Tribunal hears first allegations of ‘deceptive marketing’ by Sears

John Syme, the bureau's commissioner of competition, said Sears intentionally deceived consumers by pretending to offer them special prices on major lines of all-season tires, while having little intention of selling substantial quantities of the tires at the regular prices. "We say the evidence will disclose a side of Sears Canada that is different from that portrayed in glossy flyers or television ads," Mr. Syme said yesterday during opening statements.

The Globe and Mail
October 28, 2003

Tribunal hears first allegations of ‘deceptive marketing’ by Sears
Competition Bureau seeks fine of $500,000 for retailer’s tire ads in 1999
Simon Tuck

OTTAWA — Sears Canada Inc. practised "deceptive marketing" in 1999 by advertising false sale prices on five lines of automobile tires, the Competition Bureau argued yesterday at a tribunal hearing.

John Syme, the bureau's commissioner of competition, said Sears intentionally deceived consumers by pretending to offer them special prices on major lines of all-season tires, while having little intention of selling substantial quantities of the tires at the regular prices.

"We say the evidence will disclose a side of Sears Canada that is different from that portrayed in glossy flyers or television ads," Mr. Syme said yesterday during opening statements.

"It is a side of Sears that we suggest that the public does not normally see."

The bureau is seeking a fine of up to $500,000. The case is expected to take at least five weeks.

Bill McNamara, lawyer for Sears, said the bureau's argument is flawed because it compares Sears with retailers that use a fundamentally different pricing strategy. Sears, like some other large retailers, uses a "high-low" strategy, he said, which means its regular prices are more expensive than retailers who offer lower regular prices but less aggressive sale prices.

"What's being compared here is not apples to apples."

Mr. McNamara also said the competition bureau's decision to pursue the case has caused Sears to abandon part of its pricing strategy in the tire market, which has caused less competition and higher prices for Canadian consumers.

The Competition Act, which includes both time and volume elements in the question of deceptive advertising, requires the tribunal to determine whether retailers sell "a substantial volume of the product at that price within a reasonable period of time."

Mr. Syme said yesterday that Sears sold less than 4 per cent of those five lines of tires at the regular price and four of the five lines were "on sale" more than half of the of period in question.

Mr. McNamara said more than 30 per cent of Sears' customers who bought a single tire that year made a purchase at regular prices.

If the bureau is successful in the case, it would mark the federal government's second major win this year in its battle to stem deceptive pricing ads. In June, Suzy Shier Inc. agreed to pay a $1-million penalty for marking clothing on sale when the items hadn't been sold at a regular price for any length of time.

That was the first fine levied under the "ordinary selling price" provision of the competition law, which came into effect in 1999. It also marked Suzy Shier's second such fine.

In 1995, it paid $300,000 for a similar violation under a since-revised provision of the Competition Act.


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