As the echoes of back-to-school bells and the laughter of Halloween fade away, advertisers are gearing up for what is often their grandest event of the year: Black Friday and Cyber Monday! But as consumers prepare to snag incredible bargains and marketers embark on crafting strategies to attract shoppers, has your business carefully considered the legal aspects that underpin these promotional events?
In Canada, price and savings claims are regulated under the federal Competition Act, as well as provincial consumer protection legislation. What's more, in recent years both federal and provincial regulators have actively enforced such regulations, resulting in an uptick in class action litigation pertaining to pricing practices and representations and giving businesses extra reason for caution.
To help you prepare for the pre-holiday shopping frenzy, we are pleased to offer some practical tips and insights on how best to navigate the web of legal considerations in your Black Friday promotions.
Transparency and truth in pricing: Ensuring proper substantiation
Ensuring transparency and accuracy in pricing is a (read: the) fundamental consideration of running compliant Black Friday promotions. While the allure of amplifying the original price of a product or service in order to present more substantial discounts may be tempting, such practices are unequivocally offside and constitute deceptive advertising tactics.
Instead, savings claims must be properly substantiated. Under the federal Competition Act, this means that in order to advertise a "sale" or discounted price, brands and retailers must ensure that such savings representations are true relative to the properly established ordinary selling price, which can be determined by using either the Time Test or Volume Test:
- The Time Test: The product must have been offered for sale at the ordinary selling price or a higher price, in good faith (i.e. at a price the supplier fully expected the market to validate, and ideally the price at which genuine sales occurred) for a substantial period of time recently before or immediately after making the representation. As such, the Time Test will be met if the product is offered for sale, in good faith, at, or above, the ordinary selling price for more than 50 per cent of the time during the six months before or after making the representation; or,
- The Volume Test: A substantial volume of the product must have been sold at the ordinary selling price or a higher price, within a reasonable period of time. The Volume Test will be met if more than 50 per cent of sales occurred at, or above, the ordinary selling price in the 12 months before or after making the representation.
The Competition Bureau's Ordinary Price Claims Guidelines offer valuable industry examples on different pricing representations and serve as illustrative tools for ensuring compliance.
Consider the general impression: Event titles matter!
Picture this: You're scrolling through Black Friday deals, and a banner catches your eye – "Black Friday Exclusive Offer!" or "Black Friday Event!" Sounds promising, right? It should, because these titles suggest something beyond the ordinary. When businesses use such enticing headlines, it's not just about slapping "Black Friday" on the offer; it's about delivering superior deals that stand out from the everyday. Think of it as offering a "Black Friday Exclusive" product bundle or promo – a deal that goes beyond the routine and gives you that extra something special during the event dates that you couldn't get immediately prior or shortly after Black Friday.
On the other hand, mislabeling regular offers or promotions as extraordinary or time-limited could leave consumers feeling a bit misled. So, when the name touts uniqueness, make sure the offer lives up to the hype and the general impression it conveys to the average consumer. At the very least, there should be some incremental benefit that distinguishes your Black Friday offer from typical promotions!
Disclaimers? They're like sidekicks – here to clarify, not steal the spotlight.
Let's not forget about disclaimers. As lawyers, we have an affinity towards disclaimers. However, while a disclaimer might help to mitigate risks, it certainly will not cure or serve to contradict more prominent aspects of a message. To be effective, a disclaimer cannot take away the general impression conveyed by the advertising claim; rather, it should only serve to clarify a relatively minor level of ambiguity.
Whether a representation is misleading is assessed from the perspective of the "general impression" that it creates for the average consumer, defined by the Supreme Court of Canada in Richard v. Time Inc. (2012 SCC 8) as an "ordinary and hurried purchaser" who is both "credulous and inexperienced" and who takes no more than ordinary care to observe that which is staring them in the face upon their first contact with an advertisement.
