codes of conduct governing false or
misleading business practices are routinely approved by the Competition
Bureau.
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Office de la protection du consommateur du Québec
Option consommateurs recommends that the Consumer Protection Act be
amended to include an interpretive clause to the effect that the provisions of
the law must be interpreted in accordance with the criterion of the
vulnerable or gullible consumer.
Option consommateurs recommends that the Office de la protection du
consommateur specify, in the Consumer Protection Act, that, to refer to a
current price when advertising a sale, a merchant should have sold more than
50% of its merchandise at that price or have attempted to do so in good faith,
for more than 50% of a reasonable period.
consommateur du Québec update its “Advertising” pamphlet along the lines
of the document Pricing Practices Guide: Guidance for Traders on Good
Practice in Giving Information about Prices published by the United Kingdom’s
Department for Business Innovation and Skills.
Québec’s Office de la langue française
Option consommateurs recommends that Québec’s Office de la langue
française encourage the Canadian Council of Better Business Bureaus to
translate the codes of practice that it administers into French.
The Canadian Council of Better Business Bureau
Option consommateurs recommends that the Canadian Council of Better
Business Bureaus specify in the BBB Code of Advertising that in order for a
retailer to refer to the usual price when advertising a sale, it must have sold
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more than 50 % of its goods at that price for a reasonable period or attempted
to do so, in good faith, for more than 50 % of a reasonable period.
Business Bureau ask the Competition Bureau to verify whether the rule
framing reference to the regular selling price found in its code of practice,
the BBB Code of Advertising, respects Subsection 74.01 (3) of the
Competition Act.
Business Bureaus translate the codes of practice that it administers into
French.
Business Bureaus publish the variables and weighting it uses to arrive at the
letter grades it awards to its members.
Business Bureaus publish, on its website, the complaints it receives regarding
the commercial practices of its members.
Business Bureaus allow at least one representative of a consumer association
recognized by Industry Canada’s Office of Consumer Affairs to sit on its Board
of Directors. This consumer association should be awarded financial
compensation in order to facilitate its participation.
Advertising Standards Canada
Option consommateurs recommends to Advertising Standards Canada that the
Canadian Code of Advertising Standards specify that when a merchant refers
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to the regular price in advertising a sale, it must have sold more than 50% of
the articles at that price or to have attempted, in good faith, to sell the
articles more than 50% of a reasonable period.
Option consommateurs recommends that in their respective codes of
practice, Advertising Standards Canada and the Canadian Council of Better
Business Bureaus standardize the clauses relating to similar commercial
practices. When there are different rules relating to a similar practice,
organizations should systematically adopt whichever is most advantageous for
consumers.
Option consommateurs recommends that Advertising Standards Canada and
the Canadian Council of Better Business Bureaus reserve the right to inspect,
for a period of two years, the advertising material that a member who has
violated the standards of the organization more than twice intends to use.
the Canadian Council of Better Business Bureaus stipulate, in their
regulations, the right to notify the Competition Bureau and to automatically
apply this regulation whenever one of their members refuses to comply with
their decisions.
Option consommateurs recommends that Advertising Standards Canada
increase public awareness of the decisions it renders against companies found
to have violated the standards it administers.
Option consommateurs recommends that Advertising Standards Canada name
a consumer association recognized by the Office of Consumer Affairs as a
member of its Board of Directors. Financial compensation should be made
available to facilitate such participation.
Canadian Federation of Independent Business
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Option consommateurs recommends that the Canadian Federation of
Independent Business publish a pamphlet on its website about misleading
marketing practices aimed at informing its members of their rights if they
consider themselves to be victims of unfair commercial practices used by
their competitors. The pamphlet should be approved by the Competition
Bureau of Canada.
Conseil québécois du commerce au détail
Option consommateurs recommends that the Conseil québécois du commerce
au détail publish an information pamphlet on its website about false or
misleading commercial practices. The contents of this pamphlet should be
approved by the Competition Bureau.
au détail establish a permanent Consultative Committee to inform its
members about false or misleading commercial practices and of the risks they
run if they contravene the rules in force.
Retail Council of Canada
Option consommateurs recommends that the Retail Council of Canada publish
an informational pamphlet on its website about false or misleading
commercial practices. The pamphlet should be approved by the Competition
Bureau.
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Introduction
Consumers like to take advantage of sales when they shop. Also, to avoid paying
the current price, many wait until the products go on sale before they purchase.
Retailers, for their part, want to sell the products on their shelves. One of the
most common ways of attracting consumers to their stores is by advertising a
sale.
To ensure that this marketing tool is not used in a misleading way, such as by
constantly advertising the same sales or by inflating the regular price of an
article in order to entice consumers to buy it, governments and industry have
adopted laws and standards that govern this business practice.
There are four chapters in this research report. In the first, we attempt to
understand why, when they advertise a sale, retailers so often emphasize the
regular price (e.g.: Was $100! Now $50!) and why this is such a powerful
marketing tool whose use needs to be monitored.
In the second chapter, we examine the laws and regulations in force in Canada
that regulate reference to current prices. We also examine the 2005 ruling
against Sears, which was the first company to be found guilty of falsely
advertising sales under the Competition Act.
In the third chapter, we examine the laws in force in the United Kingdom, the
United States and Australia with respect to misleading marketing practices. Our
particular interest here is to see how Canada's laws could be improved in this
regard.
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In the final chapter, we present the results of a major data collection study that
was conducted to determine whether merchants were using misleading
commercial practices. The data was collected every two weeks over the period
of a year in seventeen furniture and mattress retail stores located in the
Montreal, Québec and Ottawa, Ontario regions.
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Chapter 1: Honest or misleading marketing
One purpose of marketing is to inform consumers of any event that affects them.
Companies use marketing to inform their customers of price changes or
promotions, or to launch a new product, etc.
Another goal of marketing is to attract and retain consumers. To achieve this,
companies may utilize a range of business strategies, from changing the way a
product is packaged to placing advertisements in the various media, such as
television.
One common marketing strategy used to attract consumers is to vary prices
or adjust them according to the targeted audience. For example, one
manufacturer may encourage a retailer to sell his product at a higher price than
others of the same type in order to project the image that his product is
superior. Alternatively, a retailer may advertise reduced prices or clearance
sales to attract customers to the store.
In this chapter we will first examine the various pricing frameworks used by
retailers to inform consumers and to appeal to them. We will then focus more
closely on how sales prices are framed in order to understand the power of this
marketing tool that is so prevalent in the retail sector.
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The five price frames
According
to a
study
commissioned
by the UK’s
Office
of
Fair Trading
(OFT), aimed at understanding the influence of price frames on consumers’
choices, retailers utilize five price frames:
•
Drip pricing. This price frame consists of revealing only part of the price,
and then adding additional costs to it as the transaction progresses. For
example, in order to finalize the purchase of a plane ticket online, the
consumer has to accept an entire range of indirect charges. These include
charges for increased fuel prices, for choosing one’s seat or insuring one’s
luggage. In the end, the consumer generally spends more than what the
airline company announced in its ad.
•
Complex pricing. This price frame consists of making it more difficult for
the consumer to opt for a better alternative. Example, by offering three
articles for the price of two. In this case, in order to determine whether
the sale price actually is a bargain, the consumer is obliged to calculate
the unit price of the advertised product and compare it with that of
articles that are not on sale. The exercise can become particularly
complex in the grocery store, where the consumer is faced with products
in a variety of formats.
•
Baiting. This price frame consists of advertising a bargain from which only
a handful of customers can benefit. For example, a retailer may advertise
that he is offering laser eye surgery for as little as $500. However, only
those needing a slight correction to their eyesight are able to benefit
from this price. In actual fact, consumers attracted by the low price of
such surgery generally pay far more than the advertised price.
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•
Time-limited or quantity-limited offers. This price frame consists of
attracting more customers than the number of products available at the
advertised price. Even though, once in the store, several consumers are
disappointed to learn that the article advertised on sale is no longer
available, some of them will still use their purchasing power to buy other
products in the store. This artificially increased patronage creates
additional demand for the retailer.
•
Sales. This price frame consists of advertising a product at a lower price
than the ordinary sales price (OSP). For example, a mattress is advertised
as being on sale for $1,000 instead of $3,000. This represents an
attractive bargain for the consumer if the advertised regular price of the
article is truly the original price; i.e. a price that has not been inflated by
the retailer.
In short, these are the five price frames1 that retailers use to promote the sale of
their products. In certain cases, they actually do permit consumers to save.
The study commissioned by the Office of Fair Trading also aimed at assessing
how these pricing structures influence consumers’ ability to make choices. In a
series of tests, participants exposed to various price frames had to choose which
merchant sold the same product at the lowest price. These tests revealed three
main points.
First of all, participants made the right choices four times out of five when the
price was displayed on the unit, i.e. when the price was displayed in its simplest
form. On the other hand, the study shows that the more complex the price
frame, the greater the degree of confusion among participants. Consequently,
1
We shall see later how governments have established criteria that companies using these price frames are
obliged to respect.
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faced with a complex price frame (e.g. drip pricing or baiting) participants had
more difficulty deciding which retailer sold the item at the best price.
The second interesting finding of the study was that participants tend to jump on
the slightest advertised bargain, thereby explaining why this particular business
practice is so widespread in the retail sector.
Third, the study indicates that these price frames are responsible for a number
of misperceptions among consumers:
In response to progressive pricing and baiting, it seems as if
buyers, in their determination to purchase a product, act as if
they own it already. They equate giving up on the transaction
to losing. With sales and limited-time offers, consumers believe
that they will be missing an opportunity if they do not buy right
away, even if it is unlikely that the prices are less competitive
than another merchant’s. 2
In short, retailers use various price frames to attract consumers to their stores in
an attempt to increase their sales. Consumers are influenced by these price
frames and the more complex the price frame, the harder consumers find it to
to choose wisely.
In what follows, and for the rest of this study, we will devote particular
attention to examining the price frame of advertising articles on sale.
Quoting the regular price
One of the most widespread price frames used by retailers is to advertise a sale
on an article while quoting its ordinary sales price (OSP)3. Every day, consumers
2
Des aubaines alléchantes qui n’en sont pas, journal Les Affaires, edition of June 12 to 18, 2010, p.17.
The expressions “ordinary (sales) price,” (OSP) “regular price” and “current price” are equivalent in this
report.
3
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17
are exposed to advertising in which the regular price is compared to the sales
price. Such ads often contain declarations such as “Was $100! Now $50!” or “On
Sale, 50% Off Regular Price.”
But why is this strategy so widespread? What are the reasons that led, as we shall
see further on, the governments of Canada, the United Kingdom, the United
States, and Australia to monitor this commercial practice?
A powerful marketing tool
Donald Lichtenstein4— a professor of marketing at University of Colorado Leeds
School of Business—explains why retailers advertise sales by referring to the
ordinary selling price in their ads. In his opinion, OSP advertising is used because:
•
“OSPs have a powerful influence on consumers;
•
OSP advertising creates a general impression of savings for the average
consumer, positively affects intentions to purchase from the advertiser
and negatively affects intentions to search competitors for a lower price.
•
By signalling a temporary bargain, a seller’s own OSP advertising affects
not only consumers who are currently contemplating the purchase of a
given product but, particularly for products where wear-out occurs on a
visible continuum, may also pull some customers into the market sooner
than otherwise would be the case.”
4 Dr. Lichtenstein testified as an expert witness in the Competition Tribunal in the case against Sears Canada
Inc, which was found guilty of advertising false discounts on tires. The professor’s testimony is reproduced in
the record of proceedings between the Competition Commissioner and Sears Canada Inc published on the
Competition Tribunal website at: www.ct-tc.gc.ca/CMFiles/CT-2002-004_0158b_38OWT-1242005-3797.pdf
p. 28 to p. 30. Dr. Lichtenstein holds a Ph.D. with a specialization in marketing, which he obtained in 1984
from the University of South Carolina. Dr. Lichtenstein was a member of the editorial board of the
publications The Marketing Journal, the Journal of Consumer Research and the Journal of Business
Research. He is a member of the editorial board of the publications Journal of Public Policy and Marketing.
In 2001, he received the Outstanding Reviewer Award from the Journal of Consumer Research. Dr.
Lichtenstein continues to act as a special examiner for the Marketing Journal and other publications.
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In short, according to Dr. Lichtenstein, OSP advertising is a powerful marketing
tool since it exerts a considerable influence on consumers. Knowing this,
dishonest retailers, in order to increase sales, could be tempted to use this
marketing tool in a misleading way by advertising false sales.
False sales
Dr. Lichtenstein also states that if the reference to the OSP is misleading, for
example if a retailer inflates the current price of an article before declaring it to
be on sale, several disadvantages can result for both consumers and competitors.
Disadvantages for consumers
•
“Misleading OSP advertising can lead consumers to believe that, by
purchasing the advertised product, they will receive a quality level that is
commensurate with the higher reference price, while only having to pay
the lower sale price.
•
The average consumer who purchases a product advertised with an
inflated seller’s own OSP is unlikely to become aware that he or she was
misled, and thus, he or she remains susceptible to subsequent reference
price deceptions.
•
The average consumer has low levels of price knowledge and engages in
very little pre-purchase search to gain this knowledge, even for expensive
items. Thus, the average consumer is vulnerable to misleading OSP
advertising.
•
Retailers who misuse OSPs as a marketing tool capitalize on consumers
who view OSP claims as “proxies” for a good deal.”
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Disdavantages for the competition
•
“The misleading OSP advertisements from one retailer can result in
negative goodwill to competitors who advertise in a non-misleading
manner.
•
A retailer who uses inflated OSP advertising not only benefits from
misleading advertising on the products that are promoted in this manner,
but
the
beneficial
effect
also
extends
to
other
non-promoted
product/service categories. When the nature of the promoted price is
misrepresented to consumers, for example, with an inflated seller’s own
OSP, retailers not only capture sales on the item that attracted
consumers to the store, but also on other items consumers purchase once
in the store. Thus, competitors operating in good faith lose the
opportunity to compete on a level playing field not only for the promoted
item, but for all items that the consumer purchases.
•
When advertiser behaviour results in consumers purchasing products that
provide less value for money, it motivates manufacturers to allocate
factors of production to those items instead of to items that would
otherwise be produced (i.e, those that “truly” provide higher value for
money). This harms competition and distorts price signals which interfere
with the optimal allocation of productive resources, so that total
consumer welfare is decreased. ”
Conclusion
OSP advertising influences consumer behaviour, which explains why the practice
is so prevalent in the market.
However, unscrupulous merchants can take unfair advantage of this tool by
advertising false sales prices. They can do this by advertising the same products
as being on sale over very long periods or by inflating the price of a product
20
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before advertising it on sale. The term “ordinary sales price” is misleading, since
the article in the “promotion” was never or almost never sold at that price.
Misleading OSP advertising harms both consumers and competition, because as
Dr. Lichtenstein points out, consumers rely on the regular price to assess the
quality of a product5. In addition, consumers tend to check competitors’ prices
less when a product is advertised on sale. They might, however, have found that
it was actually sold for less elsewhere.
Obviously, if misleading OSP advertising harms consumers and the competition, it
is not surprising that governments and the industry, through self-regulating
organizations, have adopted laws and standards to prohibit this commercial
practice.
5
Other studies support this observation. For example, the study published by the Office of Fair Trading
entitled Pricing Practices: Their Effects on Consumer Behaviour and Welfare points out on page 16 that:
“There is an abundance of evidence to show that advertised reference prices (ARPs) influence a range of
consumer price-related responses, including increasing perceptions of the fair price, the normal price, the
lowest available price in the market, the potential savings, the purchase value, and also that they decrease
additional search effort (…)”. The study is posted at: www.oft.gov.uk/shared_oft/business_leaflets/659703/
Advertising-of-prices/Pricing-Practices.pdf, consulted on June 15, 2011. It includes a list of authors who have
written on this topic.
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Chapter 2: Laws and standards in Canada
In Canada, the laws or standards prohibiting specific commercial practices,
including misleading OSP advertising, are administered by the Competition
Bureau, by a number of self-regulating organizations and by certain provincial
agencies whose mission is to protect consumers.
In addition to reviewing these laws and standards, we will consider certain
judgments rendered against companies that have broken the law through
misleading sales advertising. In particular, we will examine the Competition
Tribunal’s ruling against Sears Canada inc, for misleading sales advertising on allseason tires.
Finally, we will examine various aspects of the work done by the Competition
Bureau. We will study the information pamphlet it published on misleading
commercial practices, its complaint processing service, and its website.
Canada’s Competition Bureau
The Competition Bureau6 (“the Bureau”) is an independent law enforcement
agency under federal jurisdiction whose mission is to ensure the protection and
promotion of competition in the marketplace and to enable consumers to make
informed choices.
Headed by the Commissioner of Competition, the Bureau is responsible for the
administration and enforcement of the Competition Act, the Consumer Packaging
and Labelling Act, the Textile Labelling Act and the Precious Metals Marking Act.
6
For more information on the Competition Bureau, visit its website at: www.competitionbureau.gc.ca.
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Under the Competition Act, the Commissioner can launch inquiries, challenge
civil suits and mergers before the Competition Tribunal (the “Tribunal”), make
recommendations on criminal matters to the Director of Public Prosecutions of
Canada, and intervene as a competition advocate with federal and provincial
bodies.
The Competition Tribunal should be distinguished from the Competition Bureau.
The former investigates complaints and decides whether to proceed with the
filing of an application to the Tribunal. The latter, created under the
Competition Tribunal Act, is a quasi-judicial agency that hears and rules on
applications filed under certain sections of the Competition Act.
The Competition Act
The Competition Act (CA) is a federal law administered by the Competition
Bureau governing most business conduct in Canada. It contains both criminal and
civil
provisions
aimed
at
preventing
anti-competitive
practices
in
the
marketplace.
The Act has 10 parts. Misleading marketing practices are prohibited by law
under Part VII (VII.1). The practice of quoting the ordinary selling price (the
current price) in advertising a sale is governed by subsection 74.01 (3) of the Act.
Subsection 74.01 (3)
In accordance with subsection 74.01 (3), a merchant7 is forbidden to give to the
public, or permit to be given to the latter, by any means whatever, false or
7
In the document entitled Ordinary Price Claims, published on the Competition Bureau website at:
www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/01227.html, the Bureau uses the term supplier rather
than retailer. To facilitate reading, we will use the term “merchant” (which will include retailers) in this
report.
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23
misleading details on a significant point related to the ordinary selling price of a
product.8 Under the terms of the law:
Ordinary price: supplier's own
74.01 (3) A person engages in reviewable conduct who, for the
purpose of promoting, directly or indirectly, the supply or use
of a product or for the purpose of promoting, directly or
indirectly, any business interest, by any means whatever, makes
a representation to the public as to price that is clearly
specified to be the price at which a product or like products
have been, are or will be ordinarily supplied by the person
making the representation where that person, having regard to
the nature of the product and the relevant geographic market,
(a) has not sold a substantial volume of the product at that
price or a higher price within a reasonable period of time
before or after the making of the representation, as the case
may be; and
(b) has not offered the product at that price or a higher price in
good faith for a substantial period of time recently before or
immediately after the making of the representation, as the case
may be.9
Consequently, in order to advertise a sale that refers to his own ordinary selling
price, the merchant must comply with one of the two following criteria: a) the
volume test or b) the time test.
The volume test requires that a substantial quantity of the product must have
been sold at this price (the OSP) or at a higher price for a reasonable period of
time10 recently before or immediately after making the representation.
8
The document is published on the Competition Bureau website at: www.competitionbureau.gc.ca/eic/site
/cb-bc.nsf/eng/00522.html, consulted on November 10, 2009.
9
Part VII.1 of the Competition Act entitled Deceptive Marketing Practices is published on the Department of
Justice Canada website at: http://lois-laws.justice.gc.ca/eng/acts/C-34/page-38.html#h-24, (the version of the
Act in force as of September 22, 2010).
10
The Bureau uses the period following the representation in cases such as when an article is advertised as
being on sale as soon as it is introduced into the store, but whose price increases after this sale is launched.
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The time test requires the merchant to offer the article in good faith at the
regular price for a substantial period of time if he wants to refer to this price to
advertise a sale.
When the Bureau verifies whether a merchant is in compliance with the Ordinary
Selling Price Provisions of the Competition Act, the criteria of volume and time
are themselves assessed in accordance with two general criteria: the relevant
geographic market and the nature of the product. The diagram below11
illustrates the process the Bureau uses to make this assessment.
The evaluation of the nature of the product and the relevant geographic market
must also satisfy compliance criteria that are evaluated by the Competition
Bureau.
General criteria
The nature of the product and the relevant geographic market are the general
criteria used in calculating the quantities sold at the regular price and
11
The diagram is taken from the Bureau’s bulletin of October 19, 2006 entitled Understanding How the
Ordinary Selling Price Provisions of the Competition Act Apply to Your Business at:
www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/02238.html; consulted on October 6, 2010.
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determining the reference period to be used for the sales the retailer made at
the regular price. This is how the Bureau assesses these criteria based on the
products that it examines.
The nature of the product
The nature of the product is used to determine the period of time that the
Bureau needs to take into account to verify whether an item was sold at the
regular price for a reasonable period. According to the document entitled
Understanding How the Ordinary Selling Price Provisions of the Competition Act
Apply to Your Business12, the nature of the product may vary depending on
whether it is:
•
seasonal/non-seasonal
•
national brand/private label
•
durable/perishable
•
fashionable
•
novelty/commonplace
•
frequently/infrequently purchased
•
new/established.13
For example, the period used for deciding whether the reference made to the
OSP of Christmas or seasonal items is consistent with the law will be different
from the one used to evaluate the OSP of mattresses because these two products
have different life cycles in the store. The reference period for non-seasonal
items is generally six months or a year.14
The relevant geographic market
12
The document is published on the Competition Bureau website at: www.competitionbureau.gc.ca/
eic/site/cb-bc.nsf/eng/02238.html, consulted on October 6, 2010.
13
Ibid.
14
This concept will be addressed in greater detail later in this report.
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The relevant geographic market criterion can be used to assess whether the
quantities sold by a retailer at the regular price in all its branches are sufficient
to ensure that referring to this price is unlikely to mislead consumers.
The Bureau considers several factors in determining the relevant geographic
market:
•
the market reach of the representations
•
the number and location of competitors
•
the likelihood of travel to purchase the product in question
•
the location of consumers reached by the representation and ease of
price comparison. 15
Thus, the Bureau can use the relevant geographic market criterion to determine
the quantity of items sold at the regular price by a department store chain that
advertises these same articles on sale in several branches located in various
provinces in Canada. For example, in the case of the Sears department store
chain, which advertised a Canada-wide sale on all-season tires, this figure was
calculated on a national basis. We shall return to this case later in the report.
The Bureau also uses the relevant geographic market criterion to assess the
damage to consumers who fall victim to a misleading business practice.
Compliance Criteria
When the Bureau has determined the nature of the product and the relevant
geographic market of a product under review, it uses the volume test or the time
test to assess whether a retailer’s OSP representations are in compliance. The
time test is itself evaluated in accordance with an evaluation of the good faith of
the merchant. Using the document Understanding How the Ordinary Selling Price
15
Ibid.
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Provisions of the Competition Act Apply to Your Business published by the
Competition Bureau, this is how the Bureau assesses compliance with these
criteria.
Volume test
According to the Bureau: “The substantial volume of product requirement will be
met if more than 50% of sales are at or above the reference price”
16
Time test
According to the Bureau, “the substantial period of time requirement will be met
if the product is offered at or above the reference price for more than 50% of the
time period considered. The time period to be considered will be six months
prior to (or following) the making of the representation”.17 Nevertheless, for
seasonal products and those with a short life span, the reference period will vary
depending on the nature of the product.
Good faith
In order to meet the time requirement, the retailer must have quoted the
reference price in good faith. The Bureau evaluates a merchant’s good faith in
accordance with the following considerations:
•
“product was openly available in appropriate volumes
•
ordinary price based on sound pricing principles and/or was reasonable
given competition in relevant market
•
ordinary price was a price that the supplier fully expected the market to
validate, whether or not the market did validate this price
16
Ibid.
Taken from the document entitled Understanding How the Ordinary Selling Price Provisions of the
Competition Act Apply to Your Business posted at: www.competitionbureau.gc.ca/eic/site/cbbc.nsf/eng/02238.html, under the heading Time Test: 2. “substantial period of time” – Bulletin, consulted on
October 6, 2010.
17
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28
•
ordinary price was price at which genuine sales occurred, or it was price
comparable to that offered by competitors.”18
In the document, however, the Bureau stresses the importance of the following
question in determining a merchant’s good faith:
Does the merchant in question truly believe that its regular
prices are genuine prices, set with expectation that the market
will validate them?19
If the answer is no, the Competition Act prescribes civil and criminal penalties
against offenders.
Comments on these criteria
As we have seen, merchants are obliged to respect the criteria of volume or time
as specified in the Ordinary Selling Price Provisions of the Competition Act if
they intend to refer to their OSP when they advertise a sale.
Generally speaking, depending on the nature of the product and the geographic
market, merchants may refer to the OSP if they have:
•
sold more than 50% of the articles at this price for a reasonable period,
or;
•
offered articles at this price, in good faith, during more than 50% of the
reference period.
After reviewing the ruling handed down by the Competition Tribunal finding
Sears Canada inc. guilty of advertising false sales on four-season tires, the law
18
See heading “Time test: 1. ‘Good faith’ “ – in the document entitled Understanding How the Ordinary
Selling Price Provisions of the Competition Act Apply to Your Business posted at:
www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/02238.html, consulted on January 15, 2010.
19
Ibid.
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29
firm Heenan Blaikie20 questioned the validity of the 50% threshold stipulated for
the time test. According to the law firm:
The Tribunal's endorsement of the 50% time period in which a
product must be offered for sale at the ordinary price is also
worthy of comment. In its reasons, the Tribunal primarily relied
upon the decision in the Eaton case to conclude that a product
on sale half, or more than half, of the time could not be said to
have been offered at its regular price for a substantial period of
time. The Tribunal has interpreted a “substantial period of
time” as meaning a time period in excess of 50%. If it was
Parliament's intent that the term “substantial” refer to a time
period greater than 50%, it could have used language consistent
with that intention. It did not. Moreover, the use of
“substantial” elsewhere in the Act does not suggest such a
reading. Apart from a cursory reference to the Eaton case, the
Tribunal did not provide any detailed explanation on why this
standard is appropriate, something that future cases will
hopefully clarify.21
The law firm contends that the Tribunal could have arrived at a different
interpretation of what constitutes a sufficient period of time to meet the time
test requirement, since the terms used in the law do not imply such a short
period.
However, we believe a more flexible interpretation of the law would be contrary
to its spirit. Since some consumers use the current price to assess the quality of a
product, the current price should be the price at which the article is generally
sold. If this is not the case, this reference may tend to distort the consumer’s
decisions with regard to factors such as the quality of the product advertised on
sale. Option consommateurs would even be inclined to believe that thresholds
greater than 50% for the time test and the volume test would result in an
improvement in the accuracy of the current price for consumers. In other words,
allowing a more flexible interpretation than the one followed by the Competition
20
The firm’s website is at www.heenan.ca.
The full text of the law firm’s analysis is published on its website at: www.heenan.ca/en/publications/
item?id=906, consulted on October 12, 2010.
21
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30
Bureau and the Competition Tribunal may have the effect of benefitting retailers
at the expense of consumers. This is contrary to the spirit of the Competition
Act, which is not intended to promote the interests of one group over another.
We believe it is appropriate to study the time and volume tests further to
reassess whether the thresholds currently used to determine a merchant’s
compliance with the Ordinary Selling Price Provisions of the Competition Act are
such as to adequately protect both consumers and the competition.
Option consommateurs recommends that the Competition Bureau examine, in
collaboration with consumer associations, whether the thresholds used to
evaluate merchants’ compliance with subsection 74.01(3) of the Competition
Act are adequate to protect consumers and the competition.
Penalties
If a retailer contravenes subsection 74.01 (03) of the Competition Act, he is
liable to both civil and criminal penalties.22 Moreover, it is important to note
that:
Under these provisions, it is not necessary to demonstrate that
any person was deceived or misled; that any member of the
public to whom the representation was made was within
Canada; or that the representation was made in a place to
which the public had access. Subsection 74.03(5) directs that
the general impression conveyed by a representation, as well as
its literal meaning, be taken into account when determining
whether or not the representation is false or misleading in a
material respect. 23
22
The information below takes into account the modifications to the Competition Act that came into effect on
March 12, 2009.
23
See under the heading False or Misleading Ordinary Selling Price Representations in the document
entitled Price-related Representations published by the Bureau at: www.competitionbureau.gc.ca /eic/site/cbbc.nsf/eng/ 00522.html, consulted on October 6, 2010.
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31
Civil regime
According to the civil regime, the competent tribunal can order a person to
cease his activity, to publish a corrective notice and/or pay an administrative
monetary penalty. More precisely:
On first occurrence, individuals are liable to penalties of up to
$750,000 and corporations are liable to penalties of up to
$10,000,000. For subsequent occurrences, the penalties increase
to a maximum of $1,000,000 for individuals and $15,000,000 for
corporations. In situations where a person has made materially
false or misleading representations about a product to the
public, the Tribunal may also make an order for restitution,
requiring the person to compensate consumers who bought such
products, and an interim injunction to freeze assets in certain
cases.24
Criminal regime
If the Competition Bureau can demonstrate a criminal intention, misleading
representations may also be subject to the general criminal provision set forth in
subsection 52 (1) of the Competition Act.25 Under the terms of the criminal
regime, a person guilty of issuing false or misleading representations is liable to:
« (…) a fine of up to $200 000 and/or imprisonment for up to
one year. If convicted on indictment, the person is liable to a
fine at the discretion of the Tribunal and/or imprisonment for
up to 14 years.”26
24
See the pamphlet entitled False or Misleading Representations and Deceptive Marketing Practices
published on the Competition Bureau website at: www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/
eng/03133.html, consulted on November 10, 2009.
