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When “Clearance” Prices Aren’t Really a Deal: Competition Bureau Takes Action Against HBC for Alleged Deceptive Regular Price Claims and Clearance Sales

June 19, 2017

By Amanda Branch

On February 22, 2017, the Canadian Competition Bureau announced it had taken legal action against Hudson’s Bay Company (“HBC”) for what it considers to be deceptive regular price claims and deceptive clearance promotions, thereby signalling that deceptive retail price claims remains an enforcement priority.

The Ordinary Price Claims Enforcement Guidelines, published by the Bureau, state that a claim to a sale price may only be made if: (i) more than 50% of the product volume is sold at or above the regular price over a certain period; or (ii) if a “good faith” volume of the product is offered at or above the regular price more than 50% of the time over a certain period. (The period is variable and may be long or short depending on the nature of the product and whether there are any seasonal variables.)

It was alleged by the Bureau that, since at least March 2013, HBC has engaged in deceptive marketing practices by offering sleep sets at grossly inflated regular prices, then advertising deep discounts on these prices which suggests to consumers that they are getting a significant deal.

The Bureau is of the opinion that the regular prices of the sleep sets were so inflated above regular market value that sales at the regular price were virtually non-existent. As a result, the alleged savings were based on a deceptive regular price – that is that the regular price was not supported by substantial sales volumes and was not set in good faith since the prices were well in excess of what HBC expected and knew customers would actually pay, and thus did not meet the requirements in the guidelines.

Additionally, the Bureau thought HBC’s practices related to “clearance” or “end of the line” promotions were deceptive. These terms are meant to imply that the price has been permanently lowered for the purpose of selling any remaining inventory. The terms also imply scarcity of product and potential time or stock limitations which may induce customers to rush their purchase decision. In reality, HBC continued to replenish stock by ordering new product during the sales and continued to offer the sleep sets even after the conclusion of the clearance promotion.

The Bureau is seeking an order requiring HBC to pay an administrative monetary penalty.

This is a good reminder that the Bureau takes price claims very seriously. While putting products on sale or offering products at a clearance price is standard practice in the retail industry, retailers are well advised to review their prices and price strategies to ensure they are meeting the Bureau’s guidelines.

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Amanda Branch Amanda Branch
B.A. (Hons) Psych., J.D.
416.957.1690  email Amanda Branch