Canadian COMPETITION & ANTITRUST LAW

Administrative monetary penalty (AMP). The civil misleading advertising (section 74.01) and abuse of dominance (section 79) provisions of the Competition Act include “administrative monetary penalties” or “AMPs” as penalties (essentially civil fines).  Under subsection 74.1(1) of the Competition Act (the penalties section for civil misleading advertising) a court may impose AMPs of up to $750,000 for individuals (up to $1 million for subsequent orders) and up to $10 million for corporations (up to $15 million for subsequent orders).  Under subsection 79(3.1) of the Competition Act, the federal Competition Tribunal may order a person to pay an AMP of up to $10 million ($15 million for subsequent orders).  The size of AMPs that may be imposed under the misleading advertising provisions was significantly increased as a result of the amendments to the Act that were introduced in 2009.  AMPs were introduced as a potential penalty for abuse of dominance for the first time in Canada as a result of those same amendments.  Competition Bureau, Frequently Asked Questions – Amendments to the Competition Act: “Administrative monetary penalties, or ‘AMPs,” are civil remedies, and quite distinct from fines (which are criminal).  The purpose of an AMP is to promote and encourage compliance with the Competition Act, and failure to pay one may be enforced civilly as a debt due to the Crown.  A fine, by contrast, is a punishment imposed by a court upon conviction of a criminal offence, and failure to pay may lead to imprisonment.”

Address harvesting. Government of Canada, Canada’s Anti-Spam Legislation (www.fightspam.gc.ca), FAQs: “This refers to the collection of email addresses through the use of things such as ‘web crawlers,’ which are computer programs that scan websites, usenet groups and social networking sites, trolling for posted electronic addresses; and ‘dictionary attacks,’ in which a computer program guesses live email addresses by methodically trying multiple name variations within a particular group of common email domains, such as Hotmail or Gmail.  Once collected, email addresses are often sold to spammers as destinations for unsolicited electronic messages.”

Advertising.  Advertising Standards Canada, Canadian Code of Advertising Standards: “Advertising is defined in the Code as any message (the content of which is controlled directly or indirectly by the advertiser) expressed in any language and communicated in any medium to Canadians with the intent to influence their choice, opinion or behaviour. Excluded from the definition of “medium” and the application of the Code are: (i) foreign media (namely media that originate outside Canada and contain the advertising in question) unless the advertiser is a Canadian person or entity; and (ii) packaging, wrappers and labels.  Also excluded from the application of the Code are political and election advertising.”  Association of Canadian Advertisers: “Advertising is defined as any message, communicated in any medium, the content of which is paid for and/or controlled by the advertiser, with the intent to influence choice, opinion or behaviour.”

Advisory opinion. Under section 124.1 of the Competition Act, any person may apply to the Commissioner of Competition, together with supporting information, for a binding written opinion regarding the application of any provision of the Act.  Written opinions can be a practical way for businesses and individuals to reduce potential competition law liability for proposed conduct.  A written opinion is binding on the Commissioner if all material facts relating to the proposed conduct have been submitted.  If issued, written opinions remain binding for as long as the material facts on which they are based remain substantially unchanged and the conduct is carried out substantially as proposed.  Binding written opinions are available, subject to the Commissioner’s discretion to issue them, for proposed conduct only.  In other words, the Bureau will not issue advisory opinions for existing business conduct.  Written opinions are available under the following provisions of the Act, among others: resale price maintenance (section 76), exclusive dealing / tied selling / market restriction (77), abuse of dominance (79), civil agreements provision (90.1), conspiracy (45), misleading advertising and deceptive marketing practices (52, 55.1, 74.01, 74.06), deceptive telemarketing (52.1), deceptive prize notices (53), multi-level marketing and pyramid selling (55 and 55.1), performance claims (74.01(1)(b)) and promotional contests (74.06).  See Competition Act section 124.1; Competition Bureau, website, Legal Actions and Opinions section; Competition Bureau, Bulletin, Competition Bureau Fee and Service Standards Handbook for Written Opinions; definition of “written opinion”.

Advocacy advertising. Advertising Standards Canada, The Canadian Code of Advertising Standards: “’advertising’ which presents information or a point-of-view bearing on a publicly recognized controversial issue.”

Automated calling devices.  CRTC: “Automated calling devices are used to dial telephone numbers and automatically deliver a pre-recorded message.  The CRTC’s Automatic Dialing and Announcing Device Rules prohibit telemarketers from using these devices to sell or promote a product or service unless a consumer has consented to be called by them.”