25
See the information bulletin entitled Ordinary Price Claims: Subsections 74.01 (2) and 74.01 (3) of the
Competition Act posted at: www.bureaudelaconcurrence.gc.ca /eic/site/ cb-bc.nsf/vwapj/ ct01182f.pdf/
$file/ct01182f.pdf, p.2.
26
See under the heading What Are the Possible Penalties? in the document entitled False or Misleading
Representations and Deceptive Marketing Practices posted at www.competitionbureau.gc.ca/eic/site/cbbc.nsf/eng/03133.html, consulted on October 6, 2010.
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32
Companies found guilty of advertising false sales
In 2005, the Competition Tribunal handed down a landmark decision respecting
the ordinary selling price provisions of the Competition Act.27 The company
involved in this landmark case is the Sears retail chain. We will review this
decision in detail and the factors used to determine the retailer’s noncompliance. We will also examine, albeit more briefly, the judgments rendered
against retailer Suzy Shier in 1995 and the Forzani Group in 2004, who were
convicted of employing misleading business practices.
Sears
In 2005, the Tribunal concluded that Sears Canada Inc. had violated the
Competition Act by making false or misleading representations when it
advertised certain tires at sale prices. According to the Tribunal, Sears had not
sold a substantial volume of tires at the regular price stated in its advertisements
and therefore, Sears could not possibly believe that the only regular price quoted
in its advertising was an authentic price offered in good faith.
While Sears was ultimately found guilty in this case, this was due to the
Tribunal’s tenacity in ensuring that, for the first time, subsection 74.01 (3) on
ordinary selling prices would be respected. Indeed, in its case, Sears tried to
show that this provision was an unjustifiable infringement of the company’s basic
right to freedom of commercial expression guaranteed by Section 2 (b) of the
Canadian Charter of Rights and Freedoms (the “Charter”).
27
The press release issued by the Bureau on this topic is published at: www.bureaudelaconcurrence.gc.ca/
eic/site /cb-bc.nsf/fra/00180.html, consulted on October 12, 2010.
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Moreover, in the Reasons for Order given on January 11, 200528, the
Commissioner of Competition acknowledged that subsection 74.01 (3) of the Act
infringed upon Sears’ right to commercial speech that is guaranteed under the
Charter. The Commissioner maintained, however, that the infringement was
justified under Section 1 of the Charter, since the said subsection was a
reasonable limit prescribed by law that is justified within a free and democratic
society. The Tribunal therefore ruled in favour of the Commissioner.29
In order to understand why Sears was found guilty of infringing subsection 74.01
(3), we will examine how the Bureau evaluated the noncompliance of the price
representations made by the company.
Evaluation of compliance
As we have seen, the Bureau and, ultimately, the Tribunal, used the criteria of
the volume test or the time test to assess a merchant’s compliance with the
Ordinary Selling Price Provisions of the Competition Act. Following are the
details of their evaluation.
The Volume Test
The table below shows the names of the tires examined by the Bureau and the
percentage of tires that Sears sold at the ordinary selling price in the 12 months
preceding the representations. Since the Commissioner had agreed that Sears’
promotional and regular prices were both set on a national basis30, the quantity
of tires
31
sold at the regular price was also calculated on a national basis.
28
See the Reasons of the Competition Tribunal entitled Commissioner of Competition v. Sears Canada Inc,
2005 Comp. Trib. 2, posted at www.ct-tc.gc.ca/CMFiles/CT-2002-004_0158b_38OWT-1242005-3797.pdf,
paragraphs 5 and 6, consulted on October 12, 2010.
29
Paragraph 129 of the Reasons.
30
The Commissioner considered that in order to evaluate Sears’ behaviour, the relevant geographic market
was Canada. See paragraphs 227 and 228 of the Reasons.
31
The data are taken from the table presented in paragraph 21 of the Reasons.
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34
Table 1: Quantity of tires sold at the regular price by Sears in the 12 months
preceding the representations
Tires on sale
BF Goodrich Plus
Michelin Roadhandler 'T' Plus
Michelin Weather Wise RH
Sport
Response RST Touring 2000
Silverguard Ultra IV
Quantity sold
2.29%
1.30%
0.82%
0.51%
1.21%
Thus, we note that of the five lines of tires sold on promotion, the company had
never sold more than 2.29% of the product at regular prices.
During the hearing, Sears itself acknowledged that it did not meet the time test
requirement that a substantial amount of the product must be sold for a
reasonable period.
The time test
The Commissioner concluded that the reference period to be used in assessing
the compliance of Sears’ business practices was to be six months, since:
1. “there is not much seasonal variation with respect to all-season tires;
2. to the extent there are sales increases in the Spring and the Fall any
contiguous six month period would capture some of the higher and lower
periods; and
3. there is little reason to expect month-to-month variation in the
percentage of tires sold at the OSP.”32
32
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35
However, for the six-month period preceding the representations in question, the
tires below were offered on sale at the regular unit price:
Response RST Touring: 46% of the time;
Silverguard Ultra: IV 60% of the time;
BF Goodrich Plus: 45% of the time.33
These results are close to, or exceed the time test limit, which is set at 50%. On
the other hand, in order to pass the time test, the merchant must also have
quoted his OSP in good faith, which according to the Commissioner, was not the
case. Indeed, the Commissioner maintains that Sears could not expect to sell the
quantity of tires shown below in the 6-month period preceding the
representations if it had quoted its current price in good faith:
Response RST Touring: between 2.3% and 4.6% at the regular price;
Silverguard Ultra IV: between 3% and 6% at the regular price;
BF Goodrich Plus: between 2.25% and 4.5% at the regular price.34
Moreover, in the twelve-month period preceding the representations in question,
only 0.51%, 1.21% and 2.29% of the tires were sold at the regular price (see Table
1 above).
The Tribunal therefore concluded that:
On the basis of that evidence, I find that Sears could not have
truly believed that its regular prices for the Response RST
Touring, Silverguard Ultra IV, and BF Goodrich Plus tires were
genuine and bona fide prices that the market would validate. 35
33
Paragraph 289, v) of the Reasons.
Ibid.
35
34
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Accordingly, since Sears met neither the volume test nor the time test for
several four-season tires, the Tribunal judged that the company was in violation
of subsection 74.01 (3).
Penalties
The corrective measures sought by the Commissioner of the Bureau included an
order prohibiting it from engaging in reviewable behaviour for a period of 10
years, publication of a corrective notice and payment of an administrative
monetary penalty of $500,000.36
At the Commissioner’s request, the Tribunal ordered Sears to pay a fine of
approximately $500,000. However, the Tribunal was less severe than the Bureau
would have wished in other regards. First of all, the Tribunal prohibited Sears
from making OSP representations for a period of 10 years, but only on tires and
other car accessories, whereas the Bureau had requested that it be for all of the
products sold by the retailer. Then, which is not inconsiderable, the Tribunal
judged that Sears was not obliged to send, by means of a flyer, a corrective
notice to consumers. In the opinion of the Tribunal, too much time had elapsed
between the time of the misleading representations and the ruling.
In the event that Sears would be found guilty of breaking the law again on the
Ordinary Price Provision (see Chapter 4), we wonder if the penalties imposed on
offending companies are sufficient to encourage them to respect it.
36
Refer to the press release issued by the Competition Bureau at: www.bureaudelaconcurrence.gc.ca/eic/ site
cb-bc.nsf/ fra/00180.html, consulted on October 12, 2010.
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The Forzani Group
July 6, 2004, the Forzani Group Ltd37 (GFL) —the largest sporting goods retailer in
Canada, which operates 391 stores,38 including Sport Chek and Sport Mart —
agreed to stop misleading consumers and to pay a record amount of $1.7 million.
Research conducted at the GFL Head Office in Calgary led the Competition
Bureau to the conclusion that the retailer had considerably inflated the regular
price of certain articles, thereby exaggerating the savings made by consumers on
articles bought “on sale” in its Sport Chek and Sport Mart stores.
Here are the terms of the consent decree concluded between the Competition
Bureau and the Forzani Group to remedy the situation:
•
to pay an administrative monetary penalty of $1,200,000;
•
to pay all the expenses incurred by the study conducted by the Bureau, in
the amount of $500,000;
•
to cease all reference to inflated regular prices in their advertising;
•
to publish corrective notices in Canadian newspapers, in Sport Chek and
Sport Mart flyers, on its websites and in its retail outlets in Canada;
•
to set up and implement an internal compliance program to ensure its
compliance with the provisions respecting misleading commercial
practices in the Competition Act.
37
This text is taken from the press release issued by the Competition Bureau at:
www.bureaudelaconcurrence.gc.ca /eic /site/cb-bc.nsf/fra/00254.html, consulted on October 12, 2010.
38
GFL owns and operates 217 stores under the banners Sport Chek, Sport Mart and Coast Mountain Sports,
as well as 174 franchises under the banners Sports Experts, Intersport, RnR, Atmosphere, Econosports and
Tech Shop.
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Suzy Shier
In 1995, the Tribunal announced that the women’s clothing chain Suzy Shier Ltd,
which operates several stores across Canada under the names of Suzy Shier, La
Senza and L.A. Express, had pleaded guilty to a charge under Section 52 (1) d) of
the Competition Act.39 As a result, the retailer was fined $300,000 by the
Criminal and Penal Division of the Court of Québec in Montreal. Moreover, the
Court issued an order prohibiting the company, its officers and directors from
repeating its misleading promotional practices.
Suzy Shier advertised sales on clothing items by means of price tags that
displayed the “original” price, the “special” price and the amount of the
reduction respectively. In-store posters also claimed savings of 50 to 70% over
the “original” price. However, it was established that the “original” price
indicated on the tags did not represent the regular price, since the clothing had
never been sold at that price. Moreover, the Competition Bureau’s investigation
revealed that the clothing already carried a “special” price tag even before
entering the store.
In his ruling, the Commissioner stated that Suzy Shier had advertised false
discounts, since, given the nature of the products in question and the relevant
geographic market:
i) Suzy Shier had not sold a substantial volume of the products
at the regular prices featured on the price tag representations
within a reasonable period of time after the making of the
representations. In that regard;
the “reasonable period of time” (the “Evaluation Period”) used
to evaluate whether or not Suzy Shier sold a substantial volume
of the products at their ‘regular prices’ took into consideration
39
For more information, consult the press release posted by the Competition Bureau at
www.bureaudelaconcurrence.gc.ca/eic/site/cb-bc.nsf/fra/00729.html, consulted on October 12, 2010.
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any seasonal qualities of the products in question in addition to
their likely liquidation periods;
and the combined average volume of product sales at the
‘regular price’ was approximately 12.5%.
ii) Suzy Shier did not offer the products at the regular prices
featured on the price tags for a substantial period of time
immediately before the making of the representations. In this
regard, during the Evaluation Period, the products were offered
for sale at the ‘regular price’ for only approximately 11% of the
time (combined average); 40
Examination of certain aspects of the Bureau’s activities
In addition to examining the Ordinary Selling Price Provisions of the Competition
Act administered by the Competition Bureau, we examined three of the Bureau’s
activities: a publication entitled False or Misleading Representations and
Misleading Marketing Practices, emails sent by the Bureau when a consumer
submits a complaint, and part of its website. Below, we present our
organization’s comments on these three activities.
The pamphlet on false or misleading representations distributed to companies
Each year, the Competition Bureau publishes pamphlets designed to keep
businesses informed about current laws. In 2009, to clarify the provisions related
to false or misleading representations in the Competition Act, the Bureau
published a pamphlet entitled False or Misleading Representations and
Misleading Marketing Practices.
This document contains a list of commercial practices that should or should not
be followed when making representations on prices. The pamphlet makes it
clear, for example, that companies must not:
40
The decision of the Competition Tribunal is published at: www.ct-tc.gc.ca/CMFiles/0001a38KNG-3820043036.pdf, p.2, consulted on October 12, 2010.
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•
“confuse “regular price” or “ordinary price” with “manufacturer's
suggested list price” or a like term. They are often not the same;
•
use “regular price” in an advertisement unless the product has been
offered in good faith for sale at that price for a substantial period of time,
or a substantial volume of the product has been sold at that price within a
reasonable period of time;
•
use the words “sale” or “special” in relation to the price of a product
unless a significant price reduction has occurred;
•
run a “sale” for a long period or repeat it every week;
•
increase the price of a product or service to cover the cost of a free
product or service.”41
However, after comparing the pamphlet with guides published by government
agencies in other countries, Option consommateurs considers that the pamphlet
could be improved.
To give only one example, in 2008, the Department for Business, Enterprise &
Regulatory Reform (BERR) in the United Kingdom published a guide for
interpreting the law on false or misleading representations regarding prices (see
Appendix 1). This 23-page guide, entitled Pricing Practices Guide: Guidance for
Traders on Good Practice in Giving Information About Prices
42
provides
companies with information on a complete range of commercial practices,
whereas the Bureau’s pamphlet gives information on only five practices.
Moreover, following our data collection, we noticed that several misleading
commercial practices described in the OFT guide are not mentioned in the
Competition Bureau’s guide.
41
The electronic version of the pamphlet is published on the Competition Bureau website
at:www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03133.html, consulted on October 6, 2010.
42
The guide is published on the Department for Business Innovation & Skill website at:
www.bis.gov.uk/assets/biscore/consumer-issues/docs/p/10-1312-pricing-practices-guidance-formerchants.pdf consulted on March 23, 2011.
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Option consommateurs recommends that the Competition Bureau produce a
more
exhaustive
informational
document
on
false
or
misleading
representations and misleading commercial practices. In order to do so, we
propose that the Competition Bureau seek inspiration in similar publications
by the Government of the United Kingdom.
Complaint processing
According to its annual report for 2007-200843, the Bureau received over 28,000
service requests, including complaints and inquiries. Among the complaints,
almost 95% related to false or misleading statements and misleading marketing
practices. The breakdown of complaint data does not make it possible to
determine how many of these related to misleading sales advertising.
Below, we examine the electronic replies that the Competition Bureau sends to
consumers who submit complaints and discuss why, in such emails, it might be a
good idea to inform consumers of the existence of subsection 9 of the
Competition Act.
The Bureau’s electronic replies
Canadian consumers who feel cheated by a company may file a complaint with
the Competition Bureau by filling out a form on the organization’s website or by
contacting an agent by telephone. When a complaint is sent by email, it is
reviewed by an enforcement officer and an email reply is sent to the
complainant.
During the production of this report, an employee of Option consommateurs sent
43
The report is posted at www.bureaudelaconcurrence.gc.ca/eic/site/cb-bc.nsf/vwapj/Annual-2008-webf.pdf/$FILE/Annual-2008-web-f.pdf, consulted on October 13, 2010. As of this date, no more recent report
has been published on the Bureau’s website.
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two complaints about the business practices of the retailer Club Piscine Super
Fitness, a chain of stores specializing in the sale of garden furniture, spas and
swimming pools. In the complaint, the consumer stated, among other things,
that the sales that the chain advertised in La Presse every week seemed likely to
mislead consumers. Here are the two e-mails and the replies received from the
Competition Bureau:
First e-mail reply, received November 25, 2009
Notre référence: R554941
Monsieur XXX
Monsieur,
Thank you for providing us with information about Club Piscine Super Fitness.
After reviewing the information you provided, we have determined that the
matter you raised should be subject to further review under the laws we
administer. We have not yet determined what action, if any, should be taken. A
representative of the Bureau may contact you should we need any additional
information.
If we determine that it is appropriate to intervene, we have recourse to a wide
range of tools for education, compliance and enforcement of the law in order to
prevent false or misleading representations and misleading marketing practices;
these include issuing notifications informing consumers or businesses about
certain marketing practices, contacting the parties to encourage voluntary
compliance with the laws we administer, and initiating law suits.
The Board must conduct its investigations in private. We cannot produce progress
reports on complaints or comment further on this case, in order to protect the
integrity of our investigations. However, we invite you to visit our website at
www.bureaudelaconcurrence.gc.ca to learn more about the work of the
Competition Bureau and to access public information on the progress of cases as
well as general information about our programs and activities.
Thank you again for taking the time to bring this matter to our attention.
Veuillez agréer, Monsieur, l'expression de nos sentiments distingués.
M. XXX
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Agent de la mise en application | Direction générale des pratiques loyales des
affaires
Enforcement Support Bureaur | Fair Business Practices Branch
1-800-348-5358 | télécopieur / facsimile 819-997-0324 | ATS/TTY 1-800-642-3844
[email protected] | [email protected]
Bureau de la concurrence | 50, rue Victoria, Gatineau (Québec)K1A 0C9
Competition Bureau | 50 Victoria Street, Gatineau, QuébecK1A 0C9
Gouvernement du Canada | Government of Canada
www.bureaudelaconcurrence.gc.ca | www.competitionbureau.gc.ca
Second e-mail reply, received May 6, 2010
Notre référence: R563442
Monsieur XXX
Monsieur,
Thank you for providing us with information about Club Piscine Super Fitness.
After reviewing the information you provided, we have determined that the
matter you raised should be subject to further review under the laws we
administer. We have not yet determined what action, if any, should be taken. A
representative of the Bureau may contact you should we need any additional
information.
If we determine that it is appropriate to intervene, we have recourse to a wide
range of tools for education, compliance and enforcement of the law in order to
prevent false or misleading representations and misleading marketing practices;
these include issuing notifications informing consumers or businesses about
certain marketing practices, contacting the parties to encourage voluntary
compliance with the laws we administer, and initiating law suits.
The Board must conduct its investigations in private. We cannot produce progress
reports on complaints or comment further on this case, in order to protect the
integrity of our investigations. However, we invite you to visit our website at
www.bureaudelaconcurrence.gc.ca to learn more about the work of the
Competition Bureau and to access public information on the progress of cases as
well as general information about our programs and activities.
Thank you again for taking the time to bring this matter to our attention.
Veuillez agréer, Monsieur, l'expression de nos sentiments distingués.
M. XXX
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Agent de la mise en application | Direction générale des pratiques loyales des
affaires
Enforcement Support Bureaur | Fair Business Practices Branch
1-800-348-5358 | télécopieur / facsimile 819-997-0324 | ATS/TTY 1-800-642-3844
Bureau de la concurrence | 50, rue Victoria, Gatineau (Québec)K1A 0C9
Competition Bureau | 50 Victoria Street, Gatineau, QuébecK1A 0C9
Gouvernement du Canada | Government of Canada
www.bureaudelaconcurrence.gc.ca | www.competitionbureau.gc.ca
In examining these emails, we noticed two significant points. First, the Bureau
informs us that it conducts its investigations in private
44
and that it:
[…] cannot produce progress reports on complaints or comment
further on this case, in order to protect the integrity of our
investigations.45
Also, the Bureau informed us that if it considers it appropriate to intervene, it
can:
1. publish warnings informing companies about certain marketing practices;
2. contact the parties directly to encourage voluntary compliance with the
law;
3. initiate a lawsuit.46
Option consommateurs does not see the benefit for Canadian consumers of
having all the Bureau’s interventions take place in private. If, after analysis of a
complaint, the Bureau is encouraged to send a notification to a company, Option
consommateurs likewise encourages the Bureau to inform the public by means,
for example, of a press release.
Also, not producing progress reports on some of the Bureau’s interventions might
prevent some consumers from complaining. The complainants might in fact
44
From the first sentence, paragraph four of the two electronic replies.
From the second sentence, paragraph four. This confidentiality measure is based on section 29 of the
Competition Act.
46
See paragraph three of these e-mails.
45
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believe, perhaps wrongly, that their efforts are not successful, which will not
encourage them to repeat such efforts in the future. Moreover, as of March 15,
2011, more than a year after sending the first complaint, the Option
consommateurs employee had received no news from the Bureau. Did the Bureau
find that the retailer's business practices were in compliance with the law? Or did
he send a notice to the retailer? Neither the complainant nor the public know.
Competition Act in order to allow the Competition Bureau to inform
complainants regularly about the status of their complaints.
Section 9
Under Section 9 of the Competition Act, any six residents of Canada aged
eighteen years or over may apply to the Commissioner of the Competition Bureau
to conduct an inquiry when, among other things, they believe that a company
has contravened the laws respecting misleading marketing practices. This
important information, however, is not included in the e-mails (see above) that
are sent to complainants. Consumers, on the other hand, might be encouraged to
get together to file a complaint if they knew that there was more likelihood that
the Bureau would consider their cases if their complaints were formulated
jointly. Moreover, consumer associations could play an important role by bringing
together consumers who consider themselves to be victims of the same
misleading business practice.
Option consommateurs recommends that the Competition Bureau inform
consumers, by any appropriate means, of the existence of Section 9 of
Competition Act.
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Option consommateurs recommends that the Competition Bureau initiate
discussions with Canadian consumer associations aimed at improving
accessibility to Section 9 of the Competition Act.
The Website
Our examination of one aspect of the Competition Bureau website suggested to
us that the Bureau might also consider including a search engine such as the one
put in place on the website of l’Office de la protection du consommateur du
Québec47 (“the Office”) to notify consumers of formal complaints sent to
merchants.
On the home page of the Office’s website, consumers can find information on a
merchant by entering the company’s name or license number in the appropriate
box. For example, by entering the name of Best Buy - a retail chain that
specializes in the sale of electronic products - consumers can learn that by March
25, 2011, the company had received 96 formal complaints over the previous two
years, that 52 of these had not been resolved and that over 59% of the
complaints that the Office receives about this company relate to its business
practices. At the bottom of this results page, consumers can also find details of
the lawsuits that the Office has filed against the company in civil court.
Option consommateurs considers that the informational tool on merchants
available on the Office’s website is a valuable source of information for
consumers. Among other things, it allows them to make a more informed choice
about the merchant they wish to do business with. Also, if the number and
nature of the formal complaints sent to the Bureau were made public, companies
might be encouraged to improve their business practices. We encourage the
Bureau to contact the Office to find out about the benefits of this tool and to
47
The Office de la protection du consommateur du Québec website is at: www.opc.gouv.qc.ca.
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decide whether it would be appropriate to include a similar one on their own
website.
Option consommateurs recommends that the Competition Bureau include a
tool on its website to provide information about merchants. This tool would
allow consumers to find out the number and kind of formal complaints the
Bureau has sent and received against a merchant.
Conclusion
The commercial practice of advertising sales by referring to the regular selling
price is regulated by the Ordinary Selling Price Provisions of the Competition
Act, a law administered by the Competition Bureau.
Generally speaking, a merchant can refer to the regular price in making a
representation about a sale if it has:
•
sold more than 50 % of the articles at this price for a reasonable period
or;
•
offered articles at this price, in good faith, for more than 50 % of a
reasonable period.
After analysis of these criteria, Option consommateurs considers that they are
perhaps not strict enough. Since the regular price, for many consumers, serves as
an indicator of the quality of a product, it should be a price at which the article
is generally sold; the thresholds used in assessing a merchant’s compliance with
the volume test and the time test should be raised.
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Codes of practice
Codes of practice are voluntary guidelines adopted by one or more organizations.
In the retail market, these codes are designed to encourage members to adopt
good business practices in order to promote healthy competition.
In Canada, there are two codes of advertising practice governing retailers’
business practices. These are the Code of Advertising administered by the
Canadian Council of Better Business Bureaus, a self-regulating organization
(SRO), and the Canadian Code of Advertising Standards, administered by
Advertising Standards Canada.
In this chapter we will examine the rules of these codes governing information on
prices, particularly those governing reference to current (regular) prices. We will
also examine some of the SROs’ activities aimed at ensuring compliance with
their codes.
The Canadian Council of Better Business Bureaus
Founded in the United States in 1912 and introduced into Canada in 1966, the
Better Business Bureau (BBB)48 (French: le Bureau d’éthique commerciale, “le
BEC”) is a self-regulating organization whose mission is to encourage businesses
to adopt good commercial practices. The Association has more than 300,000
member companies and 122 regional agencies. In Canada, a division of the BBB –
the Canadian Council of Better Business Bureaus (CCBBB)49 – oversees the
activities of the Canadian agencies.
48
The BBB website is at: www.bbb.org/us, consulted on November 1, 2010.
The website of the Canadian division is: www.bbb.org/canada, consulted on November 1, 2010. The
French version of the Web site is at: www.ccbbb.ca/francais/cancouncilfr.html. Note that on March 16, 2011,
the design of the French-language site was rather rudimentary compared to the English version.
49
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There is at least one BBB in each province of Canada. For example, Québec has
two agencies: le Bureau d’éthique commerciale du Québec50 and the BBB of
Eastern & Northern Ontario and the Outaouais51. Ontario has five: the BBB of
Eastern and Northern Ontario and the Outaouais, the BBB of Mid-Western and
Central Ontario52, the BBB of Central South Ontario BBB53, the BBB of Western
Ontario54 and the BBB of Windsor & Southwestern Ontario55.
Among the members of the CCBBB56 those represented in our data collection
sample are Mattress Mart, Sears Holdings Corporation, The Brick Warehouse
Corporation, United Furniture Warehouse (also known under the name of the
Brick Clearance Centre) and Leon’s Furniture Ltd.
To receive BBB accreditation, the company must respect the BBB Code of
Advertising, a code that governs commercial practices in advertising, including
OSP advertising.57
The Advertising Code
The Advertising Code58 sets forth specific rules on a significant number of
commercial practices for advertisers, advertising and media agencies. We have
examined those that frame reference to regular selling price (Article A),
50
For more information, consult their website at: http://Québec.bbb.org, consulted on November 1, 2010.
For more information, consult their website at: http://ottawa.bbb.org, consulted on November 1, 2010.
52
For more information, consult their website at: http://mwco.bbb.org, consulted on November 1, 2010.
53
For more information, consult their website at: http://hamilton.bbb.org, consulted on November 1, 2010.
54
For more information, consult their website at: http://london.bbb.org, consulted on November 1, 2010.
55
For more information, consult their website at: www.windsorbbb.com, consulted on November 1, 2010.
56
Some of these are members of the CCBBB through their head office.
57
A 2,800 page document entitled Do's and Don'ts in Advertising contains the entire legal framework and all
the codes of practices of U.S. industry, including those of the BBB. To find out more about this document, go
to: http://onlinestore.cch.com/productdetail.asp?productid=2454.
58
The BBB Code of Advertising is published at www.bbb.org/canada/SitePage.aspx?id=7de726b1-bd234368-ba94-f84702b0fae9, consulted on November 2, 2010.
51
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advertising a sale (Article G), emergency sales (Article H) and the use of the
expression “Save Up To $X” (Article I).
Article 1 A). Comparison with own former selling price
According to the code, a retailer can refer to his own current price when
advertising a sale as follows:
The former price should be the actual price at which the
advertiser has been currently offering (see 2. below) the
merchandise immediately preceding the sale, on a regular basis,
and for a reasonably substantial period of time.
Offering prices, as distinguished from actual former selling
prices, have frequently been used as a comparative to
misleadingly imply a savings. In the event few or no sales were
made at the advertised comparative price, the advertiser
should make sure that the higher price does not exceed the
advertiser’s usual and customary retail markup for similar
merchandise, not an inflated or exaggerated price, and is one at
which the merchandise was openly and actively offered for sale,
for a reasonably substantial period of time, in the recent,
regular course of business, honestly and in good faith.
Descriptive terminology often used by advertisers includes:
regularly,” “was,” “you save $_____,” and “originally.” If the
word “originally” is used and the original price is not the last
previous price, that fact should be disclosed by stating the last
previous price, or that intermediate markdowns have been
taken, e.g, “originally $400, formerly $300, now $250”;
“originally $400, intermediate markdowns taken, now $250.”
Option consommateurs noted that this rule does not specify what percentage of
sales must be made at the regular price during the period in which the product
must be advertised at the regular price to ensure that such references are
unlikely to mislead consumers.
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However, in the document entitled ”Understanding How the Ordinary Selling
Price Provisions of the Competition Act Apply to Your Business”59 published by
the Competition Bureau, the Bureau states that, depending on the product and
the relevant geographic market, a merchant may refer to the current price if it
has:
•
sold more than 50 % of the articles at this price during a reasonable period
or;
•
offered articles at this price, in good faith, during more than 50 % of a
reasonable period.
Option consommateurs considers this rule taken from the Code should be verified
by the Competition Bureau and, if necessary, corrected by the CCBBB in order to
clarify the percentage of sales to be made at the regular price or the length of
time for which an item must be advertised at the regular price to permit
merchants to refer to it when advertising a sale.
Business Bureaus specify in the BBB Code of Advertising that in order for a
retailer to refer to the usual price when advertising a sale, it must have sold
more than 50 % of its goods at that price for a reasonable period or attempted
to do so, in good faith, for more than 50 % of a reasonable period.
Business Bureaus ask the Competition Bureau to verify whether the rule
framing reference to the regular selling price found in its code of practice,
the BBB Code of Advertising, respects Subsection 74.01 (3) of the
Competition Act.
59
The document is published on the Competition Bureau website at:
http://competitionbureau.gc.ca/eic/site/cb-bc.nsf/fra/02238.html.
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whether the rules, in particular those framing reference to the regular price
found in the code of practice entitled BBB Code of Advertising managed by
Canadian Council of Better Business Bureaus, respect the Competition Act.
Article G: Sales
According to the Code, when advertising a sale, a retailer must respect certain
criteria:
The unqualified term “sale” may be used in advertising only if
there is a significant reduction from the advertiser's usual and
customary price of the merchandise offered and the sale is for a
limited period of time. If the sale exceeds thirty days
advertisers should be prepared to substantiate that the offering
is indeed a valid reduction and has not become their regular
price.
Time limit sales should be rigidly observed. For example,
merchandise offered in a “one-day sale,” “three-day sale,”
“this week only,” sale should be taken off “sale” and revert to
the regular price immediately following expiration of the stated
time.
Introductory sales should be limited to a stated time period,
and the selling price should be increased to the advertised
regular price immediately following termination of the stated
period.
Price predictions advertisers may currently advertise future
increases in their own prices on a subsequent date provided
they do, in fact, increase the price to the stated amount on
that date and maintain it for a reasonably substantial period of
time thereafter.
