When “Clearance” Prices Aren’t Really a Deal: Competition Bureau
Takes Action Against HBC for Alleged Deceptive Regular Price
Claims and Clearance Sales
Jun 19, 2017
Author: 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.
Information on this website is for information only. It is not, and should not be taken as, legal advice. You should not rely on, or take or not take any action, based upon
this information. Professional legal advice should be promptly obtained. Bereskin & Parr LLP professionals will be pleased to advise you.
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