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Competition Bureau investigating Sears and Hudson's Bay over mattress pricing

 22 February 2015      

OTTAWA (23 February 2015) - Two of this country's leading department stores are under investigation by the Competition Bureau of Canada for having promoted false discounts to their mattress prices.

Sometime last month, the bureau sought and received an order from the Federal Court of Canada demanding Sears Canada Inc. and Hudson's Bay Co. produce records about their recent pricing strategies. The publicly-held merchants were given 75 days to comply with the order.

The bureau said both retailers "failed to offer certain sleep sets at the regular price or higher for a substantial period of time" and "made materially false or misleading representations to the public in relation to its clearance sales" of mattress sets, according to documents filed in court.

This isn't the first time Sear's Canada and Hudson's Bay have been named in a Competition Bureau-centred complaint about their mattress pricing practises. Option consommateurs, a consumer rights advocate based in Montreal, filed a complaint not only against Sears Canada and Hudson's Bay but several other retailers including The Brick, Leon's, Brault & Martineau, Germain Larivière and Mattress Mart, a regional sleep chain with stores in Ontario, Quebec and Nova Scotia. That complaint was filed mid-2011.

Because of the bureau's complex rules surrounding confidentiality, the disposition of that particular case isn't known at this time.

Related Story: Consumer group files misleading advertising complaint against 8 retailers

According to the Globe & Mail, spokespersons for both Sears and Hudson's Bay said they're co-operating with the investigation and are gathering the information required under the court order.

Vincent Power, vice president of communications for Sears Canada, said the company "is committed to ensuring its advertising makes only valid claims and otherwise meets all legal and regulatory requirements."

He added the retailer - which is generally considered by most industry insiders to be one of the top two or three mattress retailers in Canada - welcomes "the opportunity to work with the bureau to establish best marketing practices that are applicable to the mattress supply industry."

Meanwhile, a spokesman for Hudson's Bay pointed out "promotional pricing is common within the mattress retail industry" and she believes her company's pricing "is in line with industry standards and, in its view, is in accordance with all Canadian laws and regulations."

Hudson's Bay, on the other hand, is not considered a major player in Canada's mattress market.

The most current figures published by Statistics Canada put mattress sales at $1.25 billion through to the end of September 2014 - up slightly from the $1.23 billion for the comparable period the prior year.

However, conventional furniture and home furnishings stores racked up about 89% of these sales. Sears and Hudson's Bay are considered ‘general merchandise stores' - and because of Statistics Canada's rules governing confidentiality - their mattress sales aren't tallied, but it's obvious for the first three-quarters of 2014, this dispute is centred on business valued at $140 million at best.

Many within Canada's mattress industry point out there has never been any true industry standard when it comes to pricing and most retailers try wherever possible to customise their product features and benefits to give themselves every conceivable advantage in their market.

And, because mattresses are both proven traffic generators and one of the best sources of superior gross margin dollars, most also include something from their assortments in every advertising vehicle they publish.

The Competition Bureau has successfully prosecuted retailers for misleading sale prices in recent years.

For example, the Competition Tribunal ruled in 2005 that Sears Canada promoted bogus tire prices in ads, resulting in a $100,000 administrative penalty and $387,000 in costs. About a year earlier, sporting goods retailer Forzani Group Ltd. (now owned by Canadian Tire Corp. Ltd.) paid $1.7-million to settle allegations it misled consumers about prices.

With its current court order, the bureau is seeking records from both retailers going back to 2013. According to the court filing, its inquiry found Sears and Hudson's Bay touted some of their mattress sets for sale at reduced prices for more than half of the time in a six-month period. They have also alleged there are examples of mattress sets being on sale for longer than a year.

According to the court filing, the bureau believes the retailers "did not sell a substantial volume of some sleep sets at the regular price or higher for a substantial period of time before making representations about the regular price."

It also said Sears and Hudson's Bay "did not offer sleep sets at the regular price or a higher price in good faith."

As the bureau is required by law to conduct its investigation in private, it's not known how long the process will take or when the matter will be resolved.

In July 2013, the Canadian Competition Bureau targeted 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. That case is also still pending.

Related Story: Competition Bureau accuses Leon's and The Brick of deceptive marketing practicesRelated Story: Leon's and The Brick fire back at Competition Bureau, say ads are ‘iconic'

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