On July 9, 2013, the Competition Bureau announced that it would be pursuing civil charges of deceptive marketing under the Competition Act against Canadian furniture retailers Leon's Furniture Ltd. and The Brick Ltd. (acquired by Leon's earlier in 2013).
In a civil action filed with the Ontario Superior Court of Justice, the Bureau alleges that the retailers' "buy now, pay later" programs, in which consumers are encouraged to purchase products under a deferred payment program, gives the false general impression that consumers can take advantage of the programs at no extra charge, and fails to adequately disclose the surcharges that will be applied to the balance of the purchase price (section 74.01(1)(a)). By way of example, a customer wanting to defer payment on a $1500 sofa could be required to pay up to $350 at the time of purchase, despite advertisements stating customers would pay "absolutely nothing" for up to 21 months.
The Bureau also alleges that the administration and processing fees applicable to the deferred payment programs are "hidden", and can result in substantial additional costs (including both up-front costs as well as costs added to the balance to be paid), which result in the final price of the product being higher than the advertised price (section 74.05(1)).
The Bureau acknowledged that, in many instances, the representations were accompanied by disclaimers that referenced the need to pay certain fees at the time of purchase. It noted, however, that lengthy disclaimers buried in the fine print and not in close proximity to the associated representations, particularly if the disclaimers contradicted the representations' literal meaning and/or general impression, are ineffective in addressing the reviewable conduct. In a statement, Commissioner of Competition John Pecman said that "Canadian consumers must receive clear and accurate information about what must be paid at the time of purchase, and what the actual cost of a particular item is if they use a deferred payment option." He went on to say that "[r]etailers cannot hide details of additional fees in lengthy disclaimers."
The Bureau has increasingly shown indications that it considers it a priority to pursue deceptive marketing and disclaimer practices, which, it is argued, take advantage of a struggling economy to exploit vulnerable consumers. In September 2012, the Bureau took action against cell phone providers Bell, Rogers and Telus for fine-print disclaimers and allegedly "hidden" cell phone fees.
It has been estimated that "buy now, pay later" transactions could comprise up to 50% of the furniture retailers' transactions across Canada. Leon's and The Brick have indicated that they will defend their positions in court.
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