Article H: Emergency” or “distress” sales
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According to the Code:
Emergency or distress sales, including but not limited to
bankruptcy, liquidation and going out of business sales, should
not be advertised unless the stated or implied reason is a fact,
should be limited to a stated period of time, and should offer
only such merchandise as is affected by the emergency. “Selling
out,” “closing out sale,” and similar terms should not be used
unless the concern so advertising is actually going out of
business. The unqualified term “liquidation sale” means that
the advertiser's entire business is in the process of actually
being liquidated prior to actual closing. Advertisers should
conform with the requirements of applicable local, provincial
and federal laws.
Article I: “Up To” savings claims
According to the Code,
Savings or price reduction claims covering a group of items with a
range of savings should state both the minimum and maximum
savings without undue or misleading display of the maximum. The
number of items available at the maximum savings should
comprise a significant percentage, typically 10%, of all the items
in the offering, unless local or provincial law requires otherwise.
Examination of certain activities
Following review of the CCBBB website, Option consommateurs feels that certain
practices could be improved.
Language of the Code
Our research has found that the codes of practice that must be respected by
members of the Canadian Council of Better Business Bureaus (CCBBB) does not
seem to have been translated into French. However, several member companies
of the organization have branches in Québec (Sears Holdings Corporation, The
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Brick Warehouse Corporation, Leon's Furniture Ltd, etc.). CCBBB and two
agencies work in Québec: the Better Business Bureau of Québec and the BBB of
Eastern and Northern Ontario and the Outaouais. In addition, pursuant to
Chapter One of the Charter of the French Language, French is the official
language of Québec.60
We believe that translating these codes will allow French-speaking consumers in
Québec and elsewhere in Canada to better understand the rules they can expect
to be followed when shopping in one of the CCBBB’s member companies.
Business Bureaus translate the codes of practice that it administers into
French.
Also, under Section 161 of the Charter of the French language, Québec’s Office
de la langue française has the mandate of ensuring that French is the normal,
everyday language of business.
161. The Office shall see to it that French is the normal and
everyday language of work, communication, commerce and
business in the civil administration and in enterprises. The
Office may, among other things, take any appropriate measure
to promote French.61
Option consommateurs recommends that Québec’s Office de la langue
française encourage the Canadian Council of Better Business Bureaus to
translate the codes of practice that it administers into French.
60
Visit Québec’s Office de la langue française website at:www.olf.gouv.qc.ca/charte/charte/clflgoff.html,
consulted on November 12, 2010.
61
See the Office de la langue Française website at: www.olf.gouv.qc.ca/charte/charte/clfcplforg.html,
consulted on 12 November 2010.
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Publication of information
The Canadian Council of Better Business Bureaus website does not clearly
indicate whether a company has been penalized under the terms of the codes of
practice that it manages. In the United States, the head office of CCBBB —the
Business Office Bureau — set up the National Advertising Division (NAD), an
investigative body whose mission is to supervise and evaluate advertising aimed
at consumers aged 12 years and older. The names of companies that receive a
complaint, the names of the complainants and the products in question in the
dispute are all published on the NAD website62. Moreover, there is also a search
engine that enables web surfers to quickly find cases being handled by the NAD.
In Canada, the CCBBB awards an overall score to its members based, among
other criteria, on the complaints they have received about their commercial
practices (misleading advertising, complaints about treatment of consumers,
billing and recovery, etc). However, the reasons why this grade is awarded are
not clearly explained. The CCBBB merely states that a company has received X
number of complaints.63
Business Bureaus publish the variables and weighting it uses to arrive at the
letter grades it awards to its members.
62
However, a pass code is required to obtain the results of an investigation. See the NAD website at:
www.narcpartners.org / reports / CaseReports.aspx, consulted on November 3, 2010. We found a summary of
some of the decisions on the following website: www.huffingtonpost.com/al-norman/wal-mart-pullsmisleading_b_221856.html. The author of the article, Mr. Al Norman, states that the NAD ruled that in a
commercial broadcast on radio and television, the Wal-Mart claim that consumers “could save an average of
over $700 a year” by doing their grocery shopping in the store was unreliable. The NAD recommended that
Wal-Mart stop broadcasting the commercial.
63
This was the case, for example, with the furniture retail chain The Brick, which reportedly received a grade
of B+ as a result of the 498 complaints sent against it. To find out more, see the CCBBB website at:
www.bbb.org/edmonton/business-reviews/furniture-retail/the-brick-warehouse-corporation-in-edmonton-ab100036#ratingdetails, consulted on November 15, 2010.
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Business Bureaus publish, on its website, the complaints it receives regarding
the commercial practices of its members.
Composition of the Board of Directors
As of November 4, 2010, no representative of a consumer association has ever
been a member of the CCBBB’s Board of Directors64 which has a total of thirteen
members. However, the Board of Directors of Advertising Standards Canada,
another self-regulating organization, always has one representative from a
consumer association65.
Business Bureaus allow at least one representative of a consumer association
recognized by Industry Canada’s Office of Consumer Affairs to sit on its Board
of Directors. This consumer association should be awarded financial
compensation in order to facilitate its participation.
Advertising Standards Canada
Founded in 1957, Advertising Standards Canada66 (ASC) is the advertising
industry’s national, not-for-profit, self-regulating body that has the mission of
promoting public confidence in advertising.
To achieve its mission, ASC pursues three main activities. First, it administers the
Canadian Code of Advertising Standards (the “Code”), which, according to the
organization, is the principal self-regulatory tool for advertising in Canada.
64
The list of members of the board of directors is published on the CCBBB website at:
http://edmonton.bbb.org/ccbbb-board-of-directors /, consulted on November 4, 2010.
65
A list of consumer associations is published on the Industry Canada Office of Consumer Affairs website at:
www.consumerhandbook.ca/fr/contacts/consumer-groups.
66
The organization’s website is at: www.adstandards.com/fr/AboutASC/aboutASC.aspx, consulted on
November 4, 2010.
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Second, it administers complaints from consumers, industry and advertisers
against their competitors or from special interest groups. Complaints related to
possible infringements of the Code are examined by independent national and
regional standards councils composed of volunteer members.
Third, through its Clearance Services, ASC offers a fee-based advertising review
mechanism in five regulated categories: alcoholic beverages, children, consumer
drugs, cosmetics, and food and non-alcoholic beverages. The advertising preapproval mechanism is designed to ensure compliance with the requirements of
specific laws, regulations and/or guidelines specific to certain industry sectors.
The ASC has 161 members,67 some of which are well-known public companies,
including Coca-Cola Ltd, PepsiCo Beverages Canada, Molson Coors Canada, Labatt
Breweries of Canada, McDonald's Restaurants of Canada, Kellogg Canada Inc, and
TD.68 The Hudson's Bay Company is the only member of the ASC that is part of
our data collection sample (see Chapter 4). Patrick Dickinson, VP Marketing, The
Bay, is also one of the association’s directors.69
The Canadian Code of Advertising Standards
Developed in 1963 and updated periodically, the Canadian Code of Advertising
Standards (the “Code”) establishes the criteria for acceptable advertising in
Canada in order to ensure that it is true, honest and accurate.
The Code has 14 clauses70. Specific rules governing reference to the current price
are to be found under Clause 3 of the Code, entitled Price Claims.
67
The list of its members is published on its website at: www.adstandards.com/fr/ AboutASC/
ASCMembers.aspx, consulted on November 8, 2010.
68
Note that the Consumers Council of Canada – a consumer association – is a member of the ASC.
69
The members of ASC’s board of directors are published on its website at: www.adstandards.com/en/Ab
utASC/ASCBoardOfDirectors.aspx, consulted on November 8, 2010.
70
The code is published on the ASC website at:
www.adstandards.com/en/Standards/canCodeOfAdStandards.aspx#price, consulted on November 8, 2010.
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Clause 3: Price Claims
With regard to representations on prices, the rules specific to advertising sales
and the use of expressions such as “up to” and “XX off” are set forth in
subclauses a) and b) of Clause 3 respectively.
A): Reference to current price
According to the Code, if a retailer wishes to advertise a sale, he must comply
with the following:
(a) No advertisement shall include misleading price claims or
discounts, unrealistic price comparisons or exaggerated claims
as to worth or value. “Regular Price,” “Suggested Retail Price,”
“Manufacturer’s List Price” and “Fair Market Value” are
misleading terms when used by an advertiser to indicate a
savings, unless they represent prices at which, in the
marketplace where the advertisement appears, the advertiser
actually sold a substantial volume of the advertised product or
service within a reasonable period of time (such as six months)
immediately before or after making the representation in the
advertisement; or offered the product or service for sale in
good faith for a substantial period of time (such as six months)
immediately before or after making the representation in the
advertisement.
In short, this clause specifies that a retailer who wishes to refer to his regular
selling price in advertising a sale must respect certain criteria. The rule states
that the retailer must have sold, at the current price, “a substantial volume of
the advertised product or service within a reasonable period of time (such as six
months) immediately before or after making the representation in the
advertisement; or offered the product or service for sale in good faith for a
substantial period of time (such as six months) immediately before or after
making the representation in the advertisement.”
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Option consommateurs considers that this rule lacks precision, which is also the
case with the similar rule administered by the Canadian Council of Better
Business Bureaus. In fact, the rule also fails to specify the volume of sales that
needs to be made at the current price or the period during which a product must
be advertised at the current price to ensure that consumers will not be misled by
references to this price in advertisements for sales.
In the document published by the Competition Bureau entitled Understanding
How the Ordinary Selling Provisions of the Competition Act Apply to Your
Business71, the Bureau states that, depending on the nature of the product and
the relevant geographic market, a merchant may refer to the current price if it
has:
•
sold more than 50% of the articles at this price for a reasonable period,
or;
•
offered the articles at this price, in good faith, for more than 50% of a
reasonable period.
Option consommateurs therefore considers that this rule should specify the
volume of sales that must be made at the regular price and the period during
which an article must be advertised at the regular price in order for a merchant
to be able to refer to this price when advertising a sale.
Option consommateurs recommends to Advertising Standards Canada that the
Canadian Code of Advertising Standards specify that when a merchant refers
to the regular price in advertising a sale, it must have sold more than 50% of
the articles at that price or to have attempted, in good faith, to sell the
articles more than 50% of a reasonable period.
71
The document can be viewed on the Competition Bureau website at:
http://competitionbureau.gc.ca/eic/site/cb-bc.nsf/fra/02238.html.
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B): “Save up to”
With regard to representations on prices, the Code states that expressions such
as “up to” or “XX off” imust be printed in an easy-to-read type face and be
legitimate. More precisely, the Code specifies that:
(b) Where price discounts are offered, qualifying statements
such as “up to,” “XX off,” etc, must be in easily readable type,
in close proximity to the prices quoted and, where practical,
legitimate regular prices must be included.
Now, as we have seen previously, according to the code administered by the
Canadian Council of Better Business Bureaus— the BBB Codes of Advertising72 -any announcement of a price reduction on a set of products should display both
the minimum and the maximum reduction offered without exaggerating the
maximum possible savings. Moreover, still according to this code, the maximum
possible savings should represent a significant amount (generally 10 % of all
products on sale) except if local or provincial legislation specifies otherwise. In
short, in this clause, the BBB Code of Advertising is more precise than the
Canadian Code of Advertising Standards. It also has the advantage of giving clear
guidelines to industry and increased protection to the consumers.
Option consommateurs recommends that in their respective codes of
practice, Advertising Standards Canada and the Canadian Council of Better
Business Bureaus standardize the clauses relating to similar commercial
practices. When there are different rules relating to a similar practice,
organizations should systematically adopt whichever is most advantageous for
consumers.
72
The BBB Code of Advertising is published at www.bbb.org/canada/SitePage.aspx?id=7de726b1-bd23-4368ba94-f84702b0fae9, consulted on November 2, 2010.
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Examination of certain activities
Following
its
examination
of
Advertising
Standards
Canada,
Option
consommateurs considers that certain of the organization’s activities could be
improved.
Penalties
If ASC concludes that a certain advertisement contravenes the Code, the
advertiser is notified of this and the complainant receives a copy of the decision
sent to the advertiser. The advertiser is requested to modify its advertisement or
to withdraw it; which must be done within a reasonable time.
If an advertiser voluntarily refuses to respect a decision handed down by a
council, ASC can:
•
“advise the exhibiting media of the advertiser’s failure to cooperate and
request media’s support in no longer exhibiting the advertising in
question; and;
•
publicly declare, in such manner as Council deems appropriate, that the
advertising in question, and the advertiser who will be identified, have
been found to violate the Code.”
The Advertising Standards Authority (ASA)73 — a self-regulatory organization of
the advertising industry in the United Kingdom — has additional means at its
disposal for penalizing recalcitrant members:
• Persistent or serious offenders can be required to have their marketing
material vetted before publication. For example, CAP’s poster industry
members can invoke mandatory pre-vetting for advertisers who have
73
The ASA website is at: www.asa.org.uk.
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broken the CAP Code on grounds of taste and decency or social
responsibility – the pre-vetting can last for two years.
• For misleading or unfair advertising, if an advertiser refuses to comply
with the ASA, then the ASA Chief Executive is able to refer the advertiser
to the Bureau of Fair Trading for legal proceedings under the Consumer
Protection from Unfair Trading Regulations 2008 or the Business
Protection from Misleading Marketing Regulations 2008.
Option consommateurs considers Advertising Standards Canada and the Canadian
Council of Better Business Bureaus should take as a starting point the sanctions
prescribed by the ASA in order to ensure respect of the standards they administer
in the area of commercial practices.
the Canadian Council of Better Business Bureaus reserve the right to inspect,
for a period of two years, the advertising material that a member who has
violated the standards of the organization more than twice intends to use.
the Canadian Council of Better Business Bureaus stipulate, in their
regulations, the right to notify the Competition Bureau and to automatically
apply this regulation whenever one of their members refuses to comply with
their decisions.
Quarterly complaints reports
Every three months ASC publishes74 a report on complaints about advertising
retained by the national and regional standards councils. There are two parts to
the report: identified cases and non-identified cases.
74
See the ASC website at: www.adstandards.com/fr/Standards/previousReports.asp, consulted on November
15, 2010.
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Under the heading “Identified Cases” are the names of the advertisers, with
details of consumer complaints about their advertisements. Under the heading
“Unidentified Cases” are listed the consumer complaints retained by the
councils; the names of the advertisers or their advertisements, however, are not
disclosed here, as the companies in question have withdrawn their ads or have
amended them appropriately.
Option consommateurs believes that a quarterly complaints report is insufficient
to inform Canadian consumers of the decisions handed down by ASC against
companies found in violation of the standards it administers.
Option consommateurs recommends that Advertising Standards Canada
increase public awareness of the decisions it renders against companies found
to have violated the standards it administers.
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Decisions
When the ASC makes a decision regarding a complaint received about a business
practice of one of its members, it publishes a table that summarizes the facts
and the decision on its website. The table includes a description of the problem,
the nature of the complaint and the decision. Because this type of
communication tool could help others in the industry to publicize their decisions
about misleading advertising, we think it appropriate to present two ASC
decisions in “table” format. One of these relates to a carrier that advertised a
false discount75 and the other relates to an electronics retailer (Best Buy)76 that
advertised a special price on a television set that was not available in the store
at the time of the advertisement.
75
See the ASC website at:
www.adstandards.com/Standards/adComplaintsReports.asp?periodquarter=4&periodyear=2007, consulted on
November 15, 2010.
76
See the ASC website at:
www.adstandards.com/Standards/adComplaintsReports.asp?periodquarter=1&periodyear=2009, consulted on
November 15, 2010.
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Composition of the Board of Directors
According to the organization’s website, the Board of Directors is supposed to
include a representative of a national consumer advocacy group. As of November
8, 2010, however, this was not the case 77
Option consommateurs recommends that Advertising Standards Canada name
a consumer association recognized by the Office of Consumer Affairs as a
member of its Board of Directors. Financial compensation should be made
available to facilitate such participation.
The Competition Bureau and the codes
The Competition Bureau participates in the development, and endorses the
content, of certain codes of conduct. This is especially true of the Voluntary
Code of Conduct for Authenticating Canadian Diamond Claims78 and the Scanner
Price Accuracy Voluntary Code79.
However, our research has shown that not all codes of conduct developed by
industry are necessarily endorsed by the Competition Bureau, although the scope
of their standards may overlap the jurisdiction of the Competition Bureau. Also,
we note that the Competition Bureau does not seem to have established the
principles governing approval of these codes.
77
As indicated in the paragraph under the heading Board of Directors on the ASC webpage at:
www.adstandards.com/en/AboutASC/ASCBoardOfDirectors.aspx, consulted on 8 November 2010. It is
possible that the ASC chose Ms. Christina Bisanz as a public representative to play this role. However, Ms.
Bisanz is not a representative of a consumer association, since she works for the Ontario Long Term Care
Association. At least, this association is not part of the list of consumer associations published by Industry
Canada’s Office of Consumer Affairs at: www.consumerhandbook.ca/en/contacts/consumer-groups,
consulted on November 8, 2010. On the other hand, representatives of consumer associations can be found on
some of the ASC’s national and regional standards councils across Canada. See:
www.adstandards.com/en/AboutASC/consumerResponseCouncils.aspx.
78
For more information, visit the Competition Bureau website at:
www.bureaudelaconcurrence.gc.ca/eic/site/cb-bc.nsf/en/03253.html, consulted on November 3, 2010.
79
For more information, visit the Competition Bureau website at:
www.bureaudelaconcurrence.gc.ca/eic/site/cb-bc.nsf/en/03253.html, consulted on November 3, 2010.
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In England, the Office of Fair Trading (OFT) also does not have the power to
oblige companies to obtain approval for their codes of conduct. However, the
organization has established a certification process (the Consumer Codes
Approval Scheme80) that specifies the principles on which this certification is
based. A company whose code has been approved by the OFT is then authorized
to display the distinctive “OFT Approved Code” logo shown below.
Moreover, according to the guide for interpreting the law on unfair commercial
practices entitled Guidance on the UK Regulations Implementing the Unfair
Commercial Practices Directive81 (2008) published by the Office of Fair Trading,
it is forbidden to promote unfair practices within a code of conduct:
The CPRs also prohibit the promotion of unfair commercial
practices by a code owner in a code of conduct82
Competition Act to ensure that codes of conduct governing false or
misleading business practices are routinely approved by the Competition
Bureau.
80
For more information, consult the OFT website at:
www.oft.gov.uk/OFTwork/ccas/;jsessionid=CFF95BE1B6845DC275614777DA7A4338.
81
The guide is published on the OFT website at:
www.oft.gov.uk/shared_oft/business_leaflets/cpregs/oft1008.pdf, consulted on November 3, 2010. See
chapter 9, “Promoting Unfair Practices in Codes of Conduct.”
82
See section 9.1 of the document entitled Guidance on the UK Regulations Implementing the Unfair
Commercial Practices Directive, published at:
www.oft.gov.uk/shared_oft/business_leaflets/cpregs/oft1008.pdf, consulted on 3 November 2010.
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Option consommateurs recommends that the Competition Bureau design a
distinctive logo certifying that a code of conduct has been approved by the
Competition Bureau.
Option consommateurs recommends that the Competition Bureau publicize
on its website the principles on which it bases approval of codes of conduct.
Conclusion
Advertising codes of practice have specific rules governing reference to the
regular sales price, advertisements for sales and the use of the terms
“liquidation” and “save up to.”
Following review of the rules of these codes, Option consommateurs has noted
that in the cases of sales, these rules do not clearly specify that a retailer must
sell more than 50% of its merchandise at the regular price for a reasonable
period or have advertised the article at this price in good faith, for more than
50% of a reasonable period, when referring to the current price in advertising a
sale. However, the Competition Bureau of Canada provides specific guidelines on
this point in a pamphlet created for businesses.
We have also remarked that these codes can be inconsistent. For example, for
the same business practice, Canadian companies operating in the retail sector,
but which are not members of the same self-regulatory organization, are not
subject to the same rules. We believe the industry would benefit from uniform
rules in the interests of promoting fair competition between merchants. If this
were done, all self-regulatory organizations would systematically adopt the rule
that was most beneficial to consumers.
Moreover, some of the regulatory agencies’ activities could be improved. For
example, the codes should always be published in French, the penalties imposed
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on recalcitrant members should be more severe and more widely publicized, and
the composition of the board of directors of such organizations should always
include at least one representative of a consumer association. In short, to
increase their credibility with the public, these organizations could improve their
practices.
Finally, we have seen that the Competition Bureau endorses certain codes of
practice. Our research has shown that advertising codes of practice have not
been approved by the Competition Bureau. However, it would be appropriate for
the Competition Bureau to routinely approve codes of practice whose nature falls
within its field jurisdiction. The Bureau should also approve the updating of rules
in the codes.
Option consommateurs would like to point out, however, that our data collection
study (see Chapter 4) reveals that certain companies do not seem to comply with
the codes of practice to which they subscribe. As well, based on the results of
several studies on the banking sector,83 we have observed that banks often fail to
comply with the codes of practice to which they are signatories. In short, after
several years of disappointment, our association has come to the conclusion that
codes of practice do not adequately protect consumers. The Canadian
government should therefore not rely only on this type of regulatory tool to
protect consumers, but must pass legislation and enforce it.
Retailers’ associations
False discounts are probably more detrimental to small retailers than to large
retail chains. In fact, department store chains often have the financial capacity
to develop marketing campaigns to reach a significant number of consumers that
83
To find out more about this research, consult the heading Research Reports on the Option consommateurs
website at: www.optionconsommateurs.org/vs_outils/rapports_recherche/services_financiers_banking.html.
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the small merchants cannot afford. This imbalance is one of the reasons why, in
1960, misleading price claims were designated a criminal offence in Canada.84
To examine how trade associations inform their members of misleading
marketing practices with regard to false discounts, we looked at the websites of
three trade associations in Canada: the Retail Council of Canada, the Conseil
québécois du commerce de détail and the Canadian Federation of Independent
Business.
Retail Council of Canada
Founded in 1963, the Retail Council of Canada (RCC) is a nonprofit organization
funded by the industry, whose aim is to promote the interests of merchants
operating in the retail sector in Canada. On its website, the association states
that it is also working to improve choices for consumers and the competitiveness
of the industry.
The organization represents a large number of stores (approximately 43,000).
However, with the exception of members who have subscribed to the Scanner
Price Accuracy Voluntary Code (Costco Wholesale Canada Ltd, Home Depot
Canada, Canadian Tire Corporation Ltd, Toys”R”Us, Rona, Wal*Mart Canada Corp,
Giant Tiger Stores Ltd, The North West Company, Best Buy/Future Shop, Home
Hardware)85, the complete list of RCC members does not appear to be published
on its website.
The RCC website provides information of a legal nature. Under the heading
Research, Statistics and Reports86 for example, one can find information on
84
See the quotation found in paragraph 89 of the Competition Tribunal order entitled Competition
Commissioner v.. Sears Canada Inc, 2005, file no.: CT2002004, Court Document no. 01 58c, published at: au
www.ct-tc.gc.ca/CMFiles/CT-2002-004_0158c_53IWZ-4152005-1900.pdf.
85
See www.retailcouncil.org/advocacy/national/issues/cp/scanner_accuracy02_eng.asp, consulted on
October 1, 2010.
86
See www.retailcouncil.org/training/research, consulted on October 1, 2010.
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minimum wages, hours and holidays for each province. The Code of Practice
known as the Scanner Price Accuracy Voluntary Code is also published there. On
the other hand, we found no information on the regulation of false or misleading
prices or misleading advertising in general.
Some members of the RCC, however, have been singled out for advertising false
discounts. According to a study conducted by Option consommateurs in 200887,
the retailers Best Buy and Future Shop inflated the regular price of certain items.
A similar practice by the retailer Canadian Tire88 was also criticized in the
newspaper La Presse.
Option consommateurs believes that the Retail Council of Canada should make
its members aware of the laws governing false or misleading advertising. It could
do this by publishing an information brochure on its website whose content is
approved by the Competition Bureau.
Option consommateurs recommends that the Retail Council of Canada publish
an informational pamphlet on its website about false or misleading
commercial practices. The pamphlet should be approved by the Competition
Bureau.
Conseil québécois du commerce de détail
The mission of the Conseil québécois du commerce de détail (CQCD) is to
represent, promote and enhance the image of the retail sector in Québec and to
develop ways of fostering the advancement of its members.89
87
See the press release denouncing this practice published on the Option consommateurs website at:
www.option-consommateurs.org/salle_presse/communiques/167
88
See http://lapresseaffaires.cyberpresse.ca/finances-personnelles/bons-comptes/200906/01/01-861739-despseudo-soldes-chez-canadian-tire.php, consulted on October 1, 2010.
89
Visit the CQCD website at:www.cqcd.org/fr/apropos, consulted on October 5, 2010.
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The CQCD has over 5,000 commercial establishments, representing almost 70% of
retail-related economic activity in Québec. The association has members from all
types of retail companies regardless of their business and location:
•
•
•
•
•
•
department stores;
independents and franchises;
chains and franchisers;
hypermarkets;
purchasing groups;
large-scale retail outlets
The CQCD publishes literature and practical tools for retailers and members of
the public interested in the retail trade. On its website can be found, for
example, a Best Practices Guide on Price Marking90 (French only), a Voluntary
Code of Best Practices for the Use of Shopping Bags 91 (French and English), and
posters92 for raising awareness among customers and employees about
shoplifting, etc.
Our research did not turn up any information on misleading marketing practices.
Since CQCD’s mission is to promote the success of its members, and the CQCD
represents the interests of small and large stores:
Option consommateurs recommends that the CQCD publish an information
pamphlet on its website about false or misleading commercial practices. The
contents of this pamphlet should be approved by the Competition Bureau.
The CQCD has also developed permanent advisory committees to articulate the
organization’s position. Currently, the organization has a consumer committee, a
labelling and accurate pricing committee, an environment Committee, an
education-training committee, a francization committee, a resource protection
90
The guide can be downloaded from: www.cqcd.org/static/fr-CA/pdf/Guide-de-reference-et-de-bonnespratiques-en-matiere-detiquetage-et-dexactitude-des-prix.pdf.
91
The guide can be downloaded from: www.cqcd.org/static/fr-CA/pdf/0804-Code-bonnes-pratiques-sacs.pdf.
92
The posters can be downloaded from:www.cqcd.org/fr/outils/trousse-de-prevention.
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committee, a human resources committee and a health and safety committee. It
does not seem to have a committee devoted to false or misleading commercial
practices.
au détail establish a permanent Consultative Committee to inform its
members about false or misleading commercial practices and of the risks they
run if they contravene the rules in force.
Canadian Federation of Independent Business
Founded en 1971, the Canadian Federation of Independent Business (CFIB)
mission is to promote the interests of small and medium enterprises to
governments in the fight for tax fairness
and reasonable labour laws and
alleviating the regulatory burden93. The association has 24,100 members94 in the
retail trade sector, which accounts for the large majority of its members.
Our research reveals that the association does not seem to educate its members
about misleading marketing practices. However, small businesses in the retail
trade are probably the ones that are most vulnerable to the unfair commercial
practices employed by the larger stores.
Option consommateurs recommends that the Canadian Federation of
Independent Business publish a pamphlet on its website about misleading
marketing practices aimed at informing its members of their rights if they
consider themselves to be victims of unfair commercial practices used by
their competitors. The pamphlet should be approved by the Competition
Bureau of Canada.
93
To learn more about the CFIB, go to its website at: http://www.cfib-fcei.ca/english/about_us.html,
consulted on Otober 5, 2010.
94
See the CFIB website at: http://www.cfib-fcei.ca/english/about_us.html, consulted on Otober 5, 2010.
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Conclusion
False or misleading commercial practices hurt competition in the retail trade.
For this reason, we believe that associations whose mission is to protect the
interests of retailers have the responsibility of informing their members about
their rights and obligations in this regard. As of this moment, neither the Retail
Council of Canada, with 43,000 members, the Conseil québécois du commerce de
détail with its 5,000 member establishments, or the Canadian Federation of
Independent Business, which has 24,000 retail trade members, seem to be doing
so on their websites.
Provincial Legislation
Provincial agencies that are mandated to protect consumers administer specific
laws prohibiting misleading commercial practices. These bodies also govern
information on prices, including reference to current prices.
In this chapter we will examine the laws of Québec and Ontario95 that frame
reference to the regular price, and if possible, the jurisprudence in this regard.
We will also review the brochures these organizations have produced to inform
consumers and merchants about misleading marketing practices.
However, one would do well to recall that the Supreme Court of Canada has
traditionally held that a valid federal law shall prevail over an equally valid
provincial law when the application of the provincial law conflicts with that of
the federal law (rule of “federal paramountcy”); there is a conflict when one
party cannot comply with both laws (called the criterion of “the impossibility of
95
We chose to examine the laws of Québec and Ontario, mainly because they are the two most populous
provinces of Canada. Québec law may be particularly interesting given the importance that citizens attach to
consumer issues. The presence of a large number of consumer groups on its territory also reflects citizens’
concerns in this regard. For more information on the consumer associations movement in Québec, we invite
you to consult the text entitled Regard sur le mouvement des associations de consommateurs published on the
Option consommateurs website.
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dual compliance”).96 More recently, the Supreme Court has ruled that, even in
the absence of such a conflict, “provincial legislation that displaces or frustrates
Parliament’s legislative purpose can also be overridden by a valid federal law.”
Consumer Protection Act (Québec)
Administered by the Office de la protection du consommateur du Québec, the
Consumer Protection Act (CPA) regulates contracts between consumers and
merchants.
The CPA contains 364 provisions, divided into three chapters and 11 appendices.
Provisions 218, 219, 223, 225 and 253 specifically regulate the commercial
practice of advertising false discounts.97 The five provisions and comments from
the book entitled Loi sur la protection du consommateur: analyse et
commentaires written by Claude Masse - chief architect of Québec’s Consumer
Protection Act.98
Provision 218
According to Provision 218:
218. To determine whether or not a representation constitutes
a prohibited practice, the general impression it gives, and, as
the case may be, the literal meaning of the terms used therein
must be taken into account.
1978, c. 9, s. 218.
96
For more information, consult the electronic brochure entitled “Regulated” Conduct published on the
website of the Competition Bureau at: http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03273.html,
consulted March 23, 2011.
