Canadian COMPETITION LAW

On August 30, 2011, the Competition Bureau announced that five individuals in Alberta were convicted and sentenced of deceptive telemarketing under the Competition Act.

In making the announcement, the Bureau stated:

“The individuals have been convicted of deceptive telemarketing under the Competition Act and of committing fraud over $5000 under the Criminal Code of Canada. The names of the individuals convicted and their respective sentences are:

Garther Cheung and Sukhraj Singh Chana, co-founders of the company, were each sentenced to one year for each of three counts of deceptive telemarketing and to two years in a federal penitentiary for committing fraud over $5,000, all time to be served concurrently.

Pritpal Chana and Ranjit Sangha, both managers of the company, were each sentenced to 16 months for each of three counts of deceptive telemarketing and 16 months for committing fraud over $5,000, all time to be served concurrently. The first eight months will be served as house arrest and the remaining eight months on probation.

Andrea Kyweriga, also a manager, was given a suspended sentence and placed on two years probation after being convicted of two counts of deceptive telemarketing and one count of fraud over $5000.

The five individuals are also prohibited from doing any act or thing that would be directed toward the deceptive telemarketing offence being committed or repeated for the next 10 years.

A sixth individual, Sarah Schaefer, pleaded guilty in 2007 and received a $15,000 fine.”

The federal Competition Act makes it a criminal offence to engage in telemarketing for the purpose of making false or misleading representations in promoting the supply of a product.

Telemarketing is defined under the Competition Act as “interactive telephone communications.”

In addition to prohibiting telemarketers from making false or misleading representations, the Act also prohibits telemarketers from engaging in a number of other activities including:

1.  Requiring advance payments in order to receive a prize;

2.  Offering gifts as inducements to purchase other products without fairly disclosing the value of the gifts;

3.  Not providing adequate and fair disclosure of the number and value of prizes; and

4.  Requiring advance payments for products offered at inflated prices.

Telemarketers are also required to make certain up-front disclosure during their calls (e.g., of the identity of the person for whom the communication is being made, the purpose of the call, nature of the product and disclosure of the price and other material terms).  In this regard, the Act sets out specific disclosure to be included at the beginning of a call (and other mandatory disclosure to be made at some point during a call).

For this reason, it is important that telemarketers use appropriate scripts during their calls to comply with the statutory requirements of the Act.  It is also important for companies and individuals engaged in telemarketing activities to comply with the general misleading advertising provisions of the Act (sections 52 and 74.01).

The enforcement of the telemarketing provisions of the Act has been aimed for the most part at companies engaged in true “scams” not legitimate marketers who may have committed technical violations.

Having said that, a number of individuals have been either charged or imprisoned in connection with the marketing of a broad range of products including business directories, office supplies and credit cards.

While imprisonment is relatively rare for contraventions of the Competition Act, it has been increasingly commonly sought by the Bureau (and obtained) for deceptive marketing activities that violate the Act, with this case being the most recent example.

For the complete Bureau news release see:

Five Alberta Individuals Sentenced in Deceptive Telemarketing Scheme

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