Bait and switch. The Competition Act contains “general” misleading advertising provisions, which generally prohibit false or misleading claims to the public to promote a product or any business interest (sections 52 and 74.01).  In addition to these general misleading advertising provisions, the Act also contains a number of other sections that prohibit or regulate specific forms of marketing and advertising practices, including “bait and switch selling” (section 74.04). Competition Bureau, Ensuring Truth in Advertising – Bait and Switch Selling: “The Competition Act prohibits ‘bait and switch’ selling which occurs when a product is advertised at a bargain price, but is not available for sale in reasonable quantities.  The provision does not apply if the advertiser can establish that the non-availability of the product was due to circumstances beyond its control, the quantity of the product obtained was reasonable, or the customer was offered a rain check when supplies were exhausted.”  Competition Bureau, Pamphlet, Bait and Switch Selling: “Under the Competition Act, retailers are prohibited from advertising products at bargain prices that they do not have available in reasonable quantities.  Liability will be avoided where the advertiser can establish that the non-availability of the product was due to circumstances beyond its control, the quantity of the product was obtained when reasonable, or the customer was offered a rain check when supplies were exhausted.  Retailers who contravene the law may be ordered by a court to stop the conduct, to publish a corrective notice, and/or to pay an administrative monetary penalty.”  See also, Better Business Bureau (BBB) Code of Advertising: “[A] ’Bait’ offer is an alluring but insincere offer to sell a product or service which the advertiser does not intend to sell. Its purpose is to switch consumers from buying the advertised merchandise or service, in order to sell something else, usually at a higher price or on a basis more advantageous to the advertiser.”  See also Competition Act, section 74.04.

Behavioural advertising. Tracking consumers online activities over time in order to deliver advertisements targeted to their inferred interests.  See e.g., Office of the Privacy Commissioner of Canada, Guidelines, Privacy and Online Behavioural Advertising (2011).

Botnets. Industry Canada, The Digital Economy in Canada: “The term ‘botnet’ refers to a collection of software robots, or ‘bots’, that operate undetected on a network of infected computers (commonly referred to as ‘zombies’). Computers can become infected in a number of ways, including: viruses sent as an attachment to a spam message; clicking on pop-up windows; or visiting an infected website. In the absence of security features such as firewalls or anti-virus programs, a computer can easily become compromised and users typically have no knowledge that their computer is operating as a zombie. Once established, botnets are controlled remotely by the originator and used for distributing all types of malware.”

Brand spoofing.  Consumer Protection BC: “Brand spoofing (aka phishing) happens when scammers create false website or send consumers e-mails or text messages from what appear to be well-known and trusted businesses.  When a consumer provides information to these fake sources, scammers gain access to private information such as SIN numbers or bank PIN numbers.”

Business-to-business (B2B) marketing. Canadian Marketing Association, Code of Ethics and Standards of Practice: “Marketing products or services to other companies, government bodies, institutions and other organizations.”

Commercial electronic message. Canada’s new anti-spam legislation (Bill C-28) introduces an “opt-in” regime for electronic marketing using “commercial electronic messages” (“CEMs”).  “CEMs are defined in Bill C-28 as follows: “For the purposes of this Act, a commercial electronic message is an electronic message that, having regard to the content of the message, the hyperlinks in the message to content on a website or other database, or the contact information contained in the message, it would be reasonable to conclude has as its purpose, or one of its purposes, to encourage participation in a commercial activity, including an electronic message that (a) offers to purchase, sell, barter or lease a product, goods, a service, land or an interest or right in land; (b) offers to provide a business, investment or gaming opportunity; (c) advertises or promotes anything referred to in paragraph (a) or (b); or (d) promotes a person, including the public image of a person, as being a person who does anything referred to in any of paragraphs (a) to (c), or who intends to do so.”  “Commercial activity” is defined very broadly as follows: “any particular transaction, act or conduct or any regular course of conduct that is of a commercial character, whether or not the person who carries it out does so in the expectation of profit, other than any transaction, act or conduct that is carried out for the purposes of law enforcement, public safety, the protection of Canada, the conduct of international affairs or the defence of Canada.”

Comparative Advertising. A common type of advertising/marketing that can be the subject of challenge by provincial or federal enforcement agencies (e.g., provincial consumer protection officials or the federal Competition Bureau) is comparative advertising.  Generally speaking, comparative advertising is where individuals or companies compare prices, product or service quality or performance to their competitors.  See e.g.: Advertising Standards Canada, Canadian Code of Advertising Standards: “Comparative advertising is advertising (as defined in the Code) that compares the advertiser’s products or services, and the products or services of one or more identifiable organization(s) or of the marketplace as a whole, concerning, for example, product or service characteristics, value, performance, consumer preference, market share, sales origin or availability.”  Like performance claims, comparative advertising can be an effective and legitimate way to distinguish products or services from the competition.  For example, the Competition Bureau has endorsed the potentially pro-competitive benefits of comparative advertising, including in its 2007 Report on the self-regulated professions in Canada (Self-regulated professions – Balancing competition and regulation) with respect to legal fees: “[c]omparative advertising fosters price competition by allowing prospective clients to compare fees.  When consumers cannot compare the prices for legal services, there is little or no incentive for lawyers to compete on price, thereby raising the costs to consumers.”  However, comparative advertising can also raise misleading advertising concerns in some cases – for example, where the information in a comparative advertising claim is false or misleading or where it includes a performance claim that is not substantiated (i.e., that is not based on adequate and proper testing, which is required under the Competition Act).  As such, it is important to ensure that comparative advertising claims are, among other things, true, accurate and that any important information (e.g., conditions, limitations, etc.) is clearly disclosed.  In addition, if comparative advertising involves performance claims, such as claims relating to the performance or reliability of a product/service, it is also important that any such claim be both accurate and substantiated before being made.