97
The provisions relating to trade practices are in Chapter III “Provisions relating to certain contracts,” in
Division VI, entitled “Service contracts involving sequential performance, and in Chapter II, “Business
Practices.”
98
Loi sur la protection du consommateur: analyse et commentaires, Claude Masse, éditions Yvon Blais,
1999.
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According to Claude Masse,99 the criterion of general impression and literal
meaning was borrowed from Section 52 (4) of the Competition Act. Since
commercial advertising often plays on the general impression it conveys, and
since advertising information is often transmitted rapidly, consumers would not,
by definition, have time to engage in lengthy discussions over the meaning of the
message it conveys. Accordingly, it is not up to the consumers to engage in long
reflections as to whether the promises or commitments made to them are
realistic, serious, valid, or otherwise; under the Competition Act, this
responsibility falls to the merchant, manufacturer and advertiser, who are bound
by the content of the message communicated to consumers.
Furthermore, still according to Claude Masse, the courts have used the criterion
of the “gullible” consumer in judging misleading advertising as it applies to the
Competition Act, based on the decision in R. v. Imperial Tobacco Products Ltd,
[1971] which was followed widely from then on. In that decision, it was felt that
an advertisement was misleading when, even though this could easily be
detected by an average, reasonable consumer, it could mislead a gullible and
inexperienced person. This gullible person test is now the one used in applying
the CPA.
However, while the criterion of the gullible consumer has been widely used since
1971, it is clear that a decision of the Court of Appeal set a precedent that could
change this trend. According to the judge, the average consumer is not gullible,
but “moderately intelligent, moderately skeptical and moderately curious.”
“[50] [TRANSLATION] The average Québec consumer is no more
naive than most other people. I imagine him as averagely
intelligent, averagely sceptical and averagely curious. He knows,
or so it seems to me, that advertising is, almost by definition,
inclined to be excessive. He would have learned a long time ago
that he cannot rely on bold print and enticing slogans, printed
99
Ibid, p.828.
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largely in block letters; that one must also read the fine print at
the bottom of the page (toward which several seemingly innocent
asterisks nearly always refer the reader) in order to understand
all the conditions of the offer. The daily inserts advertising cars,
furniture and electrical goods, holiday trips south, investment
funds, computers and cellphones all offer perfect examples of
this… not to mention the rest.100
We all hope, like the judge, that consumers are not gullible, and at least
“moderately intelligent.” However, the danger of assuming that consumers are
automatically immune to misleading or exaggerated advertising can mean giving
a competitive advantage to merchants who alter reality the most over those who
are more transparent in their advertising.
Option consommateurs recommends that the Consumer Protection Act be
amended to include an interpretive clause to the effect that the provisions of
the law must be interpreted in accordance with the criterion of the
vulnerable or gullible consumer.
Provision 219
According to provision 219:
No merchant, manufacturer or advertiser may, by any means
whatever, make false or misleading representations to a
consumer.
1978, c. 9, s. 219.
According to Claude Masse,101 this provision of the law insists that one may not
mislead a consumer, regardless of the means employed. This means that
consumers must not be misled through the use of an image, text, or cartoon
100
Time inc. v. Richard, no. 500-09-017967-076,
www.jugements.qc.ca/php/decision.php?liste=45677639&doc=97337D324E7ACB3B8880038642B123F1F2
6907C8E60561EB74F8976E6F5C7F39, consulted May 26, 2010.
101
Loi sur la protection du consommateur: analyse et commentaires, Claude Masse, Éditions Yvon Blais,
1999, p.835.
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whether it is published in the print media, on the radio, television, by fax, or
online.
The author states that this provision does not contain the traditional distinction
between a representation that focuses on the considerations that led the
consumer to accept a contract and the secondary considerations that related
solely to the price paid. Thus, Section 272102 of the CPA would allow the judge to
grant the appropriate penalty: nullity in the case of false representations that
undermine the desire of contracting itself, and a reduction in the consumer's
obligations and/or damages in other cases in which the consumer would have
contracted anyway, but on lesser terms. All representations made to consumers
must be true and the CPA does not tolerate “white lies.”
Provision 225
No merchant, manufacturer or advertiser may, falsely, by any
means whatever,
(a) invoke a price reduction;
(b) indicate a regular price or another reference price for
goods or services;
(c) let it be believed that the price of certain goods or services
is advantageous.
1978, c. 9, s. 225.
102
Section 272: If the merchant or the manufacturer fails to fulfil an obligation imposed on him by this Act,
by the regulations or by a voluntary undertaking made under section 314 or whose application has been
extended by an order under section 315.1, the consumer may demand, as the case may be, subject to the other
recourses provided by this Act, (a) the specific performance of the obligation; (b) the authorization to execute
it at the merchant's or manufacturer's expense; (c) that his obligations be reduced; (d) that the contract be
rescinded; (e) that the contract be set aside; or (f) that the contract be annulled, without prejudice to his
claim in damages, in all cases. He may also claim punitive damages. 1978, c. 9, s. 272; 1992, c. 58, s. 1;
1999, c. 40, s. 234.
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According to Claude Masse, the suppression of misleading marketing practices
with regard to pricing is above all the responsibility of the federal authorities,
who for almost thirty years have been charged with administering the relevant
provisions of the Competition Act (Section 52 (1) d)).
Although it is the federal authorities that are generally responsible for remedying
misleading commercial practices with regard to pricing, Option consommateurs
believes that Québec’s Consumer Protection Act should continue to prohibit such
practices and to update the law in this regard. This is partly because Québec
consumers are probably more familiar with the Consumer Protection Act than
with the Competition Act. So if Québec consumers who fall victim to misleading
business practices can find no provisions prohibiting them in the CPA, it is
possible that these consumers are unaware of the existence of such provisions in
the Competition Act, and consequently, will be unable to assert their rights.
Since the Ordinary Selling Price Provisions of the Competition Act administered
by the Competition Bureau are more accurate than Provision 225 of the
Consumer Protection Act, and since the Competition Bureau has specified in the
document entitled Understanding How the Ordinary Selling Price Provisions of
the Competition Act Apply to Your Business103 that, depending on the nature of
the product and the relevant geographic market, a merchant may refer to a
regular price in advertising a sale if it has:
•
or;
•
reasonable period.
103
The document is published on the Competition Bureau website at:
http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/02238.html
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Option consommateurs believes that the Consumer Protection Act should specify
the proportion of items that must be sold at the regular price or the period
during which an item must be advertised at that price for a merchant to refer to
such prices when advertising a sale.
consommateur specify, in the Consumer Protection Act, that, to refer to a
current price when advertising a sale, a merchant should have sold more than
50% of its merchandise at that price or have attempted to do so in good faith,
for more than 50% of a reasonable period.
Provision 253
Where a merchant, manufacturer or advertiser makes use of a
prohibited practice in case of the sale, lease or construction of
an immovable or, in any other case, of a prohibited practice
referred to in paragraph a or b of section 220, a, b, c, d, e or g
of section 221, d, e or f of section 222, c of section 224 or a or b
of section 225, or in section 227, 228, 229, 237 or 239, it is
presumed that had the consumer been aware of such practice,
he would not have agreed to the contract or would not have
paid such a high price.
1978, c. 9, s. 253;1985, c. 34, s. 273.
According to Claude Masse, this presumption aims at establishing a fraudulent
intention. It frees the consumer of the burden of proving that, had he been
aware of the practice involved, he would not have entered into the contract or
would have done so on lesser terms. This presumption may however be rebutted
by the merchant. Note also that under the changes made in 1985, violations
related to the real estate sector are all presumed to be fraudulent.
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Jurisprudence
In searching the Société québécoise d’information juridique website104, which
lists a large number of decisions rendered by Canadian courts, we found a
Québec judgment respecting a false discount. It concerned a mattress company Water Beds Unlimited – that inflated the price of a product before advertising it
on sale.
Waterbeds Unlimited
In 1985,105 the company Waterbeds Unlimited was accused of publishing
misleading advertisements. In these ads, the company said that if customers
bought a bed for the sum of $359, they would get another free. However, it was
shown that in the days corresponding to the sales advertised in the newspaper,
the single bed sold for about $180, which was half the price stated in the “2 for
1” ad. The company was convicted under Section 218 of the CPA.
OPC “Advertising” pamphlet
In order to educate consumers and merchants about the laws governing false or
misleading
advertising
practices,
Québec’s
Office
de
la
protection
du
consommateur published a pamphlet called La Publicité.106 The section entitled
“advertising prices” provides certain guidelines with regard to false discounts.
According to the pamphlet, no merchant, manufacturer or advertiser may:
•
“give more prominence to the price of an item in a set than to the price
of the complete set. For example, emphasizing that a golf club is on sale
104
The SOQUIJ website is at: www.jugements.qc.ca. It is possible that there are other judgments on this
issue.
105
Québec c. Lits d’eau Illimités (1985), inc, C.Q. Montréal, n° 500-27-015945-894, November 10, 1993,
Bernard Grenier, j, LPJ 94-1836.
106
The electronic version of the pamphlet is available at:
www.opc.gouv.qc.ca/Documents/Publications/Depliants/DEP_Publicite.aspx#PublicitePrix, consulted on
May 18, 2010.
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for $50, while it cannot be sold without paying $500 for the whole set to
which it belongs;
•
falsely announce a reduced price. For example, advertising a $300
discount on a computer, when the price displayed in the store before,
during and several months after the “SuperSale” actually remained the
same;
•
falsely suggest that the quoted price of a good or service is accurate. For
example, advertising an “unbeatable” discount on a TV, when it is
possible
to
obtain
the
same
model
for
the
same
price
or less.”
Based on the results of this research, we believe that this pamphlet could be
updated along the lines of the document produced by the UK’s Department for
Business, Enterprise and Regulatory Reform (BERR) entitled Pricing Practices
Guide: Guidance for Traders on Good Practice in Giving Information about
Prices107 (see Appendix 1) which provides companies with information on a
number of misleading commercial practices on prices prohibited by law.
consommateur du Québec update its “Advertising” pamphlet along the lines
of the document Pricing Practices Guide: Guidance for Traders on Good
Practice in Giving Information about Prices published by the United Kingdom’s
Department for Business Innovation and Skills.
107
The guide is published on the Internet by the Department for Business Innovation and Skills at
www.bis.gov.uk/assets/biscore/consumer-issues/docs/p/10-1312-pricing-practices-guidance-formerchants.pdf, consulted March 23, 2011.
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Consumer Protection Act, 2002 (Ontario)
Administered by the Ministry of Consumer Services,108 Ontario’s Consumer
Protection Act, 2002109 is an eleven-part document. Section 14 of Part III
prohibits false discounts.
Section 14: False, misleading or deceptive representation
Section 14 of Ontario’s Consumer Protection Act, 2002 states:
It is an unfair practice for a person to make a false, misleading
or deceptive representation. 2002, c. 30, Sched. A, s. 14 (1).
Examples of false, misleading or deceptive representations
(2) Without limiting the generality of what constitutes a false,
misleading or deceptive representation, the following are
included as false, misleading or deceptive representations:
[…]
11. A representation that a specific price advantage exists, if it
does not.
[…]
14. A representation using exaggeration, innuendo or ambiguity
as to a material fact or failing to state a material fact if such
use or failure deceives or tends to deceive.
108
Website: http://www.sse.gov.on.ca/mcs/en/Pages/default.aspx, consulted on May 20, 2010.
The legislation is available at: http://www.e-laws.gov.on.ca/html/regs/english/elaws_regs_050017_e.htm,
consulted on May 20, 2010. Consolidation Period: from July 1, 2009.
109
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Conclusion
In Canada, the business practice of advertising a sale by referring to a “regular”
price is regulated by the Ordinary Price Provisions of the Competition Act, a law
administered by the Competition Bureau.
According to the criteria used by the Competition Bureau, a merchant may refer
to a price in advertising a sale if it has:
•
or;
•
reasonable period.
After due consideration of these criteria, Option consommateurs considers that
they may not be strict enough. Since for many consumers, the regular price is an
indicator of the quality of a product, it should be the one at which the article is
generally sold. Otherwise, there is a danger that the criteria used by the Bureau
could unfairly benefit certain merchants to the detriment of consumers who rely
on this indicator.
Penalties have been imposed on businesses that have violated the Ordinary Price
Provisions of the Competition Act. However, given the results of the data
collection study (see Chapter 4), it is possible that the amount of the penalties is
insufficient to convince larger retailers to comply the law. They may decide that
it is more advantageous for them to advertise false discounts than risk losing
market share by complying with the law. If this purely mercantile mentality
prevails, the practice will be pursued to the detriment of all Canadian consumers
and to the competition, hence the importance of administering the law more
strictly and imposing larger fines.
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The voluntary codes of practice in advertising contain rules governing the
indication of prices, including reference to the regular price. Upon reviewing
these rules, Option consommateurs observed that in regard to sales, the codes
do not clearly specify that a retailer must sell more than 50% of its merchandise
at the regular price for a reasonable period or have advertised the article at that
price in good faith, for more than 50% of a reasonable period, when referring to
the regular price in advertising a sale. The Competition Bureau of Canada,
however, provides specific guidance on this point in a brochure intended for
businesses.
We have also noted that these codes can be inconsistent. For the same business
practice, for instance, Canadian companies working in the same retail sector
that are not members of the same self-regulatory organization are not subject to
the same rules. We believe that it is in the industry’s interest to standardize the
rules, especially since it would promote fair competition between merchants. If
this is done, the self-regulatory organizations should systematically adopt rules
that are most beneficial to consumers.
Also, certain activities of the regulatory agencies could be improved. For
example, the codes should always be published in French, the penalties imposed
on recalcitrant members could be more severe and more widely publicized, and
the composition of the board of directors of these organizations should always
include at least one representative of a consumer association. In short, these
organizations could improve their practices and thereby enhance their credibility
with the public.
False or misleading commercial practices are harmful to competition in the retail
trade. This is why we believe that associations with the mission of protecting the
interests of merchants should educate their members in such practices, including
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that of advertising false discounts. As of this moment, neither the Retail Council
of Canada, with 43,000 members, or the Conseil québécois du commerce de
détail which has 5,000 commercial member establishments, or the Canadian
Federation of Independent Business, which has 24,000 retail members, seem to
offer such information on their websites.
In Québec and in Ontario, the laws that protect consumers prohibit false or
misleading commercial practices. However, we believe it would be beneficial to
consumers in Québec if the Office of Consumer Protection tightened the rules
governing the pricing of products advertised on sale and improved the
information it publishes on its website in this regard.
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Chapter 3: Federal laws abroad
Like Canada, the United Kingdom, the United States and Australia have adopted
federal laws prohibiting false or misleading commercial practices. We have
chosen to focus on the federal provisions prohibiting false discounts in these
countries mainly because their laws, like those in Canada, are based on a system
of jurisprudence (common law). We will review the penalties that the federal
agencies that administer the law can impose. Finally, we will examine cases of
companies that have been convicted of advertising false discounts.
United Kingdom: Consumer Protection from Unfair Trading
Regulations
Administered by the UK’s Office of Fair Trading110 - the equivalent of the
Competition Bureau of Canada – the Consumer Protection from Unfair Trading
Regulation111 (CPR), was created to protect consumers from, among other things,
misleading marketing practices. The law primarily regulates112 the relationship
between consumers and merchants, and applies to the sale of goods or services,
which includes common consumer items such as clothing but also real estate and
financial services.
The CPR has five parts. The provisions prohibiting misleading marketing practices
110
The OFT's website is: www.oft.gov.uk, consulted on October 25, 2010. The United Kingdom includes
Great Britain (England, Scotland and Wales) and Northern Ireland.
111
The legislation is published on the website of the National Archives of the United Kingdom:
www.legislation.gov.uk/uksi/2008/1277/contents/made, consulted on October 18, 2010. This law replaces the
Consumer Protection Act of 1987 in response to the adoption by Parliament of the European Union (EU)
Directive entitled EU Unfair Commercial Practices Directive (Directive 2005/29/EC published on the portal
of the European Union at http://ec.europa.eu/consumers/rights, consulted on October 18, 2010.
112
According to the Department for Business, Enterprise and Regulatory Reform (BERR), the scope of the
law can extend to practices originating in other levels of the supply chain. One example would be a
misleading label posted by a manufacturer. In this case, even though the direct contact with the consumer is
through the intermediary of the retailer, the fault may still contravene the provisions of the CPR.
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are contained in Part 2 of the law, entitled “General Prohibition of Unfair
Commercial Practices” under the heading “Misleading Actions.”
Prohibition of unfair commercial practices
Under this provision, merchants are prohibited from making representations that
unduly affect, or are likely to unduly affect, the behaviour of the average
consumer. A representation is misleading if:
(a) it contravenes
diligence;and
the
requirements
of
professional
(b) it materially distorts or is likely to materially distort the
economic behaviour of the average consumer with regard to the
product. 113
In addition, the provision entitled “Misleading Actions” specifies what a
misleading business practice entails.
Misleading Actions
Under this provision, a commercial practice is misleading if it contains false
information or if its overall effect is to deceive the average consumer. By law:
Misleading actions
(1) A commercial practice is a misleading action if it satisfies
the conditions in either paragraph (2) or paragraph (3).
(2) A commercial practice satisfies the conditions of this
paragraph—
(a) if it contains false information and is therefore
untruthful in relation to any of the matters in paragraph (4) or
if it or its overall presentation in any way deceives or is likely
113
http://ec.europa.eu/consumers/cons_int/safe_shop/fair_bus_pract/transpos_laws_uk1.pdf, partie 2, p.3,
consulted on April 28, 2010, bold of the author.
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to deceive the average consumer in relation to any of the
matters in that paragraph, even if the information is factually
correct;and
(b) it causes or is likely to cause the average consumer to
take a transactional decision he would not have taken
otherwise.
(3) A commercial practice satisfies the conditions of this
paragraph if—
(a) it concerns any marketing of a product (including
comparative advertising) which creates confusion with any
products, trade marks, trade names or other distinguishing
marks of a competitor;or
(b) it concerns any failure by a merchant to comply with a
commitment contained in a code of conduct which the merchant
has undertaken to comply with, if—
(i) the merchant indicates in a commercial practice
that he is bound by that code of conduct, and
(ii) the commitment is firm and capable of being
verified and is not aspirational, and it causes or is likely to
cause the average consumer to take a transactional
decision he would not have taken otherwise, taking
account of its factual context and of all its features and
circumstances.114
As a guide for interpreting the law, the OFT gives a specific example of when the
act of advertising a false discount is prohibited under the law:
A merchant advertises televisions for sale saying the price has
been substantially discounted. In fact, they have only been on
sale at the non-discounted price in very small numbers for a
very short period of time in one of the merchant’s numerous
shops. Whilst the merchant’s advertisement may be factually
correct, it is likely nonetheless to be misleading. The average
114
The law The Consumer Protection from Unfair Trading Regulations 2008 is available at:
http://ec.europa.eu/consumers/cons_int/safe_shop/fair_bus_pract/transpos_laws_uk1.pdf, consulted on April
28, 2010.
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consumer would have been deceived about the existence of a
specific price advantage in a way that is likely to cause him to
take a different decision about the television – in this case to
buy it.115
Penalties
Under the CPR, the OFT may, among other things, use the following methods:
•
educate and inform offenders;
•
enforce codes of conduct;
•
undertake civil remedies;
•
request the application of penalties.116
Before initiating any court action, the OFT or other local organizations such as
Trading Standards117 will attempt to seek compliance from offenders through
counselling and education. However, should the latter not end up changing their
practices, civil and criminal proceedings may be initiated under the CPR.
Civil Remedies
Under the law, civil proceedings can be initiated. In addition, a court may issue a
consent order to stop the violations. Violation of this order may be considered
contempt of court, which could lead to two years’ imprisonment and a very high
fine.
115
Consumer Protection from Unfair Trading: guidance on the UK Regulations implementing the Unfair
Commercial Practices Directive, Office of Fair Trade, p. 31. The document is available on the OFT’s
website: www.oft.gov.uk/shared_oft/business_leaflets/cpregs/oft1008.pdf.
116
Information on sanctions is taken from Chapter 11 entitled “Compliance and Enforcement” of the
document entitled Consumer Protection From Unfair Trading published on the OFT website at:
www.oft.gov.uk/shared_oft/business_leaflets/cpregs/oft1008.pdf.
117
The Trading Standards Institute (www.tradingstandards.gov.uk) is a professional association whose
mission is to encourage companies to adopt fair trade practices. The association has approximately 200
offices in the United Kingdom except for Northern Ireland, where such organizations appear to be
administered by the government.
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Criminal Remedies
The CPR designates certain offenses as criminal. The commercial practice of
advertising false discounts may lead to criminal proceedings. If a corporation is
convicted of committing a criminal offense, it is liable to:
•
a £5000 fine;
•
imprisonment for a term not exceeding two years.
Jurisprudence: False discounts at Officers Club
On May 26, 2005, the Office of Fair Trading won a lawsuit against the
management of the Officers Club retail chain, which specializes in selling
clothing and accessories for men.118 The OFT accused the company of
permanently displaying a promotion of 70%. The “low” prices, however, were in
fact the usual selling price.
The High Court ruled that for a reference price to be genuine, the articles must
have been offered for sale at that price in substantial quantities, for a sufficient
period of time. The regular price must also have been established in good faith.
We were unable to determine the nature of the sanctions imposed on the
retailer.
118
See the press release entitled OFT stops misleading price ads;Court judgment says discounts must be
genuine, published on the website of the Office of Fair Trading: www.oft.gov.uk/news/press/2005/102-05,
consulted on October 22, 2010.
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USA: The Federal Trade Commission Act
Administered by the Federal Trade Commission (FTC),119 the Federal Trade
Commission Act (FTCA) prohibits false or misleading commercial practices in the
United States. The law states that:
Unfair methods of competition in or affecting commerce, and
unfair or misleading acts or practices in or affecting commerce,
are hereby declared unlawful.120
It also defines the scope of the law:
It shall be unlawful for any person, partnership, or corporation
to disseminate, or cause to be disseminated, any false
advertisement—
1. By United States mails, or in or having an effect
upon commerce, by any means, for the purpose of
inducing, or which is likely to induce, directly or
indirectly the purchase of food, drugs, devices,
services, or cosmetics;or
2. By any means, for the purpose of inducing, or which
is likely to induce, directly or indirectly, the
purchase in or having an effect upon commerce, of
food, drugs, devices, services, or cosmetics.121
In short, by law, unfair commercial practices are prohibited regardless of the
marketing means employed (“by any means”). This prohibition applies to a
relatively extensive range of goods (food, drugs, devices, services, or cosmetics).
On the other hand, there seems to be no provision in the FTCA that relates
specifically to misleading marketing practices. The situation is different in
119
The Agency’s website is: www.ftc.gov.
Chapter 15, paragraph 45. The FTCA (amended in 1994) is available on Cornell University Law School’s
website: www.law.cornell.edu/uscode/15/usc_sec_15_00000045----000-.html, consulted on October 15,
2010.
121
Ibid, but paragraph 52.
120
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Canada, where Subsection 74.01 of the Competition Act sets forth the conditions
(criteria of quantity and time) to be met by merchants who want to refer to their
regular price when advertising a sale.
The FTC has, however, produced a guide for interpreting the FTCA that mitigates
the general character of the law. The guide describes several prohibited business
practices, including advertising false discounts.
Guides Against Misleading Pricing
The FTC Guides Against Misleading Pricing122 is a five-page document that
provides specific examples of price information prohibited by law. Section 233.1
regulates reference to the usual price.
Section 233.1: Former price comparisons
According to the guide, if a merchant refers to the usual price when advertising a
sale, the product on sale must have been sold at that price or have been
advertised at this price, in good faith on a regular basis for a sufficiently long
period for the reference price to be seen as legitimate and true. In the original
version:
(a) One of the most commonly used forms of bargain advertising
is to offer a reduction from the advertiser's own former price
for an article. If the former price is the actual, bona fide price
at which the article was offered to the public on a regular basis
for a reasonably substantial period of time, it provides a
legitimate basis for the advertising of a price comparison.
Where the former price is genuine, the bargain being advertised
is a true one. If, on the other hand, the former price being
advertised is not bona fide but fictitious -- for example, where
an artificial, inflated price was established for the purpose of
enabling the subsequent offer of a large reduction -- the
122
The guide is available on the FTC website at: www.ftc.gov/bcp/guides/decptprc.htm, consulted on October
14, 2010.
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“bargain'' being advertised is a false one; the purchaser is not
receiving the unusual value he expects. In such a case, the
“reduced'' price is, in reality, probably just the seller's regular
price.
(b) A former price is not necessarily fictitious merely because
no sales at the advertised price were made. The advertiser
should be especially careful, however, in such a case, that the
price is one at which the product was openly and actively
offered for sale, for a reasonably substantial period of time, in
the recent, regular course of his business, honestly and in good
faith -- and, of course, not for the purpose of establishing a
fictitious higher price on which a misleading comparison might
be based. And the advertiser should scrupulously avoid any
implication that a former price is a selling, not an asking price
(for example, by use of such language as, “Formerly sold at
$XXX''), unless substantial sales at that price were actually
made.
(c) The following is an example of a price comparison based on
a fictitious former price. John Doe is a retailer of Brand X
fountain pens, which cost him $5 each. His usual markup is 50
percent over cost; that is, his regular retail price is $7.50. In
order subsequently to offer an unusual “bargain'', Doe begins
offering Brand X at $10 per pen. He realizes that he will be able
to sell no, or very few, pens at this inflated price. But he
doesn't care, for he maintains that price for only a few days.
Then he “cuts'' the price to its usual level -- $7.50 -- and
advertises: “Terrific Bargain: X Pens, Were $10, Now Only
$7.50!'' This is obviously a false claim. The advertised “bargain''
is not genuine.
(d) Other illustrations of fictitious price comparisons could be
given. An advertiser might use a price at which he never offered
the article at all; he might feature a price which was not used
in the regular course of business, or which was not used in the
recent past but at some remote period in the past, without
making disclosure of that fact; he might use a price that was
not openly offered to the public, or that was not maintained for
a reasonable length of time, but was immediately reduced.
(e) If the former price is set forth in the advertisement,
whether accompanied or not by descriptive terminology such as
“Regularly,'' “Usually,'' “Formerly,'' etc, the advertiser should
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make certain that the former price is not a fictitious one. If the
former price, or the amount or percentage of reduction, is not
stated in the advertisement, as when the ad merely states,
“Sale,'' the advertiser must take care that the amount of
reduction is not so insignificant as to be meaningless. It should
be sufficiently large that the consumer, if he knew what it was,
would believe that a genuine bargain or saving was being
offered. An advertiser who claims that an item has been
“Reduced to $9.99,'' when the former price was $10, is
misleading the consumer, who will understand the claim to
mean that a much greater, and not merely nominal, reduction
was being offered.
We note however that the Guide does not specify the proportion or the exact
period during which an article must have been sold or advertised at the regular
price for a merchant to refer to it when advertising a sale. In this respect, as we
have already seen, the Competition Bureau has established more precise criteria.
Penalties
If a company breaks the law by disseminating false or misleading claims, it is
subject to various penalties, depending on the nature of the offense:
•
The FTC or the courts can obtain a consent order, which obliges the
merchant to stop broadcasting a false or misleading advertisement, to
justify future advertising, to report periodically to FTC staff and to pay a
fine of $16,000 per day per advertisement if it breaks the law again;
•
Consumers can obtain significant financial compensation if they are
successful in seeking civil remedies. Advertisers may be required to
reimburse every consumer who bought the product, in whole or in part;
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•
Advertisers may also be required to take out new ads to correct the
misinformation conveyed in the original ad.123
The absence of judgments
According to a text published by the law firm Heenan Blaikie, the Federal Trade
Commission has not initiated legal proceedings relating to a misleading price
since 1979.124 This is explained by the fact that the FTC has delegated this
responsibility to the States, which have generally adopted their own laws in this
regard.125
To explain the inaction of the FTC in this area, Robert Pitofsky - former chairman
of the FTC from 1995 to 2001 – is reported to have said that consumers now have
so much access to information on prices and retailers that OSP controls are
scarcely necessary.126
« Where consumers are fully capable, through common sense or
simple observation, of protecting their interests against
advertising exaggerations or distortions, there would be no
reason for the law to intervene. »127
In short the FTC has decided for various reasons to leave it up to States to
intervene in cases of misleading information on prices. However, our research
shows that the United States is the only country where the federal agency
123
From a document called Advertising FAQ's: A Guide for Small Business, published on the Federal Trade
Commission’s website: www.ftc.gov/bcp/edu/pubs/business/adv/bus35.shtm, consulted on October 18, 2010.
The law is the letter m) of paragraph 45 of Chapter 15 of the FTCA published in:
www.law.cornell.edu/uscode/15/usc_sec_15_00000045----000-.html, accessed 18 October 2010. The law
does not appear to provide a criminal sanction.
124
From the article Sears Canada Inc. Case Study on Sale Pricing, available at:
www.heenan.ca/en/publications/item?id=906, consulted on October 13, 2010.
125
To learn more about state laws concerning false or misleading business practices, we encourage you to
read including the Uniform Deceptive Trade Practices Act and the Uniform Consumer Sales Practices Act,
two documents used to standardize these laws in the U.S.. A comparative table is also published on the
website: http: //law.jrank.org/pages/11799/Deceptive-Trade-Practices.html.
126
Ibid.
127
From the article: Robert Pitofsky: Public Servant and Scholar, published on the FTC’s website:
www.ftc.gov/speeches/muris/muris010612.shtm, consulted on October 14, 2010.
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responsible for protecting competition has made such a decision. Option
consommateurs believes that this approach should not be adopted in Canada for
the following reasons:
•
there are high concentration levels in several sectors of the Canadian
economy. Consequently, a few large companies often hold a significant
share of the market;
•
large Canadian companies tend to deploy a network of branches
throughout the country;
•
large companies can utilize the same business practices in every branch
of their networks.
Consequently, if the Competition Bureau of Canada were to delegate the
responsibility for administering the elimination of false or misleading
commercial practices to provincial agencies, each agency would have to
penalize the same practice used by every branch of every company that
operates in different provinces. Delegating this responsibility to the provinces
could result in an unnecessary duplication of work for Canadian government
agencies mandated to protect consumers.
