The federal Competition Bureau is investigating whether Canada's two major department-store retailers have touted bogus discounts of their mattresses.
Last month the bureau stepped up its inquiry into Sears Canada Inc. and Hudson's Bay Co. sale pricing and the Federal Court has agreed to order the merchants to produce records about their price strategies within 75 days.
The bureau alleges the retailers "failed to offer certain sleep sets at the regular price or higher for a substantial period of time" and "made materially false or misleading representations to the public in relation to its clearance sales" of mattress sets, according to documents filed in court.
Sears got caught about a decade ago for pitching false discounts on tires. Now the bureau is looking at mattress-set prices at Sears and Hudson's Bay, demanding information on pricing and profit margins in a probe that could turn the estimated $1.8-billion-a year mattress-and-bed foundation business on its head.
Spokespersons for Sears and Hudson's Bay said they're co-operating with the investigation and are in the process of providing the information required under the court orders.
Sears "is committed to ensuring its advertising makes only valid claims and otherwise meets all legal and regulatory requirements," said Sears' spokesman Vincent Power. He added the retailer welcomes "the opportunity to work with the bureau to establish best marketing practices that are applicable to the mattress supply industry."
Hudson's Bay's Tiffany Bourre said the country's mattress retail segment is "highly competitive … Promotional pricing is common within the mattress retail industry." She said the retailer's process of pricing its mattresses "is in line with industry standards and, in its view, is in accordance with all Canadian laws and regulations."
Mattress retailing is an opaque sector in which it's almost impossible for consumers to compare prices among merchants. Retailers tend to carry their own models with their own prices. But many of the products are made by the industry's two dominant manufacturers: Tempur Sealy International Inc. and Serta Simmons Bedding LLC.
"There's continual promotion among brands, and products look very similar," said John Williams of retail consultancy J.C. Williams Group, which estimates 2013 mattress and foundation sales rose 3.6 per cent to $1.8-billion from a year earlier. "The continual sales are confusing. You never know whether you got the best deal."
Still, mattress retailers can generate high profit margins without the risk of having to stock much inventory, shipping products to customers directly from manufacturers, he said.
Production is mostly done domestically to avoid costly overseas shipping of the bulky merchandise, said Ryan Trainer, president of the International Sleep Products Association in Alexandria, Va. Mattress companies have efficient "just in time" deliveries of customer purchases – often in just a few days compared to as many as 12 weeks in the furniture business, he said.
The bureau has clamped down on retailers for misleading sale prices in the past. In 2005, the Competition Tribunal ruled that Sears Canada promoted bogus tire prices in ads, resulting in a $100,000 administrative penalty and $387,000 in costs. Less than a year earlier, sporting goods retailer Forzani Group Ltd. (now owned by Canadian Tire Corp. Ltd.) agreed to pay $1.7-million to settle allegations it misled consumers about prices. And in 2003, clothier Suzy Shier Inc. agreed to pay a $1-million penalty in a similar matter.
Today the bureau is seeking records from Sears and Hudson's Bay going back to 2013, court documents say. The bureau's inquiry found the retailers touted some of their mattress sets for sale at reduced prices for more than half of the time in a six-month period, the filings say. They allege there appears to be examples of the retailers offering mattress sets for sale for longer than a year.
The bureau says it has reason to believe the retailers "did not sell a substantial volume of some sleep sets at the regular price or higher for a substantial period of time before making representations about the regular price," according to the documents. And they "did not offer sleep sets at the regular price or a higher price in good faith," the filings say.