The Competitor
August 2002
Sears Canada Inc. alleged to have made
Misleading Advertised Ordinary Price Claims
by Adam Kalbfleisch
The Competition Bureau (the “Bureau”) has filed its first
application under the civil ordinary selling price provisions of
the Competition Act. This application, filed on July 23, 2002,
with the Competition Tribunal, alleges that Sears Canada Inc.
(“Sears”) deceived consumers about the true value of their
savings by inflating (no pun intended) the “regular” price of
tires while advertising certain tires at “sale” prices during
1999.
The Bureau is asking the Tribunal to issue a prohibition
order for 10 years and to order Sears to cease and desist the
alleged conduct, to publish a public corrective notice, and to
pay a monetary penalty of $500,000.
Although the investigation of Sears’ tire marketing
practices “has continued up to the present,” officials have
limited the case to 1999 due to the retailer’s federal court
challenge that questions the scope of the Bureau’s inquiry beyond
that year.1
The Competition Act establishes two ways to determine a
legitimate “ordinary” price to which retailers may compare their
own sale prices. A retailer’s ordinary price is one at which:
1
See pleadings in Sears Canada Inc. v. The Commissioner of Competition and Brian Gover, a Presiding Officer
Appointed Pursuant to Section 11 of the Competition Act, ongoing, Federal Court of Canada - Trial Division, Court File
No. T-739-02, where counsel for Sears argues in a notice of application that the Presiding Officer had incorrectly
interpreted the statutory language "any matter that is relevant to the inquiry", contained in section 11, and had thereby
made a jurisdictional error by enlarging the scope of the Commissioner's inquiry beyond 1999. In support of this
argument, counsel for Sears argues, inter alia, that the Order requiring employees of Sears to appear and be examined
before the Presiding Officer was obtained upon reading the Information of a Competition Law Officer which defined the
Relevant Period for the Commissioner's inquiry as January through December, 1999. Similarly, an Order requiring Sears
to produce certain records and to provide written returns of information pursuant to section 11 was obtained upon reading
of another Information which defined the Relevant Period as the calendar year 1999.
STIKEMAN ELLIOTT
2

a “substantial” volume of the product has been sold
(the volume test); or

the product has been sold for a “substantial” period
of time (the time test).
The Bureau has defined “substantial” to mean:

at least 50% of the volume sold; or

50% of the time offered.2
Sears allegedly sold less than 4% of the five types of
tires studied at the advertised “regular” price in 1999.
The
tires were on sale between 40% and 80% of the time.
The Bureau alleges that Sears never had a genuine
expectation of selling the tires at the “regular” price, creating
an impression that “the tires, when promoted on sale, represented
a greater value than was actually the case,” adding that the tire
example violates Sears’ own internal pricing policies.
The federal government amended the Competition Act in 1999
to create a civil
“ordinary selling price provision” after
determining that some cases once regarded as criminal in nature
would be more appropriately handled under a civil regime.
The Sears case highlights the fact that the Bureau has
become
much
more
vigilant
in its enforcement activities related to ordinary price claims.
On
February
7,
2002
the
Retail
Council of Canada (RCC), a non-profit association of retailers
with 8,500 members, issued a member notice stating that officials
from
the
Bureau
had
recently
advised
the
RCC
that
they
were
investigating
complaints
concerning
retailers’
compliance
with
the
ordinary
price claims provisions of the Competition Act. The member notice
can
be
found
at:
2
The Bureau publishes on its website a thorough explanation of how it applies this part of the Competition Act and a
series of hypothetical examples. The address is: http://strategis.ic.gc.ca/SSG/ct01182e.html
STIKEMAN ELLIOTT
3
http://www.retailcouncil.org/govrelations/federal/notice020207.as
p
It is also worth noting that the Bureau does not limit its
review of ordinary price claims to comparisons between a
particular retailer’s regular and sale prices.
The Bureau will
also look at inter-retailer comparisons of the “Compare At” ilk,
which invite the consumer to compare one retailer’s price to a
competitor’s price. This type of inter-retailer price comparison
raises several issues, including whether the comparison was
valid at the time the original comparison was made.
If you have questions concerning the ordinary pricing or
other misleading advertising provisions of the Competition Act,
call the author or another member of Stikeman Elliott’s
Competition Group.