Canadian COMPETITION LAW

September 30, 2010

The Globe and Mail reported today that Wind Mobile has filed a Competition Bureau complaint with Rogers in relation to Rogers’ advertising for its Chatr wireless discount brand.  Wind Mobile’s complaint appears to be based on the misleading advertising (which include false comparative advertising claims) and/or false performance claim provisions of the Competition Act.

In this regard, the Globe is reporting that Wind Mobile’s Chairman Anthony Lacavera has said that “there is absolutely no solid or objective technical basis for Chatr’s claim to have more network reliability and fewer dropped calls than Wind.”

This most recent complaint by Wind Mobile is one in a series of competition law related disputes in the telecom sector that have included an abuse of dominance complaint by Mobilicity against Rogers apparently alleging that Rogers is abusing its dominant position in the use of “fighting” or “flanking” brands (see: Mobilicity Files Competition Bureau Complaint Against Rogers) and recent novel proceedings in which the Supreme Court of British Columbia struck out Novus Entertainment’s claims against Shaw Cablesystems based on the abuse of dominance provisions of the Competition Act (and in particular predatory pricing related claims) (see: British Columbia Supreme Court Rejects Novus’ Section 79 Predatory Pricing Claim Against Shaw).

Misleading Advertising Law in Canada

The federal Competition Act contains both criminal and civil provisions that prohibit false or misleading representations.  The general civil misleading advertising provision of the Act prohibits representations to the public, to promote a product or any business interest, that are false or misleading in a material respect.  For a representation to be false or misleading under the civil misleading advertising provision, it must be established on the civil burden of proof (i.e., on a balance of probabilities) that: (i) a representation has been made, (ii) to the public, (iii) to promote a product (including services) or any business interest, (iv) the representation is false or misleading and (v) that it is false or misleading in a “material” respect.  The criminal misleading advertising provision of the Act is substantially similar, except that in order to establish criminal misleading advertising, it must also be established on the criminal burden of proof (i.e., beyond a reasonable doubt) that a representation was intentionally made (i.e., was made “knowingly or recklessly”).

Performance Claims under the Competition Act

In addition to the “general misleading advertising” provisions, the Competition Act also prohibits false performance claims, and in particular prohibits representations to the public about the “performance, efficacy or length of life of a product” that is not based on an “adequate and proper test.”  While performance claims themselves are not prohibited, any testing or verification of a performance claim must be performed before the claim is made and the onus is on the person making the representation to prove that the claim is based on an adequate and proper test.  As such, while performance claims can be a legitimate and effective way to distinguish goods or services from competitors, it is important that adequate and proper testing is performed (or appropriate statistics or support are obtained) before performance claims are made.  (the federal Competition Tribunal has also recently held that there a non-exhaustive list of factors are relevant in considering whether testing is “adequate and proper”).

2009 Amendments – Increased Penalties

Also, as a result of the 2009 amendments, significantly increased penalties for civil false or misleading representations have been introduced including “administrative monetary penalties” (essentially civil fines) of up to $750,000 for individuals ($1 million for subsequent orders) and $10 million for corporations ($15 million for subsequent orders), which are more than ten times the previous penalties.

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I am a Toronto competition and advertising lawyer offering business and individual clients efficient and strategic advice in relation to competition/antitrust, advertising, Internet and new media law and contest law.  I also offer competition and regulatory law compliance, education and policy services to companies, trade and professional associations and government agencies.

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