Watchdog accuses Leon’s, The Brick of deceptive marketing

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The Competition Bureau is accusing two of Canada's largest discount furniture chains, Leon's Furniture Ltd. and The Brick Ltd., of deceptive marketing with their well-known "buy now, pay later" promotions.

Such promotions, the watchdog alleges, actually require upfront fees that can run into the hundreds of dollars.

Advertisements for the furniture and appliance retailers often promise shoppers the ability to buy without even a down payment. In its court documents, the bureau included a sample ad that said customers would pay "absolutely nothing" for up to 21 months.

The bureau filed a civil action in Ontario Superior Court Tuesday alleging the results of an investigation into the companies show that the fine print can require customers to pay various upfront "administrative," "processing" or "membership" fees.

For example, the bureau alleged in its document, a customer wanting to buy a $1,500 sofa with no money down could end up paying more than $350 up front.

No allegations have been proven in court.

Consumers must receive "clear and accurate information" about prices when they buy products, Competition Commissioner John Pecman said in a statement.

"Retailers cannot hide details of additional fees in lengthy disclaimers," he said.

The allegations carry the possibility of a maximum $10-million fine for each company. In its court filing, the bureau calls the no-money-down pledges "false and misleading" and demands the retailers stop and reimburse "current and former customers" the extra money they paid.

A spokesperson for Leon's, which acquired The Brick earlier this year and now has 300 stores across Canada, was not immediately available to comment.

In its court filing, the bureau noted that The Brick describes its customer base as "credit needy," with incomes of between $30,000 and $60,000, including a group that it calls "Busy Jennys" or "females aged 30-49 in the 'lower middle to middle [income] range" that are at "the busiest time of their lives" managing childcare and mortgage payments.

The bureau alleges in the document that the disclaimers offered by the companies are "ineffective," usually contradict the impression the ads convey, are "lengthy, in fine-print" and are "typically situated far away from the associated representations."

The Competition Bureau uses the term "drip pricing," a practice that means loading up surcharges during the buying process.

Observers say the move reflects long-standing public warnings from the bureau that it would go after fine-print disclaimers.

"The bureau, for some time now, have been sending signals that it sees disclaimer practices as a serious concern and frankly as an enforcement priority, " said Subrata Bhattacharjee, a competition lawyer with Heenan Blaikie LLP in Toronto. "The bureau believes that this type of practice is somewhat common. And certainly in times of economic stress consumers are particularly vulnerable."

In its filing, the bureau listed several "aggravating factors," saying that it had warned both companies about their practices. It said it warned The Brick about "the seriousness of deceptive marketing practices" in 2009 when the company agreed to pay back certain customers over a promotion and in 2010 when it agreed to "correct its mislabelling of Bamboo products."

The bureau also said the companies had changed their marketing habits in Quebec after facing class-action lawsuits from consumers there, which was settled.