• Buy Now, Pay (More) Later! Competition Bureau Alleges Retailers’ “Buy Now, Pay Later” Promotion Misled Consumers
  • July 15, 2013 | Author: Imran Ahmad
  • Law Firm: Cassels Brock & Blackwell LLP - Toronto Office
  • Earlier this week, the Competition Bureau (the “Bureau”) announced that it had commenced proceedings alleging misleading advertising against Leon’s Furniture Limited and The Brick Ltd., two of Canada’s largest furniture and home appliance retailers. The Bureau claims that the companies’ deferred payment programs (more commonly known as “buy now, pay later” promotions) required consumers who signed-up for the promotion to pay significant up-front fees, in addition to financing charges. The retailers (who are under common ownership) have publicly denied these allegations and indicated that they “will vigorously defend their position in court”.

    According to the Bureau, the additional up-front fees (the details of which were allegedly buried in the fine print), meant that the overall price (not including finance charges) paid by consumers who took advantage of the buy now, pay later program was higher than the advertised price. In its press release, the Bureau stated that the practice of “including a lengthy fine-print disclaimer is no licence to advertise prices that are simply unavailable to consumers using a deferred payment option”.

    This case is noteworthy for several reasons:

    1. Commissioner Pecman’s First Misleading Advertising Case. This is the first misleading advertising case brought by the new Commissioner of Competition. Bringing this case sends a clear signal that the Bureau will continue to advance its consumer protection mandate through the aggressive enforcement of the misleading advertising provisions of the Competition Act.
    2. Builds on Prior Enforcement Action. This case builds on the recent enforcement action taken against Bell in connection with price representations that were allegedly misleading because the advertised prices did not include additional mandatory fees which were similarly buried in fine-print disclaimers. In that case, Bell agreed to pay the maximum administrative monetary penalty of $10 million. For a copy of our eLert on the Bell case.
    3. Reliance on the “General Impression” Test. This case also appears to rely on the recent Supreme Court of Canada decision in Richard v. Time Inc. In that case, the Supreme Court found that the general impression of a representation is to be considered from the perspective of the “ordinary hurried purchaser” who must be viewed as “credulous and inexperienced”. For a copy of our eLert on the Richard v. Time Inc. case.

    The key takeaway for businesses is that the Bureau is likely to continue to scrutinize the terms of consumer transactions to ensure that they do not contain hidden fees that increase the ultimate price to the consumer above advertised prices. Accordingly, companies should consider reviewing their business practices to ensure that any “administrative”, “processing”, “membership” or other fees they charge are (i) sufficiently disclosed to consumers, and (ii) consistent with their advertised prices.

    Additionally, it may be worthwhile for companies to revisit their use of disclaimers to ensure that they are clear (including the use of appropriately sized fonts and positioning), as well as take steps to ensure that sales personnel understand the importance of providing accurate and complete information to consumers regarding the total cost of their purchase.