Australia: the Trade Practices Act
Administered by the Australian Competition and Consumer Commission128 (ACCC),
the 13-part Trade Practices Act129 (TPA) covers almost every aspect of the
128
For more information, visit: www.accc.gov.au. Consulted on October 25, 2010.
The law is published at www.austlii.edu.au/au/legis/cth/consol_act/tpa1974149/index.html#longtitle,
consulted on October 25, 2010.
129
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market: the relationship between suppliers, wholesalers, retailers, competitors
and customers. The fifth part of the Act deals with unfair commercial practices.
Part V: Consumer protection
False or misleading representations are prohibited under Articles 52 and 53 of
the Act. Section 52 prohibits misleading commercial practices generally.
S. 52 Misleading or deceptive conduct
(1) A corporation shall not, in trade or commerce, engage in
conduct that is misleading or deceptive or is likely to mislead or
deceive.
(2) Nothing in the succeeding provisions of this Division shall be
taken as limiting by implication the generality of subsection (1).
[…]
Section 53 prohibits misleading representations about the price of a good or
service.
S. 53 False or misleading representations
A corporation shall not, in trade or commerce, in connexion
with the supply or possible supply of goods or services or in
connexion with the promotion by any means of the supply or use
of goods or services:
[…]
e) make a false or misleading representation with respect to
the price of goods or services;
[…]
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In Australian federal law, we found no specific laws framing reference to the
usual price. There is a guide to the interpretation of the TPA, however, that does
specify the merchants’ obligations in this regard.
Misleading Prices (Guide)
Misleading Prices,130 a guide published by the ACCC, provides explanations of
how the Trade Practices Act (TPA) frames price representations. According to the
guide, when a company advertises a sale, it must have offered the article at the
regular price for a reasonable period just prior to the sale.
Was–Now advertising
Products or services advertised with a 'was'–'now' price claim
should accurately reflect a comparison between the previous
price ('was') and the current price ('now') being offered.
Further, the actual previous price must have been offered for a
reasonable period prior to the discount offer commencing so
that it is a genuine offer and not just a price that has been
inflated to make a sale price seem more attractive.
The guide also provides an example of false discounts:
For example, a retailer must not advertise a jacket for $85
('now' price) discounted from $100 ('was' price), if that retailer
does not normally sell the jacket for $100 or if the jacket has
been offered at the higher price for only a short amount of
time.
While the interpretation of the Australian federal law in this guide seems, at first
sight, silent on the issue of the reasonable quantity of items that need to have
130
The guide is available on the ACCC’s website:
www.accc.gov.au/content/index.phtml/itemId/815334?pageDefinitionItemId=86167, consulted on October
25, 2010. Another interesting guide to consult for deceptive business practices is Misleading & deceptive
conduct, available at: www.accc.gov.au/content/index.phtml/itemId/815335.
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been sold at the usual price prior to advertising a sale, a press release dating
from November 2009 quotes a court-ordered undertaking by a retailer not to:
promote or offer any goods for sale using comparative price
representations (other than using RRPs) unless those goods have
been offered for sale or sold at the higher price in reasonable
quantities for a reasonable amount of time immediately prior
to the commencement of the promotion or offer.131 (emphasis
added):
Nevertheless, neither the guide nor the press release specifies the percentage of
items sold at the regular price or exactly how long an article must have been
advertised at the regular price in order to permit a retailer to refer to this price
when advertising a sale.
Penalties
Under the Act, a company guilty of using misleading marketing practices is
subject to a fine of up to A$10 million.132 In some cases, the infringement can
result in imprisonment.
According to the document Advertising and Selling published by the ACCC,133
natural or legal persons who are victims of unfair commercial practices may sue.
In such cases, the courts may ask the company:
•
to compensate victims (refund, cancellation of contract, damages and
interest, etc.);
•
to publish corrective notices;
•
to establish compliance programs;
131
See the ACCC press release entitled Another bedding retailer corrects price representations, available at
www.accc.gov.au/content/index.phtml/itemId/903205/fromItemId/815456, consulted on October 25, 2010.
132
The law is available at: www.comlaw.gov.au/Details/C2011C00003/Html/Volume_1#param381,
consulted on March 28, 2011.
133
The document is available at: www.accc.gov.au/content/index.phtml/itemId/303213, p. 20-21, consulted
on September 8, 2010.
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•
to stop the practice.
Judgments
According to the Australian law firm Blake Dawson (2009),134 the ACCC actively
monitors price comparisons made by companies. Below, we summarize the cases
of six companies convicted between 2002 and 2009 of advertising false discounts.
Image Blinds and Premier Blinds & Awnings
In 2009,135 following an investigation by the ACCC, the retail stores Image Blinds
and Premier Blinds & Awnings admitted advertising false discounts. In their ads,
these retailers continuously advertised discounts of 25% to 40% less than the
suggested retail price. Consumers, however, never realized any savings, since
the items were sold at the same price both before and after the “sale.” The
ACCC ordered the retailers to cease disseminating misleading advertising, to
publish corrective notices and comply with the law.
Yarrabee Investments Pty Ltd
In 2009,136 this furniture and bed retail store posted price comparisons on its
website and in newspapers such as “Suggested retail price $4,989, now only
$999.” The ads included the words “on sale now” and “limited.” But Yarrabee
admitted that the articles had never been sold at the “suggested retail price.”
The ACCC ordered the retailer to cease the dissemination of misleading
advertising and to comply with the law.
134
Blake Dawson, ACCC pursues advertisers for misleading “was/now” pricing comparisons,
www.blakedawson.com/Templates/Publications/x_article_content_page.aspx?id=54701, March 20, 2009,
consulted on September 10, 2010.
135
See the ACCC’s press release at:
www.accc.gov.au/content/index.phtml/itemId/907240/fromItemId/621575, consulted on September 8, 2010.
136
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Carrerabenz Diamond Industries Pty Ltd
In 2008,137 this company specializing in the sale of diamonds pleaded guilty to 27
counts of misleading business practices. The company advertised discounts
ranging from 42% to 233% on diamonds while an investigation by the ACCC found
that the diamonds had never been sold at the “regular” price. The company was
ordered to pay a fine of $220,000.
Sleep City and Everyday Living
In 2008, these two bed retailers published a catalogue displaying promotions
using “was $X, X $now” price comparisons, However, the companies admitted
that the reference price was not the price at which the items had been offered
or sold for a reasonable period. The ACCC directed the companies to comply with
the law, to post corrective notices in their stores and on their websites, and to
publish an information notice in an industry magazine. The company also
promised to give a $100 gift voucher to consumers who had purchased any of the
items improperly promoted in its catalogue.
Ascot Four Pty Ltd.
In 2008,138 this jewellery retailer was ordered to pay, in addition to court costs, a
$380,000 fine for publishing misleading advertising. An investigation by the ACCC
found that the regular price used to advertise items on sale was misleading,
since none of the items had been sold at the advertised regular price or at a
price that was close to the advertised regular price.
137
138
See the ACCC’s press release at: www.accc.gov.au/content/index.phtml/itemId/874077, consulted on
September 9, 2010.
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Allans Music Group
In 2002,139 the largest retailer of musical instruments in Australia was fined
$80,000 for publishing misleading advertising in its catalogue. An investigation by
the ACCC found that the regular price used to advertise nine items on sale was
misleading, since none of these items had ever been sold at that price prior to
the sale. The company has also begun to contact consumers who were victims of
the practice and to offer them a $50 gift certificate. Amounts that cannot be
repaid to victims will be donated to charities.
Conclusion
Like Canada, the United Kingdom, the United States and Australia have adopted
federal laws prohibiting misleading marketing practices.
Unlike Canada, whose Competition Act contains specific provisions regulating
reference to current prices, other federal regulatory frameworks contain no such
provisions. Canada appears to be the only country to have stipulated the
percentage of items that must have been sold at the regular price and the length
of time for which an article must have been advertised at the regular price in
order for a merchant to refer to these prices when advertising a sale.
Federal agencies whose mission is to protect competition are more or less active
in administering laws on false or misleading business practices. Of the agencies
reviewed, the Federal Trade Commission is the only one that has totally
delegated responsibility for the suppression of misleading business practices to a
third party: the State legislatures of the United States. Of all the federal
139
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agencies, the Australian Competition and Consumer Commission (ACCC) seems to
be the most active in administering and combatting misleading marketing
practices. Since 2008, it has secured convictions against five companies for such
practices. Also, in May 2008, the UK’s Office of Fair Trading published a
consultation paper to examine how the new rules on pricing are to be applied.140
Penalties for violations are sometimes civil and sometimes criminal. Generally,
under the civil regime, the court may order offenders to cease activities, publish
a corrective notice to compensate consumers who bought the product, and pay
an administrative monetary penalty, which in Canada and Australia may be as
high as $10 million for corporations.
Under the criminal regime, those convicted may be subject to a fine and up to
fourteen years’ imprisonment. (In practice, however, since it is often difficult to
determine who in the company was responsible for the misleading marketing
practices, natural or legal persons are not prosecuted under the criminal regime.
At least, our research has turned up no such cases.)
140
See the press release, OFT examines legal implications of pricing research, available on the OFT website
at: http://oft.gov.uk/news-and-updates/press/2010/59-10, consulted on October 26, 2010.
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Chapter 4: Data Collection
In 2008, as a result of a data collection study carried out on the websites of Best
Buy and Future Shop,141 two retail companies specializing in the sale of
electronic products, our organization identified and denounced false discounts
advertised by these companies. They had inflated the regular price of certain
laptops before advertising it on sale.
This public exposure has encouraged many consumers and merchants to share
their experiences with us. For instance, Mr. X,142 who worked in retail for several
years, told us that furniture and mattress retailers employ misleading marketing
practices to boost sales. To determine the truth of this allegation, our
organization decided to conduct a major data collection exercise.
Methodology
The purpose of the data collection study was to identify misleading marketing
practices used by certain furniture and mattress retailers. For example, we
wanted to see whether the companies were advertising false discounts or
whether the items sold in the clearance centres were actually offered at
liquidation prices.
To do this, we decided to monitor, approximately every two weeks over a period
of a year, the prices that a number of companies quoted on several of their
products. In what follows, we explain in detail the criteria we used to select the
stores we studied, and how the data collection study was conducted. At the end
141
The press release is available at Options consommateurs’ website: www.optionconsommateurs.org/salle_presse/communiques/167/, consulted on June 10, 2010.
142
This person has asked to remain anonymous.
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of this chapter, we also explain how we chose to present the results in this
report.
Selection of stores
Retailers were mainly chosen on the basis of three criteria: the size of our
budget, their geographical accessibility (convenience option) and their relative
size in the Canadian market.143
In addition, for strategic reasons, we chose to collect data in two clearance
centres. We made this choice because, in a recession, consumers are looking for
bargains, and merchants might be tempted to take advantage of this fact. The
methodology used to examine business practices in clearance centres is different
from that used for “regular” stores. This will be described after the description
of the methodology used for “regular” stores.
The stores chosen
Since Option consommateurs’ offices are located in Montreal and Ottawa, and
considering our budgetary capacity, we were able to collect data in 16 stores,
including nine in the Ottawa area (only in Ontario) and six in Québec, in the
Montreal area.
For logistical reasons, we grouped the stores to be investigated into clusters. For
example, Brault & Martineau - the largest furniture retailer in Québec - has a
branch in Brossard on the South Shore of Montreal. There is also a branch of the
Matelas Bonheur retail chain close to this location. Since having stores
concentrated in one area facilitated the investigators’ movements during data
collection and reduced transportation costs, we chose to collect our data from
143
Since we were unable to obtain reliable statistics on market shares of retailers of furniture and mattresses,
we tried to determine their importance in the market based on the number of branches operated in Canada.
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these two stores. Generally, therefore, the closeness of stores to each other was
an important criterion in choosing which stores to investigate.
Also, whenever possible, we collected data from two branches of the same chain
in both the Montreal and Ottawa regions. This strategy allowed us to check if the
same business practices were employed in more than one branch in Canada. Also,
this “double” verification had the advantage of reducing the risk of error due to
measurement bias, because the data in these locations were collected by
different investigators.
Table 2: List of Retailers
Retailers
Region where the investigation took place
Montreal
Ottawa
The Bay
X
X
Brault & Martineau
X
Brick
X
X
Brick Centre de liquidation
X
X
Germain Larivière
X
Leon
X
Matelas Bonheur
X
Mattress Mart
Sears
Sleep Country
(known as Dormez-Vous in Québec)
X
X
X
X
X
X
Data collection
The merchants were unaware of the presence of the investigators or that data
collection was under way. If an investigator was identified and it became
impossible to return to the store, or if a merchant used an electronic flyer to
advertise its sales, the investigator could collect the data from the company’s
website (if necessary, using the postal code of the branch where the data
collection was to take place). For each of the stores, under the heading
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“Highlights,” we specify whether the data were obtained from the company’s
website or from the store.
Duration of the investigation
The salespersons who were contacted by telephone before starting data
collection indicated that the mattresses and furniture have a shelf life of one to
two years. They are then renewed by the manufacturer. Mostly due to budgetary
considerations, the data collection study was conducted over the period of a
year, from September 2009 to the end of August 2010.
Frequency of data collection
For budgetary reasons, we decided to collect data every two weeks. Naturally,
since retailers make regular promotions (weekly, biweekly mailings of flyers,
monthly “manager’s promotions” etc.), the data collection study did not allow us
to list every sale that the retailers advertised. However, we hoped that a twicemonthly collection was enough to provide us with an overview of the business
practices the retailers used to promote the sale of their products.
Day of data collection
Depending on their availability, the investigators chose the day of the week or
the weekend during which the data collection would be conducted. This day
(Tuesday, Wednesday, Thursday, Saturday...) could vary from one collection to
another for the same store. Since the stores are busier on weekends, it is
possible that retailers advertise more promotions at these times. So if the
investigator did frequently not carry out data collection on the weekends, he
may have missed several promotions. Consequently, the results of his data
collection may underestimate the number of sales advertised by the retailer.
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The opposite is not necessarily true. If the investigator carries out data
collection mainly on weekends, it is possible that the results of the data
collection study better reflect what the customers who come to the store are
exposed to. In any case, the purpose of this data collection study is not to create
a representative sample that would allow us to arrive at a generalization about
practices in the entire industry, but simply to identify whether the retailers may
have used misleading marketing practices to promote sales of some of their
products.
Equipment used
To collect the data, the investigators took notes of price tags on a log sheet,
collected print flyers, recorded electronic ones, shot videos with the use of a
hidden camera, took photos and made voice recordings using a tape recorder.
Data collected
From the price tags, the investigators generally copied the product number, the
brand, the price, and, where applicable, the sale price and the length of the
promotion.
Choice of products
In each of the stores where the data collection study took place we decided, for
budgetary reasons, to concentrate on about 10 products. The investigator was
free to choose any items in the category of furniture or mattresses. In order to
avoid detection, the investigators might, for example, choose products some
distance away from the salespersons’ workstations.
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Discontinued products
If, during the investigation, a product was no longer available in the store, the
investigator replaced it with another product, ideally in the same category. This
was consistent with the requirements of the investigation, which was essentially
to determine the accuracy of the discounts, even though the reporting period of
different products may have varied.
The scope of the data collection
By analyzing the data, we are able to identify business practices used by
furniture and mattress retailers to promote the sale of their products. Since the
purpose of the investigation was to gather information and not to make a
judgement about our observations, we cannot judge whether a company was or
was not in compliance with certain laws governing commercial practices or
whether its practices were misleading or otherwise.
However, if products were advertised on sale on a regular basis, or if the
investigators identified other questionable business practices, the results of the
data collection study could raise doubts about a company’s compliance with the
laws governing certain business practices. It will be up to the relevant public
authorities, particularly the Competition Bureau of Canada, to take the
necessary steps, based on the analysis of data collected, to judge whether the
companies have resorted to misleading commercial practices.
Methodology for clearance centres
In the clearance centres where we chose to conduct data collection, the
methodology described above was modified completely in the course of the
investigation, for the following reasons:
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•
Turnover of merchandise is high. It was therefore often impossible to
monitor an article for more than a few weeks;
•
There are often a large number of salespersons in the store and they
move around a lot.
Consequently, in the clearance centres, the investigators’ main task was to
determine whether the items advertised as being liquidated were actually sold at
a lower price than when they were advertised on sale in the chain’s “regular”
stores.
To accomplish this, the investigators were obliged, on several occasions during
the investigation period (once every two or three months or when the
investigator managed to get away from a salesperson), to take notes, photos or
make videos and then compare the prices of items sold in these centres with the
liquidation price of the same items advertised in the flyers of the chain’s
“regular” stores.
Choice of data presented
A huge amount of data was collected by the investigators, who monitored
information on the prices of a dozen products on 26 occasions in 16 different
stores. In theory, therefore, if no product was replaced during the data
collection period, investigators potentially collected 4160 indications.
Obviously, some of the data were not significant and there was no point in
presenting them. The sample was thus sorted, and the most suggestive cases
were retained. Incidentally, according to Simon N. Roy,144 the study of suggestive
cases is also the most common methodological approach in the social sciences. In
144
Recherche sociale: de la problématique à la collecte des données, Les Presses de l’Université du Québec,
2006, p. 167.
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this approach, exemplary or even exaggerated cases are selected in studying or
illustrating a phenomenon. According to the author, the study of suggestive cases
can reinforce general theories by providing particularly revealing examples that
help crystallize a vague state of affairs or one that is otherwise difficult to
measure.
Accordingly, the cases presented are not representative of the entire set of data
collected and therefore we cannot, on the basis of the selected cases, arrive at
any general conclusions about the commercial practices within a store or the
industry as a whole. What the data primarily allows us to do is to identify certain
business practices used by some merchants.
That said, as we will see later, the suggestive case study proved to be a
methodological approach that was well suited to the aim of our research. The
cases analyzed helped identify several misleading commercial practices used by
retailers.
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Results
The results of the investigation are truly astonishing. Option consommateurs has
concluded that misleading business practices seems to be common in the market.
Below, in alphabetical order by name of store, we present the significant results,
the “highlights” of our data collection. For each branch, we also provide a brief
description of the retailer. Following the presentation of the highlights, we make
recommendations to the Competition Bureau of Canada so that it can correct the
situation, if the Bureau believes it’s necessary.
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The Bay in Nepean, Ontario
Bayshore Shopping Center
100 Bayshore Drive
Ottawa (Nepean), Ontario
K2B 8C1
Tel.: 613-596-9810
Option consommateurs , December 17, 2009
Description of Retailer
Founded in 1670, the Hudson Bay Company (HBC) operates The Bay, Zellers,
Décodécouverte and Fields retail store chains. The Bay department store chain,
which has 92 branches145 across the country, specializes in selling a wide range of
popular products such as clothing, cosmetics, appliances and mattresses. The
HBC is a member of the self-regulatory organization, Advertising Standards
Canada.
145
From the Bay’s website at: http://www.thebay.com/eng/aboutus/aboutHBC.cfm, consulted on February 24,
2010.
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Highlights
Following data collection conducted in the store approximately every two weeks,
we made three observations. One, the difference between the regular price and
the sale price of mattress / boxspring sets is considerable. Two, a significant
number of mattress / boxspring sets are advertised on sale on the floor at the
same time. Finally, certain sets are advertised on sale on a regular basis.146
Following are the details of these observations:
•
The difference between the regular price and the sale price of
mattress / boxspring sets is considerable. The sale price is often twice
or even three times less than the displayed regular price. For example:
1. The current price of the Sealy Simetry II Pillow Top queen-size mattress /
boxspring set was $2298; it was advertised on sale several times at $898.
2. The current price of the Sealy Impeccable II Euro Pillow Top queen-size
mattress / boxspring set was $2998; it was advertised on sale at $998,
$1,098, $948 and $978.
3. The current price of the Sealy Sonoma Valley Euro Pillow Top queen-size
$898 and $1098.
4. The current price of the Sealy Gold Choice Pillow Top mattress and
boxspring queen-size mattress / boxspring set was $3998; it was
advertised on sale at $1,498 and $1,298.
146
During the investigation, we took 140 photos and shot 37 films to support the observations made by the
investigator. These are stored on the USB key in the folder “The_Bay.”
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5. The current price of the Simmons Cranbrook III queen-size mattress and
boxspring was $2398; it was advertised on sale at $998 and $898.
6. The current price of the Simmons Waterford III queen-size mattress /
boxspring set was $2798; it was advertised on sale at $1,098 and $998.
7. The current price of the Sealy Euro Pillowtop Silver II Choice queen-size
$1198 and $898.
8. The current price of the Sealy Choice Eurotop Bronze II queen-size
mattress / boxspring set was $2398; it was advertised on sale at $998 and
$928.
9. The current price of the Sealy Choice Eurotop Bronze II queen-size
mattress / boxspring set was $2398; it was advertised on sale at $998 and
$928.
Here, as just one example, is the price tag of a mattress / boxspring set
advertised on sale. In red: the sale price of the set, to the left of this, the
current price, and on the far right, the amount “saved” by the consumer.
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•
The retailer often displays a large number of mattress / boxspring sets
on sale in the store. For example:
1. In 6 out of 23 data collections, there were always at least eight mattress
/ boxspring sets advertised on sale for a very low price compared to the
current price.
2. In 9 out of 23 data collections, there were always at least seven mattress
current price.
3. In 11 out of 23 data collections, there were always at least six mattress /
boxspring sets advertised on sale for a very low price compared to the
current price.
4. In 12 out of 23 data collections, there were always at least five mattress
current price.
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5. In 17 out of 23 data collection sessions there were always at least four
mattress / boxspring sets advertised on sale for a very low price
compared to the current price.
6. In 19 out of 23 data collections, there were always at least three
mattress / boxspring sets advertised on sale for a very low price
compared to the current price.
7. In 20 out of 23 data collections, there were always at least two mattress
current price.
8. In 21 out of 23 data collections, there was always at least one mattress /
boxspring set advertised on sale for a very low price compared to the
current price.
The photos below,147 taken on September 3, 2010, show that the retailer may
advertise a significant number of mattress / boxspring sets on sale at the same
time (in the pictures, it is not always easy to read the word “sale,” but the top
of the price tag generally shows the red section that contains the word). Other
photos, videos and investigation records reveal that this practice is repeated
often.
147
The photos, videos and logs of the investigation are stored on the USB key in the folder “The_Bay”
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•
Certain mattress / boxspring sets are often advertised on sale on the
floor. For example:
1. The Sealy Impeccable II Euro Pillow Top mattress / boxspring set was
advertised on sale in 14 of the 22 data collection sessions conducted from
October 8, 2009 to September 3, 2010.
2. The Sealy Sonoma Valley Euro Pillow Top mattress / boxspring set was
November 19 to September 3, 2010.
3. The Simmons Cranbrook III mattress / boxspring set was advertised on sale
in 8 of the 12 data collection sessions conducted from March 23 to
September 3, 2010.
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4. The Simmons Waterford III queen-size mattress / boxspring set was
March 23 to September 3, 2010.
5. The Sealy Silver Choice II Euro Pillow Top mattress / boxspring set was
6. The Sealy Choice Eurotop Bronze II mattress / boxspring set was
7. The Simmons Victoria II mattress and box set was advertised on sale in 7 of
the 11 data collection sessions conducted from April 9 to September 3,
2010.
Recommendation
Considering the considerable difference between the regular price and the sale
price of several mattress / boxspring sets;
Whereas the retailer advertised a considerable number of mattress / boxspring
sets on sale in the store at the same time and, consequently, it is unlikely that
these sets are sold in large quantities at the regular price;
Whereas several mattress / boxspring sets are regularly advertised on sale;
Whereas, in order to advertise a sale by referring to the current price, a retailer
must (in order to comply with the Ordinary Price Provisions of the Competition
Act administered by the Competition Bureau) have sold more than 50% of its
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123
merchandise at that price, for a reasonable period or have offered the article at
that price in good faith, for more than 50% of a reasonable period;
whether the sales of mattress / boxspring sets examined by our organization
during the data collection, especially those listed in this report that were
advertised by the retail store The Bay, located at 100 Bayshore Drive,
Ottawa, are likely to mislead consumers.
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La Baie, Promenades St-Bruno
800 Des Promenades Boulevard
St-Bruno-de-Montarville, Québec
J3V 5J9
Tel.: 450-653-4455
Founded in 1670, the Hudson Bay Company (HBC) operates The Bay, Zellers,
Décodécouverte and Fields retail store chains. The Bay department store chain,
which has 92 branches across the country, specializes in selling a wide range of
popular products such as clothing, cosmetics, appliances and mattresses. The
HBC is a member of the self-regulatory organization, Advertising Standards
Canada.
Highlights
In this store, data collection148 was conducted approximately every two weeks
over the period of a year. Following the analysis of data collected, we made
three observations. One, certain mattress / boxspring sets are advertised on sale
often in the stores. Two, the difference between the current price and the sales
price of the mattress / boxspring sets is considerable. Three, the retailer often
displays sales on a large number of mattress / boxspring sets in the store.
Following are the details of these observations.
•
Some mattress / boxspring sets are often advertised on sale in stores.
For example:
148
The electronic log is saved on the USB key in the folder: cléUSB\La_Baie_St-Bruno.
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1. The Simmons Beautyrest Amethyst II queen-size mattress / boxspring set
was advertised on sale in 7 of the 12 data collection sessions conducted
from September 29, 2009 to March 7, 2010.
2. The Simmons Beautyrest Deauville II queen-size mattress / boxspring set
from September 29, 2009 to March 7, 2010.
3. The Simmons Beautyrest World Class Ophelia II queen-size mattress /
boxspring set was advertised on sale in 7 of the 13 data collection
sessions conducted from September 29, 2009 to March 20, 2010.
4. The Sealy Grand Pacific II queen-size mattress / boxspring set was
advertised on sale in 11 of the 19 data collection sessions conducted
from September 11, 2009 to May 30, 2010.
5. The Sealy Royal York II queen-size mattress / boxspring set (without
mattress cushion) was advertised on sale in 12 of the 19 data collection
sessions conducted from September 11, 2009 to May 30, 2010.
6. The Sealy Tofino II queen-size mattress / boxspring set was advertised on
sale in 11 of the 19 data collection sessions conducted from September
11, 2009 to May 30, 2010.
7. The Stearn & Foster Oceanview queen-size mattress / boxspring set was
advertised on sale in 13 of the 21 data collection sessions conducted
from September 29, 2009 to July 7, 2010.
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8. The Gatineau II queen-size mattress / boxspring set was advertised on
sale in 7 of the 12 data collection sessions conducted from April 17 to
September 17, 2010.
•
The difference between the regular price and the sale price of
mattress / boxspring sets is considerable. The sale price is often twice
or even three times less than the ticketed regular price. For example:
1. The current price of the Simmons Beautyrest Amethyst II queen-size
mattress / boxspring set was $2,398; it was advertised on sale at $898
and $959.
2. The current price of the Simmons Beautyrest Classic Cranbrook II queensize mattress / boxspring set was $2,398; it was advertised on sale at
$998 and $959.
3. The current price of the Simmons Beautyrest Classic Jade II queen-size
mattress / boxspring set was $2,198; it was advertised on sale at $798
and $879.20.
4. The current price of the Simmons Beautyrest Deauville II mattress /
boxspring set was $3,098; it was advertised on sale at $1,298 and $1,098.
5. The current price of the Simmons Waterford Supreme II queen-size
mattress / boxspring set was $2,598; it was advertised on sale at $1,098
and $1,198.
6. The current price of the Simmons World Class Ophelia II queen-size
mattress / boxspring set was $3,398; it was advertised on sale at $1,298
and $1,198.
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7. The current price of the Sealy Royal York II mattress / boxspring set
(without mattress cushion) was $2,498; it was advertised on sale at $898
and $998.
8. The current price of the Sealy Tofino II queen-size mattress / boxspring
set was $3,498; it was advertised on sale at $1,198 and $1,298.
9. The current price of the Sealy Posturepedic Impeccable II queen-size
mattress / boxspring set was $2,998 and $2,898; it was advertised on
sale at $998 and $1,098.
10. The current price of the Sealy Posturepedic Symmetry II queen-size
mattress / boxspring set (with mattress cushion) was $2,298; it was
advertised on sale at $898 and $998.
11. The current price of the Stearns & Foster Oceanview queen-size
mattress / boxspring set was $3798; it was advertised on sale at $1,498
and $1,398.
12. The current price of the Gatineau II queen-size mattress / boxspring set
was $2,498; it was advertised on sale at $998 and $1,098.
•
The retailer often displays a large number of mattress / boxspring sets
on sale in the store. For example:
1. In 8 out of 27 data collections, there were always at least eight mattress
current price.
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2. In 9 out of 27 data collections, there were always at least seven mattress
current price.
3. In 12 out of 27 data collections, there were always at least six mattress /
boxspring sets advertised on sale for a very low price compared to the
current price.
4. In 15 out of 27 data collections, there were always at least five mattress
current price.
5. In 19 out of 27 data collections, there were always at least four mattress
current price.
6. In 24 out of 27 data collections, there were always at least two mattress
current price.
7. In 26 out of 27 data collections, there was always at least one mattress /
boxspring set advertised on sale for a very low price compared to the
current price.
Recommendation
Considering the considerable difference between the regular price and the sale
price of several mattress / boxspring sets;
Whereas the retailer advertised a considerable number of mattress / boxspring
sets on sale in the store at the same time;
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Whereas several mattress / boxspring sets are regularly advertised on sale;
Whereas, in order to advertise a sale by referring to the current price, a retailer
must (in order to comply with the Ordinary Price Provisions of the Competition
Act administered by the Competition Bureau) have sold more than 50% of its
merchandise at that price, for a reasonable period or have offered the article at
that price in good faith, for more than 50% of a reasonable period;
whether the sales advertised by the retailer The Bay at 800, boulevard des
Promenades à St-Bruno-de-Montarville, Québec, on all the mattress /
boxspring sets examined by Option consommateurs during its data collection,
especially those listed in this report, are likely to mislead consumers.