Competition Tribunal. Competition Tribunal website:  “The Competition Tribunal is a specialized tribunal that combines expertise in economics and business with expertise in law. The Tribunal is a strictly adjudicative body that operates independently of any government department. The cases it hears are complex and deal with matters such as mergers, misleading advertising and restrictive trade practices.  The Competition Tribunal should be distinguished from the Competition Bureau.  The Competition Bureau investigates complaints and decides whether to proceed with the filing of an application to the Tribunal.”  See also: Competition Tribunal Act and Competition Tribunal Rules.

Consent agreement. Consent agreements are the form of settlement document entered into under the civil provisions of the Competition Act (the deceptive marketing and reviewable practices provisions), and have replaced the former process of obtaining consent orders from the Competition Tribunal.  Under Part VII.1 (Deceptive Marketing Practices) the Commissioner of Competition and a person in relation to whom the Commissioner has applied (or may apply) for an order may enter into a consent agreement to settle the matter.  Consent agreements are registered with the Competition Tribunal, upon which any proceedings are terminated and the consent agreement has the same force and effect as a court order (i.e., an order of the Competition Tribunal, Federal Court or provincial superior court, all of which are “courts” for the purposes of Part VII.1 of the Act).  Consent agreements may also be entered into under the Part VIII Reviewable Matters provisions, including in relation to sections 75 (refusal to deal), 76 (price maintenance), 77 (tied selling / exclusive dealing / market restriction) and 79 (abuse of dominance).  See section 105.  As under Part VII.1 of the Act, consent agreements entered into under Part VIII, once registered with the Tribunal, terminate the proceedings, if any, and have the same force as a Competition Tribunal order.  See also Competition Bureau, Bulletin, Corporate Compliance Programs: “Depending on the circumstances, conduct contravening the Acts may be resolved without fully contested proceedings. The Act contains provisions that provide the Tribunal with the power to issue consent agreements under section 105 to address civil reviewable matters under Part VIII of the Competition Act. The Tribunal also has the authority to issue consent orders, which may include the publication of corrective notices under section 74.12. Section 34 provides that a court may, on application of the Attorney General of Canada, issue a consent prohibition order with or without an admission of guilt.”

Consumer marketing. Canadian Marketing Association, Code of Ethics and Standards of Practice: “Marketing products or services to individuals when they are purchasing for personal or household use.”

Cyberlibel. USLegal.com: “Cyberlibel is essentially same as defamation, except that the alleged defamatory material is posted on the Internet. Defamation may also be referred to as libel, slander, disparagement, defamation of character, etc. Defamation in the Internet can be classified as libel in view of that material communicated on the Internet is published e.g. bulletin boards, emails, chat rooms etc.”

Deceptive prize notice.  Competition Bureau, Enforcement Guidelines, Application of the Competition Act to Representations on the Internet: “Subsection 53(1) of the [Competition Act] makes it an offence to send deceptive notices of prizes. A notice is deceptive where, among other things, there has not been adequate and fair disclosure of certain information, including facts which materially affect the chances of winning. The offence applies to sending the prize notification or causing it to be sent, whether ‘by electronic or regular mail or by any other means’. Further information on the Bureau’s policy with respect to section 53, can be found in the publication entitled Deceptive Notices of Winning a Prize – Section 53 of the Competition Act available on the Competition Bureau Web site.”

Defamation. Shakespeare, Othello, Act 3, Scene 3:  ”Good name in man and woman, dear my lord is the immediate jewel of their souls.  Who steals my purse steals trash; ‘tis something, nothing; ‘Twas mine, ‘tis his, and has been slave to thousands.  But he that fliches from me my good name robs me of that which not enriches him, and makes me poor indeed.”  Gatley on Libel and Slander:  “The gist of the torts of libel and slander is the publication of matter (usually words) conveying a defamatory imputation. A defamatory imputation is one to a man’s discredit, or which tends to lower him in the estimation of others, or to expose him to hatred, contempt or ridicule, or to injure his reputation in his office, trade or profession, or to injure his financial credit. The standard of opinion is that of right-thinking persons generally. To be defamatory an imputation need have no actual effect on a person’s reputation; the law looks only to its tendency. A true imputation may still be defamatory, although its truth may be a defence to an action brought on it; conversely untruth alone does not render an imputation defamatory.”  Wilson v. Switlo, 2011 BCSC 1287, per Mr. Justice R. Punnett: “The law of defamation concerns the civil wrongs of libel and slander.  At common law, libel is defamatory expression in writing or some other permanent form while slander is an oral statement or some other form of transitory expression.  Generally, expression that tends to lower a person’s reputation in the estimation of ordinary, reasonable members of society generally, or to expose a person to hatred, contempt or ridicule is defamatory… An allegation of defamation may rest on the literal meaning of a statement or on its inferential meaning, or on the claim that the statement constitutes a legal innuendo.  In this case only the literal and inferential meanings of the impugned statements are in issue.  Where the literal meaning is in issue, it is unnecessary to go beyond the words themselves.  A claim based on the inferential meaning relies on what the ordinary person will infer from the statement.  That is, it is a matter of impression.”  [Elements]:  “A plaintiff in a defamation action is required to prove three things to obtain judgment and an award of damages: (1) that the impugned words were defamatory, in the sense that they would tend to lower the plaintiff’s reputation in the eyes of a reasonable person; (2) that the words in fact referred to the plaintiff; and (3) that the words were published, meaning that they were communicated to at least one person other than the plaintiff.”

