Canadian COMPETITION LAW

Conventional wisdom is that the Competition Bureau will pursue most misleading advertising cases civilly, under section 74.01 of the Competition Act, not criminally (the Act also contains a criminal misleading advertising provision, section 52, as well as a number of other criminal deceptive marketing offences).

For example, in the Bureau’s 1999 Bulletin on the choice of the criminal or civil track for misleading advertising, which remains its leading statement on the question, the Bureau states that the civil track will be pursued in most instances (though it may proceed criminally where there is both clear evidence of intent – for example, continuing conduct after complaints are made – and a criminal prosecution is in the public interest).

Despite this expressed restraint to proceed criminally, there have been a steady stream of deceptive advertising and marketing cases over the past few years where the Bureau has commenced criminal enforcement proceedings.  Some recent cases have involved deceptive telemarketing (see: here, here and here), employment opportunity schemes (see: here and here), a GST refund fraud scheme (see: here) and the sale of counterfeit cancer drugs on the Internet (see: here).  In terms of criminal misleading advertising cases, the Bureau has appeared to be most concerned with deceptive telemarketing and fraudulent business directory schemes (although its efforts have not been restricted to those two categories of cases).

While imprisonment is rather rare in Canada for competition law offences, several individuals in these cases were also sentenced to imprisonment, ranging from conditional sentences in the community to 3 years, in addition to paying monetary penalties.

In yet another example, the Bureau recently announced that an Alberta man has been ordered to stand trial for misleading advertising and breach of a previous consent agreement.

According to the Bureau’s announcement, the Alberta Provincial Criminal Court has ordered an Edmonton individual, Director of Strategic Ecomm Inc. and MSH Investments Inc., to stand trial on criminal charges regarding the making of materially false or misleading representations, contravention of a registered consent agreement, possession of property obtained by crime and laundering the proceeds of crime.  The accused had entered into a consent agreement with the Bureau in 2006 in relation to allegedly false advertising in connection with online job opportunities and paid a $100,000 penalty.

In addition to being another example of the Bureau’s willingness to proceed criminally in some misleading advertising cases, it is also an illustration of the Bureau’s apparent increased desire to ensure that consent agreements (i.e., settlements) are complied with.  Other such recent examples include steps to enforce a consent agreement negotiated with Nivea’s Canadian distributor (see: Competition Bureau Requires Maker of Nivea to Correct Inaccurate Public Statements Related to Nivea Consent Agreement) and some recent public remarks made by the  Commissioner of Competition:

“Finally, on a relatively low-profile matter, Nivea, we were able to send a deterrence message in no uncertain terms, that representations made to the Commissioner, and embodied in court orders, will, if flouted, face real consequences. The same can be said with regard to a breach of a Consent Agreement in the mergers context. For the Competition Act to have vigour, commitments made to the Commissioner and the courts must be honoured.”

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