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130
Brault & Martineau
9500 Taschereau Boulevard
Brossard, Québec
J4X 2W2
Tel.: 450 619-6777
Founded in 1960, the Brault & Martineau retail chain has a total of 21 stores: 10
Brault & Martineau department stores, 5 clearance centres and 6 Galeries du
sommeil. All the stores in the chain are located in Québec. Brault & Martineau
department stores specialize in the retail sale of furniture, mattresses,
household appliances and electronics.
Highlights
We carried out data collection149 in this store approximately every two weeks
over the period of a year. Following the analysis of data collected, we made two
observations: One, certain items were advertised on sale more often than at the
current price. Two, for a mattress and box spring set, when offering a boxspring
“free,” the retailer sometimes increased the price of the mattress. The details
of these observations are as follows:
•
Some items were advertised on sale more often than at the regular
price. For example:
1. From September 27, 2009 to September 5, 2010, the rocker recliner
(code: 001487) was advertised on sale in 15 out of 25 data collections.
The current price of the chair was ticketed at $859. The article was
149
The electronic log, web pages and videos taken during the investigation are recorded on the USB key on
the folder: cléUSB\Brault_et_Martineau.
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offered on sale at $699 (12 times) or $749 (once) or Brault & Martineau
paid the taxes (twice).
2. From September 27, 2009 to September 19, 2010, a five-piece kitchen
set (code: 00237012 13A) was advertised on sale in 17 out of 25 data
collections. The current price of the set was ticketed at $1,449. The
article was offered on sale at $1099 (3 times) or $1199 (7 times) or $999
(4 times) or Brault & Martineau paid the taxes (3 times).
•
For a mattress and box spring set, when offering a boxspring “free,”
the retailer sometimes increased the price of the mattress. For
example:
1. On September 27, and November 13 and 29, 2009, the Zed Bed Nature Eco
Mistral mattress and boxspring were advertised on sale at $1,499 and $389
respectively. However, on October 16 and 31, 2009, the boxspring was
offered free if one bought the mattress at $1,599; a markup of $100.
2. On September 27, 2009, the Zed Bed Green Nature Latex mattress and
boxspring were advertised on sale at $1,579 and $389 respectively.
However, on October 16 and 31, 2009, the boxspring was offered free if
one bought the mattress at $1599; a markup of $20.
3. On September 27, 2009, the Arc-en-ciel mattress and boxspring were
advertised on sale at $669 and $269 respectively. However, on October 16
and 31, 2009, the boxspring was offered free if one bought the mattress at
$779, a markup of $110.
4. On September 27, and November 12 and 29, 2009, the Simmons Nickel
mattress and boxspring were advertised on sale at $799 and $299
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respectively. However, on October 16 and 31, 2009, the boxspring was
offered free if one bought the mattress for $999, a markup of $200. In its
flyer, the merchant stated the price of the boxspring at $269.
5. On September 27, 2009, the Simmons Casablanca mattress and boxspring
were advertised on sale at $899 and $299 respectively. However, on
October 16 and 31, 2009, the boxspring was offered free if one bought the
mattress at $999, a markup of $100.
6. On September 27, 2009, the Serta Nola mattress and boxspring were
$849, a markup of $100. In its flyer, the merchant listed the price of the
boxspring at $249.
7. On September 27, 2009, the Simmons Alegresse mattress and boxspring
were advertised on sale at $1,199 and $299 respectively. However, on
October 16 and 31, 2009, the boxspring was offered free if one bought the
mattress at $1,269, a markup of $70. In its flyer, the merchant listed the
price of the boxspring at $299.
8. On September 27, 2009, the Sommex Berger mattress and boxspring were
$749, a markup of $110. In its flyer, the merchant listed the price of the
boxspring at $249.
Recommendations
Whereas some mattress / boxspring sets are regularly advertised on sale;
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Whereas when offering a boxspring “free,” the retailer sometimes increases the
price of the mattress;
whether the sales advertised by the retailer Brault & Martineau located at
9500, boulevard Taschereau in Brossard, Québec, which were examined by
Option consommateurs in this report, are likely to mislead consumers.
whether the sales examined by Option consommateurs in this report, in
which the retailer Brault & Martineau located at 9500 Taschereau Boulevard,
Brossard, Québec seems, for some mattress and boxspring sets, have
increased the price of a mattress when offering a boxspring “free,” are likely
to mislead consumers.
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The Brick, Montréal
8701 De l’Acadie Boulevard
Montréal, Québec
H4N 3K1
Tel.: 514 381-1313
Image from www.broccolini.com March 2, 2011
Founded in Edmonton in 1971, The Brick retail chain now has 200 stores150 across
Canada. Its department stores sell mostly furniture, household appliances,
electronics and mattresses. Since 1976, The Brick Warehouse Corporation has
been a member of the self-regulatory commercial practices organization the
Better Business Bureau.
The Brick also owns 20 Clearance Centres, four of which are located in Québec,
three in Alberta, two in British Columbia, one in Manitoba and ten in Ontario. On
150
Specifically, The Brick is made up of 100 Brick stores, 32 franchised stores, 23 mattress stores, three
Super Stores, 10 Clearance Centres and 43 United Furniture Warehouse stores (acquired in 2004). For more
information, visit:
www1.thebrick.com/brickb2c/jsp/ancillary/bodyOnlyTemplate.jsp?pageName=company_info_about_brick&
_requestid=1548556, consulted on January 27, 2010.
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the website of the Clearance Centres,151 it states: “Every day you can save up to
90%; exclusive weekly furniture, electronics and appliance offers!”
Highlights
We collected data in this store approximately every two weeks for a year. We
also examined the sales prices of some items advertised on the merchant’s
website and some of the flyers published by Brick (known as the “Brick
Brochure”).
Following the analysis of data collected, the analysis of the flyer and the analysis
of the website, we made two observations: One, the current price of an item
advertised on sale is not always clearly indicated on the label of the product or
in the flyer. Two, in the flyers published in Québec or on its website, when Brick
advertised a sale on a set (such as a dining room set), it sometimes referred to
the price of the set when the items in the set were purchased separately instead
of referring to the current price of that set. Following are the details of these
observations.
•
On the price tags of items advertised on sale, the current price is not
always clear. For example, in the photo reproduced below, it states that
the 5-piece dining room set is on sale for $599.97 until February 28, 2010.
However, the current price of the set is not indicated.
151
www.liquidationbrick.com/content.php, consulted on March 4, 2010.
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Option consommateurs , February 26, 2010
•
Also, in some flyers distributed in Québec, where Brick advertised a sale
on a set (such as a dining room set), Brick sometimes refers to the
total of the prices of each item sold separately instead of referring to
the current price of that set. But if a product is advertised on sale, it is
the current price of the set that is likely to help consumers assess
whether the sale is a good deal. The reference to “package price when
purchased separately” may, however, have the effect of inflating the
value of this promotion to consumers. Following are some examples of
this practice:
1. In the scan below,152 the Lanton 5-piece dining room set is advertised at
$599.95, and to the right of this price, it states: “$1,219.85 when
purchased separately.” The current price of the set is not indicated.
152
Flyer for Québec from July 12 to 29, 2010, p.3.
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2. Similarly, in the scan below,153 the Yaletown 5-piece dining room set is
advertised at $699.95, and to the right of this price, it states: “$1,419.85
when purchased separately.” The current price of the set is not indicated.
3. Or again, in the scan below,154 the 6-piece Yaletown bedroom set with
queen-size bed is advertised at $1,999.97, and under this price, it states:
153
154
Brick Flyer for Québec: July 12 to 29, 2010, p.3.
Brick Flyer for Québec: January 1 to 10, 2010, p.3.
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“$2,969.88 when purchased separately.” The current price of the set is
not indicated.
4. Once more, on the store's website155 (see first image below), the fivepiece set is advertised at $599.95 with the notation in red “As
advertised.” The current price of the article is not indicated. By clicking
on the link156 leading to the details about the set (second picture below),
the retailer also refers to the price of the set “purchased separately.”
155
www1.thebrick.com/brickb2c/jsp/catalog/subCategory.jsp?itemID=cat180098&displayName=Diningroom
+%26+Dinette+Sets&navAction=jump&navCount=2&pageNum=0&sortOrder=ascending&sortProperty=dis
playName&pageSize=11&trail=null&sortMode=strprop&_requestid=2618006, consulted on February 17,
2010.
156
www1.thebrick.com/brickb2c/jsp/catalog/product.jsp?id=HJ4848PK5&navAction=jump&navCount=9,
consulted on February 17, 2010.
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Recommendations
Whereas the retailer The Brick does not always indicate the current price of the
article advertised on sale in its flyers or on its product labels;
Whereas the retailer The Brick sometimes refers to the price of the set “when
purchased separately” when advertising a sale on a set instead of referring to the
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current price of that set, which we believe does not help the consumer to
effectively evaluate whether the promotion is a true bargain;
Whereas, we believe that referring to the total of the prices of each article sold
separately when the retailer advertises a sale on a set may have the effect of
inflating the actual value of this promotion for consumers;
the retailer The Brick (Québec) to clearly display, in every medium, the
the retailer The Brick (Québec) not to refer to the price of a set when items
are sold separately when advertising a sale on the set, but to refer to the
current price of the set.
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The Brick Québec Flyers
Highlights
During the data collection, we collected a large number of flyers issued and
distributed in Québec by the retailer The Brick. While examining these, we made
two observations. One, some items are advertised for long periods. Two, the
retailer does not always mention the current price of an item advertised in the
flyer. Following are the details of our observations.
•
Some items are often advertised in flyers. For example:
1. Over a period of six months, from September 4, 2009 to March 4, 2010, the
Oakdale 2-piece sectional sofa (code: OAKDALSEC, OAKDACSEL) was
advertised at least 69% of the time in flyers (124 out of 181 days). The
sofa was in fact advertised at $999.97 (this time, the current price was
given as $1,299.97) from September 4 to 30, 2009,157 at $998.97 from
November 1 to 30, 2009,158 at a 23% discount from December 4 to 6,
2009,159 at a 50% discount if one bought the sofa or the matching armchair
from December 7 to 24, 2009,160 at $1,099.97 from January 1 to 10,
2010161 at $1099.97 from January 25 to 31, 2010,162 at $999.97 from
February 1 to 28, 2010163 and $999.97 from March 1 to 7, 2010164.
157
Brick Catalogue, September 2009, p.5.
Flyer: Superbes achats de novembre, p.1.
159
Flyer: Payez seulement 77¢ par dollar, December 4, 2009, p.2. Above the price of the item is indicated in
red “now only.” The price before the sale would thus be $299.97 ($230.98 / $0.77).
(230.98 $/0,77 $).
160
Flyer, December 11, 2009: Liquidation d’inventaire 2009 Tous les sofas 50 % de rabais […].
161
Flyer, January 1, 2010: La folie du nouvel an tous les meubles et matelas 20 % de rabais […], p.3.
162
Flyer, January 29, 2010: Vente sous la tente intérieure, p. 3.
163
Flyer, January 1-28, 2010: 28 days of Friends and Family sale!, p.12. Under the price it states: Coupon
expires February 28, 2010. Cannot be combined with other discount or bonus gift offers.
164
Flyer, March 5, 2010: La célèbre vente d’après Noël de Brick est de retour!, p. 4.
158
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Also, It is possible, since our methodology did not permit us to examine all
the flyers issued by The Brick, that this article was advertised for more
than 69% of the six-month period in question.
2. Over a period of six months, from September 4, 2009 to March 4, 2010, a
chenille recliner (code: 2300-BU2/SD2/BL2) was advertised at least 68% of
the time in flyers (123 out of 181 days). The recliner was in fact
advertised at $449.97 from September 4 to 30, 2009,165 at $449.97 from
October 1 to 31, 2009,166 at $399.97 from December 1 to 24, 2009,167 at
$461.97 from December 4 to 6, 2009,168 at a 20% discount from January 1
to 10, 2010,169 at $449.97 from February 1 to 28, 2010170 and $399.97 from
March 1 to 7, 2010171.
Also, it is possible, since our methodology did not permit us to examine all
the flyers issued by The Brick, that this article was advertised for more
than 69% of the six-month period in question.
3. Over a period of six months, from September 4, 2009 to March 4, 2010, the
Pronto-AC Contemporary Recliner was advertised at least 66% of the time
in flyers. The recliner was in fact advertised at $299.97 from September 4
to 30, 2009,172 at $299.97 from October 1 to 31, 2009,173 at $259.97 from
165
September 2009 catalogue where it says: “Savings for every room in your home” at the top of the page,
p.9.
166
Flyer: Superbes achats d’octobre, p.3.
167
Flyer: Superbes achats de décembre, p.3
168
Flyer: Payez seulement 77 ¢ par dollar, December 4, 2009, p.2. Above the price of the item, stated
“During the day 77 cents on the dollar” and in red, “Now Only.” The price before the sale would then be
$599.96 ($461.97 / $0.77).
169
Flyer, January 1, 2010: La folie du nouvel an tous les meubles et matelas 20 % de rabais […], p.1.
170
Flyer: 28 days of Friends and Family Sale!, p.17. Above the price is printed “Special Friends & Family
Price” and, under the price “Coupon expires February 28, 2010. Cannot be combined with any other discount
or bonus gift offers.”
171
Flyer: La célèbre vente d’après Noël de Brick est de retour!, p. 5.
172
Flyer: Superbes achats du mois d’octobre, p. 3. At the top of the page, it says: All recliners on sale! 10%
off the ticketed price of the furniture. Excludes offers discounts and promotions. The price before the sale
would then be $333.33 ($299.97 / $0.90).
173
Flyer, October 28, 2009, p.1.
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October 28 to November 5, 2009174 from November 6 to 8, all recliners
were advertised at 50% off the ticketed price when the consumer
purchased the matching armchair175 at $299.97 from December 1 to 24,
2009,176 at $230.98 from December 4 to 6, 2009,177 at $299.97 from
February 1 to 28, 2010,178 from March 1 to 7, 2010 there was a 25%
discount on all furniture.179 On January 27, 2011, on The Brick’s website,
the chair was advertised at $349.97 (not on sale, see picture below).
Note: Since our methodology did not permit us to examine all the flyers
issued by The Brick from September 4, 2009 to March 4, 2010, it is possible
that this article was advertised on sale more often in that period.
174
175
Flyer, November 6, 2009,p.1.
Flyer, Superbes achats de décembre, p.3
177
Flyer: Payez seulement 77 ¢ par dollar, December 4, 2009, p.2. Above the price of the item, it states
“During the day, 77 cents on the dollar” and in red, “Now Only.” The price before the sale would then be
$599.96 ($461.97 / $0.77).
178
Flyer: 28 days of Friends and Family Sale!, p.17. Above the price is printed “Special Friends and Family
Price” and, under the price “Coupon expires February 28, 2010. Cannot be combined with any other discount
or bonus gift offers.”
179
Flyer, March 5, 2010, p.3.
176
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•
The retailer does not always refer to the current price of items advertised
in the flyer. For example:
1. On page 53 of the flyer for February 1 to 28, 2010 (see scan below), the
washer and dryer set is advertised at $999. However, the current price
of the set is not indicated.
2. On page 42 of the flyer for August 3 to 29, 2010 (see scan below), the
mattress / boxspring set is advertised at $549.39 However, the current
price of the set is not indicated.
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3. On page 7 of the flyer for April 23 to 25, 2010 (see scan below), the
dryer is advertised at $249. However, the current price of the set is not
indicated (but in this case, the consumer could deduce the price, since it
states that there is a 50% discount on the dryer if one buys the washer).
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Recommendations
Whereas, in order to comply with the Ordinary Price Provisions of the
Competition Act, a law administered by the Competition Bureau of Canada, a
retailer must have sold more than 50% of the articles at the current price or have
offered items at that price in good faith for more than 50% of a reasonable
period,;
Whereas the articles with the codes OAKDALSEC, OAKDACSEL, and 2300BU2/SD2/BL2 PRONTO-AC were advertised in the flyer for a period of six months
for 69%, 68% and 66% of the time;
Whereas these items were possibly advertised on sale in other flyers, since our
methodology did not allow us to collect all those distributed by the retailer;
Whereas, in its flyer, the retailer uses different terms such as “Superb Buys”
“Now Only,” “28 days of Friends and Family Price,” “Flyer In Force From X to”
“Coupon Expires On XXX,” etc. which could lead consumers to believe that the
items advertised in the flyer are on sale;
Whereas, even though the retailer does not always make direct reference to
current prices in its flyer, the use of these expressions implicitly refers to the
current price;
whether the sales advertised in the flyers distributed in Québec by the
retailer The Brick that Option consommateurs has reviewed in this report are
in compliance with the Ordinary Price Provisions of the Competition Act.
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the retailer The Brick to clearly display, in every medium, the current price
of items advertised on sale.
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The Brick in Nepean, Ontario
565 West Hunt Club Road
Nepean, Ontario
K2G 5W5
Tel.: 613-225-8898
Option consommateurs, 19 décembre 2009
180
information, visit:
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149
Highlights
In this store, we conducted data collection182 approximately every two weeks for
a year. In analyzing the data, we made three observations. One, certain items
are advertised on sale often. Two, the retailer advertised a significant number of
promotions during the year. Three, on the price tags of items advertised on sale,
the current price is not always clear. Following are the details of these
observations:
•
Certain items are advertised on sale often. For example:
1. From October 22, 2009 to August 20, 2010, the Sage Microfiber Rocker
Recliner armchair (code: 6734SG) was advertised on sale in 12 of the 20
data collections.
2. From November 19, 2009 to September 3, 2010, the Navy Recliner (code:
2100F-NVY) was advertised on sale in 13 of the 19 data collections.
•
The retailer The Brick advertised a significant number of promotions
during the year. In fact, in addition to the sales advertised in brochures,
flyers and those displayed in stores (e.g. liquidation items), the sales staff
could also provide consumers with “Exclusive Customer VIP Certificates.”
These certificates give the holder access to preferential prices for one
day. However, the certificates appear to be quite easy to obtain. In fact,
181
The log sheet and the photos and videos taken during the investigation are stored on the USB key in the
folder: cléUSB\Brick_Nepean.
182
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in several data collections, the investigator asked a salesperson for a
certificate and got one every time. Scans of these certificates are
presented in Appendices 2-6. They were valid on February 4,183 April
16,184 May 14,185 July 2186 and September 3187 2010.
•
On the price tags of the items advertised on sale, the current price is
not always clear. For example:
1. In the photo below, the Montana five-piece Dinette set is advertised on
sale for $699.97 until June 24, 2010. However, the current price of the
set is not clear.
Option consommateurs , June 18, 2010
2. In the next example, below, the 5-piece Dinette set is advertised on sale
at $549.97 $ until May 27, 2010. However, the current price of the unit is
not clearly indicated.
183
See Appendix 2.
See Appendix 3.
185
See Appendix 4.
186
See Appendix 5.
187
See Appendix 6.
184
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Option consommateurs , May 21, 2010
Recommendations
Whereas the retailer The Brick, located at 565 West Hunt Club Road Nepean,
Ontario does not always indicate the current price of an item advertised on sale
on its price tag;
Whereas some items are often advertised on sale in the store, and consequently,
it is unlikely that these items are sold in large quantities at current prices;
Whereas the number of promotions over the period of a year is substantial;
offered items at that price in good faith, for more than 50% of a reasonable
period,;
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Option consommateurs recommends that the Competition Bureau determine
whether, from September 2009 to September 2010, the retailer The Brick,
located at 565 West Hunt Club Road Nepean, Ontario, was in compliance with
the Ordinary Price Provisions of the Competition Act on most of the products
offered in the store.
the Brick retail outlets concerned to clearly display, in every medium, the
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Brick Clearance Centre in Laval
1001 Curé-Labelle Boulevard
Laval, Québec
H7V 2V6
Tel.: 450-973-1111
Option consommateurs, May 21, 2010
Option consommateurs, February 2, 2010, inside the store
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Highlights
The sales staff at The Brick Clearance Centre Laval move around a lot generally,
making it difficult for the investigator to take notes in the store on a regular
basis. On some occasions, however, he was able to take photos and shoot videos
in the store (with a hidden camera) while the sales staff was busy with other
customers.
By examining photographs and films taken by the investigator, we made two
observations. One, the price of some items advertised in this Clearance Centre
are the same or higher than the price at which they were advertised in flyers for
the “regular” Brick stores. Two, there are also some items in this Clearance
Centre that are not being liquidated. Following are the details of these
observations.
188
information, visit:
189
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•
The price of some items advertised in this Clearance Centre is the
same or even higher than when they were advertised in flyers for the
“regular” Brick stores.” For example:
1. On February 26, 2010, a poster (see photo below) was displayed
announcing that the Maytag washer and dryer set bearing the code
“EPICZ” were being sold at the “final clearance” price of $1,199.
Option consommateurs, February 26, 2010
However, on page 7 of the brochure for February 26 to 28, 2010 (see scan
below), the set is advertised at $999 in “regular” Brick stores in Québec.
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In addition, on page 53 of the brochure for February 1 to 28, 2010 (see scan
below), the same set was advertised at $1,199, the same price as the “final
clearance” price at the Clearance Centre.
2. Another example: On February 26, 2010, the Maytag washer and dryer
set (code: Mayt7) was announced on sale at the “final clearance” price
of $799 (see picture below):
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On many occasions, however, the set was advertised at a lower price in flyers for
the “regular” Brick store. For example, a few weeks earlier, on page 4 of the
flyer for December 4 to 6, 2009 (see scan below), the set was on sale for $748
($429 + $319) in “regular” Brick stores in Québec.
Also, on page 12 of the flyer for December 1 to 24, 2009 (see scan below), the
set was advertised at $747 ($429 + $318).
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Also, on page 6 of the flyer for March 1 to 7, 2010 (see scan below), the set was
advertised at $649, i.e. $150 less than the price shown on the February 26 2010
“final clearance” price in the Clearance Centre.
Finally, on page 7 of the flyer for April 23 to 25, 2010 (see scan below), the set
was advertised at $798 (549 + 249) and, according to this flyer, was still being
sold in “regular” Brick stores in Québec.
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3. Another example: On February 26, 2010, the Sealy mattress / boxspring
set (code: AQUA4FQPK) was ticketed (see photo below) at the “final
clearance” price of $899.97.
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However, on the last page of the flyer for February 26 to 28, 2010, the same set
is advertised on sale at the same price in “regular” Brick stores. (See the two
scans below — the second scan is an enlargement of the lower part of the first).
In addition, on page 42 of the flyer for February 1 to 28, 2010 (see scan below),
the set was advertised at the same price as in the Clearance Centre.
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4. Another example: On March 4, 2010, as shown in the images below, the
Frigidaire washer (code: FTF530FS) was ticketed at $549 in the
Clearance Centre.190
Option consommateurs, March 4, 2010
190
On the first price tag in the above photo, the list price of $649 is crossed out, and on the bottom price tag
“Now $549” and “Save $100” are indicated in red. The second photo shows the product code on the back of
the price tag.
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A few weeks later, on page 6 of the flyer for April 26 to May 9, 2010 (see
scan below), the washer is advertised at $498.96.
5. Another example: on July 23, 2010 at The Brick Clearance Centre, an
inclinable sofa (code: TOREN2-RL) is posted on sale at $899 (yellow price
tag, see photos below).
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Option consommateurs, July 23, 2010
But a month later, on page 3 of the flyer for August 30 to September 9, 2010 (see
the left corner of the scan below), the same sofa was advertised at $879.97.
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6. Another example: on February 26, 2010, a double mattress / boxspring
set (code: OELITEFPK) is ticketed at the “final clearance” price of $549.
Photo prise par Option consommateurs, 26 février 2010
However, several months later, on page 42 of the brochure for August 3 to 29,
2010 (see scan below), the set is advertised at $549.39 in “regular” Brick stores.
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•
The Clearance Centre also offers items that are not being liquidated.
In fact, clearance items are labelled yellow, and items that are not being
liquidated are labelled red.191 For example:
1. The range shown below is not being liquidated, since the article is
labelled red, even though it contains the words “Brick Clearance” and
“special purchase.” Note also that only one price is shown, in contrast to
the yellow price tags (see below) on which a current price and a
discounted price are shown.
191
A saleswoman confirmed (voice recording made on October 22, 2009), that this store sells “brand new
stuff... we sell everything... to have variety.” Listen to the segment from 3:00 to 3:50 of recording 22102009
stored on the USB drive on the folder: Brick_liquidation_laval\audio from.
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Another example of a red price tag, below: the front-loading washer and dryer
set is also not in liquidation in spite of the words “Brick Clearance” and “Special
Purchase” on the price tag.
In fact, only the articles with yellow price tags are being liquidated, for
example, the refrigerator below which is labelled “Brick Clearance,”
“Regular Price $749,” “now $699 “and” save $100.”
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Or the mattress that is labelled “Brick Clearance,” “Regular Price $1,789,” “Now
$949” and “Save $840.”
Or the dryer that is labelled “Brick Clearance,” “Regular Price $579,” “Now
$479” and “Save $100.”
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Moreover, if we look at the videos that were shot on January 8, 2009192 and May
21, 2010, we can see that a significant proportion of the merchandise in the
Clearance Centre bears a red price tag and, therefore, is not being liquidated.
The investigator estimated that during each data collection, approximately 15%
of the merchandise on the floor had a red price tag.
However, a retail outlet that advertises itself as a Clearance Centre cannot,
under the Better Business Bureau Code of Advertising (of which The Brick
Warehouse Corporation has been a member since 1976)193 sell merchandise that
is not in liquidation. Article H of this code states:
« H. “Emergency” or “distress” sales
Emergency or distress sales, including but not limited to
bankruptcy, liquidation and going out of business sales, should
not be advertised unless the stated or implied reason is a fact,
192
See videos 0812009 and 21052010 in the folder: Brick_liquidation_laval\films on the USB drive.
See: www.bbb.org/edmonton/business-reviews/furniture-retail/the-brick-warehouse-corporation-inedmonton-ab-100036, consulted February, 15, 2010. On the other hand, no branch of The Brick was
accredited locally in Québec as of February 15, 2010. Consequently, only the parent company is a member of
The Brick BBB.
193
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should be limited to a stated period of time, and should offer
only such merchandise as is affected by the emergency. “Selling
out,” “closing out sale,” and similar terms should not be used
unless the concern so advertising is actually going out of
business. The unqualified term “liquidation sale” means that
the advertiser's entire business is in the process of actually
being liquidated prior to actual closing. Advertisers should
conform with the requirements of applicable local, provincial
and federal laws. »194
In short, since not all the merchandise sold at the Brick Clearance Centre in
Laval is being liquidated (red price tags) and since the merchandise that is
advertised as being liquidated may be sold there at a higher price than when it is
advertised in flyers for “regular” Brick stores in Québec, Option consommateurs
believes that this store does not respect the BBB Code of Advertising of which
the The Brick parent company is a member.
Recommendations
Whereas the price of some clearance items advertised in the Brick Clearance
Centre located at 1001 Boul. Curé-Labelle are the same or even higher than
when they were advertised in flyers for “regular” Brick stores in Québec;
Whereas this store whose trade name includes the word “Clearance” also sells
merchandise that is not in liquidation;
Whereas this store does not appear to comply with section H of the Code of
Advertising administered by the Better Business Bureau, of which the Brick
parent company is a member;
whether the items advertised as being liquidated at the Brick Clearance
194
The code is published on the BBB website at: www.bbb.org/canada/SitePage.aspx?id=7de726b1-bd234368-ba94-f84702b0fae9, consulted on 15 février 2010.
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Centre located at 1001 Boul. Curé-Labelle in Québec that were reviewed by
Option consommateurs in this report are likely to mislead consumers.
whether the Brick Clearance Centre located at 1001 Boul. Curé-Labelle,
Québec, whose trade name contains the word “Clearance” may sell
merchandise that is not being liquidated without misleading consumers or
harming competition.
Option consommateurs recommends that the Competition Bureau regulate
the use of the terms “Clearance Centre” and “Centre de Liquidation.”
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Brick Clearance Centre in Nepean
Nepean, Ontario
K2E1A5
Tel.: 613-224-7555
Option consommateurs, December 19, 2009
195
information, visit:
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Highlights
Due to the high turnover of merchandise at the Clearance Centre, it was
impossible to monitor the products sold in the store over long periods. In
addition, since the sales staff generally move around a lot, it was hard to take
notes and photos of price tags every two weeks. A few times, however, when the
salespersons were busy serving other customers, the investigator was able to
take multiple pictures of price tags.197
By examining the photographs and collecting and comparing the prices of items
sold in the Clearance Centre with the prices of these items advertised in flyers
for “regular” Brick stores, we made two observations: One, some items in this
Clearance Centre are advertised at the same price or higher than when they
were advertised in flyers for “regular” Brick stores in Ontario. The details of
these observations are presented below. Two, the sign (see photo of the store
above) at the front of the store displaying the name “The Brick Clearance
Centre” may mislead consumers about the actual size of this Clearance Centre.
•
The prices of some items advertised in this Clearance Centre are the
same or higher than when they were advertised in flyers for
“regular” Brick stores in Ontario. For example:
1. On March 4, 2010, the price tag in the photo below taken at the Brick
Clearance Centre stated that the range (code: YWFE361LQ) was
196
The 126 photographs and 5 videos and the scans of pages of flyers showing the items examined later in
this report and compiled during the data collection are stored on the USB key in the folder:
cléUSB\Brick_Clearance_Nepean.
197
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previously sold at the “regular” price of $849; that it is “now” being sold
for $689, and that the consumer will “save” $160.
However, on page 7 of the national flyer for July 12 to 29, 2010 (see scan
below), the range was advertised at $599.99 in “regular” Brick stores.
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Clearance Centre stated that the dryer (code: YNED7200TW) was
previously sold at the “regular” price of $599, that it is “now” being sold
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However, on page 4 of the national flyer for September 4 to 10, 2009 (see scan
below), the dryer was advertised at $549 in “regular” Brick stores.
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In addition, on page 21 of the national flyer for September 4 to 30, 2009 (see
scan below), the dryer was also advertised at $549 in “regular” Brick stores.