Dictionary attack. Government of Canada, Canada’s Anti-Spam Legislation (www.fightspam.gc.ca), FAQs: “… a computer program guesses live email addresses by methodically trying multiple name variations within a particular group of common email domains, such as Hotmail or Gmail.”

Direct-to-consumer marketing.  OECD, Competition Assessment Toolkit (2011): “Increasingly, countries are imposing bans or introducing significant regulations on direct-to-consumer marketing of products via email, fax and telephone. In general, both large and small companies and self-employed individuals rely on this channel to advertise their products and services. One factor that has been driving this type of advertising is the relatively lower cost – in comparison to say advertising on television and specialty magazines. This type of direct advertising may also be preferred by many companies as they are better able to reach their target audience. One of the significant downsides of this type of marketing relates to intrusion of privacy.”

Double ticketing. Competition Bureau, Ensuring Truth in Advertising: “Section 54 of the Competition Act is a criminal provision.  It prohibits the supply of a product at a price that exceeds the lowest of two or more prices clearly expressed in respect of the product.  Any person who contravenes section 54, is guilty of an offence and liable to a fine of up to $10,000 and/or imprisonment up to one year on summary conviction.”

Due diligence defence. The Competition Act contains pure criminal offences (i.e., requiring subjective intent, such as the criminal misleading advertising provision, section 52) and strict liability offences (i.e., where proof of carrying out the mere actus reus, or act elements, is sufficient to constitute an offence subject to a due diligence defense).  In this regard, due dligence defenses are available under the deceptive telemarketing (section 52.1), deceptive prize notice (section 53(1)) and multi-level marketing (section 55(1)) provisions of the Competition Act.  See also Competition Bureau, Bulletin, Corporate Compliance Programs (2010): “For certain false or misleading representations and deceptive marketing practices provisions under the Competition Act and certain provisions of the Consumer Packaging and Labelling Act, the Textile Labelling Act and the Precious Metals Marking Act, a company may argue that it had exercised due diligence to prevent the conduct.  Although the pre-existence of a program is not, in and of itself, a defence to allegations of wrongdoing under any of the Acts, a credible and effective program may enable a business to demonstrate that it took reasonable steps to avoid contravening the law. In this regard, such a program may support a claim of due diligence. Documented evidence of corporate compliance will assist a company in advancing a defence of due diligence, where available.” … “The existence of a program does not immunize businesses or individuals from enforcement action by the Commissioner or from prosecution by the DPP.20 However, in determining the most appropriate means to resolve cases involving offences where the exercise of due diligence is a defence, the Commissioner may give weight to the pre-existence of a credible and effective program in making sentencing recommendations to the DPP. A program will be considered credible and effective where it can be demonstrated that it was reasonably designed, implemented and enforced in the circumstances.”

Election advertising. Advertising Standards Canada, The Canadian Code of Advertising Standards: “Includes ‘advertising’ about any matter before the electorate for a referendum, ‘government advertising’ and ‘political advertising,’ any of which advertising is communicated to the public within a time-frame that starts the day after a vote is called and ends the day after the vote is held. In this definition, a ‘vote’ is deemed to have been called when the applicable writ is issued.”

Field marketing. Canadian Marketing Association, Code of Ethics and Standards of Practice:  “Field marketing is face-to-face promotion or sale of products or services to consumers.  It includes merchandising, sampling, demonstrations and events.”

Free. Competition Bureau, Pamphlet, False or Misleading Representations and Deceptive Marketing Practices: “Don’t increase the price of a product or service to cover the cost of a free product or service.”  Competition Bureau, Ensuring Truth in Advertising, False or Misleading Representations: “… where article A is advertised as being free with the purchase of article B, but article B is available at a discount or lesser price if the ‘free’ article is foregone, then article A is not if fact free. … Nor is it ‘free’ in a ‘two-for-one’ situation where the price of the first article is inflated to cover the cost of the second.”  U.S. Federal Trade Commission, FTC Guide Concerning Use of the Word “Free” and Similar Representations:  “Meaning of “Free” … The public understands that, except in the case of introductory offers in connection with the sale of a product or service … an offer of ‘Free’’ merchandise or service is based upon a regular price for the merchandise or service which must be purchased by consumers in order to avail themselves of that which is represented to be ‘Free’. In other words, when the purchaser is told that an article is ‘Free’ to him if another article is purchased, the word ‘Free’ indicates that he is paying nothing for that article and no more than the regular price for the other.  Thus, a purchaser has a right to believe that the merchant will not directly and immediately recover, in whole or in part, the cost of the free merchandise or service by marking up the price of the article which must be purchased, by the substitution of inferior merchandise or service, or otherwise.”

