Competition Law: What Businesses Need to Know

What do luxury sofa influencer campaigns, ‘made in Canada’ mattress ads and bids for bulk appliance contracts have in common?

They are all areas where home goods businesses can unknowingly break the law.

Understanding competition law isn’t just about staying compliant — it’s about staying competitive. In Canada, the Competition Act applies to all businesses across the country, from local furniture retailers to national distributors. Knowing the basics can save a business owner from costly legal fees and help protect their company’s brand and bottom line.

That’s where the Competition Bureau comes in. The bureau is the independent law enforcement agency that administers and enforces the Competition Act. Its mandate is to protect and promote competition in Canadian markets, ensuring businesses can compete fairly and consumers benefit from lower prices, better products and more choice. The bureau does this largely by investigating potentially anti-competitive behaviour, taking enforcement action when necessary, and providing guidance to help businesses comply.

Competition law is designed to maintain a level playing field, so small and medium-sized businesses have a shot at competing and growing in a market. Companies big and small should know the rules of fair play. Some practices that are offside the law include price-fixing, bid-rigging, deceptive marketing and abuse of market dominance.

In recent years, the Competition Bureau has taken enforcement action against two well-known companies in the home goods sector.

Sleep Set Savings
In 2017, the bureau took legal action against the now-defunct Hudson’s Bay Company (HBC), for its marketing around certain sale prices and clearance promotions.

Since at least 2013, the company had been making savings claims throughout Canada that did not reflect real discounts. The bureau alleged HBC offered sleep sets at inflated regular prices and then advertised deep discounts on these prices. The Competition Act prohibits retailers from referring to an inflated regular price when advertising sales.

The bureau also alleged HBC made misleading representations in their clearance promotions. HBC implied that the price of sleep sets was lowered to sell the remaining on-hand inventory, but it did not in fact have significant on-hand inventory. Instead, it ordered new products from manufacturers when consumers made purchases.

Claims about limited inventory are a common example of a tactic known as scarcity cues. While businesses can certainly warn consumers a product or service is somehow limited, these claims must be truthful.

To settle the investigation, HBC agreed to pay a $4 million penalty and $500,000 toward the Competition Bureau’s costs.

As part of a consent agreement, HBC also agreed to ensure its marketing of all sleep sets would comply with the relevant Competition Act provisions, and to establish and maintain a corporate-wide compliance program.

Furniture and Appliances Marketing
In September 2023, the bureau investigated The Dufresne Group (TDG) and its affiliates for similar reasons.

As in the earlier case with HBC, the bureau concluded that advertised deals on certain products were based on inflated regular prices.

It also found TDG and its affiliates gave consumers the false or misleading impression that deals on certain products would eventually end — for example, once a countdown timer expired — when this was not the case. These tactics, called urgency cues, must only be used when they are true.

As part of this settlement, TDG and its affiliates agreed to pay a $3.25 million penalty and $100,000 toward the Competition Bureau’s costs; have their marketing practices comply with the Competition Act; and establish and maintain a corporate compliance program.

While both cases relate to large companies, many of the bureau’s cases involve small or medium-sized businesses. One of the most effective ways for all businesses to protect themselves is by implementing a compliance program, which was part of the HBC and TDG settlements.

Setting Up a Compliance Program
A compliance program is a set of policies, procedures and practices supported by the management team to help a business stay on the right side of the law. These programs can be scaled to fit the size and risk profile of the business and don’t necessarily need a lot of resources to be effective.

The benefits of a compliance program include: reducing the risk of legal action and penalties; enhancing reputation and trust with customers and partners; improving operational focus and reducing internal distractions; increasing opportunities to partner with larger companies; and helping businesses spot and report anti-competitive conduct.

The Competition Bureau offers resources, support and opportunities to engage, including webinars with Q&A sessions. Businesses are encouraged to visit the bureau’s online compliance hub, which includes resources to help understand the law, how it applies to their business as well as resources to assist with the development of a credible and effective compliance program. By committing to compliance, businesses can protect their reputations, contribute to a fair marketplace and position themselves for long-term success.

Amy Hill is a senior competition law officer with the Competition Bureau of Canada’s compliance and outreach unit. The unit is responsible for promoting compliance with the Competition Act and other laws administered and enforced by the bureau.