When is a sale really a sale? If someone puts a fake regular price on a product and then crosses it out, claiming the item is marked down, the consumer might not be saving anything at all. The Competition Act requires that when a business advertises a sale price by relating it to a higher regular price (the full price of the product without any discounts), the business must be able to validate the regular price.
Businesses use two types of regular prices as a reference for claiming savings:
- a seller's own regular price, for example: “Our regular price $100, Now $50”
- a market price, for example: “List price $100, Our price $50”
Whether businesses reference their own regular price, or a market price, the Act requires that they validate the regular price by satisfying one of two tests:
- Volume test: A substantial volume of the product was sold at that price or a higher price within a reasonable period of time before or after the making of the representation.
- Time test: The product was offered for sale, in good faith, for a substantial period of time, at that price or a higher price recently before or immediately after the making of the representation.
When deciding whether a representation of an “ordinary selling price” raises concerns under the Competition Act, the court considers both the literal meaning of the information and the general impression it makes. This is known as the “general impression test.”
Remedies for non-compliance
If a person engaged in conduct contrary to subsection 74.04(2) or 74.01(3) of the Competition Act, such person may be ordered to stop engaging in such conduct, to publish a corrective notice, and/or pay an administrative monetary penalty.
For individuals, the penalty for first-time violations is up to the greater of:
- $750,000 ($1 million for each subsequent violation); and
- three times the value of the benefit derived from the deceptive conduct, if that amount can be reasonably determined.
For corporations, the penalty for a first-time violation is up to the greater of:
- $10 million ($15 million for each subsequent violation); and
- three times the value of the benefit derived from the deceptive conduct, or, if that amount cannot be reasonably determined, 3% of the corporation’s annual worldwide gross revenue
Having a credible and effective compliance program can provide benefits in dealing with the Competition Bureau to resolve a violation of one of the legislation it enforces. A compliance program can also help:
- reduce the risk of potentially illegal conduct
- protect your brand and reputation
- detect instances of potentially illegal conduct at an early stage
- identify when others might put you at risk
To find out more information on written opinions under section 124.1 of the Competition Act, contact the Bureau’s Information Centre toll-free at 1-800-348-5358 or online. If a written opinion is provided by the Commissioner, a fee will apply based upon the section of the Act the proposed conduct or practice applies to. A written opinion is binding on the Commissioner as long as the facts submitted are accurate, and it remains binding if the facts on which the opinion is based remain substantially unchanged and your conduct or practice is carried out, as proposed. All fees and service standards for written opinions are set out in the Competition Bureau Fee and Service Standards Policy.
- Cases and outcomes
- Written opinions
- Enforcement guidelines: Ordinary price claims
- Advertising dos and don’ts
- Competition Act, subsections 74.01(2) and 74.01(3)
- Price-related representations
- False or misleading representations
- Taking the risk out of saving claims (Volume 4: Deceptive Marketing Practices Digest)