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Competition Bureau accuses Leon's and The Brick of deceptive marketing practices

 9 July 2013      

OTTAWA (10 July 2013) - The Canadian Competition Bureau is targeting Leon's Furniture and its wholly-owned subsidiary, The Brick, for what it believes are deceptive marketing practices related to its popular and frequent ‘buy now, pay later' promotions.

In a statement, the federal business watchdog said its investigation into ‘buy now, pay later' revealed, among other things, that customers were required to pay up-front fees, despite the promise inherent in the ‘buy now, pay later' promotion.

The bureau, which is an independent law enforcement agency policing business practices, has filed an action with the Ontario Superior Court of Justice seeking an end to what it described as a "type of deceptive advertising" and seeking refunds for all customers who paid administration or processing fees from both Leon's and The Brick.

"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," said John Pecman, Commissioner of Competition. "Retailers cannot hide details of additional fees in lengthy disclaimers."

The bureau accuses both Leon's and The Brick of burying details of additional up-front fees in the purchase agreement's fine print, which led to the final price of the product sold being higher than the advertised price for those consumers using the deferred payment option.

Depending on applicable fees due at the time of purchase (which may include processing or administrative fees, delivery fees and taxes), the bureau continued, a customer wanting to defer payment on a $1,500 sofa could end up paying more than $350 at the time of purchase, even though the advertisements clearly state no payment is required at the time of purchase.

"When a price is offered to consumers for a product, it must be both clear and accurate," said Lisa Campbell, deputy commissioner in charge of the bureau's Fair Business Practices Branch. "Including a lengthy fine-print disclaimer is no license to advertise prices that are simply unavailable to consumers using a deferred payment option."

Leon's closed its acquisition of The Brick this past March. In a statement, the publicly-held, full-line furniture retailer tersely refuted the bureau's accusation.

"The deferred payment plans offered by Leon's and The Brick benefit consumers," the company said, adding, "Leon's and The Brick deny the commissioner's allegations and will vigorously defend their position in court. As the matter is before the court, Leon's and The Brick will not comment further at this time."

A finance industry analyst pointed out in a note to clients that in late 2012, The Brick agreed to pay $2 million to settle a 2009 class-action lawsuit filed in Quebec that made similar claims; and in 2007, BMTC Group paid $2 million in a similar Quebec class-action lawsuit.

No initial court date has been announced, although cases such as these often take several years to wind their way through the justice system.

The bureau's action covers all banners and franchises operated by both Leon's Furniture and The Brick, including United Furniture Warehouse. Leon's operates 76 corporate and franchise stores, with locations in every province except British Columbia. The Brick has 230 stores operating under The Brick, United Furniture Warehouse, The Brick Mattress Store and Urban Brick banners.

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Home Goods and its accompanying newsletter - HGO This Week - covers the furniture, bedding, appliances, consumer electronics, accessories, lamps and lighting and floor coverings product sectors of the big ticket home goods market in Canada. HGO is also a forum for the dissemination of market research and hard-hitting articles on best practices for Canadian retailers.

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