How to Avoid Pitfalls in Pricing Promotions

13 Mar How to Avoid Pitfalls in Pricing Promotions

Have you ever considered the legal rules when advertising the price of a product? Stay on the right side of Canadian law by keeping these key pitfalls in mind before structuring a sale.

Drip pricing

A key pitfall to watch out for when advertising prices is neglecting to disclose an all-in price,  and adding in additional fees late in the checkout journey. While it may be tempting to highlight an attractive price and expand on the details later, the location of disclosure is crucial. It is risky to “drip” mandatory delivery or installation fees into the final price, if these fees aren’t disclosed at the outset.

Consider whether the initial pricing claim on its own would be false or misleading without a disclosure of these additional costs, as it is risky to rely on a subsequent disclosure or disclaimer to correct what would otherwise be an otherwise false or misleading main message.

Supporting sales claims

Another key pitfall is not keeping track of regular pricing for a product when setting sales prices. Canada has very prescriptive laws requiring that the regular price be offered in “good faith” for a “substantial” period of time (…or volume, but we won’t get into that). The Competition Bureau has interpreted “substantial” to mean that the regular price must have been offered for at least half of the six months prior to the sale, on a rolling basis. The “good faith” requirement is even more onerous, requiring evidence of market research, audits of competitor pricing, and even a requirement to maintain a minimum volume of sales at the stated regular price.

These requirements to substantiate the regular price are stricter than the laws in many other countries, and routinely come as an unwelcome surprise to businesses testing out promotions in Canada.

Bait and switch, double ticketing, oh boy!

There are a number of other pricing issues that can come up, like ensuring adequate quantities of promoted product is available to avoid the federal and provincial prohibitions against bait-and-switch selling practices. There has also been a recent litigation interest in the prohibitions against double ticketing, so ensure that products are only advertised at one price (this one is a criminal offence, so be extra careful).

Take-away?

Pricing claims are also an area of active enforcement by the federal regulator, particularly pricing claims made online. Many companies have entered into consent agreements for millions of dollars to resolve these enforcement actions. So what to take away? When promoting a price in advertising, the first disclosure of the price remains key. Keep the creativity in pricing strategy, but be sure to also keep these tips in mind to avoid any pricing pitfalls!

Disclaimer: This article is for informational purposes only and does not constitute legal advice. Companies are encouraged to seek legal counsel to ensure compliance with applicable laws.