Canada: When Is A "Sale" Not A "Sale"? Canada’s Competition Bureau Issues Its First "Ordinary Price" Decision

Apart from dealing with traditional antitrust matters such as cartels, mergers, abuse of dominance and distribution/pricing practices, Canada’s Competition Act also contains an array of provisions governing various types of misleading representations and other deceptive marketing practices. These include provisions with respect to misleading advertising, "ordinary price" claims, deceptive telemarketing, promotional contests and "pyramid" selling.

The Canadian Competition Bureau has placed misleading representations/deceptive marketing practices among its top enforcement priorities. Recently, the Bureau has paid particular attention to the Competition Act’s "ordinary selling price" ("OSP") provisions, which are intended to ensure that consumers are not misled by inflated "ordinary prices" when buying items that are advertised as being "on sale."

In 2003, for example, the Bureau entered into a settlement with a leading women’s clothing retailer, which agreed to pay an "administrative monetary penalty" of C$1m (€621,000) for making allegedly misleading "sale" claims. Similarly, in 2004, Canada’s largest national retailer of sporting goods agreed to pay a total of C$1.7m (€1m) for allegedly overstating the actual savings to consumers on items bought at its so-called "sale" prices.

The beginning of 2005 has witnessed yet another Canadian retailer falling foul of the Competition Act’s OSP provisions. In the first contested proceeding under these provisions, the Canadian Competition Tribunal held on 24 January 2005 that Sears Canada misled consumers in 1999 by exaggerating the possible savings available to them when buying certain automobile tyres. The Tribunal also upheld the constitutionality of the OSP provisions, which Sears had challenged as part of its defence in this case.

The OSP provisions

The Competition Act’s OSP provisions authorise the Competition Tribunal to issue a remedial order where a person who makes a representation about the price at which a product has been "ordinarily supplied":

  • did not sell a "substantial volume" of the product at that price (or a higher price) within a "reasonable period of time" before or after the making of the representation (the "volume test"), and
  • did not offer the product at that price (or a higher price) in "good faith" for a "substantial period of time" either "recently before" or "immediately after" the making of the representation (the "time test").

However, the OSP provisions do not apply if the person establishes that, in the circumstances, the impugned representation was not "false or misleading in a material respect."

The Tribunal’s decision in Sears

The Competition Bureau filed its application against Sears on 22 July 2002. The Commissioner alleged that Sears had misled consumers on several occasions in 1999 about the real value of their savings on the purchase of five brands of tyres by referring to inflated "regular" prices when advertising these tyres as having been "on sale." Moreover, based on Sears’s internal documents, the Bureau alleged that the company was aware of these problems and did not take sufficient steps to avoid them, thus failing to publish its advertisements with the requisite "good faith."

In its application for relief, the Bureau sought an order from the Tribunal

(i) prohibiting Sears from engaging in this type of conduct for ten years – the maximum period provided for in the OSP provisions,

(ii) requiring Sears to issue "corrective notices," and

(iii) obliging Sears to pay an "administrative monetary penalty" of C$500,000 (€310,000).

The Bureau’s application was hotly contested by Sears. There were numerous interlocutory motions and the hearing took 28 days, including testimony from eight expert witnesses. In the end, however, the Tribunal agreed with the Bureau and held that Sears had violated the OSP provisions, which it also found to be constitutionally valid. Specifically, the Tribunal found that:

(i) Sears had failed to meet the volume test with respect to the sale of all five of the lines of tyres at issue because less than 5% of these tyres had been sold at the purported "regular" price (Sears conceded that this was the case).

(ii) Based on Sears’s own documents, its purported "regular" prices were not offered in "good faith" as required under the time test.

(iii) Sears did not meet the "substantial period of time" requirement in the time test for four of the five lines of tyres because the tyres were only sold at the purported "regular" prices for less than half the applicable reference period of six months.

(iv) Sears failed to establish that its representations were not "false or misleading in a material respect."

In reaching its conclusion, the Tribunal made a number of important points regarding the OSP provisions:

  • The terms "substantial volume," "reasonable period of time" and "substantial period of time" may defy precise measurement but they are terms of common usage with commonly understood meanings. They help ensure that the OSP provisions are applied flexibly, which is necessary to deal with the variety of circumstances that may arise.
  • Although the Tribunal did not discuss the volume test at great length, it made its view clear that selling less than 5% of an item at the "ordinary" (or "regular") price will not be sufficient to meet this requirement.
  • The "good faith" element of the "time test" will be satisfied if the supplier truly believed that its "ordinary" prices were genuine and bona fide, i.e. there was an expectation that the market would validate those "ordinary" prices.
  • A product that has been "on sale" for more than half the applicable reference period preceding the savings claim, has not been offered at its "ordinary" price for a "substantial period of time" and therefore will not meet the time test.
  • The onus is on the supplier to prove that a representation that fails to comply with the OSP provisions is not otherwise materially misleading. In this case, the Tribunal held that the size of the advertised savings (25%-50%) was of sufficient magnitude to cross the materiality threshold because it was large enough to attract consumers to buy Sears’s tyres.
  • The absence of actual consumer harm or the fact that many consumers may be satisfied with their purchases is not relevant to whether the representations are material and, as such, is not relevant to whether a contravention of the OSP provisions has or has not occurred.

Having found a contravention of the OSP provisions, the Tribunal issued an order prohibiting Sears from engaging in similar reviewable conduct for a period of ten years. However, the Tribunal declined to extend this prohibition to all products offered for sale by Sears and instead limited it to Sears’s tyres and automotive products. The Tribunal also held that ordering Sears to publish corrective notices would serve no purpose, given that the misleading claims in question were made more than five years earlier.

The Tribunal also reserved on the question of whether Sears should be ordered to pay a penalty of C$500,000 (€310,000), as requested by the Bureau. The Tribunal ordered that a separate hearing be held to consider this issue together with the question of costs.


The OSP provisions were established as a civil reviewable practice under amendments to the Competition Act introduced in 1999. Before that, making misleading claims about "sale" prices was a criminal offence.

The objective in decriminalising the OSP provisions was to put in place a less complicated process to deal with potentially misleading "sale" claims. However, it is not at all clear that these goals are being met, considering that the Sears case took more than two and a half years to resolve – and more than five years after the representations in question were made.

That said, the Competition Bureau is obviously very pleased with the Tribunal’s ruling. The Commissioner of Competition heralded the decision as an "important milestone in the Competition Bureau’s efforts to ensure that consumers get honest and accurate pricing information from retailers," adding that "Canadian consumers should expect nothing less than truth in advertising, when deciding where to spend their hard earned money."

As a result of the Bureau’s success in Sears, retailers doing business in Canada can expect their "on sale" promotions to be subjected to closer scrutiny. Moreover, the consequences for companies of violating the OSP provisions may become even more onerous in the near future, given the Canadian government’s proposal to increase the maximum monetary penalty for a first violation from C$100,000 to C$10 million (€62,000 to €6.2m) and for any subsequent violations, from C$200,000 to C$15 million (€124,000 to €9.3m).

There is also a proposal to authorise the Tribunal to order parties found to have engaged in misleading advertising – including misleading "ordinary price" claims – to pay restitution to consumers.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.


Competition Bureau, "Landmark Competition Act Ruling Against Sears Canada" (January 24, 2005)

Commissioner of Competition v Sears Canada Inc, 2005 Comp. Trib. 2

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Mark C. Katz
In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions