Canadian COMPETITION LAW

October 5, 2023

On September 27, 2023, the Canadian Competition Bureau (Bureau) announced that the Dufresne Group Inc. (TDG) (Dufresne Group), based in Manitoba, had agreed to settle an ordinary selling price (OSP) and urgency cue marketing related case for CDN $3.25 million (see: Competition Bureau, News Release, The Dufresne Group to pay $3.25 million penalty to settle Competition Bureau concerns over marketing claims).

In making the announcement, the Bureau said that “[t]actics that pressure consumers to make a purchase quickly, like limited time offers, must be truthful”, that “[a]ll businesses in Canada should review their marketing practices and make sure they comply with the law” and that “taking action against deceptive marketing practices remains one of [its] highest priorities.”

According to the Bureau, the Dufresne Group and its affiliates, which operate under retail brands Dufresne Group Furniture and Appliances and certain Ashley HomeStores, offered some of their products at inflated regular prices and then advertised them at big discounts, which suggested significant savings to consumers that were unavailable. More specifically, the Bureau found that the Dufresne Group did not sell a substantial volume of the relevant products at the advertised regular prices within a reasonable time before the claims were made, nor did they offer the products at the regular prices for a substantial period of time as required by the “volume” and “time” tests set out under the Competition Act (see discussion of OSP claims below).

The Bureau also challenged some of the Dufresne Group’s other urgency cue related marketing claims, which, according to the Bureau, gave consumers a false or misleading impression that certain deals on products would no longer be available after a certain time when that was not the case (e.g., through the use of countdown timers). For example, the Bureau found that the Dufresne Group make claims, such as “40% OFF (Sale ends Sep 19 2022)”, that created the general impression that discounted prices on some products would no longer be available after a certain time, when that was not in fact the case.

The Dufresne Group and the Bureau agreed to settle this case under a negotiated consent agreement, in which the Dufresne Group will pay a $3.25 million penalty, made commitments for their marketing to comply with the Competition Act and will establish and maintain a competition law compliance program.

Ordinary Selling Price (OSP) and Sales Claims
Under the Competition Act

In addition to general civil and criminal misleading advertising provisions, the Competition Act also includes standalone civil ordinary selling price provisions (sections 74.01(2)-(5)). These sections are intended to prevent false or misleading inflated claims relating to a seller’s regular prices or the regular prices in a market generally.

Claims relating to the ordinary or regular price of a product cannot be made unless one of two statutory tests set out in the Competition Act are met:

The “Volume Test”: A substantial volume of the relevant product must have been sold at the claimed regular price (or higher) within a reasonable period of time either before or after the claim has been made. The Bureau’s position is that a substantial volume is more than 50% of sales at or above the referenced ordinary price and a reasonable period of time is 12 months before or after the claim is made (though this may be shorter depending on the nature of the product – for example, in the case of seasonal products).

The “Time Test”: The product has been offered for sale in good faith at the regular price (or higher) for a substantial period of time before or immediately after the claim has been made. The Bureau’s position is that whether a product has in fact been offered for sale in good faith depends on a number of factors and a substantial period of time means more than 50% of the six months before or after the claim is made (which, as under the volume test, may be shorter depending on the nature of the product).

The Bureau has commenced OSP marketing claim related enforcement in a number of industries, including in relation to retail craft supplies (Michael’s), online retailing (Amazon), department stores (e.g., Sears) and other retailers (e.g., sports and clothing retailers). Some of the penalties in OSP cases have ranged between $1.1 million and $3.5 million.

Aside from the OSP provisions, false or misleading “sale” or other discount claims can also violate the general criminal or civil misleading advertising provisions of the Competition Act under sections 52(1) or 74.01(1) (e.g., where a product is always on sale or a claim is made that a product is on sale when there has been no actual price reduction).

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For more information about ordinary selling price and sales related claims under the Competition Act, see: Ordinary Selling Price (OSP) Claims and Sales, Price Claims, Misleading Advertising and General Impression Test.

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