General impression. A term used in the context of advertising and marketing law, and in particular in relation to misleading advertising under the Competition Act.  In general, an advertising or marketing claim may contravene the “general” criminal (section 52) or civil (section 74.01) misleading advertising provisions of the Competition Act if it is literally false or misleading or if the “general impression” of the claim is false or misleading.  In this regard, subsection 52(4) of the Competition Act provides: “In a prosecution for a contravention of [the criminal misleading advertising section], the general impression conveyed by a representation as well as its literal meaning shall be taken into account in determining whether or not the representation is false or misleading in a material respect.”  The general civil misleading advertising provisions contain a similar section (subsection 74.03(5)).  As such, when reviewing advertising and marketing for compliance with the misleading advertising provisions of the Act, the entire context of a claim or representation must be considered, including the association and placement of words, the placement and choice of images, graphics and pictures, and as well consideration of whether the omission of material information (e.g., relating to price, quality, scope of services, important conditions, limitations, etc.) may mean that the “general impression” of the overall claim or representation could be seen as false or misleading.  The Competition Bureau’s 2001 Misleading Advertising Guidelines provided one of the most detailed and relevant discussions of the “general impression test”, despite having been since replaced by updated misleading advertising guidelines by the Bureau since:  “Section 52(4) requires a court to take into account the general impression conveyed by a representation, in addition to its literal meaning. … The application of the general impression test is particularly important where: the representation is partially true and partially false, or the representation is capable of two meanings, one of which is false; the representation is literally true but is, in fact, misleading since it fails to reveal certain essential information … the representation is literally or technically true but creates a false impression, for example where the advertised results of a test of a product may not be significant to its use or efficacy but the representation makes it appear otherwise … ; the representation is literally true insofar as the oral or written statements are concerned but the visual part of the representation may create a false impression, for example where it depicts a model which is different from the advertised product …”

Government advertising. Advertising Standards Canada, The Canadian Code of Advertising Standards: “‘advertising’ by any part of local, provincial or federal governments, or concerning policies, practices or programs of such governments, as distinct from ‘political advertising’ and ‘election advertising.’”

Greenwashing.  Devika Kewalramani & Richard J. Sobelsohn (Moses & Singer LLP): “’Greenwashing’ is a novel word that merges the concepts of ‘green’ (environmentally sound), and ‘whitewashing’ (to gloss over wrongdoing), to describe the deceptive use of green marketing that promotes a misleading perception that a company’s policies, practices, products or services are environmentally friendly.  ‘Greenwashing’ officially became part of the English language in 1999 with its entry into the Oxford English Dictionary.  It defines the term as ‘disinformation disseminated by an organization so as to present an environmentally responsible public image.’  The term is generally used when an organization expends more time and resources marketing their ‘greenness’ than actually adopting procedures that are environmentally beneficial.  It includes the practice of misleading customers regarding the environmental advantages of a specific product or service through deceptive advertising and unsubstantiated claims.”

Illegal lottery. In addition to complying with standalone promotional contest provisions in the federal Competition Act (section 74.06), promotional contests in Canada are regulated by illegal lottery provisions of the federal Criminal Code (sections 206 and 207).  While the relevant provisions of the Code are complex and somewhat archaic, in general an illegal lottery consists of: (i) a prize, (ii) chance and (iii) consideration.  See also Better Business Bureau (BBB) Code of Advertising: “No contest, drawing or other game of chance that involves the three elements of prize, chance and consideration should be conducted since it constitutes a [illegal] lottery …”  Based on the federal Criminal Code, promotional contest organizers often remove either the consideration element (e.g., a “no purchase necessary” entry option), the chance element (e.g., adding a skill element, for example making the contest a skill contest or including a skill-testing question), or both in order to remove a promotional contest from the scope of the illegal lottery provisions of the Code.

Interest-based advertising (IBA).  Association of Canadian Advertisers: “Interest-based advertising (IBA), or online behavioural advertising, is the collection of online data and web-viewing behaviours from computers or devices over time and across non-affiliate websites designed to predict user preferences or interests in order to deliver ad messages based on those inferred preferences.  With IBA, benefits accrue to advertisers (effective and efficient means of reaching potential consumers), publishers (they receive premium rates that allow them to continue to provide quality content for free) and consumers (who receive more relevant advertising).”

Internal do not contact list. Canadian Marketing Association, Code of Ethics and Standards of Practice: “A list of current customer, consumer or business contact information of those persons or businesses who have requested that they not be contacted by the marketer’s organization.  It is used to cross-reference and purge that information from any list to be used for any marketing campaign by that organization.  Often referred to as an ‘internal deletion list’, this Code requires that internal do not contact lists must be maintained by every organization that markets for every channel by which they market and that the information must be retained on the list for three years.”

Label.  Canadian Food Inspection Agency: “includes any legend, word or mark attached to, included in, belonging to or accompanying any food, drug, cosmetic, device or package.”  See also Food and Drugs Act.

