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Consumer & Retail Advisor

Online Price Advertising: Amazon to Pay $1.1 Million to Settle Canadian Competition Bureau Investigation

Posted in Competition, Legislation
Dominic Therien

The Competition Bureau (Bureau) announced January 11 that Amazon.com.ca, Inc. (Amazon) has agreed to pay a $1 million penalty for contravening the misleading advertising provisions under the Canadian Competition Act including recent provisions that came into force as part of Canada’s Anti-Spam Legislation (CASL). Amazon will also pay $100,000 towards the investigative costs incurred by the Bureau. The fine follows an investigation into Amazon’s pricing practices over two years on Amazon Retail, the platform by which the company sells directly to consumers.

The e-commerce company has entered into a consent agreement with the Bureau to settle the investigation of Amazon’s practices related to comparing its prices to a regular price (or “list price”) to advertise savings for consumers. The Bureau concluded that Amazon had relied on list prices provided by suppliers, without verifying that those prices were prevailing market prices. The Bureau reviewed savings claims with respect to Amazon Retail advertised on amazon.ca, on Amazon mobile applications, in emails sent to consumers, as well as in other online advertisements.

The Bureau’s investigation specifically assessed certain Blu-ray DVD products being sold by Amazon. It found that Amazon frequently used “You Save” claims that specified a dollar amount of savings and a percentage discount. For example, the pricing advertising might indicate:

List Price: CDN$ 39.99

Price: CDN$ 29.99 & FREE Shipping on orders over CDN$ 35

You Save: CDN$ 10.00 (25%)

These representations created the general impression that certain products sold on www.amazon.ca were available for purchase at prices lower than prevailing market prices. The Bureau reviewed Amazon’s pricing practices under the ordinary selling price (OSP) provisions of the Competition Act (subsection 74.01(2)). The Bureau found that other suppliers had not sold the relevant Blu-ray DVDs in substantial volumes at the advertised list prices (or higher) within a reasonable period of time (12 months) before Amazon’s advertising (the “volume test”). Likewise, other suppliers had not offered the Blu-ray DVDs for sale at list prices advertised by Amazon (or higher) in good faith for a substantial period of time (6 months) before Amazon made its pricing representations (the “time test”). Because Amazon’s savings claims did not meet either the “volume test” or “time test”, the claims were found to be misleading.

The Bureau found that Amazon’s pricing practices also contravened subsection 74.011(2) of the Competition Act, which is the general prohibition on misleading representations in electronic messages sent to consumers that was introduced under CASL. The Bureau recently relied on these provisions as part of its investigation into car rental prices and discounts, and the Amazon settlement underlines the Bureau’s focus on online advertising

Amazon has already changed its practices on its Canadian website to accurately represent the savings available to consumers. According to the consent agreement, Amazon has adopted and implemented policies to ensure compliance with the relevant Competition Act provisions.

This price advertising settlement follows the May 2015 consent agreement with retailer Michael’s, in which the company agreed to pay $3.5 million following the Bureau’s concern over price advertising for custom and select ready-made framing.