Earlier this week, the Competition Bureau (the
"Bureau") announced that it had commenced proceedings
alleging misleading advertising against Leon's Furniture
Limited and The Brick Ltd., two of Canada's largest furniture
and home appliance retailers. The Bureau claims that the
companies' deferred payment programs (more commonly known as
"buy now, pay later" promotions) required consumers who
signed-up for the promotion to pay significant up-front fees, in
addition to financing charges. The retailers (who are under common
ownership) have publicly denied these allegations and indicated
that they "will vigorously defend their position in
According to the Bureau, the additional up-front fees (the details
of which were allegedly buried in the fine print), meant that the
overall price (not including finance charges) paid by consumers who
took advantage of the buy now, pay later program was higher than
the advertised price. In its press release, the Bureau stated that
the practice of "including a lengthy fine-print disclaimer is
no licence to advertise prices that are simply unavailable to
consumers using a deferred payment option".
This case is noteworthy for several reasons:
Commissioner Pecman's First Misleading Advertising
Case. This is the first misleading advertising case
brought by the new Commissioner of Competition. Bringing this case
sends a clear signal that the Bureau will continue to advance its
consumer protection mandate through the aggressive enforcement of
the misleading advertising provisions of the Competition
Builds on Prior Enforcement Action. This case
builds on the recent enforcement action taken against Bell in
connection with price representations that were allegedly
misleading because the advertised prices did not include additional
mandatory fees which were similarly buried in fine-print
disclaimers. In that case, Bell agreed to pay the maximum
administrative monetary penalty of $10 million. For a copy of our
eLert on the Bell case, please
Reliance on the "General Impression"
Test. This case also appears to rely on the recent Supreme
Court of Canada decision in Richard v. Time Inc. In that
case, the Supreme Court found that the general impression of a
representation is to be considered from the perspective of the
"ordinary hurried purchaser" who must be viewed as
"credulous and inexperienced". For a copy of our eLert on
the Richard v. Time Inc. case, please
The key takeaway for businesses is that the Bureau is likely to
continue to scrutinize the terms of consumer transactions to ensure
that they do not contain hidden fees that increase the ultimate
price to the consumer above advertised prices. Accordingly,
companies should consider reviewing their business practices to
ensure that any "administrative", "processing",
"membership" or other fees they charge are (i)
sufficiently disclosed to consumers, and (ii) consistent with their
Additionally, it may be worthwhile for companies to revisit their
use of disclaimers to ensure that they are clear (including the use
of appropriately sized fonts and positioning), as well as take
steps to ensure that sales personnel understand the importance of
providing accurate and complete information to consumers regarding
the total cost of their purchase.
For a copy of the Competition Bureau's press release, please
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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