Canadian Business And The Law 5th Edition By Dorothy Duplessis – Test Bank
Critical Analysis: In other cases, prominent retailers agreed to pay substantial
penalties, some in excess of $1 million. Have these high-profile cases altered the behaviour of retailers? Do consumers have greater confidence in advertised bargain prices?
It is hoped that retailers will take note of the significant penalties and notoriety and alter their behaviour accordingly. However, consumers play a role in deterrence as well, by demonstrating their interest in and awareness of the rules regarding sale prices. Consumers lack the information to judge the volume and time tests. They can only be vigilant and file complaints for
investigation. Competitors may also monitor pricing claims and file complaints if justified.
Photo caption: What must this retailer ensure to avoid complaints about this sale? Sale or bargain prices must be based on ordinary prices that reflect the volume test and the time test
as described on textbook pages 604-605.
Business Application of the Law: Scanner Price Accuracy Voluntary Code
Critical Analysis: Do voluntary codes, such as this one, provide helpful strength to the provisions of the Competition Act? Can voluntary codes replace regulation and enforcement? Are you aware of this code?
This code appears to be widely publicized and consumer friendly, and to have an accessible complaint mechanism. Consumers might be more inclined to use this process than to file a complaint with the Competition Bureau. If consumers do not receive satisfactory resolution of complaints, they can still complain to the bureau. Industry associations are accountable to the extent that their failure to deal effectively with consumer complaints will affect their standing in the industry and may cause the bureau to tighten the rules and their enforcement. Regarding the effectiveness of this code, the last question can be useful. If students as consumers are either not
aware of this code or unlikely to use it, then its value is limited.
Photo caption: What are the legal parameters of telemarketing?
The regulations are basically the same as those governing door-to-door sales. The regulations
aim at protecting consumers from high-pressure tactics and deceptive practices (see textbook page 609). A specific limit on telemarketing is the do not call list (see textbook page 612), which
prevents marketers from random and unlimited calling.
Technology and the Law: Developments in Online Marketing and Sales
Critical Analysis: Are there persistent barriers to the growth of online business? Will regulators and industry effectively deal with these barriers?
This feature explains the threat to consumer confidence of not providing adequate protection
against Internet fraud, and the various attempts of governments and industry associations to regulate and prevent such fraud. This is an evolving field of law. However, the barriers to growth and the ways to address those barriers are possibly more within the control of business than within the control of lawmakers. The underlying goal of regulation is to increase consumer confidence and protect consumers from deceptive and fraudulent practices. Such regulation is not
onerous for business and should be considered as sound marketing practice.
Ethical Considerations: Marketing Law and Ethics
Critical Analysis: Does the law promote ethical behaviour? Is it in the interest of business to act ethically?
Although these questions are posed in the context of marketing, they can be applied to all aspects of business and the law. As a result, ethics and the law is one of the themes of this text. The questions invite open and wide-ranging discussion. The law promotes ethical behaviour in that it sets the basic level of acceptable behaviour, but it can also lead business practices. For example, it is unlikely that the tobacco industry would have acted ethically to curtail tobacco advertising and promotion without the stringent regulations that are now in force.
It can be argued that it is in the interest of business to act ethically for practical and altruistic reasons. A business that wants to create and maintain a positive reputation in the industry and with its customers will be strongly motivated to act ethically. Of course, there are many examples in which ethical behaviour is not in evidence. The financial industry provides a wealth of relevant examples.
Underlying this discussion is the challenge of defining or identifying ethical behaviour. It is by
nature an elusive concept.
Situations for Discussion, page 619
1. Mega Goods Inc. is a major discount retailer operating throughout Canada. The
Home Co-op is also a nationwide chain, but it is a cooperative buying group of smaller retailers that band together in order to achieve buying power. Both retailers buy large volumes of plastic food containers from the major manufacturer (PFC Inc.) in the market. The product line is an important customer draw and is often used in special promotions.
Mega Goods is eager to increase its market share, particularly with the entry of a multinational, U.S.-based discounter into the Canadian market. It decides to
attempt to eliminate the direct competition from Home Co-op in smaller centres.
Mega Goods approaches PFC and requests changed conditions of purchase. Specifically, it asks for a significant drop in price in return for a reduced payment period. This change will place it at a distinct advantage over Home Co-op, as Home Co-op cannot pay quickly because of its membership structure. Mega Goods intends to approach all other major suppliers if this proposal works.
PFC management is quite concerned, as Home Co-op is a long-standing customer. Would supplying on Mega Goods’ terms be legal? Is it a wise business practice?
The relevant provisions of the Competition Act are those covering abuse of dominant position. Specific prohibitions of price discrimination and predatory pricing have been repealed. Such activity is now investigated—presumably after notification by Home Co-op or PFC—and reviewed as possible abuse of dominant position by Mega. There will, however, be difficulties in proving that Mega has abused its position.
There must be evidence that Mega and Home Co-op are indeed competitors and that Home Co-op is prepared to meet the same sales terms as Mega. It is likely that Home Co-op cannot meet the same terms because of its structure. It cannot pay as quickly. The key, however, will be whether the drop in price is a true reflection of the economic benefit of a reduced payment period. The words “significant” and “distinct advantage” would suggest that it may, in fact, go beyond this benefit. To be legal, the price advantage cannot be any greater than the true reflection of the benefit of the payment terms, or the bureau may determine that the pricing is indeed discriminatory and constitutes abuse. It may be, for example, that if the price is a true
reflection, Home Co-op will find ways of obtaining financing to meet the terms.
In terms of pricing, the bureau will look to the ability and desire of Mega to control prices in smaller centres. The Bureau must prove that Mega will use the price advantage to lower prices in smaller centres in order to drive out Home Co-op. Once that competition is removed, it will be free to raise prices once more. Presumably, Mega does not expect the new competitor to enter these smaller markets and is therefore going to use profits gained there to sustain operations elsewhere. This will be a difficult argument to prove at this stage, since so much is speculative. PFC must establish that any price advantage is a direct and provable reflection of improved payment terms. It might also seek advice from the bureau. Clearly, PFC is facing a changed
environment and one in which the pressure to reduce the cost of goods will increase.