Marketing. Canadian Marketing Association, Code of Ethics and Standards of Practice: “Marketing is a set of business practices designed to plan for and present an organization’s products or services in ways that build effective customer relationships.”

Mass marketing fraud. Competition Bureau, Ensuring Truth in Advertising: “Mass Marketing Fraud is defined as fraud committed via mass communication media using the telephone, mail, and the Internet. Provisions under the criminal regime of the Competition Act prohibit materially false or misleading representations made knowingly or recklessly, deceptive telemarketing and deceptive prize notices.”

“Material”. To violate the criminal or civil misleading advertising provisions under the Competition Act (sections 52 and 74.01) a representation must be made to the public that is “false or misleading in a material respect”.  In this regard, “materiality” does not depend on the value of a transaction, but rather has been held by Canadian courts to mean that a representation or claim could lead an average consumer to purchase a product (or otherwise alter their conduct).  For example, see Competition Bureau, Enforcement Guidelines, Application of the Competition Act to Representations on the Internet (2009): “To contravene certain provisions of the Act, a representation must be “false or misleading in a material respect”. This phrase has been interpreted to mean that the representation could lead a person to a course of conduct that, on the basis of the representation, he or she believes to be advantageous. It is important to note that omitting relevant information could also be viewed as material.”  See also R. v. Kenitex Can. Ltd. et al. (1980), 51 C.P.R. (2d) 103:  “[A] representation will be false or misleading in a material respect if, in the context in which it is made, it readily conveys an impression to the ordinary citizen which is, in fact, false or misleading and if that ordinary citizen would likely be influenced by that impression in deciding whether or not he would purchase the product being offered”.

Misleading advertising. Competition Bureau, Ensuring Truth in Advertising, Misleading Advertising and Labelling: “The misleading advertising and labelling provisions enforced by the Competition Bureau prohibit making any deceptive representations for the purpose of promoting a product or a business interest, and encourage the provision of sufficient information to allow consumers to make informed choices.  The false or misleading representations and deceptive marketing practices provisions of the Competition Act contain a general prohibition against materially false or misleading representations. They also prohibit making performance representations which are not based on adequate and proper tests, misleading warranties and guarantees, false or misleading ordinary selling price representations, untrue, misleading or unauthorized use of tests and testimonials, bait and switch selling, double ticketing and the sale of a product above its advertised price. Further, the promotional contest provisions prohibit contests that do not disclose required information.  The Consumer Packaging and Labelling Act, Textile Labelling Act and Precious Metals Marking Act all contain prohibitions regarding false or misleading representations. They also require certain labelling or marking information aimed at assisting consumers in making informed purchasing decisions.”  See also Competition Act, sections 52 and 74.01.

Multi-level marketing plan. Competition Act, subsection 55(1): “… a plan for the supply of a product whereby a participant in the plan receives compensation for the supply of the product to another participant in the plan who, in turn, receives compensation for the supply of the same or another product to other participants in the plan.”  See also Competition Bureau, Truth in Advertising, Multi-level Marketing: “Multi-level marketing is a plan for the distribution of products whereby participants earn money by supplying products to other participants in the same plan. They, in turn, make money by supplying the same or other products to other participants.  Operators of, and participants in, legitimate multi-level marketing plans should disclose:
the different levels of earnings or compensation received by participants in the plan; the amount of money earned by a typical participant; and the time and effort required to reach specific levels of income.”  The Competition Act makes it a criminal offence for operators and participants of multi-level marketing plans to make compensation claims to prospective participants unless certain disclosure requirements are met – i.e., “fair, reasonable and timely” disclosure within the knowledge of the person making the claim is made to prospective participants of the: (i) actual or (ii) likely compensation to be received in the plan (based on a number of prescribed factors).  The penalties for contravening the multi-level marketing provisions of the Act include unlimited fines (i.e., in the discretion of the court), imprisonment for up to five years, or both.  Multi-level marketing plans that constitute pyramid selling schemes under the Act are illegal.  See definition of “pyramid selling scheme” and subsection 55.1(1) of the Act.  In other words, while multi-level marketing plans are legal provided certain prescribed disclosure requirements are met, pyramid selling as defined in the Act constitutes a criminal offence.  For more information see: Competition Bureau, Enforcement Guidelines, Multi-level Marketing Plans and Schemes of Pyramid Selling (2009); Competition Act, subsection 55(1).

Performance claim. Competition Bureau, Ensuring Truth in Advertising, Misleading Advertising and Labelling: “Businesses should not make any performance claims unless they can back them up. The Competition Act prohibits any representation in the form of a statement, warranty or guarantee of the performance, efficacy or length of life of any given product, not based on adequate and proper testing. The onus is on advertisers to prove that the representation is based on an adequate and proper test. The test must have been concluded before the representation is made and the data must be readily available upon request by the Bureau.”  See also the definition of “misleading advertising”.

