By RCCAQ

Even very recently, many of our members called our attention to promotional practices of questionable legality. The last striking example was presented as a promotion offered by a direct insurer in the form of an annual cashback upon the purchase of an insurance product. After we checked with our law firm, it turned out that there was no basis for describing this offer as illegal.

What this example clearly illustrates, though, is how difficult it is to put things in perspective. At the centre of these promotional practices, which are geared to attracting clients and winning their loyalty, are the coupled selling and the tied selling. Frequent sources of confusion, they are used in several consumer sectors, including the insurance industry. Since the first is lawful and the second is illegal, it is important to clarify what these concepts mean. Some time ago we asked André Bois about that. His explanations are still relevant.

Coupled selling

Coupled selling―also known as promotional or combo coupling―refers to the option of purchasing more than one product or service at the same time. According to this marketing technique, clients pay less per unit than they would if they purchased the products separately. Nothing, however, prevents them from buying each of the products separately.

In the insurance sector, coupled selling is frequent: if you purchase car insurance, you qualify for a discount on your home insurance. Regardless of the promotion, you might still decide to purchase each policy separately from the insurer of your choice.

Coupled selling is perfectly legal. Under section 406.2 of the Act respecting insurance, two financial products can be sold at a rebate, provided that consumers are not obligated to purchase both products together.

Tied selling

Tied selling consists of making the purchase of one item (product or service) contingent on the purchase of another item. In other words, consumers are obligated to buy both items and cannot purchase item A if they do not purchase item B. Therefore, there is an element of constraint.

Under section 406.2 of the Act respecting insurance, tied selling is prohibited. Legally speaking, any insurer that makes the signing of a contract contingent on the signing of another contract is guilty of an infraction. In addition, section 22 of the Act respecting the distribution of financial products and services prohibits representatives, financial institutions (e.g. banks and credit unions), firms and enterprises that offer financing for the purchase of goods or services from making the signing of a credit contract contingent on signing an insurance contract with a given insurer. Banks are also covered by section 459.1 of the Bank Act, which prohibits the practice of tied selling using coercion.

Illegal practices

Although the legal provisions governing coupled selling and tied selling are very clear, unethical practices are prevalent. Fortunately, section 21 of the Act respecting the distribution of financial products and services clearly states that clients who have entered into a tied selling arrangement are allowed to give up one financial product without losing the other.