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Competition Bureau charges HBC with deceptive marketing

 27 February 2017     Michael J. Knell 

OTTAWA – The Competition Bureau is filing a lawsuit against the Hudson’s Bay Company, alleging the department store has been engaging in “deceptive clearance promotions for mattresses and foundations” over the past four years. It’s a charge the publicly-held retailer is vehemently denying.

“HBC has engaged in deceptive marketing practices by offering sleep sets at grossly inflated regular prices, and then advertising deep discounts off these deceptive regular prices in order to promote the sale of the sleep sets to the public. The regular prices of the sleep sets were so inflated above what the market would bear that sales at the regular price were virtually non-existent,” the commission said in documents outlining its case, which it is bringing before the Competition Tribunal here.

In announcing the suit, the bureau noted the Competition Act forbids retailers from enticing consumers by making reference to an inflated regular price when advertising sales.

It also accused HBC of misleading consumers into thinking it was selling its remaining on-hand inventory during ‘clearance and ‘end-of-line’ promotions, when it was actually ordering new factory fresh sleep sets to fulfill each new purchase.

“HBC markets many of the products it sells using a ‘high-low’ pricing strategy,” the bureau’s affidavit said. “Under this strategy, HBC offers merchandise at a high regular price with frequent deep promotional discounts off that price.”

As evidence, the bureau cited a number of HBC promotions held in 2013 and 2014 centred on four specific mattress sets, including a Sealy Posturepedic model called Mount Royal that was featured in a ‘Bay Days’ flyer for the period between 25 April and 01 May 2014. The set was advertised for $788 with a regular price of $1,998.

“The deep discount off the almost $2,000 regular price creates the impression of substantial savings,” the bureau said, adding, “The promoted savings are illusory – HBC never sold a single Mount Royal tight top queen sleep set at the regular price prior to this representation. Since the regular price is not an actual regular price, the $1,210 savings promoted by reference to the regular price are not actual savings.

“The alleged savings in the representation are based on a deceptive regular price: namely, the regular price was not supported by substantial sales volume, was not set in good faith and was not offered as the selling price for a substantial period of time,” the affidavit continued. In other words, the bureau suggests HBC didn’t sell a single set at the regular price.

The bureau is asking in its application, which was filed last Wednesday (22 February 2017) that the Competition Tribunal end these deceptive marketing practices and require HBC to pay the costs associated with the proceeding as well as an administrative monetary penalty.

“Today’s application to the Competition Tribunal is about providing consumers with accurate and truthful information when making purchasing decisions. Savings claims must always reflect real discounts. The bureau will continue to take all appropriate action in order to ensure that consumers are provided with honest information,” John Pecman, Commissioner of Competition, said in a statement.

HBC said it disagrees with the bureau’s position and plans to vigorously oppose the application, Tiffany Bourre, the company’s director of communications told the Globe & Mail. “We believe our mattress pricing process is fair, competitive and in line with industry standards and the Competition Act.”

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This HGO article was written by:
Michael J. Knell
Michael J. Knell

Michael is the publisher and editor of Home Goods Online. A seasoned business journalist, he has researched and written about the furniture, mattress and major appliance industries in both Canada and the United States for the past three decades.

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