Running a Black Friday sale in Canada without a fake discount

Stop 01The basic rule

The Bureau puts it in one sentence: “When advertising, businesses cannot invent a higher regular price to make a sale look like a bargain when it’s not.” Its example: you cannot advertise an item as “$100, now $50” if it never actually sold at $100.

It calls this a fake ordinary selling price, and says it can mislead consumers and violates the Competition Act.

Stop 02Two kinds of “regular” price

The Bureau describes two types of reference price that businesses use to claim savings:

• Your own regular price: “Our regular price $100, now $50.”
• A market price: “List price $100, our price $50.”

Either way, the Bureau says the regular price “must be a price the item is genuinely sold at, and businesses must be able to prove it.”

Stop 03The two tests

To be valid, a regular price has to pass one of two tests. The Bureau’s consumer page summarizes them like this:

• Volume test: more than 50 per cent of sales of the product were at that price or higher within a reasonable period, usually within a year, before or after the promotion.
• Time test: the product was offered for sale, in good faith, at that price or higher for a substantial period of time, usually within a year, immediately before or after the promotion. “In good faith” means the retailer honestly believes the price is fair and expects customers will actually pay it.

The Bureau’s longer guidelines on ordinary price claims go into more detail. Under the volume test, they look at the twelve months before or after the claim. Under the time test, they look at the six months before or after, and the product must have been offered at or above the reference price for more than half of that time. Both periods can be shorter for products where that makes sense.

Two details from the guidelines matter for a small shop:

• Seasonal products. A seasonal product may be sold for a shorter period than other products, and the tests then apply to that shorter period.
• The window rolls. The guidelines warn that the time period is rolling, so if you keep a product discounted for months, the “regular” price may stop being regular.

Stop 04Clearance sales and MSRP

Two common cases get special mention in the guidelines.

A clearance sale may fail both tests, but the Bureau says a seller promoting one “will likely be able to show” the price comparison was not otherwise misleading if the sale is clearly labelled as a clearance sale.

For a manufacturer’s suggested retail price (MSRP), the guidelines say the Commissioner would not likely start an inquiry where MSRP is not compared to the actual selling price and it is prominently disclosed that the product can be sold for less.

Stop 05Urgency cues

The Bureau’s page on fake sales and discounts lists pressure tactics that “may not be truthful,” and they are exactly the features online store themes like to switch on in November:

• Limited time offer, when the discounted price stays available long after the deadline.
• Countdown timer, when the timer runs out or resets but the offer is still there.
• Low stock or high demand claims, such as “Only 2 left in stock” or “5 other shoppers are also looking at this product right now,” when availability does not actually change.

If your shop platform adds a countdown or a stock banner automatically, check whether it reflects anything real. If it does not, turn it off.

Stop 06Bait and switch

Bait and switch is advertising a product at a bargain price when it is not available in reasonable quantities, even though the market, the size of the business and the advertisement suggest it should be. The Bureau’s example is a heavily discounted item that turns out to be out of stock or only available at full price.

The Act does not apply if the business can show one of three things:

• it took reasonable steps to get reasonable quantities but could not, because of events beyond its control that could not reasonably be anticipated;
• it got reasonable quantities, but demand went beyond reasonable expectations;
• it offered a rain check: the same product, or an equivalent of equal or better quality, at the bargain price within a reasonable time, to everyone who asked and missed out while the price applied.

For a small business, the rain check is the one to plan for. Decide in advance how you will take names and honour the price if a doorbuster sells out in an hour.

Stop 07What happens if you get it wrong

The Bureau says people found to have engaged in this conduct may be ordered to stop, to publish a corrective notice, and to pay an administrative monetary penalty. For a corporation’s first violation, the bait and switch page lists a maximum of the greater of $10 million, or three times the benefit from the conduct, or, if that cannot be determined, 3 per cent of annual worldwide gross revenue.

For most small sellers, though, the real cost is customers who notice. A shop whose “regular price” is always crossed out stops being believed.

Stop 08A pre-sale checklist

The Bureau’s own tips for businesses, plus a few of mine, in one list:

1. 01Only use a regular price that is genuine. Check your sales records or price history for the item.
2. 02Keep records of every promotion: dates, discounts, regular prices, and any “buy one, get one” offers. The Bureau specifically recommends this.
3. 03Avoid vague savings claims you cannot back up, such as “20% off our regular price!” with no regular price you can show.
4. 04Label clearance as clearance.
5. 05Turn off fake urgency: timers that reset, stock counts that never change.
6. 06Buy enough stock for the advertised deal, or state the quantity, and be ready with a rain check.
7. 07Tell your staff how the sale works. The Bureau suggests educating employees about deceptive sales practices.

Honest pricing is simpler to run, too. One true regular price, one clear sale price and a fixed end date are easier to set up, easier to explain at the till, and easier to defend.

I keep simple routines for small businesses on my own site, and longer explainers on ZELR.