LFL reaches settlement with Competition Bureau
OTTAWA – The Competition Bureau has announced the two operating banners of the publicly-held Leon’s Furniture Limited (LFL) will donate $750,000 worth of home furnishings to registered charities across the country over the next two years. The gift will act as a settlement over a charge of deceptive marketing practises made against Leon’s and The Brick some five years ago.
In a statement, the bureau said it worked “cooperatively” with the two national full-line furniture retailers to reach the settlement, which brings an end to the legal proceedings it launched shortly after Leon’s acquired The Brick in July 2013. It will also approve the charities chosen to receive the donations.
At the time, the federal business watchdog said its investigation into ‘buy now, pay later’ promotion events revealed, among other things, customers were required to pay up-front fees, despite the inherent promise found the advertising.
The bureau, an independent law enforcement agency policing business practises, filed the action with the Ontario Superior Court of Justice – which also mediated the settlement – 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,” John Pecman, Commissioner of Competition, said at the time. “Retailers cannot hide details of additional fees in lengthy disclaimers.”
The bureau accused 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.
However, LFL refuted all allegations that its advertising was misleading while maintaining the message was not only iconic but all fees, taxes and other conditions are clearly spelled out to the consumer at time of purchase.
“Leon’s has been offering and advertising deferred payment programs to Canadian consumers for more than 25 years. Its Don’t Pay a Cent Event and Ho Ho Hold the Payment promotions are Canadian icons, which the (Competition) Commissioner now seeks to impugn,” the company said in its Statement of Defense.
“Deferred payment programs are, and have for many years been common among retailers of furniture, mattresses, electronics and appliances. Deferred payment programs are valued by consumers, for whom they are an inexpensive financing option for ‘big ticket’ items, especially when compared to credit cards,” the retailer continued.
In its announcement, the bureau also said LFL has also agreed to adhere to its guidance on the proper use of disclaimers in advertising and the disclosure of fees associated with their financing plans.
It also urged all businesses selling furniture, appliances and electronics to review their marketing practices, particularly as they relate to financing plans as it will continue to monitor advertising in this area. The bureau said advertisers looking for guidance on the proper use of disclaimers should read its Disclaimers Demystified, part of its Deceptive Marketing Practices Digest.
This past February, the bureau filed 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 – a charge the retailer vehemently denies. The investigation into that matter is ongoing.
Even though the dispute with LFL has taken five years to conclude, the bureau said it prefers to resolve matters with the use of lengthy and costly litigation.
“Consumers expect and deserve truth in advertising,” Josephine Palumbo, deputy commissioner of competition, said in announcement the settlement. “The bureau works to ensure Canadians can trust advertising claims made by businesses and can be confident in their purchasing decisions. Increased competition in the marketplace provides consumers with competitive prices and more choice.”
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