“’Limited time offers’ and ‘countdown clocks’, types of urgency cues, could create the false or misleading impression that consumers must purchase a product quickly prior to the end of a promotion when, in fact, the promotion is renewed or replaced by another. The ordinary selling price provisions of the Competition Act aim to ensure that when products are promoted at sale prices, the deals are not based on inflated regular prices.”
Competition Bureau
(News Release (September 27, 2023),
“The Dufresne Group to pay $3.25 million penalty
to settle Competition Bureau
concerns over marketing claims”)
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“Consumers win when retailers offer aggressive discounts, but savings claims must be substantiated. When comparisons are made between regular and sale prices, consumers respond to the implied savings. As such, it is important that businesses make accurate and truthful claims when advertising the price of a product.”
Competition Bureau
(Michael’s OSP case)
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In addition to the general criminal and civil misleading advertising provisions of the Competition Act (sections 52 and 74.01), the Act also sets out certain misleading advertising related criminal offences (under Part VI of the Act – Offences in Relation to Competition), which are subject to fines and imprisonment, and reviewable matters (under Part VII.1 of the Act – Deceptive Marketing Practices), which are subject to civil penalties including administrative monetary penalties (AMPs, which are essentially civil fines).
These include provisions relating to deceptive telemarketing (section 52.1), deceptive prize notices (section 53), double ticketing (section 54), multi-level marketing (section 55), pyramid selling schemes (section 55.1), performance claims (section 74.01(1)(b)), misleading or unauthorized use of tests and testimonials (section 74.02), bait and switch selling (section 74.04), the sale of products above an advertised price (section 74.05) and promotional contests (section 74.06).
Ordinary Selling Price (OSP) Provisions
In addition to the above, the Competition Act also includes standalone civil ordinary selling price or “OSP” provisions (sections 74.01(2)-(5)). These sections are generally intended to prevent 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 Competition Bureau’s (Bureau) view 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, again, as under the volume test, may be shorter depending on the nature of the product).
The Bureau has commenced OSP 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.
Sale Claims
Importantly, aside from the standalone 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 or 74.01 (e.g., where a product is always “on sale”, when there is no higher price, or a claim is made that a product is “on sale” when there has been no actual price reduction). For more information, see: Misleading Advertising.
Potential Penalties
Some of the potential penalties for violating the civil deceptive marketing practices provisions under Part VII.1 of the Competition Act include Competition Tribunal or court orders to stop the conduct, publish a corrective notice, pay restitution to consumers and AMPs.
Following 2022 amendments to the Competition Act, the maximum AMPs for civil deceptive marketing increased: (i) for individuals, up to the greater of $750,000 ($1 million for each subsequent order) and three times the value of the benefit derived from the deceptive conduct if that amount can be reasonably determined; and (ii) for corporations, up to the greater of $10 million ($15 million for each subsequent order), three times the value of the benefit derived from the deceptive conduct or, if the latter amount cannot be reasonably determined, 3% of the corporation’s annual worldwide gross revenues.
The potential penalties for violating the general criminal misleading advertising section of the Competition Act (section 52) include, on indictment, a fine in the discretion of the court and/or imprisonment for up to 14 years and, on summary conviction, a fine of up to $200,000 and/or imprisonment for up to one year.
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SERVICES AND CONTACT
We are a Toronto based competition and advertising law firm offering business and individual clients efficient and strategic advice in relation to competition/antitrust, advertising, Internet and new media law and contest law. We also offer competition and regulatory law compliance, education and policy services to companies, trade and professional associations and government agencies.
Our experience includes advising clients in Toronto, across Canada and the United States on the application of Canadian competition and regulatory laws and we have worked on hundreds of domestic and cross-border competition, advertising and marketing, promotional contest (sweepstakes), conspiracy (cartel), abuse of dominance, compliance, refusal to deal and pricing and distribution matters. For more information about our competition and advertising law services see: competition law services.
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For more information about our firm, visit our website: Competitionlawyer.ca
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