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Clearance Centre stated that the refrigerator (code: ED2KVEXVQ) was
previously sold at the “regular” price of $1249; that it is “now” being
sold for $1049, and that the consumer will “save” $200.
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However, on page 6 of the Ontario/BC flyer for July 1 to 11, 2010 (see scan
below), the refrigerator was advertised at $999 in “regular” Brick stores.
In addition, on page 50 of the national flyer for August 3 to 29, 2010 (see scan
below), the refrigerator was also advertised at $999 in “regular” Brick stores.
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Also, on page 7 of the national flyer for August 30 to September 9, 2010 (see
scan below), the refrigerator was advertised at $999 in “regular” Brick stores.
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Also, on page 7 of the national flyer for August 9 to August 22, 2010 (see scan
below), the refrigerator was advertised at $999.39 in “regular” Brick stores.
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Clearance Centre stated that the sofa (code: PORTO-RS) was previously
sold at the “regular” price of $999, that it is “now” being sold for $699,
and that the consumer will “save” $300.
Option consommateurs, 4 mars 2010
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However, on page 7 of the national flyer for May 10 to 27, 2010 (see scan
below), the sofa was advertised at $599.97 in “regular” Brick stores.
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Also, on page 3 of the flyer for August 30 to September 9, 2010 (see scan
below), the sofa was advertised at $699.97 in “regular” brick stores (97¢
more than when it was in “liquidation” at the “Clearance Centre”).
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Also, on page 2 of the national flyer for June 14 to 24, 2010 (see scan below),
the sofa was again advertised at $699.97 in “regular” Brick stores.
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Also, on page one of the national flyer for June 3 to 13, 2010 (see scan
below), the sofa was again advertised at $699.97 in “regular” Brick stores.
Also, on page 10 of the national flyer for February 1 to 28, 2010 (see scan
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.
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And on page 5 of the national flyer for March 1 to 4, 2010 (see scan below), the
sofa was still advertised at $699.97 in “regular” Brick stores.
On page one of the national flyer for October 16 to 27, 2009 (see scan below),
the sofa was again advertised at $699.97 in “regular” Brick stores.
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Clearance Centre stated that the sofa (code: BRIANCA-S) was previously
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However, on page one of the national flyer for October 16 to 27, 2009 (see scan
6. On April 9, 2010, the price tag in the photo below taken at the Brick
Clearance Centre stated that the sofa (code: HUSTLE-S) was previously
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Option consommateurs, April 9, 2010
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However, on page one of the national flyer for November 27 to December 3, 2009
(see scan below), the sofa was advertised at $399.97 in “regular” Brick stores.
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7. On April 9, 2010, the price tag in the photo below taken at the Brick
Clearance Centre stated that the sofa (code: TOREN2-RS) was previously
sold at the “regular” price of $1,699.99 that it is “now” being sold for
$1499, and that the consumer will “save” $200.
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However, on page 3 of the national flyer for August 30 to September 9,
2010 (see scan below), the sofa was advertised at $899.97 in “regular”
Brick stores, i.e. $600 less than when it was in “liquidation.”
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Furthermore, on page one of the national flyer for July 1 to 11, 2010 (see scan
below), the sofa was advertised at $1199.97 in “regular” Brick stores, i.e. $300
less than when it was in “liquidation.”
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Also, on page 5 of the national flyer for August 9 to 22, 2010 (see scan
However, on page 2 of the national flyer for June 3 to 13, 2010 (see scan below),
the sofa was advertised at $1299.97 in “regular” Brick stores, i.e. $200 less than
when it was in “liquidation.”
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Also, on page 3 of the national flyer for May 10 to 27, 2010 (see scan
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Furthermore, on page 5 of the national flyer for March 1 to 4, 2010 (see
scan below), the sofa was advertised at $1199.97 in “regular” Brick stores.
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In addition, on page 2 of the national flyer for December 1 to 24, 2009
(see scan below), the sofa was advertised at $1,199.97 in “regular” Brick
stores.
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Finally, on page one of the national flyer for October 16 to 27, 2009 (see
scan below), the sofa was advertised at $1,199.97 in “regular” Brick
stores.
8. On June 4, 2010, the price tag shown in the photos below stated that the
washer (code: ITW4300SQ) was previously on sale (Special Buy) at $329.
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Option consommateurs, June 4, 2010
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However, on page 6 of the national flyer for August 30 to September 9,
2010 (see scan below), the washer was advertised at $329 in “regular”
Brick stores.
Also, on page 6 of the national flyer for June 3 to 13, 2010 (see scan
below), the washer was also advertised at $329 in “regular” Brick stores.
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9. On June 18, 2010, the price tag in the photo below taken at the Brick
Clearance Centre stated that the washer (code: YWED9450L) was
previously sold at the “regular” price of $1099.99, that it is “now” being
sold for $949, and that the consumer will “save” $150.
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However, on page 6 of the national flyer for April 26 to May 9, 2010 (see
scan below), the washer was advertised at $899 in “regular” Brick stores.
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10. On June 18, 2010, the price tag in the photo below taken at the Brick
Clearance Centre stated that the recliner (code: 2300-BL2) was
previously sold at the “regular” price of $649, that it is “now” being sold
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However, on page 3 of the national flyer for December 1 to 24, 2009 (see
scan below), it was advertised at $399.97 in “regular” Brick stores.
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below), it was advertised at $449.97 in “regular” Brick stores.
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•
A large banner198 placed at the front of the store that reads: “The
Brick Clearance Centre” may mislead consumers about the actual
surface area of the clearance centre. In fact, from the street, the
consumer might think, as the photo of the store shows, that the whole
left-hand side of the store’s surface area is devoted to clearance items.
In reality, only a smaller part of the store located on the right
(according to the investigator, it is actually about a third of the total
floor area of the building excluding the portion reserved for storage)
contains clearance items. In the photo above, on the extreme right, it
can also be seen that the entrance to the Clearance Centre is not the
main door, which primarily serves the United Furniture Warehouse
store. A video made on January 8, 2009199 clearly shows that the lefthand side of the store is not used to sell merchandise in liquidation, but
the merchandise of the United Furniture Warehouse store.
Recommendations
Whereas the price of some of the liquidation items advertised at the Brick
Clearance Centre located at 350 West Hunt Club Road in Nepean, Ontario is the
same or even higher than when they were advertised in the flyer for “regular”
Brick stores;
Whereas a huge banner placed on the front of the store that reads: “The Brick
Clearance Centre” may mislead consumers about the actual surface area of the
Clearance Centre;
198
According to the investigator, this banner was on the front of the store every time he conducted his
collection in the Ottawa area.
199
See video 2009-08-01-2 stored on the USB key in the folder:
Brick_Clearance_Nepean\Superficie_trompeuse.
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whether the items advertised by the retailer as being in liquidation at the
Brick Clearance Centre located at 350 West Hunt Club Road Nepean, Ontario
that were reviewed by Option consommateurs in this report are likely to
mislead consumers.
whether the banner displayed on the front of the Brick Clearance Centre
located at 350 West Hunt Club Road Nepean, Ontario that announces the
Brick Clearance Centre could mislead consumers about the actual surface
area of the clearance centre.
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Dormez-Vous?
9181 De l’Acadie Boulevard
Montréal, Québec
H4N 3K1
Tel.: 514-321-4134
Founded in 1994, and purchased in 2006 by the company Sleepcountry,200
Dormez-vous? is a chain of stores specialized in the sale of mattresses, with forty
branches in Québec. According to its website, it is the largest mattress retailer in
Québec and the only one to offer Sealy, Serta, Simmons, Stearns & Foster,
Tempur-Pedic and Kingsdown beds under one roof.
200
To learn more about the details of the acquisition, see the article entitled Sleep Country to buy Montreal
specialty chain, published on the Furniture/Today website: www.furnituretoday.com/article/32779Sleep_Country_to_buy_Montreal_specialty_chain.php.
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Highlights
In this store, we collected data about every two weeks over the period of a year.
While analyzing the data, we noted that the retailer sometimes printed
“Introductory Price” on the price tag of certain items even when these items had
been sold in its stores for months. For example:
1. On September 16, 2009, October 8, 2009, October 22, 2009 and
November 5, 2009, the price tag for the Spalding Sensitex Soy queen-size
mattress / boxspring set indicated a current price of $2,998.88. But on
November 19, 2009, December 5, 2009, December 15, 2009, January 4,
2010, February 8, 2010 and February 26, 2010, the price tag for the set
indicated a sale price of $2,399.10 accompanied by the words,
“Introductory Price.” Then, on March 14, 2010, April 10, 2010, April 25,
2010, May 7, 2010, May 25, 2010 and June 10, 2010, the price tag
indicated a current price of $2,998.88. And on July 7, 2010, the price tag
again indicated a sale price of $2,399.10 accompanied by the words
“introductory price.”
2. On September 16, 2009, October 8, 2009, October 22, 2009 and October
5, 2009, the price tag of the Spaldin Memory Soy queen-size mattress /
boxspring set indicated a current price of $3,296.86. Later, on November
19, 2009 and December 5, 2009, the price tag indicated that the item
was on sale at $2,637.49. Then, on December 15, 2009, January 4, 2010,
February 8, 2010 and February 26, 2010, the price tag indicated a price
of $2,637.49 accompanied by the words “Introductory Price.” Finally,
the price tag showed a price of $3,296.86 during all the data collections,
which ended on September 2, 2010.
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Recommendation
Whereas the store Dormez-vous? located at 9181, Boul. De l'Acadie in Montreal
used the term “Introductory Price” on the price tag of certain products
advertised on sale while these products had been available in its stores for
several months;
Whereas the term “Introductory Price” may have appeared for several months on
the price tag of a product;
whether the use of the term “introductory price” by the retailer Dormezvous? located at 9181 boul. De l'Acadie in Montreal on the products reviewed
by Option consommateurs in this report is likely to mislead consumers.
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Germain Larivière
2900 Jacques-Bureau Avenue
Montréal, Québec
H7P 6B3
Tel.: 514-866-8691
Option consommateurs, December 19, 2009.
Germain Larivière is a high-end store specializing in the sale of furniture,
appliances and electronics. Germain Larivière has two branches in Québec.
Highlights
In this store, we collected data about every two weeks for a year. Following
analysis of the data collected, the investigator made three observations. One,
almost all the price tags of all the items sold in this store that were examined
during the data collection study show that the products are consistently sold for
less than the “regular” price. Two, we were able, over long periods, to monitor
articles whose price tags continually referred to a regular price that was higher
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than the sale price. Three, the retailer seemed to refer to a “regular” price
when advertising an additional discount on an item. Following are the details of
these observations.
•
Except for small accessories such as lamps, picture frames,
sculptures, flower pots, etc,201 all the price tags examined during the
data collection sessions indicate that the products are always sold at
less than the regular price. To demonstrate this, the investigator made
several videos at different points throughout the investigation. These 12
videos, which were shot on December 19 in 2009, and on January 8,
January 26, February 21 and April 13 in 2010, are stored on the USB key
in the folder entitled germain/films. Also, the 262 photos202 of price
tags taken on December 17 in 2009, and on January 8, January 26,
February 21, March 4, March 23, April 13, April 23, May 7, May 21, June
4, June 21, July 9, July 23, August 6, August 20 and September 3 in
2010, support this observation.
•
Since the price tags of items203 in the store indicate a sale price that
is below the regular price, all the items monitored by the
investigator were sold at less than the regular price during each data
collection. Among the data collected, we wish to emphasize three
articles that were monitored over a long period.
1. On 20 consecutive occasions, namely, on October 22, November 6 and
19, December 3 and 17, 2009, and January 8 and 26, February 21,
March 4 and 23, April 13 and 23, May 7 and 21, June 4 and 21, July 9
and 23, and August 6 and 20, 2010, a kitchen set (code: 8I6D8I3M) was
sold at a price that was lower than the regular price. Photos taken on
201
For examples of indications of prices for small accessories, see the folder:
germain/photos/petitsaccessoires.
202
These photos are stored in the germain/photos folder on the USB key.
203
Except for small accessories such as lamps, frames, sculptures, flower pots, etc..
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January 8, February 21, March 4 and 23, April 13 and 23, May 7 and 21,
June 4 and 18, July 9 and August 6 and 20, 2010 confirm most of the
data collected by the investigator. These photos are saved in the folder
germain/8I6D8I3M. Below are photos of the price tags taken on January
8 and August 20, 2010:
Option consommateurs, January 18, 2010
Option consommateurs, August 20, 2010
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2. On 18 consecutive occasions, namely on October 22, November 6 and
19, December 3 and 17, 2009, on January 8 and 26, February 21, March
4 and 23, April 13 and 23, May 7 and 21, June 4 and 21, July 9 and 23,
2010, the investigator noted that the kitchen set (code: 1I5D0I3M) was
put on sale at a price lower than the regular price. Photos taken on
December 17, 2009 and on January 8, February 21, March 4 and 23,
April 13 and 23, May 7 and 21, June 4 and 18, and July 9 and 23, 2010
confirm most of the data collected by the investigator. These photos
are stored in the folder germain/1I5D0I3M. Below are photos of the
product labels taken on January 8 and August 20, 2010:
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Option consommateurs, July 2010
3. On 14 occasions, namely, December 17, 2009 and on January 8 and 26,
February 21, March 4 and 23, April 13 and 23, May 21, June 21, July 9
and 23, and August 6 and 20, 2010, the kitchen set (code: 0I4D1L7M)
was on sale at less than the regular price. Photos taken on January 8,
March 4, April 13 and 23, May 21, June 18 and July 9, 2010 confirm
most of the data collected by the investigator. These photos are saved
in the folder germain/0I4D1L7M. Below are photos of the price tag
taken on January 8 and July 9, 2010:
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•
Finally, the investigator noted that the words “On Promotion” and
“Additional Discount of X%” are sometimes used when the retailer
attaches a red price tag to a product. The retailer still refers to the
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“regular” price in calculating the savings for the consumer who buys the
product at the sale price.204 This is an example:
204
Photos of these “additional discounts” are stored on the USB key in the folder
germain/photos/rabaisadditionnel.
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Thus, by announcing an “additional rebate” on the price tag, the retailer
confirmed that the item had already been sold at reduced prices
compared to the regular price. However, as we have seen above, the
articles seem rarely to have been sold at such a price. The term
“additional discount” may therefore be likely to mislead consumers.
Recommendation
Whereas the store located at 2900 Germain Larivière, Avenue Jacques-Bureau in
Montreal includes a reference to a “regular” price on its price tags in announcing
a lower sales price to consumers;
Whereas this reference is made on a significant proportion of products sold in its
stores;
Whereas such reference might be repeated over long periods, which would make
the sales price the actual regular price;
Whereas the retailer uses the term “additional rebate” when it attaches a red
price tag to a product, indicating that the retailer uses the reference to the
regular price to advertise a supplementary discount;
offered items at that price in good faith, for more than 50% of a reasonable
period;
whether the reference to the current price made by retailer Germain
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Larivière, located at 2900 Avenue Jacques-Bureau in Montreal, that appears
on all the products reviewed by Option consommateurs during its
investigation, is likely to mislead consumers.
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Leon’s Furniture in Ottawa
2600 Queensview Drive
Ottawa, Ontario
K2B8H6
Tel.: 613-820-6446
Founded in 1909, Leon's Furniture Limited is a chain of department stores
specializing in the sale of a wide range of furniture, appliances and home
electronics. Leon’s has 38 corporate stores and 28 franchised stores in every part
of Canada except British Columbia. On March 2, 2011, the company was not a
member of any self-regulatory business practices organization.
Highlights
Data collection did not work in this store. The sales staff moved around so much
that the investigator was unable to take notes discreetly and on a regular basis.
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To work around this problem, we decided to examine the prices of several
products, mainly kitchen sets and mattress / boxspring sets, on the Leon’s
website,205 at intervals of about two weeks.
Following this data collection,206 we made two observations. One, certain items
are advertised on sale often. Two, we noted that in the store, the retailer did
not always indicate the current price of an item on sale and the duration of the
promotion on the price tag. Following are the details of these observations.
•
Certain items are advertised on sale often. For example:
1. In every data collection session conducted between January 10 to
September 2, 2010, the Florence Collection 7-piece kitchen set (code:
25548872) was advertised on sale. The current price quoted for the set
was $1,199 and the sale price was $999 or $1099. On the Leon’s
website, on March 22, 2010, the item was advertised as follows:
205
206
We used the postal code of the branch to browse the Leon’s website.
The Web pages, e-flyer and some photos are stored on the USBkey in the folder: cléUSB\leon_ottawa.
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2. In every data collection conducted between January 10 to September
2, 2010, the Achillea 9-piece kitchen set (code: 25593077) was
advertised on sale. The current price quoted for the set was $1,569 and
the sale price was $1399 or $1299. On the Leon’s website, on
September 2, 2010, the item was advertised as follows:
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3. In 13 of 15 collections conducted between January 10 to September 2,
2010, the Sealy Willow Collection mattress / boxspring set (code:
65800132) was advertised on sale. The current price quoted for the set
was $799 and the sale price was $599 or $699. On the Leon’s website,
on January 10, 2010, the item was advertised as follows:
On August 19, 2010, more than seven months later, the article was advertised
in the same manner on the website:
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4. In 10 of 15 data collection sessions conducted between January 10 to
September 2, 2010, the Sealy Lotus Collection mattress / boxspring set
(code: 65800182) was advertised on sale. The current price quoted for
the set was $799 and the sale price was $599 or $699. On the Leon’s
website, on January 10, 2010, the item was advertised as follows:
On September 2, 2010, more than seven months later, the article was
advertised on sale, at a higher price:
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5. In every data collection session conducted between January 10 to
September 2, 2010, the Simmons Cambridge Pillow Top mattress /
boxspring set (code: 29811012) was advertised on sale. The current
price quoted for the set was $599 and the sale price was $499. On the
Leon’s website, on January 10, 2010, the item was advertised as
follows:
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On September 2, 2010, more than seven months later, the article was still
advertised on sale at the same price:
6. In 11 out of 15 data collection sessions conducted between January 10
to September 2, 2010, the Serta Blithe Collection mattress / boxspring
set (code: 78912012) was advertised on sale. The current price quoted
for the set was $599 and the sale price was $499.
•
In the stores, the regular price of items advertised on sale and the
length of the promotions are not always clearly indicated on the
front of the price tag. For example:
1. As can be seen in the photo below, the queen-size D/S Cambridge
P/Top mattress / boxspring set was advertised on sale at $499 (a
yellow price tag indicates a sale). However, on the front of the price
tag, the consumer can see neither the current price of the article nor
the duration of the promotion.
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Recommendations
Whereas certain items advertised on the Leon’s website are advertised on sale
often;
Whereas in the store, the retailer does not always post the current price of items
on sale or the duration of the promotion;
retailer must have sold more than 50% of items at regular price or have offered
items at that price in good faith, for more than 50% of a reasonable period;
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whether the sales advertised on the website of the retailer Leon’s, which
were examined by Option consommateurs in this report, are likely to mislead
consumers.
the retailer Leon to clearly display, in every medium, the current price of
items advertised on sale and the duration of promotion.
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Leon in St-Hubert
1909 F.X. Sabourin Street
Saint-Hubert, Québec
J3Z 0B3
Tel.: 450-445-2969
Founded in 1909, Leon's Furniture Limited is a chain of department stores
specializing in the sale of a wide range of furniture, appliances and home
electronics. Leon’s has 38 corporate stores and 28 franchised stores in every part
of Canada except British Columbia. On March 2, 2011, the company was not a
member of any self-regulatory business practices organization.
Highlights
In this store, we carried out data collection about every two weeks for a year.207
Following analysis of the data collected, we made three observations. One,
certain items are advertised on sale often. Two, the current price of items
advertised on sale are hard to see, as it is printed on the back of the price tag.
Three, the duration of promotions is not always clearly indicated on the price
207
The log sheet, web pages and photos taken during the investigation are stored on the USB key in the
folder: cléUSB\leon_st_hubert.
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tag. Following are the details of these observations.
•
Several items are advertised on sale often as a “Featured Value.”208
For example:
1. From September 27, 2009 to September 16, 2010, the Franklin leather
chair (code: 904-75420) was advertised as a “Featured Value” in 19 of
25 data collections. The indicated current price of the article was
$649; the sale price was $499 or $489.
2. From September 11, 2009 to September 16, 2010, the Monarch
Specialities armchair and stool set (code: 473-31649) was advertised as
a “Featured Value” in 19 of 26 data collections. The current price of
the article was marked at $279 and $269; the sale price was $269 or
$229.
3. From September 11, 2009 to June 12, 2010, the O-fino table and chair
set (code: 106-06525) was advertised as a “Featured Value” in 17 of 20
data collections. The current price of the article was marked at $1099;
the sale price was $1099 or $799.
4. From September 11, 2009 to September 16, 2010, the Bistro 9-piece
dining room set (code: 540-97155) was advertised as a “Featured
Value” in 22 of 26 data collection sessions (on four occasions, the set
could not be found in the store). The article was advertised on sale at
$1299, $1199 and $1179. It was never sold at the current price during
the data collection period.
208
Several vendors confirmed to the investigator that this price tag indicates that the item is on sale.
According to the vendors we spoke to, the sales usually last a month.
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5. From September 27, 2009 to July 25, 2010, the Sealy Lotus queen-size
mattress / boxspring set (code: 658-00182) was advertised as a
“Featured Value” in 17 of 22 data collections. The current price of the
article was marked at $799; the sale price was $649, $699 and $599.
Below is an image taken from Leon’s website on September 2, 2010
advertising the item on sale at $699.209 The indicated current price was
$799.
6. From September 11, 2009 to June 27, 2010, the Simmons Beautyrest
Calder queen-size mattress / boxspring set (code: 298-20112) was
advertised as a “Featured Value” in 20 of 21 data collections. The
current price of the article was marked at $1099; the sale price was
$849.
7. From May 16 to September 16, 2010, the Sealy Calla II queen-size
mattress / boxspring set was advertised as a “Featured Value” in 8 of 9
data collections. The current price of the article was marked at $1399;
the sale price was $899 and $999. Below is an image taken from the
209
We also recorded other Web pages on June 15, 8 and 22 July, 5 and August 19 and September 2, 2010 that
support the investigator’s observations. These pages are stored on the USB key in the folder cléUSB\Léon_StHubert\Lotus.
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Leon’s website210 on March 8, 2011 showing the advertised article on
sale at $899. The current price was given as $1399.
•
The current price is not always indicated on the front of the price tag
of products advertised on sale (“Featured Value”). According to the
investigator, the duration of the promotion is not shown there, either. It
can be seen from the photo below that the current price of the article is
not clearly indicated.
210
The research was carried out using the postal code of the Ottawa store, (K2B 8H6), because we were
unable, on March 8, 2011, to change the postal code of the site or to obtain the French version of the site.
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Recommendations
Whereas the Leon’s store located at 1909, rue F.X. Sabourin in Saint-Hubert,
Québec, often advertises the same articles on sale;
Whereas in the store, the retailer does not always clearly indicate the current
price of an item on sale and the duration of the promotion on the price tag;
offered the items at the regular price in good faith, for more than 50% of a
reasonable period;
whether the items advertised on sale by the retailer Leon’s located at 1909
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rue F.X. Sabourin in Saint-Hubert, Québec, which were reviewed by Option
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Mattress Mart, Ontario
1654 Carling Avenue211
Ottawa, Ontario
K2A 1C5
Tel.: 613-728-4306
Photo from Mattress Mart’s website, February 22, 2011
Founded in 1976, the retail chain Mattress Mart, which specializes in the sale of
mattresses, has 10 stores in eastern Ontario and western Québec and two
branches in the Maritimes. The branch where the investigation was conducted is
a member of the Canadian Better Business Bureau, a major business practice
self-regulatory organization.
Highlights
Since the store is small and the sales staff move around a lot generally, it was
difficult to go to that branch every two weeks to take notes. To circumvent this
problem, we decided to review, approximately every two weeks for a year,
certain items advertised on sale in the store’s electronic flyer.212
211
The store moved to the current address from 1490 Richmond Road in Ottawa in late 2009.
However, a few times, usually when the vendors were busy with other customers, the investigator was able
to take pictures and movies (with a hidden camera) of items advertised on sale in the stores. Photos, videos,
phone records and e-flyers are stored on the USB key in the folder: cléUSB\mattress_mart.
212
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Following review of the data collected, we made two observations. One, certain
mattress / boxspring sets are almost always advertised on sale in the e-flyer.
Two, in-store, all the mattress / boxspring sets seem to be constantly advertised
on sale. Following are the details of these observations.
Review of electronic flyer
Mattress Mart issued a flyer213 an electronic version of which is available on its
website. Approximately every two weeks,214 between September 2009 and
September 2010, we monitored the prices of certain mattress / boxspring sets
that were advertised.
•
Several mattress / boxspring sets were advertised on sale every time,
or nearly every time, that data collection was performed. For
example:
1. The Galaxy Bedding Rideau TT queen-size mattress / boxspring set
was advertised on sale during every data collection session without
exception. Indeed, this set was advertised as a “Current Promotion”
in the e-flyer at $639 in September, October and November 2009, at
$628 in December 2009, January 2010 and February 2010, at $639 in
March, April, May and June, 2010 and at $698 in July and $699 in
August and September, 2010. It was noted that as of July, in the
flyer, the retailer quoted the current price of the set as $799. Also,
213
Note that the flyer does not specify the validity period of the promotions. According to the investigator in
this store, every mattress/boxspring set seemed to be always advertised on sale. Videos and photos taken in
the store at different times during the investigation would seem to corroborate this (see photos and videos
stored on the USB key in the folder: cléUSB\mattress_mart). Electronic flyers examined are on the USB key:
cléUSB\mattress_mart\circulaires_electroniques.
214
The flyers were recorded, in 2009, on September 9 and 24, October 8 and 21, November 6 and 20,
December 4 and 18, and in 2010, on January 7 and 27, February 18, March 3 and 22April, 8 and 22, May 7
and 20, June 3 and 21, July 8 and 22, August 5 and 19 and September 2.
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sales staff confirmed by telephone215 that the current price of the
article was higher than the advertised sale price. Below, we
reproduce pages 1 and 4 of the flyer saved on August 5, 2010. On
page 1, printed in red, it states: “Truckloads Arriving Weekly” and
on page 4, the current price of the set is seen crossed out above the
sale price of the set.
215
The calls were made on October 21, 2009, January 7, 2010 and April 8, 2010. Recordings of the last two
calls can be found on the USB key in the folder: cléUSB\mattress_mart\enregistrements_telephoniques.
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2. The Bedding Galaxy Rideau TT mattress / boxspring set was
advertised on sale in every data collection session from October 2009
to August 2010, without exception. Indeed, this set was advertised
as a “Current promotion” in the e-flyer, at $689 from October to
December 2009 and in January and February, 2010. The sale price of
the set then rose to $799 from March to June and went down to $788
in July and August. Note that in July and August, in the flyer, the
retailer quoted the current price of the set as $899. Also, sales staff
confirmed by telephone216 that the current price of the article was
higher than the advertised sale price. Below, on page 4 of the e-flyer
received on August 5, 2010, the queen-size set is advertised on sale
for $788 rather than $899.
216
The calls were made October 21, 2009, January 7, 2010 and April 8, 2010. The last two calls were
recorded; these recordings are stored on the USB key in the folder:
cléUSB\mattress_mart\enregistrements_telephoniques.
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3. The Simmons Acadia Back Guard Luxury Firm queen-size mattress /
boxspring set was advertised on sale in every data collection session
except for December 4 and 18, 2009 and January 7, 2010. In fact,
this set was advertised as a “Current promotion” in the e-flyer, at
$899 from September 2009 to March 2010,217 at $999 in April, at $848
in May, at $999 in June, at $988 in July and at $999 in September.
Note that from March, in the e-flyer, the retailer quoted the current
price of the set at $1,199. We reproduce below, as an example,
pages 1 and 7 of the flyer saved on March 22, 2010. On page 1, it
states “On Sale Now” and on page 7, the current price can be seen
crossed out just above the sale price.
217
Except on December 4 and 18 and January 7, 2010.
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Below is a photo taken in the store, during the data collection, of the
price tag of the set indicating that the item is on sale.
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Option consommateurs , date unknown
4. The Simmons Byron Hi-loft Pillow Top queen-size mattress /
from September 2009 to September 2010, except on December 18,
2009 and January 7, 2010. In fact, this set was advertised as a
“Current promotion” in the e-flyer, at $1,099 from September 2009
to March 2010,218 at $1,199 in April, at $988 and $1,199 in May, at
$1,199 in June, at $1,088 in July and at $1,199 in August. Note that
as of March, in the e-flyer, the retailer quoted the current price of
the set as $1,399.
5. The Simmons Camden BackGuard Comfort Top queen-size mattress /
from November 2009 to September 2010, without exception. In fact,
218
Except December 8, 2009, and January 7, 2010.
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this set was advertised as a “Current promotion” in the e-flyer, at
$1,199 in November 2009, at $1,299 and $1,288 in December, at
$1,288 in January and February 2010, at $1,299 and $1399 in March,
2010 and at $1,399 from April to September 2010. Note that, as of
March, in the e-flyer, the retailer quoted the current price of the set
as $1,599.
6. The Sealy Ochorios Euro Pocket Coil queen-size mattress / boxspring
set was advertised on sale in every data collection session from
October 2009 to July 2010, without exception. In fact, this set was
advertised as a “Current promotion” in the e-flyer, at $1,499 from
October to December 2009, at $1,488 in December 2009 and January
2010, and at $1,499 from February to July 2010. Note that, as of
December 2009, in the e-flyer, the retailer quotes the current price
of the set as $1,999.
7. The Kingsdown Fusion I-II-III queen-size mattress / boxspring set was
advertised on sale in every data collection session from October 2009
to July 2010, except for February 18 and March 3. In fact, this set
was advertised as a “Current promotion” in the e-flyer, at $1,899 in
October 2009, at $1,999 in November, at $1,999 and $1,788 in
December, at $1,788 in January 2010, at $1,899 in March and April,
at $1,899 and $1,799 in May, at $1,799 in June and at $1,788 in July.
Note that, as of July, in the e-flyer, the retailer quotes the current
price of the set as $2,399.
