It has been almost a decade since the Competition Bureau sunk its teeth into the enforcement of ordinary price claims, pursuant to the Competition Act’s deceptive marketing practices provisions. But what is old may be new again as recent signals from the Competition Bureau point towards increased enforcement focus on these types of claims in the future. As such, Canadian businesses should ensure that their corporate compliance programs and pricing practices are in-line with the OSP rules of the Act and the Bureau’s Ordinary Price Claims Guidelines which the Tribunal relied on heavily when analyzing past cases.In particular, Subsections 74.01(2) and (3) of the Act set out specific requirements for the calculation of the ordinary selling or reference price on which savings claims are based, known as the “volume test” and the “time test”:
Volume Test – In order to meet the volume test, the reference price must be one at which a substantial volume of product has been sold at that price (or a higher price), within the relevant geographic market, within a reasonable period before or after the savings claim is made.
Time Test– In order to meet the time test, the product has to have been offered at the reference price (or a higher price) in good faith in the relevant geographic market for a substantial period of time recently before or immediately after making the savings claim.
The fundamental principle behind the ordinary price claim rules is that an advertised savings must be bona fide, such that the savings described are real and do not exist in perpetuity.
Use of savings claims is a key component of virtually all advertising in the marketplace, and can be used as a powerful tool to attract consumers. It follows that businesses (and their legal teams in particular) need to be vigilant about the proper use of savings claims. By implementing compliance programs and providing regular compliance training to marketing teams, businesses will be able to avoid running afoul of the OSP rules.