In the world of advertising, disclaimers are your allies, as opposed to your escape route. Since disclaimers – as well as asterisked or footnoted information – must not contradict more prominent aspects of a message, placing certain types of information in legal disclaimers will not provide meaningful legal protections in cases where the information in the disclaimer contradicts the overall impression conveyed by the advertisement – particularly where such information relates to a material representation (such as the price of a product, a minimum purchase requirement, etc.).
Ensuring your message is clear, truthful and communicates all material offer conditions, restrictions and exclusions will be key. Similarly, you'll want to consider whether your product is subject to and complies with any prescribed disclosure placement, as well as prominence, requirements. One clear example is Québec's rule on laying greater prominence on a product's all-inclusive selling price than its constituent amounts or installment or lease payments. Ultimately, relying on legal disclaimers to communicate material offer conditions or information subject to prominence disclosure requirements may increase your exposure to risk.
One size may not fit all. You may also need to tailor your disclosures based on the advertising platform. For instance, consider whether visual, audible or simultaneous visual-and-audible disclaimers should be used to ensure important information is communicated effectively and in a manner that suits the medium. Failure to provide transparent information can result in customer confusion and even potential legal issues.
Watch the clock: Communicating time-limited offers without the false hype
When it comes to time-limited offers, honesty is the best policy. If you're contemplating a "one-day only" Black Friday promo, avoid extending the offer through Cyber Monday. The use of countdowns to build anticipation by highlighting the time remaining until the conclusion of a sale can create a false sense of urgency. This is particularly true if the brand intends to prolong the offer beyond the confines of Black Friday. Drawn in by the ticking clock, customers may be influenced by a perceived time constraint to make a purchase decision they might have otherwise taken more time to consider but for the false sense of urgency created.
How many are left? Consider inventory levels
Before diving into the nitty-gritty of your promotional offer, take stock of your inventory levels. If you anticipate a surge in demand throughout the offer's promotional period, you'll want to ensure that you have ample stock on hand to meet those expectations.
Concerned about not having enough quantity to cover the reasonably expected demand (which is both a science and an art to estimate)? Transparency is paramount. Ensure your promotional materials clearly and conspicuously disclose any potential quantity limitations. Québec, in particular, takes it a step further: if stock is limited, your ad must not only disclose that fact, but must also specify the actual number of units available.
No surprises at checkout: What you see is what you pay
Québec has long required that any pricing representation to consumers include all mandatory fees and charges that may apply – exclusive only of taxes, duties chargeable under a federal or provincial statute that must be charged directly to consumers to be remitted to a public authority, and deposit recycling fees refunded upon return.
While all-in pricing was previously a general "best practice" in provinces outside Québec, which had not enacted their own all-in pricing rules, it is now federal law! In June 2022, Canada's Competition Act was amended to include provisions explicitly recognizing "drip pricing" – the practice of "offering a product or service at a price that is unattainable because consumers must also pay additional charges or fees to buy the product or service" – as a harmful business practice.
The Act now provides that price representations that are not attainable "due to fixed obligatory charges or fees" constitute a false or misleading representation – unless the "obligatory charges or fees represent only an amount imposed by or under an Act of Parliament or the legislature of a province."
"Drip pricing" has been a major focus of the Competition Bureau's enforcement actions over the last decade. Although the recent amendments to the Competition Act now explicitly prohibit the practice, the Bureau had previously used the long-standing prohibitions on misleading advertising to target excluding unavoidable charges from advertised prices. In other words, the recently enacted "for greater certainty" provision is the legal equivalent of turning a page from the past and making it official.
For national pricing representations, this becomes a game of pricing precision. Selling across Canada means playing to the highest common denominator. The goal is to ensure that any Canadian, from coast to coast, can walk into any retailer or e-tailer and pay the advertised price or even less, but never more. The only wiggle room? Those "obligatory charges or fees" that are "imposed" by law. Crunching the numbers to calculate the all-in price requires decoding which fees fall under the legal umbrella.
While Black Friday and Cyber Monday promotions are great tools to boost sales and enhance customer engagement, navigating the legal landscape strategically and thoughtfully are key to their success.Advertising and Product Regulatory team.
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.