Phishing.  Industry Canada, The Digital Economy in Canada: “Phishing is a technique which counterfeits existing legitimate web sites and businesses, in order to obtain credit card numbers, bank account information, social insurance numbers and passwords, directly leading to identity theft and fraud.”  Consumer Protection BC: “Brand spoofing (aka phishing) happens when scammers create false website or send consumers e-mails or text messages from what appear to be well-known and trusted businesses.  When a consumer provides information to these fake sources, scammers gain access to private information such as SIN numbers or bank PIN numbers.”

Political advertising. Advertising Standards Canada, The Canadian Code of Advertising Standards: “’advertising’ appearing at any time regarding a political figure, a political party, a political or government policy or issue, or an electoral candidate.”

Prepackaged product.  Canadian Food Inspection Agency: “means any product that is packaged in a container in such a manner that it is ordinarily sold to or used or purchased by a consumer without being re-packaged.”  See also Consumer Packaging and Labelling Act.

Principal display surface.  Canadian Food Inspection Agency: “generally, it is that part of the container that is visible to the purchaser when the package is being displayed for the purpose of sale.”  See also Consumer Packaging and Labelling Regulations.

Principal display panel.  Canadian Food Inspection Agency: “generally means that part of a label applied to the principal display surface, which is the side or surface of a container that is displayed or visible under normal or customary conditions of sale or use.”  Consumer Packaging and Labelling Regulations.

Publisher’s defence.  Competition Bureau, Application of the Competition Act to Representations on the Internet: “For reviewable conduct under sections 74.01 to 74.06 of the Act [the civil misleading advertising and promotional contest provisions of the Competition Act], a defence is found in subsection 74.07(1) for a person who merely ‘prints or publishes or otherwise disseminates a representation, including an advertisement, on behalf of another person in Canada’, so long as certain conditions are met. This exception is sometimes referred to as the ‘publisher’s defence’ but, provided its conditions are met, it applies to any person who merely disseminates or distributes a false or misleading representation. In other words, it is available to any person who does not have decision-making authority or control over the content. The required conditions which must be met under this exception are: the disseminating person accepted the representation for dissemination in good faith and in the ordinary course of its business; and the person on whose behalf the representation is being made is in Canada, and the disseminating party recorded its name and address.  The Bureau will focus its enforcement efforts primarily on businesses which are responsible for content or have a degree of control over that content, rather than on businesses operating as a conduit, that is, a disseminator or distributor of the content.”

Puffery.  Australian Competition & Consumer Commission: “Puffery is a term used to describe wildly exaggerated, fanciful or vague claims for a product or service that nobody could possibly treat seriously, and that nobody could reasonably be misled by.  Examples of puffery include ‘best food in town’ or ‘freshest taste ever.’”

Pyramid selling. Competition Bureau, Truth in Advertising, Pyramid Selling: “A scheme of pyramid selling is illegal under the Competition Act. It is a multi-level marketing plan that includes either compensation for recruitment, required purchases as a condition of participation, inventory loading, or the lack of a buy-back guarantee on reasonable commercial terms.”  “Sections 55 and 55.1 of the Competition Act are criminal provisions addressing multi-level marketing and pyramid selling. Section 55 prohibits operators or participants in a multi-level marketing plan from making representations relating to compensation without fair, reasonable and timely disclosure of the amount of compensation received or likely to be received by typical participants in the plan. Section 55.1 of the Act provides that a multi-level marketing plan that includes either compensation for recruitment, required purchases as a condition of participation, inventory loading, or the lack of a buy-back guarantee on reasonable commercial terms, constitutes a prohibited “scheme of pyramid selling.  Any person who contravenes section 55 or 55.1 is guilty of an offence and liable to a fine of up to $200,000 and/or imprisonment up to one year on summary conviction, or to fines in the discretion of the court and/or imprisonment up to five years upon indictment.”  See definition of multi-level marketing plan; Competition Bureau, Enforcement Guidelines, Multi-level Marketing Plans and Schemes of Pyramid Selling – Sections 55 and 55.1 of the Competition Act; Competition Act, sections 55, 55.1.

Robocall.  A term used in the telemarketing industry to refer to the use of “automated calling devices”.  See e.g., CRTC: “Automated calling devices are used to dial telephone numbers and automatically deliver a pre-recorded message. The CRTC’s Automatic Dialing and Announcing Device Rules prohibit telemarketers from using these devices to sell or promote a product or service unless a consumer has consented to be called by them.  They can, however, be used by police and fire departments, schools and hospitals if they have a valid public service message to communicate. Automated calling devices can also be used for appointment reminders and thank you calls.”

Sale above advertised price.  Competition Bureau, Ensuring Truth in Advertising, Price-related Representations: “Section 74.05 of the Competition Act is a civil provision. It prohibits the sale or rent of a product at a price higher than its advertised price. The provision does not apply if the advertised price was a mistake and the error was immediately corrected.  If a court determines that a person has engaged in conduct contrary to section 74.05, it may order the person not to engage in such conduct, to publish a corrective notice and/or to pay an administrative monetary penalty of up to $750,000 in the case of a first time occurrence by an individual and $10,000,000 in the case of a first time occurrence by a corporation. For subsequent orders, the penalties increase to a maximum of $1,000,000 in the case of an individual and $15,000,000 in the case of a corporation.”

