Hudson's Bay Co. misled consumers on mattress prices, says Competition Bureau

Canada's Competition Bureau alleges that the Hudson's Bay Company used deceptive price claims and other tactics to mislead consumers about sales of mattress and box spring sets.

An investigation found that HBC claimed "grossly inflated regular prices" for sleep sets, then advertised enormous discounts of those prices. That misled consumers into believing they were getting a significant deal, according to the bureau's complaint filed with the Competition Tribunal on Wednesday.

Hudson's Bay denies the allegation and says it will "vigorously oppose" the application to the tribunal.

The Competition Bureau is still conducting an investigation into Sears' mattress marketing practices, a spokeswoman confirmed to CBC News. The investigation into mattress sales at both companies was made public in February 2015.

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The Competition Bureau's complaint is full of examples of what it calls HBC's "deceptive marketing practices."

For example, a weekly Hudson's Bay flyer from the summer of 2013 advertised a Beautyrest TruEnergy Brooklyn queen mattress set on sale for $1,298 — $1,800 off the purported regular sale price of $3,098.

Canada's Competition Act forbids retailers from misleading the public about the "ordinary selling price" of a product and sets out strict criteria for determining the selling price from which discounts can be calculated.

The Competition Bureau says HBC didn't meet those criteria in its mattress sales, because it didn't sell enough non-discounted sleep sets to establish a "regular" price (in Competition Bureau parlance, this is known as "the volume test.") In the case of the Brooklyn mattress set, HBC only sold a single set at full price in the months before it offered a discount off that price in the summer of 2013, according to the bureau's findings. (That single sale was later returned, resulting in net sales of zero for the period studied by the bureau.)

The Competition Bureau also says HBC didn't offer regular prices for a long enough time to satisfy the "good faith" aspect of its other standard for establishing a regular sales price, known as "the time test."

Last-chance clearance, or not?

The Competition Bureau also says Hudson's Bay misled consumers into believing they were getting deals on inventory-clearance sales of mattresses and foundations, when in fact those sleep sets were being ordered new. That would contravene the Competition Act, which establishes standards for advertising products with a limited supply.

By advertising a clearance sale in which supplies were limited, the Competition Bureau says, HBC customers "may have rushed their purchasing decision, limited the number of competing retailers they visited, or entered into purchases that they otherwise would not have made in the absence of the perceived savings."

The Competition Bureau says HBC was actually ordering mattresses from its suppliers to replenish its stock, instead of clearing out its existing inventory.

The bureau alleges HBC has been engaged in the deceptive practices since March 2013.

The Bay 'to vigorously oppose' application

"We take compliance with all laws and regulations very seriously, and we believe our mattress pricing process is fair, competitive and in line with industry standards and the Competition Act," HBC spokesman Tiffany Bourre said in an emailed statement. "We disagree with the Competition Bureau's position and will vigorously oppose the application to the Competition Tribunal."

In its application, the Competition Bureau is "seeking an end to what it considers to be deceptive marketing practices, and the payment of an administrative monetary penalty by HBC."

Sales of mattress sets are worth about $1.2 billion in annual sales in Canada, according to the bureau's complaint.