8. The Simmons Beautyrest Black Collection De Luxe Firm Top Pocketed
Cable Coil System queen-size mattress / boxspring set was
advertised on sale in every data collection, except on October 21,
2009. In fact, this set was advertised as a “Current promotion” in the
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e-flyer at $2,099 from November 2009 to April 2010, at $2,099 and
$2,199 in May, at $2,199 in June 2010, at $2,088 in July and $2,088
and $1,988 in August. Note that, as of July, in the e-flyer, the
retailer gives the current price of the set as $2,499.
9. The Simmons Beautyrest Black Collection De Luxe Hi Loft Pillow Top
queen-size mattress / boxspring set was advertised on sale in every
data collection, except on October 21, 2009. In fact, this set was
advertised as a “Current promotion” in the e-flyer” at $2,399 from
November 2009 to June 2010, at $2,388 in July and at $2,388 and
$2,288 in August. Note that, as of July, in the e-flyer, the retailer
quotes the current price of the set as $2,799.
Review of in-store business practices
In every data collection session conducted in the store between September 2009
and September 2010:
•
All mattress / boxspring sets are always advertised on sale. The videos
shot in 2009219 and on March 4, April 23, May 21, June 4, June 18, July 9
and August 6, 2010 and photos taken in 2009220 and, on February 20,
March 23, April 9 and July 9, 2010 support this observation. The retailer
would consistently include the terms “Save” or “Extra price cut” on the
price tags of mattress / boxspring sets.
Recommendations
Whereas, in its e-flyer, the retailer Mattress Mart regularly advertised several
mattress / boxspring sets on sale between September 2009 and September 2010;
219
220
Unfortunately, we do not have the exact dates of the videos shot in 2009.
Unfortunately, we do not have the exact dates of the photos taken in 2009
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Whereas videos and photos taken in the store seem to show that all mattress /
boxspring sets are constantly advertised on sale at the retailer Mattress Mart
located at 1654 Carling Avenue in Ottawa;
offered the items at the regular price, in good faith, for more than 50% of a
reasonable period,
Whereas, in its e-flyer, the retailer Mattress Mart does not specify the duration
of the advertised promotions;
whether the sales advertised by the retailer Mattress Mart in its e-flyer,
which were reviewed by Option consommateurs in this report, are likely to
mislead consumers.
whether the use of the words “Save” and “Extra Price Cut” that appear on
the price tags of products advertised on sale by the retailer Mattress Mart,
located at 1654 Carling Avenue, Ottawa, is likely to mislead consumers.
the retailer Mattress Mart to clearly state the current price of items
advertised on sale for the duration of the promotion.
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Matelas Bonheur
8050Q Taschereau Boulevard
Brossard, Québec
J4X1C2
Tel.: 450-923-5571
Image from Matelas Bonheur’s website, March 7, 2011
Founded in the 1990s, the company Matelas Bonheur is a chain of stores
specializing in the retail sale of mattresses and bedding accessories. The
company has 15 branches in Québec. The retailer’s policy is to guarantee the
lowest prices every day on major brand mattresses such as Sealy, Serta, TempurPedic, Green Sleep, Zedbed and Mat Tech.
Highlights
In the store, we collected data221 roughly once a month over the period of a
year. Following data collection, the investigator noted that items advertised on
sale in the flyer are not usually items prominently displayed in the stores and
221
The log sheet and flyers are recorded on the USB key in the folder: cléUSB\matelas_bonheur.
As the store was small and the vendors moved around a lot generally, it was difficult for the investigator to
visit the store every two weeks. Accordingly, data collection was carried out roughly once a month.
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that these items are not always recommended by the sales staff. We would need
further studies to verify if the merchant complies with the laws regarding
business practices, our investigation does not allow us to conclude that this
merchant is using deceptive business practices.
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Sears in Ottawa
2165 Carling Avenue
Ottawa, Ontario
K2A 1H2
Tel.: 613-729-2561
From the Carlingwood Shopping Centre’s website
Sears Canada Inc. owns, among its other business concerns, 122 department
stores in Canada that offer a wide range of popular consumer items such as
clothing, home furnishings, appliances and mattresses. Sears Holdings
Corporation is a member of the Canadian Better Business Bureau, a major
business practice self-regulatory organization.
Highlights
We collected data in this store about every two weeks for a year. After analyzing
the data, we made two observations. One, the difference between the current
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price and the sale price of some items is significant. Two, some sets are regularly
advertised on sale.222 Following are the details of these observations.
•
The difference between the current price and the sale price of certain
items is substantial. Often, some sets on sale are 13% to 40% less
expensive than the current price. For example:
1. The stated current price of the Stearns & Foster Crandal queen-size
mattress / boxspring set (code: 69464) was $3,299.98, and the sale
price, on several occasions, was $1,979.98 (40% off) or $2,499.98 (24%
off) or $2,699.98 (18% off). The retailer posted this label in stores to
advertise the sale:
Option consommateurs, September 3, 2010
222
During the investigation, we took 98 photos and 15 videos that support the observations made by the
investigator. These and the investigation log are stored on the USB key in the folder: Sears_Ottawa.
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2. The stated current price of the Stearns & Foster Ardmore queen-size
price, on several occasions, was $1,699.98 (26% off).
3. The stated current price of the Sears 5-piece Concerto Dining set was
$2299.97 or $2399.97 and the sale price, on several occasions, was
$1699.97 or $1799.97, i.e. at least 25% cheaper.
4. The stated current price of the Sears 5-piece Dallas Dining set (code:
20243) was $1,599.97 and the sale price, on several occasions, was
$1099.97 or $1199.97, i.e. at least 25% cheaper.
5. The stated current price of the Hollyburn III recline lift chair (code:
60432) was $1,599.99 and the sale price, on several occasions, was
$1279.99, i.e. 20% cheaper.
6. The stated current price of the Kingsdown Sensation queen-size mattress
/ boxspring set (code: 69545) was $1,999.98, and the sale price, on
several occasions, was $1,499.98 or $1,599.98, i.e. at least 20% cheaper.
7. The stated current price of the Kingsdown Acadian Euro Top queen-size
price, on several occasions, was $1,099.98 or $999.98, i.e. at least 15%
cheaper.
8. The stated current price of the Duncan Rocker Recliner (code: 60145)
was $799.99 and the sale price, on several occasions, was $699.99 or
$599.99, i.e. at least 13% cheaper.
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•
On the floor, certain dining sets and mattress / boxspring sets are
advertised on sale often.223 For example:
1. The Sears 5-piece Dallas Dining set (code: 20243) was advertised on sale
in 7 of 11 data collection sessions conducted from April 9 to September
3, 2010.
2. The Duncan Rocker Recliner (code: 60145) was advertised on sale in 13
of 21 data collection sessions conducted from October 22 to September
3, 2010.
3. The Hollyburn III recline lift chair (code: 60145) was advertised on sale in
11 of 14 data collection sessions conducted from February 20 to
September 3, 2010.
4. The Kingsdown Sensation mattress / boxspring set (coded 69545) was
advertised on sale in all the data collection sessions conducted from
June 21 to September 3, 2010.
5. The Kingsdown Acadian Euro Top mattress / boxspring set (code: 49386)
was advertised on sale in 15 of 18 data collection sessions conducted
from November 19, 2009 to September 3, 2010.
6. The Stearns and Foster Crandal mattress / boxspring set (code: 69464)
on November 17, 2009 to September 3, 2010.
223
Note: sometimes, for the mattress and boxspring sets, the retailer announced a Mix & Match sale in which
the colour of the boxspring fabric may not have been the same as the colour of the mattress fabric. However,
since consumers generally cover the mattress and boxspring with a sheet, and therefore the colour of the two
parts does not show, we believe Mix & Match sales to be equivalent to “regular” sales. Moreover, the price of
a Mix & Match set is usually the same or more expensive than that of a matching set on sale.
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7. The Stearns and Foster Ardmore mattress / boxspring set (code: 69381)
was advertised on sale in every data collection session conducted from
June 4 to September 3, 2010.
Recommendation
Whereas the difference between the current price and the advertised price on
sale items is often substantial;
Whereas the same item is regularly advertised on sale;
offered the items at regular price in good faith, for more than 50% of a
reasonable period;
whether the sales advertised by the retailer Sears, located at 2165 Carling
Avenue in Ottawa, on all the products reviewed by Option consommateurs in
this report, are likely to mislead consumers.
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Sears in Brossard
8505 Taschereau Boulevard
Brossard, Québec
J4Y 1A4
Tel.: 450-678-9066
Sears Canada Inc. owns, among its other business concerns, 122 department
stores in Canada that offer a wide range of popular consumer items such as
clothing, home furnishings, appliances and mattresses. Sears Holdings
Corporation is a member of the Canadian Better Business Bureau, a major
business practice self-regulatory organization.
Highlights
In this store, we collected data roughly every two weeks over the period of a
year.224 In examining the data, we made two main observations: One, all the
mattress / boxspring sets we monitored were usually sold at less than the current
price225. Two, even if we exclude “mix and match” sales, the mattress /
boxspring sets were advertised on sale often. Following is a detailed explanation
of these observations:
•
All the mattress / boxspring sets we monitored were usually sold at
less than the stated current price. The sets were either on sale or the
224
The electronic log sheet and some photos are stored on the USB key in the folder: cléUSB\sears_brossard.
Mattress and boxspring sets were generally advertised on sale or sold cheaper when they were not “Mix
and Match.” From what several vendors said, “matched” means that the fabric is the same on the mattress and
the boxspring and “unmatched” means that it is different. Since consumers generally cover the mattress and
boxspring with a sheet, this difference does not really matter. It is therefore likely that consumers always
choose the cheapest option and thus only rarely pay the displayed price.
225
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consumer had the opportunity to buy a “mix and match” set for less
than the current price. For example:
1. From September 29, 2009 to September 17, 2010,226 the Sears-O-Pedic
Oxford 1732 SL mattress and boxspring set was advertised on sale or
“mix and match” in 24 of 26 data collections. Specifically, the set was
advertised on sale at $579.98 (twice), at $599.98 (once), at $719.98
(twice), at $599.99 (eight times) or “mix and match” at $599.98 (twelve
times). The stated current price was $1,199.98.
2. From September 11, 2009 to September 17, 2010, the Sealy Posturepedic
Meridian II tight top queen-sized mattress and boxspring sets were
advertised on sale or “mix and match” in 26 of 27 data collections.
Specifically, the set was advertised on sale at $799.98 (10 times), at
$719.98 (four times), at $999.98 (twice), to $699.98 (once), at $899.98
(once), and “mix and match” at $799.98 or $719.98 or at $899.98 (eight
times). The stated current price was $1,198.98.
3. From September 11, 2009 to June 12, 2010, the Serta Cortez queen-size
mattress / boxspring set was advertised on sale or “mix and match” in
each of the 20 data collections. Specifically, the consumer was always
able to buy this set on sale at $995.95, at $899.98, at $999.99, at
$999.98, at $1,099, at $999 or buy it “mix and match” at $999.99 and
$999.98. The stated current price of the set was $1999.95 and $1999.98.
4. We have other examples of this practice observed over shorter periods in
the log sheet for this store.
226
Except on October 1, 2009, when the investigator did not find the set on the floor.
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•
Some mattress / boxspring sets are advertised on sale often, even not
counting “mix and match” sales. For example:
Meridian II tight top queen-sized mattress / boxspring set was advertised
on 17 of 27 data collections.
Meridian II tight top queen-sized mattress / boxspring set was advertised
on 17 of 27 data collections.
3. From September 29, 2009 to July 7, 2010, the queen-size Sealy
Posturepedic Meridian Luxury II mattress / boxspring set was advertised
on sale 15 of 22 data collections.
4. From September 11, 2009 June 12, 2010, the Serta Cortez queen-size
mattress / boxspring set was advertised on sale 18 of 27 data collections.
5. We have recorded other examples of this practice observed over shorter
periods in the log sheet for this store.
Recommendation
Whereas several articles are regularly advertised on sale;
offered the items at regular price in good faith, for more than 50% of a
reasonable period.
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whether the sales advertised by the retailer Sears, located at 8505 boul.
Taschereau in Brossard, on all the products reviewed by Option
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SleepCountry
2194 Carling Avenue
Ottawa, Ontario
K2A 1H3
Tel.: 613-829-4635
SleepCountry is a retail chain specializing in the sale of mattresses. SleepCountry
has 73 branches across Canada, including five in Alberta, 21 in British Columbia,
two in Manitoba, 43 in Ontario, two in Québec and two in Saskatchewan.
Sleepcountry is not a member of a business practices self-regulatory
organization.
Highlights
Since this store is small and the sales staff move around a lot, it was impossible
to take notes about the product price tags discreetly and on a regular basis. To
circumvent this problem, we reviewed the e-flyer for the store approximately
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every two weeks for a year.
Based on the analysis of data collected, we made two observations. One, the
retailer does not make the length of its promotions clear in its electronic flyer.
Two, the retailer does not always make the current price of sale items clear in
its electronic flyer. Following are the details of these observations.
•
SleepCountry does not make the length of its promotions clear in its
electronic flyer. The e-flyers saved on the USB drive demonstrate this.
•
SleepCountry does not always indicate the current price of items
advertised on sale in its electronic flyer. However, as can be seen in the
picture below, the retailer advertises a “Year End Clearance Sale” and at
the top right of the page, adds “Come Into Our Stores for Even More
Savings.” However, the current price of these items is not indicated.
Other flyers stored on the USB support this observation.
Recommendation
Whereas the retailer SleepCountry does not always clearly indicate the length of
its promotions in its electronic flyer,;
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Whereas the retailer SleepCountry does not always clearly indicate the current
price of articles advertised on sale in its electronic flyer;
the retailer SleepCountry to clearly indicate, in any medium, the current
price of an item advertised on sale and the duration of the promotion.
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United Furniture Warehouse
Ottawa, Ontario
K2E 1A5
Tel.: 613-224-7555
Founded in Vancouver in 1981, the retail chain United Furniture Warehouse
(UFW) specializes in the retail sale of a wide range of goods including furniture
and mattresses. UFW has 36 branches in Canada: four in BC, ten in Alberta, three
in Saskatchewan, three in Manitoba and sixteen in Ontario.227 In 2004, the chain
was purchased by the retailer The Brick.
Highlights
In this store, data collection was conducted approximately every two weeks over
the period of a year. We found no irregularities in the way it advertised its sales.
227
Taken from the store’s website: www.ufw.com/stores/storeLocator.html, consulted on March 2, 2010.
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However, the investigator noted that the current price of items advertised on
sale is not always clearly stated in the e-flyer or in stores. Following are the
details of this observation.
Review of electronic flyers
•
In the e-flyers, we noted that the current prices of items advertised on
sale are not always indicated. For example, on the first page of the
electronic flyer recorded on June 21, 2010 (see picture below), the
retailer refers to an “Ultimate Sale,” but does not list the current prices
of the advertised items.
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Review of in-store business practices
•
When the retailer advertised a sale in the store, the current price of
the item on sale was not always clearly stated.228 For example:
228
Photos were taken in the UFW store on 350 West Hunt Club Road in Ottawa.
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1. August 20, 2010, as shown in the photo below, the price tag does not
clearly state that the article is on promotion.
2. On August 20, below, a photo of the sign states that the five–piece
Montana Dining Room set is on sale for $599.39. Neither the current
price nor the length of the promotion are mentioned.
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Recommendation
Whereas the United Furniture Warehouse retailer does not, in its electronic
flyer, systematically state the current price of items advertised on sale;
Whereas in the United Furniture Warehouse store located at 350 West Hunt Club
Road, Ottawa, the current price of items advertised on sale and the length of the
promotion are not always clearly visible;
the retailer United Furniture Warehouse to clearly indicate, in every
medium, the current price of an item advertised on sale and the duration of
the promotion.
Conclusion
Misleading marketing practices hurt consumers and competition. When they
receive erroneous signals about prices, consumers are misled about the real
value of the product and cannot make informed choices. In addition, companies
that use misleading marketing practices attract customers to the detriment of
legitimate businesses, which harms competition.
Our data collection study reveals in particular that many companies in which we
conducted our investigation seem to be using misleading commercial practices.
A retailer who wishes to advertise a sale by referring to the current price must,
in order to comply with the Ordinary Price Provisions of the Competition Act
administered by the Competition Bureau of Canada, have sold at that price more
than 50% of its merchandise for a reasonable period or have offered the article at
the usual price, in good faith, for more than 50% of a reasonable period.
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However, of the 16 retailers that were investigated solely in terms of false
discounts, we recommend that the Competition Bureau verify 10 of these
concerning several of the items that they advertised on sale. According to the
data collected, several retailers seem to inflate the normal price of their
products. Others regularly advertise the same articles on sale over very long
periods. Others advertise, at regular intervals and the same time, such a large
number of articles on sale in the same category that it is unlikely that a
significant number of these items have been sold at the stated current price.
Some retailers advertise sales with no reference to the “regular” price. Some of
the flyers that we reviewed are full of expressions highlighted in red, such as
“Now Sold At” “Deals of the Week,” “Flyer Valid from XXX to XXX,”229 suggesting
that the articles advertised will be sold at less than the usual price. However,
the current price of the advertised items is not always shown. It is therefore
difficult to know if an item advertised in the flyer is on sale or not. Since
consumers rely on the regular price to assess discounts, Option consommateurs
believes that the Competition Act should specify that a merchant must clearly
indicate the current price of an item advertised on sale.
Competition Act to state that a merchant must indicate, in every medium,
the current price of an item advertised on sale.
The price tag could also be improved if we are to help consumers make informed
choices in an environment where they are bombarded with sales. One
inexpensive way of doing this would be to require retailers to clearly indicate, on
the back of the price tag, when possible, the prices and the length of the sales
for each of the products during the previous six months. In this way, consumers
would know whether the item is often on sale and the price they can expect to
229
Suggesting that prices are only valid for a limited period.
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pay for the item in the near future.
Competition Act to require merchants to indicate, on the back of their price
tags, whenever possible, the prices and duration of sales advertised during
the previous six months.
In 2005, the retailer Sears was ordered to pay to a fine of nearly half a million
dollars for advertising false discounts on tires. Following our data collection, we
noticed that, six years later, the practice still seems to be used in the market. If
this is the case, the Competition Bureau and the Competition Tribunal should
reconsider their approach to the application of the Ordinary Price Provisions of
the Competition Act.
In order to encourage companies to comply with the Ordinary Price Provisions of
the Competition Act, the Competition Bureau and the Competition Tribunal
could, for example, reconsider whether the fines given to offending companies
are sufficient to encourage them to adopt good business practices.
Other misleading commercial practices seem to have been identified during the
data collection. For example, retailers display the words “Introductory Price” on
a price tag when the product in question has been on sale in the store before.
Also, for a mattress and box spring set, the merchant offer for ‘free’ the box
spring, but he increases the price of the mattress.
In addition, the data collection study conducted in two clearance centres has
revealed some embarrassing results for the industry and the Competition Bureau.
In fact, we have observed that many products advertised in these clearance
centres are sold at a price that is equal to and sometimes higher than when they
are advertised on sale in the “regular” stores of the same chain. One centre also
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sale merchandise that is still being sold in the “regular” stores of the same
chain.
Self-regulatory organizations that administer a code designed to regulate the
commercial practices of their members do not seem to be able to do so
effectively. Several member companies of these organizations seem to deviate
from the codes that they have the duty to respect. However, it usually takes only
a few store visits before a questionable business practice is detected. In our
opinion, the Competition Bureau should not rely on these agencies to correct the
current situation and, as we saw earlier in this report, these codes of practice
should always be approved by the Competition Bureau.
In short, on the basis of this data collection, Option consommateurs believes that
even informed consumers are unable to effectively compare prices between one
retailer and another when they wish to buy furniture or mattresses. Misleading
commercial practices such as referring to inflated regular prices and the use of
phrases that could be misleading make the market so opaque that it is generally
impossible for consumers to arrive at an optimal, informed choice. In addition,
other commercial practices such as using a different model name for the same
product from one store to the next generally prevents consumers from finding
out where the product is sold at the best price. This practice seems to be
common in the retail mattress sector.
We believe that it is currently the merchants who make the law in the furniture
market and free trade does not, in this case, result in a desirable situation for
consumers and small businesses.
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General Conclusion
Advertising sales influences consumer behaviour, which explains why the practice
is so prevalent in today’s retail market. But some merchants may abuse this
marketing tool and use misleading business practices. Among the deceptive
techniques that seem to be used, we noticed that some products are advertised
on sale over long periods.
This misleading business practices are is detrimental to consumers because he
relies on the regular price to assess the value of a product. Moreover, as
consumers tend to check prices among competitors less when a product is
advertised on sale, honest merchants are penalized by the unfair practices used
by their competitors.
In Canada as elsewhere, misleading commercial practices are prohibited under
federal law. However, the Competition Act is unique: it regulates specific
reference to the current price, which does not seem to be the case in the other
jurisdictions examined in this research. In addition, in Canada, the agency that
administers this law is the only one that has established clear criteria for
compliance that must be respected by merchants who wish to refer to the usual
price when advertising a sale. According to these criteria, a merchant may refer
to the current price if:
•
More than 50% of items are sold at that price for a reasonable period or;
•
items are offered at the regular price in good faith for more than 50% of a
reasonable period.
Option consommateurs believes that it is possible that these criteria may not be
strict enough. Since for many consumers the regular price is an indicator of the
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quality of a product, this price should be the price at which the article is usually
sold for the indicator to be as specific as possible. Otherwise, these criteria may
be such as to unduly favour certain retailers to the detriment of consumers.
The Act seems to have another shortcoming. It states that a merchant who refers
to the current price must satisfy the Volume Test or the Time Test. But what
happens when a retailer advertises its sales, for example in a flyer, without
referring to current prices? Has he circumvented the law? Does he still need to
meet the compliance criteria? Since consumers rely on the current price to assess
the quality of a product, Option consommateurs believes that the Competition
Act should specify that merchants must indicate the current price of an item
advertised on sale.
Penalties for violations are civil and sometimes criminal. In Canada, breaking the
law can result in an administrative monetary penalty of up to 10 million dollars.
However, based on the results of our data collection, we find that it is possible
that the amount of the penalties actually imposed is not sufficient to encourage
retailers to comply the law.
The Federal Trade Commission in the United States is the only federal agency
with the mission of protecting consumers that has delegated full responsibility
for the suppression of misleading business practices to a third party: State
governments. Based on our analysis, this strategy would not be advantageous in
Canada because of the propensity of Canadian retail companies to develop a
network of branches across the country and employ the same business practices
in each.
Advertising codes of practice have rules governing the reference to prices
including reference to current prices. Option consommateurs noted that in the
case of sales, these rules do not clearly specify that a retailer must, in order to
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make reference to the current price when advertising a sale, sell more than 50%
of its merchandise at the regular price for a reasonable period or have advertised
the article at the usual price, in good faith, for more than 50% of a reasonable
period. We also note that the codes of practice might be inconsistent.
In Québec and in Ontario, the laws that protect consumers prohibit false or
misleading commercial practices. However, we believe it would be beneficial to
consumers in Québec if the Office de la protection du consommateur tightened
the rules governing the pricing of products advertised on sale and improved the
information it publishes on its website in this regard.
The data collection study that we conducted every two weeks over the period of
a year in 16 stores in the Montreal and Ottawa regions reveals that many
companies that were investigated seem to use misleading commercial practices.
Most common among these are advertising the same items on sale over very long
periods, inflating the current price of products and using terms such as
“Introductory Price” and “Liquidation” in a manner that could mislead
consumers.
Since consumers are exposed to a significant number of sales in stores, price
labelling must be improved if we want to help them make informed choices. The
Competition Bureau could do this by requiring retailers to clearly indicate, on
the back of the price tag (when possible), the duration of sales and the sales
prices advertised over the preceding six months. This way, consumers would
know if the item is on sale often and the price they can expect to pay if the item
comes on sale again.
In conclusion, to reduce the risk that retailers use misleading business practices
and to promote fair competition in the retail sector, we might need to turn
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toward a solution such as the one adopted in France, which is to limit sales to
specific times determined by law, after Christmas sales for example.230
230
In France, the Direction générale de la concurrence, de la consommation et de la répression des fraudes
(DGCCRF) has the mission of ensuring the fair, safe functioning of the markets.
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Bibliography
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Newspaper Articles
Des aubaines alléchantes qui n’en sont pas, Les Affaires, June 12-18, 2010,
p.17.
Grammond, S. Des pseudo-soldes chez Canadian Tire, La Presse, 2009.
Norman, A. Wal-Mart Pulls Misleading Ads – Again, Huffington Post, 2009.
Press Releases
Competition Bureau, Canada’s Largest Sporting Goods Retailer Pays $1.7
million doe Misleading Consumers, 2004.
Option consommateurs , Best Buy et Future Shop gonflent le prix réguliers de
certains articles, Option consommateurs , 2008.
Judgments
Court of Appeal of Québec, Time inc. v. Richard, number 500-09-017967-076,
2009.
Court of Québec, Québec v. Lits d’eau Illimités Inc, number 500-27-015945894, 1993.
Competition Tribunal, Commissioner of Competition v. Sears Canada inc,
Comp. Trib. 2, File Number CT2002004, 2005, 113p.
Legislation
The Charter of the French Language, R.S.Q, Chapter C-11.
Consumer Protection Act, 2002
Competition Act (R.S.C, 1985, c. C-34).
Québec Consumer Protection Act.
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Publications
Better Business Bureau, Code of Advertising.
Competition Bureau, “Regulated” Conduct, 2010.
Competition Bureau, Understanding How the Ordinary Selling Price Provisions
of the Competition Act Apply to Your Business, 2006.
Competition Bureau, Ordinary Price Claims: Subsections 74.01(2) and 74.01(3)
of the Competition Act, 1999.
Competition Bureau, Ordinary Price Claims.
Competition Bureau, False or Misleading Representations and Misleading
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Masse, C. Loi sur la protection du consommateur: analyse et commentaires,
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Advertising Standards Canada, The Canadian Code of Advertising Standards.
Office de la protection du consommateur du Québec, La publicité.
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Better Business Bureau: www.bbb.org
Competition Bureau: www.competitionbureau.gc.ca
Office of Consumer Affairs: www.ic.gc.ca/eic/site/oca-bc.nsf/eng/home
Canadian Council of Better Business Bureau: www.bbb.org/canada
Conseil québécois du commerce de détail: www.cqcd.org
Canadian Federation of Independent Business: www.cfib-fcei.ca
Department of Justice Canada: http://laws.justice.gc.ca
Ontario Ministry of Consumer Services:
www.sse.gov.on.ca/mcs/en/pages/default.aspx
National Advertising Division: www.nadreview.org
Advertising Standards Canada: www.adstandards.com
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Office de la protection du consommateur du Québec: www.opc.gouv.qc.ca
Office québécois de la langue française: www.olf.gouv.qc.ca
Option consommateurs : www.option-consommateurs.org
Retail Council of Canada: www.retailcouncil.org
Competition Tribunal: www.ct-tc.gc.ca
United Kingdom
Press Releases
Office of Fair Trading, OFT stops misleading price ads; Court judgment says
discounts must be genuine, 2010.
Legislation
The Consumer Protection from Unfair Trading Regulations 2008
Websites
Advertising Standards Authority: www.asa.org.uk
Department for Business Innovation & Skill: www.bis.gov.uk
Office of Fair Trading: www.oft.gov.uk
Trading Standards Institute: www.tradingstandards.gov.uk
Publications
Department for Business Innovation & Skill, Pricing Practices Guide, 2010.
Lichtenstein, D. Price perceptions, merchant incentives, and consumer
welfare, Journal of Product & Brand Management, 2005.
Nottingham University Business School, Research into misleading price
comparisons, 2005.
Office of Fair Trading, Consumer Protection from Unfair Trading: Guidance on
the UK Regulations implementing the Unfair Commercial Practices Directive,
2008.
Research Report
2011
3
United States
Newspaper Articles
Heenan Blaikie, Sears Canada Inc.: Case Study on Sale Pricing, Canadian
Marketing & Advertising Law Update, 2005.
Legislation
Federal Trade Commission Act
Publications
Bureau of Consumer Protection Business Center, Advertising FAQ's: A Guide for
Small Business.
Federal Trade Commission, FTC Guides Against Misleading Pricing.
Websites
Bureau of Consumer Protection Business Center: http://business.ftc.gov
Federal Trade Commission: www.ftc.gov
Australia
Newpaper Articles
Blake Dawson, ACCC pursues advertisers for misleading “was/now” pricing
comparisons, 2009.
Press Releases
Australian Competition & Consumer Commission, ACCC moves on more retailers
for misleading two-price advertising, 2009.
Australian Competition & Consumer Commission, Allans music fined $80,000 for
misleading Christmas catalogue, 2002.
Australian Competition & Consumer Commission, Another bedding retailer
corrects price representations, 2009.
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4
Australian Competition & Consumer Commission, Ascot Four Pty Ltd (Formerly
Zamel's Pty Ltd) appeal dismissed, 2009.
Australian
Competition
& Consumer
Commission,
OFT
examines
legal
implications of pricing research, 2010.
Australian Competition & Consumer Commission, Sleep City and Everyday
Living customers offered redress following ACCC action, 2009.
Legislation
Competition and Consumer Act 2010.
Publications
Australian Competition & Consumer Commission, Advertising and selling.
Australian Competition & Consumer Commission, Misleading & misleading
conduct.
Australian Competition & Consumer Commission, Misleading pricing.
Websites
Australian Competition & Consumer Commission: www.accc.gov.au
Blake Dawson: www.blakedawson.com
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Appendix 1: Pricing Practices Guide
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Appendix 2: VIP Certificate February 4, 2010
Research Report
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Appendix 3: VIP Certificate, April 16, 2010
Research Report
2011
30
Appendix 4: VIP Certificate May 14, 2010
Research Report
2011
31
Appendix 5: VIP Certificate July 2, 2010
Research Report
2011
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Appendix 6: VIP Certificate September 3, 2010
Research Report
2011
33

Genuine or fake sales? Review of regulatory frameworks in Canada

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