Spam. Industry Canada, The Digital Economy in Canada: “Although there is no internationally agreed-upon definition of “spam”, many countries consider it to be any bulk commercial email sent without the express consent of recipients. Spam is no longer just a nuisance, but has quickly evolved into a vehicle for malware, threats to privacy, scams, fraud and misleading trade practices, such as phishing. It is now estimated that spam represents more than 80% of all e-mail traffic. Processing and managing spam creates costs that are ultimately paid for by businesses and personal e-mail users.”  OECD Task Force on Spam: Anti-spam Toolkit of Recommended Policies and Measures (2006): “There is no internationally agreed definition of spam, which is defined differently in national legislative approaches. For this reason the Task Force has not attempted to classify spam. Nevertheless, there are common characteristics that countries have recognized in their definitions: (i) electronic message: spam messages are sent electronically. While e-mail is by far the most significant channel for spam, other delivery channels are also considered in a number of countries (mobile spam, such as SMS and MMS, spam over IP, etc); (ii) hidden or false message origins: spam messages are often sent in a manner that disguises the originator by using false header information. Spammers frequently use un-authorized third-party e-mail servers; (iii) spam does not offer a valid and functional address to which recipients may send messages opting out of receiving further unsolicited messages; (iv) illegal or offensive content: spam is frequently a vehicle for fraudulent or deceptive content, viruses, etc. Other spam includes adult or offensive content, which may be illegal in some countries, especially if it is sent to minors; (v) utilization of addresses without the owner’s consent: Spammers often use e-mail addresses that have been collected without the owner’s explicit consent. This is frequently done through software programs which gather addresses from the Web or create e-mail addresses (harvesting and dictionary attacks); (vi) bulk and repetitive: spam messages are typically sent in bulk in an indiscriminate manner, without any knowledge about the recipient other than the e-mail address. In conclusion, there is a common understanding that spam is a threat to the Internet as an effective and reliable means of communication, and for the overall evolution of the e-economy. This common understanding has led to calls for greater co-operation among all stakeholders in finding common solutions to spam.”

Spyware. Industry Canada, The Digital Economy in Canada: “Spyware is software that collects information about a user without the user’s knowledge or consent. It may also be software that modifies the operation of a user’s computer without the user’s knowledge or consent. Typical kinds of spyware include keyloggers, which send a list to a third party of the keys that a user pressed, and adware, which displays to the user advertisements selected by the adware’s owner.”

Telemarketing. Competition Act, section 52.1:  “’telemarketing’ means the practice of using interactive telephone communications for the purpose of promoting, directly or indirectly, the supply or use of a product or for the purpose of promoting, directly or indirectly, any business interest.” Competition Bureau, Enforcement Guidelines, Telemarketing – Section 52.1 of the Competition Act: “’Interactive telephone conversations’ will be interpreted as live voice communications between two or more persons.  The Bureau will not consider ‘interactive telephone communications’ to have occurred with regard to: fax communications; Internet communications; or a customer’s interaction with automated prerecorded messages.”

Web crawler. Government of Canada, Canada’s Anti-Spam Legislation (www.fightspam.gc.ca), FAQs:  “… computer programs that scan websites, usenet groups and social networking sites, trolling for posted electronic addresses.”

Word-of-mouth marketing. Canadian Marketing Association, Code of Ethics and Standards of Practice: “Also sometimes referred to as ‘buzz’ marketing, word-of-mouth marketing is capturing the attention of consumers and the media to generate favourable word of mouth about a brand, product, service or organization.”

Written opinion. Under section 124.1 of the Competition Act, any person may apply to the Commissioner of Competition, together with supporting information, for a binding written opinion regarding the application of any provision of the Act.  Written opinions can be a practical way for businesses and individuals to reduce potential competition law liability for proposed conduct.  A written opinion is binding on the Commissioner if all material facts relating to the proposed conduct have been submitted.  If issued, written opinions remain binding for as long as the material facts on which they are based remain substantially unchanged and the conduct is carried out substantially as proposed.  Binding written opinions are available, subject to the Commissioner’s discretion to issue them, for proposed conduct only.  In other words, the Bureau will not issue advisory opinions for existing business conduct.  Written opinions are available under the following provisions of the Act, among others: resale price maintenance (section 76), exclusive dealing / tied selling / market restriction (77), abuse of dominance (79), civil agreements provision (90.1), conspiracy (45), misleading advertising and deceptive marketing practices (52, 55.1, 74.01, 74.06), deceptive telemarketing (52.1), deceptive prize notices (53), multi-level marketing and pyramid selling (55 and 55.1), performance claims (74.01(1)(b)) and promotional contests (74.06).  See Competition Act section 124.1; Competition Bureau, website, Legal Actions and Opinions section; Competition Bureau, Bulletin, Competition Bureau Fee and Service Standards Handbook for Written Opinions; definition of “advisory opinion”.

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Other Advertising & Marketing Glossaries

Interactive Advertising Bureau (IAB) Glossary

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COMPETITION/ANTITRUST LAW & ECONOMIC TERMS

For other competition/antitrust law & economic terms see:

Antitrust Alphabet

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