Improvements to the Competition Act...Ordinary Price Claims

March 18, 1999

Change in the law defines 'regular' price for advertisers What does "50% off regular" mean? The new Competition Act spells out the criteria the Competition Bureau considers when it examines complaints about price claims in advertising. It sets out two tests: How long was the product offered for sale at the so-called "regular" price? How much product actually sold at that price? The new provisions clear up questions about whether advertisers can introduce new products at "sale" prices, and whether they can advertise discounts from a price when few - if any - units sold at that 'regular' price.

Key points

Two tests

The new provisions set out two "tests" for determining the validity of ordinary price claims. If the claim passes either test, it will be considered legitimate.

1. "Substantial volume" of actual sales

Was a substantial volume of the product recently sold at the price the advertiser claims is the ordinary price?

2. Offered for sale for a "Substantial period of time"

Was the product offered for sale, in good faith, for a substantial period of time, at the price the advertiser claims is the ordinary price?

Where the product is introduced at a 'sale' price, the tests are applied to the 'after sale' period. So, yes, introductory sale prices are okay, provided the product reverts to the 'after sale' price for a substantial period of time, or a substantial volume of product is sold at the 'after sale' price. Similarly, if a product is offered for sale at a given price for a substantial period of time, the new provision recognizes that as the 'ordinary' price even if only a few units sold at that price.

Background

Regular price claims are a powerful marketing tool. Where comparisons are made between two prices, consumers respond to the implied savings. If there is no sound basis for the comparison, the consumer has been duped.

The new provisions clarify the law, and respond to feedback that consumers generally understand 'regular price' as the price they can buy a product at most of the time. Now advertisers can base their claims on either criteria - volume or time - and even if a particular representation meets neither test, it is open to the advertiser to make the case that the representation is not misleading.

Misleading price claims are one of the types of conduct now dealt with by the Competition Bureau under the new civil process (see the fact sheet "Civil Track for Misleading Advertising").

Guidelines

The Competition Bureau has issued Draft Guidelines entitled "Ordinary Price Claims" which set out how the Bureau will interpret key terms such as "substantial volume", "substantial period of time".

There will be broad consultations on these guidelines before they are finalized. Anyone interested in obtaining a copy of the guidelines or providing comments, may do so by calling the Bureau's Information Centre at: 1-800-348-5358 or 819-997-4282.

To report misleading price claims, call
1-800-348-5358