Ordinary Price Provisions of the Competition Act

Backgrounder

July 6, 2004

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The Ordinary Price provisions contained in subsections 74.01(2) and 74.01(3) of the Competition Act (the Act) are part of the deceptive marketing practices provisions of the Act. These provisions are aimed at ensuring truth in advertising and discouraging deceptive marketing practices, goals consistent with the Act's overall purpose of maintaining and encouraging competition while providing consumers with competitive prices and product choices. By enforcing these provisions, the Competition Bureau facilitates an honest and competitive forum for business in Canada.

Why do such deceptive marketing practices matter to Consumers?

Everyone likes a bargain! This being the case, Ordinary Price and discount claims play a significant role in consumers' purchasing decisions. Consumers will often shop around, or wait for products to go on sale rather than buy them at the regular, or Ordinary Price, making that price and subsequent discount claims a powerful marketing tool. In addition, consumers often look to price as an indicator of product quality. When the "regular" or "compare at" price of a product is inflated, consumers may be misled as to the true quality of that product.

When is a represented bargain really a bargain? If someone prices a product merely to create a reference price for the purposes of a mark down, the consumer may be duped into making purchases he or she would not have otherwise made, and may not realize any savings at all. Bargains are realized when the consumer is able to take advantage of discounts on products where representations of their Ordinary Price meet the volume or time test (see "Guidelines Regarding Ordinary Price Claims" below).

...To Competitors?

A business representing a product with a discount from an inflated "regular" or "compare at" price can entice consumers away from competitors who represent their products truthfully, putting them at a competitive disadvantage.

Guidelines regarding ordinary price claims

Section 74.01 of the Act deals with civil reviewable matters in respect of deceptive marketing practices in the form of misrepresentations to the public. The Ordinary Price provisions are contained in subsections 74.01(2) (reference to the market price) and 74.01(3) (reference to the supplier's own price). They prohibit the making, or the permitting of the making, of any materially false or misleading representation, to the public, as to the Ordinary Price of a product (products include both articles and services), by any means whatever. Ordinary Price is validated in one of two ways:

(1) 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 (volume test);

(2) the product was offered for sale, in good faith, at that price or a higher price for a substantial period of time recently before or immediately after the making of the representation (time test).

For both businesses and consumers, it is crucial to note that the general impression conveyed by a representation, as well as its literal meaning, is considered when determining whether or not it is false or misleading in a material respect.

If, on review, a court determines that a person has engaged in conduct contrary to the Ordinary Price provisions, it may order the person not to engage in such conduct or substantially similar conduct, to publish a corrective notice and/or to pay an Administrative Monetary Penalty.

Resolution

As an alternative to applying to the court to issue an order under the civil provisions of the Act, the Commissioner may register a Consent Agreement with the Court under section 74.12 of the Act. A Consent Agreement has the same force and effect as if it were an order of the Court itself. Further, it gives disputing parties resolution in a timely fashion while avoiding the significant costs of litigation.

A Consent Agreement may include:

• an Administrative Monetary Penalty
• the full compensation of the Bureau's investigative costs
• restitution in appropriate cases
• the publication of corrective notices
• the development and implementation of a Corporate Compliance Program which ensures the company's commitment to comply with the Act

In addition to remedying the anti-competitive activity, Consent Agreements encourage future conformity with the Act and provide an educational tool.

Since the civil deceptive marketing practices' provisions were brought into the Act in 1999, the Competition Bureau has commenced inquiries into a number of Ordinary Price cases. The Commissioner's case against Sears Canada is currently before the Court. The case against Suzy Shier was settled in June 2003, by way of a Consent Agreement including a $1-million Administrative Monetary Penalty.

For more information:

For more information regarding the Ordinary Price provisions of the Act or the general application of the Act, contact the Bureau's Information Centre at 1-800-348-5358, or visit our Web site.