In July, the Competition Bureau brought a lawsuit in the Ontario
Superior Court against two of Canada's largest home furniture
retailers, Leon's Furniture Limited ("Leon's")
and The Brick Ltd. ("The Brick") seeking, among other
things, refunds for customers who participated in "buy now,
pay later" promotions, as well as Administrative Monetary
Penalties under the Competition Act.
In a press release issued July 9, 2013, the Competition Bureau
stated that its investigation revealed that customers had to pay
up-front fees to participate in the promotion, notwithstanding the
"pay later" promise, resulting in an item costing
customers more than the advertised price. The example given in the
press release is a sofa advertised at $1,500. Customers wanting to
defer payment on the sofa could end up paying more than $350 at the
time of purchase depending on processing or administrative fees,
delivery fees and taxes.
The Commissioner of Competition ("Commissioner"), John
Pecman stated in the release: "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.
The Competition Bureau is alleging that Leon's and The Brick
buried details of the up-front fees and the real cost to customers
of furniture bought using deferred payment in fine print.
This is consistent with the Competition Bureau's policy of
ensuring consumers are aware of the amount they are actually paying
for a product. As an example, in 2009, the Competition Bureau
issued Consumer Rebate Promotions enforcement guidelines, which
prohibit price rebates that disguise the price customers pay at the
time of purchase.
Leon's and The Brick have now filed a Statement of Defence,
denying the allegations of the Commissioner, and stating, among
other things, that the representations cited in the Statement of
Claim were taken out of context, and that, even if taken out of
context, these statements were neither false nor misleading. For
example, Leon's and The Brick note that they have offered
deferred payment programs for more than 25 years, with the
Leon's promotions being "Canadian icons". It is well
recognized that, outside of Quebec, retailers who offer deferred
payment programs generally charge processing fees for the service.
Further, the industry practice is to advertise prices which do not
include taxes or fees for additional services, such as financing or
delivery. It is well known by consumers that such taxes and fees
may be payable. Leon's and The Brick highlighted that, in
addition to not paying any part of the purchase price during the
deferral period, their customers do not pay any interest during
that period (unlike other retailers who charge retroactive interest
if the customer fails to pay for the product at the end of the
deferral period). Taxes and fees for additional services (for
example, for delivery, financing, and any government imposed fees)
may be payable either at the beginning or the end of the deferral
period. In most cases, the processing fees are paid at the end of
the deferral period. The amount and timing of such fees are
disclosed to the customer before purchase.
The Commissioner in turn filed his Reply, arguing that the
surcharge is an inherent part of the purchase price, refuting that
the representations stated in his Statement of Claim were out of
context and maintaining that several representations were
unaccompanied by any disclaimer. The pleadings are now closed.
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In less than nine months, on July 1, 2017, persons affected by a contravention of Canada's anti-spam legislation will be able to invoke a private right of action to sue for compensation and potentially substantial statutory damages.
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