By Tiyam Shiribabadi
Have you ever been drawn into a store by the promise of a great discount? And then you rush and arrive at the store to find out that the sale didn’t offer the discounts promised or the sale items have a grossly inflated original price tag? The manipulation of sale prices is a deceptive marketing practice to imply a discount where there may be none.
Unless you’re a shopper who keeps track of products and pricing, consumers do not usually realize they are being deceived. The Competition Bureau in Canada has the mandate of ensuring the proper operation of the market, and has successfully investigated big corporations that were found in some instance to have engaged in deceptive pricing practices that took advantage of consumers.
To give rise to an investigation, it must be found that there were deceptive representations as defined under the Competition Act.
Determining the Deceptive Pricing
Section 74.01(1)(a) of the Competition Act specifically disallows deceptive representations. First, the deceptive representation must be for the purpose of promoting the supply or use of a product or promoting any business interest either directly or indirectly. Second, the conduct must be any representation made to the public. Third, the conduct must be false or misleading in a material respect. It is not necessary to prove any specific individual was deceived or misled.
Furthermore, there are specific tests that must be conducted to determine whether or not the ordinary price of a product is indeed accurate when it is used as a point of comparison for the sale price. The ordinary price must conform with only one of two tests set out in subsections 74.01(2) and 74.01(3) of the Competition Act. Bearing in mind some of the definitions clarified within the Competition Act, the following is a summary of the two options for determining ordinary pricing:
- Volume Test: Has more than 50% of the product been sold at or above the ordinary price, within a reasonable period of time?
- Time Test: Has the product been offered for sale, in good faith, for a substantial period of time?
The nature of the product informs the reasonableness of the timing, whereas factors like fair market value and pricing by competitors inform whether the product was sold in good faith.
Consequences of Deceptive Pricing
If Competition Tribunal determines that deceptive pricing has occurred, the tribunal has to ability to grant any of the following four orders:
- An order prohibiting the conduct;
- An order to publish a public notice that brings the details of the deceptive pricing and investigation to the attention of the parties’ consumers;
- An order to pay a fine that may go up to 10 million dollars;
- An order to compensate the consumers of the deceptively priced products.
Deceptive Pricing as a Criminal Act
This article largely focuses on the civil provisions of the Competition Act. However, where there is evidence of knowingly or recklessly carrying out the deceptive conduct, deceptive pricing practices may carry heavy penalties. The penalty for guilty determinations in these instances may be monetary fines and imprisonment. Both depend on the type of conviction and on the discretion of the court. Once the court finds a party guilty, consumers who suffered as a result of the criminal conduct can commence a private action for damages.
If consumers wish to bring a complaint forward, they would need to contact the Competition Bureau’s Information Centre or fill out a complaint form directly on their website. Additionally, the Competition Bureau has published a general guideline on their website to better understand the concept of regulating pricing. Links on deceptive pricing and the complaint process can be found below.
Competition Bureau’s General Guideline: https://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03125.html#bargain
Competition Bureau’s Information Centre: https://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/00157.html
Competition Bureau’s Online Complaint Form: https://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/frm-eng/GHÉT-7TDNA5
Competition Act: https://laws.justice.gc.ca/eng/acts/C-34/index.html