“Scarcity cues tell consumers when an offering — be it a price, a product or a service — is in short supply. When these claims are true, they can provide consumers important information so that they don’t miss out on a deal. When untrue, they can mislead consumers into making purchases they might not have otherwise made or rushing them into purchases without considering competitive offers.”
Competition Bureau,
The Deceptive Marketing Practices Digest
Volume 6 (April 17, 2023)
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“Scarcity cues” are advertising/marketing claims that an offer for a product or service has limited availability. According to the Competition Bureau, when such claims are true, they can provide consumers with important information so that they don’t miss out on a deal. When untrue, however, they can mislead consumers into making purchases that they might not otherwise have made or rushing into purchases without considering competitive offers.
In its April 17, 2023 Deceptive Marketing Practices Digest, the Competition Bureau gives some examples of scarcity cues, including:
1. Claims that only a small amount of stock is left.
2. Claims that certain prices are available for only a limited time so consumers should “hurry” or “act fast”.
3. Claims that a certain percentage of stock has already been purchased (for example, 80% of available flight or other types of reservations are taken).
4. Countdown timers that tick toward a time where the product or limited time offer will no longer be available.
5. Countdown timers indicating that consumers have a limited time to complete a purchase or another rival consumer will gain access to the item that is in the consumer’s cart.
6. Pop-ups or other claims of how many people are currently viewing or interested in the same product.
Scarcity cues and related social proofing can also be automated and coded into online commerce websites using plug-ins and algorithms to falsely simulate demand and limited inventory levels.
“Social Proof” Marketing Tactics
Businesses can also add so-called “social proof tactics” to scarcity cue related marketing, using various methods to let consumers know that other consumers like or want the same product (e.g., that other consumers are considering buying a product that a customer already has in their virtual basket).
Scarcity Cues and the Competition Act
There are no specific scarcity or urgency cue provisions under the federal Competition Act.
However, the general civil and criminal misleading representation provisions of the Competition Act (sections 74.01 and 52) can apply to scarcity cues and other types of urgency related marketing claims where they are either literally false or misleading.
Like other types of advertising/marketing claims, the general impression of a scarcity claim is also relevant in determining whether a claim is false or misleading in a material respect.
In this regard, the Competition Bureau, in its April 2023 Deceptive Marketing Practices Digest, gives the example where a hotel or online travel accommodation platform claims that there are only five rooms left at the consumer’s preferred hotel for particular travel dates and that 10 people are interested in those same rooms. If the fact that 10 people are looking to book that hotel for completely different days (e.g., weeks or months away), while the claim may be literally true, the omission of the other consumers’ preferred dates may mean that the general impression of the claim is nevertheless false or misleading.
Competition Bureau
Scarcity and Urgency Cues Related Enforcement
Scarcity and urgency cues are one of the Competition Bureau’s misleading advertising related priorities.
For example, On September 27, 2023, the Competition Bureau announced that the Dufresne Group Inc. (TDG) (Dufresne Group), a Manitoba furniture and appliance retailer, had agreed to settle an ordinary selling price (OSP) and urgency cue marketing related case for $3.25 million (see: Competition Bureau, News Release, The Dufresne Group to pay $3.25 million penalty to settle Competition Bureau concerns over marketing claims). For our blog post on this case, see: Dufresne Group Settles Ordinary Selling Price (OSP) and Urgency Cue Marketing Case with Competition Bureau for $3.25 Million.
In making the announcement, the Bureau said that “tactics that pressure consumers to make a purchase quickly, like limited time offers, must be truthful”, that “all businesses in Canada should review their marketing practices and make sure they comply with the law” and that “taking action against deceptive marketing practices remains one of [its] highest priorities.”
According to the Competition Bureau, the Dufresne Group and its affiliates, which operate under retail brands Dufresne Group Furniture and Appliances and certain Ashley HomeStores, offered some of their products at inflated regular prices and then advertised them at big discounts, which suggested significant savings to consumers that were unavailable.
More specifically, the Competition Bureau found that the Dufresne Group did not sell a substantial volume of the relevant products at the advertised regular prices within a reasonable time before the claims were made, nor did they offer the products at the regular prices for a substantial period of time as required by the “volume” and “time” tests set out under the ordinary selling price (OSP) provisions of the Competition Act.
The Competition Bureau also challenged some of the Dufresne Group’s urgency cue related marketing claims, which, according to the Bureau, gave consumers a false or misleading impression that certain deals on products would no longer be available after a certain time when that was not the case (e.g., through the use of countdown timers).
For example, the Competition Bureau found that the Dufresne Group made claims, such as “40% OFF (Sale ends Sep 19 2022)”, that created the general impression that discounted prices on some products would no longer be available after a certain time, when that was not in fact the case.
The Dufresne Group agreed to settle this case with the Competition Bureau under a negotiated consent agreement, in which it agreed to pay a $3.25 million penalty, made commitments for their marketing to comply with the Competition Act and agreed to establish and maintain a competition law compliance program.
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