Archive for the 'Advertising' Category
By William Wu (Centre for Innovation Law and Policy)
Google has announced its new privacy policy, which will take effect on March 1. Google is doing away with the over 60 different existing privacy policies for its various products and replacing them with one single shorter and simpler privacy policy.
Those who are most affected by this change are people with Google accounts. Under the new privacy policy, if a user is signed in to the Google account, Google will be able to collect and combine user information from across its various products and services. For example, Google will be able to collect and analyze your search terms on the Google search engine and suggest related videos when you next go onto YouTube. This will enable Google to form fuller and more comprehensive user profiles. As Google emphasized in its announcement, this change will allow it “to create one beautifully simple and intuitive experience across Google.”
I saw this rather fine note recently by Davies Ward Phillips & Vineberg LLP (Anita Banicevic, Erika Douglas and David Stolow). We are reprinting it with permission.
Businesses operating in Canada should be aware of a recent trend towards greater regulation and enforcement action surrounding pricing representations where additional costs are not clearly disclosed up front. Last week, the Minister of State for Transport announced that the Canada Transportation Agency is proceeding with regulations to require Canadian air carriers to include all fees, charges and taxes in advertised prices. This trend towards requiring up-front disclosure of all fees and charges in any advertised pricing is consistent with the enforcement initiatives recently undertaken by the Competition Bureau (the “Bureau”) as well as the approach taken in recent class actions involving pricing representations brought in Québec and Ontario. The Bureau’s aggressive enforcement approach combined with an increase in class actions concerning pricing representations suggests it may be prudent for businesses to consider disclosing all fees imposed by the seller and applicable to all customers up front in any advertising.
The Vancouver Sun, Montreal Gazette, Huffington Post and others have reported that Rogers has launched constitutional arguments in response to allegations by the federal Competition Bureau that it misled consumers with performance claims in relation to its Chatr cell phone brand.
In particular, according to media reports, Rogers is arguing that the civil “performance claim” provision of the Competition Act is contrary to the freedom of expression rights under the Charter and that the penalties for civil misleading advertising are unconstitutional.
In a story reported earlier today in the Toronto Star, the Star reported an announcement by Interactive Advertising Bureau of Canada (“IAB”) Vice-President Sam Parent that online marketers will soon introduce self-regulation for behavioral advertising (see: Advertisers to Police Themselves When Targeting Online Users).
The past year has been a busy and eventful one for Canadian advertising and marketing law. Recent developments since 2010 span most key areas including the application of the “general misleading advertising” provisions of the Competition Act, the use of disclaimers, social media, e-mail marketing, performance claims and telemarketing.
At the same time, new legislation has been introduced that will impact how companies market in Canada, most notably the new federal anti-spam legislation (Bill C-28), and new cross-border enforcement initiatives were announced including a new international do-not-call enforcement network co-chaired by the CRTC.
These developments mean that it remains important for companies to effectively and efficiently navigate through Canadian advertising and marketing rules. Some of the more interesting and noteworthy developments in 2010 and 2011 are discussed below.
The past year has been a busy one for Canadian competition law.
Developments in 2011 include new cases, enforcement and legislation in most key areas including abuse of dominance (the Competition Bureau’s ongoing challenge of The Toronto Real Estate Board and CREA settlement in late 2010), criminal conspiracy (developments in price-fixing class action litigation and some Bureau enforcement), refusal to deal (several important private access section 75 cases, including a decision of the Federal Court of Appeal), contested mergers (in the waste and airline markets), price maintenance (the merchant fees case involving Visa and MasterCard) and misleading advertising (involving Bell Canada, Rogers and others).
The Competition Bureau is testing the new rules under Canada’s Competition Act, which came into force in 2009 and 2010, and private plaintiffs are creating new law in a number of ongoing competition/antitrust class actions in Canada (principally indirect purchaser price-fixing cases relating to the sale and supply of dynamic random access, or “DRAMs”, high fructose corn syrup and computer operating systems).
At the same time, several new pieces of legislation have been introduced including a federal omnibus crime bill, which will eliminate conditional sentences for some competition law offences, and sweeping new anti-spam legislation (Bill C-28 or “FISA“) that once in force will be among the strictest anti-spam regimes in the world.
The Commissioner of Competition, and other federal enforcement officials including the RCMP, have also expressed intentions to adopt tougher enforcement stances in relation to competition law and other white collar crime.
In general, these developments mean that it remains important for Canadian companies, organizations and their executives to maintain a practical awareness of Canadian competition law.
Some of the key competition law and related developments of 2011 include:
Toronto – January 24, 2012
The Canadian Marketing Association will be holding a one-day seminar on January 24, 2012 on non-for-profit marketing: “Marketing Online Successfully”.
From the Canadian Marketing Association:
“If you’re a not-for-profit marketer who’s looking for a quick way to become more comfortable with and proficient at Internet direct marketing – this seminar is for you!
With the CMA’s Intensive One-Day Internet Marketing Seminar for Not-For-Profit marketers, you’ll save time, skip the aggravation and quickly move up your Internet marketing learning curve as you join a select group of Canadian not-for-profit marketers for a practical, interactive, hands-on session on Internet direct marketing.
Content areas will include: recap of online Canadians’ habits and usage; discussion about mobile, video and other upcoming trends; review of results tracking methodologies; in-depth look at direct response Internet media and pay per click search engine marketing as a basis for building SUCCESSFUL acquisition and advocacy based direct response campaigns; and real life examples and case studies of not for profit marketers who are doing Internet marketing right.
The seminar is led by Jay Aber, President of The Aber Group Inc., a leading Internet-based direct marketing firm whose clients include Plan Canada, WWF-Canada, Heart & Stroke, Habitat for Humanity, American Express, Sun Life & Stratford Shakespeare Festival among many others. In addition to his other accomplishments, Jay chaired the Digital Marketing Council for the CMA for six years and wrote and taught the inaugural CMA’s e-Marketing (now Digital Marketing) course.”
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For more information see:
Canadian Marketing Association – Not-For-Profit Seminar: Marketing Online Successfully
On December 6, 2011, the federal Privacy Commissioner Jennifer Stoddart issued new online tracking guidelines for advertisers which, among other things, restrict the tracking of children and tracking technologies people can’t opt out of (i.e., turn off).
In making the announcement, which were part of remarks made at the Marketing and the Law Conference in Toronto (see: “Respecting Privacy Rights in the World of Online Behavioural Advertising”, Remarks by Jennifer Stoddard, Privacy Commissioner of Canada at the Marketing and the Law Conference (Toronto, December 6, 2011)), the Privacy Commissioner said:
“The use of online behavioural advertising has exploded and we’re concerned that Canadians’ privacy rights aren’t always being respected. Many Canadians don’t know how they’re being tracked – and that’s no surprise because, in too many cases, they have to dig down to the bottom of a long and legalistic privacy policy to find out. …
Some people like receiving ads targeted to their specific interests. Others are extremely uncomfortable with the notion of their online activities being tracked. People’s choices must be respected.”
The Canadian Institute will be holding an Advertising and Marketing Law Conference on Wednesday, January 25-26, 2012 at the Four Seasons Hotel, Toronto, Ontario.
From the Canadian Institute:
“We have obtained the highest quality speakers to present you with cutting edge analysis and practical guidance on the latest issues in this constantly evolving area of law. In fact, leaders in this field have been relying on our conference year after year to hone their skills, so join us at The Canadian Institute’s 18th Annual Advertising & Marketing Law program and be equipped with the tools necessary to be completely confident in your practice. Keynote Address: Melanie Aitken, Commissioner of Competition, Competition Bureau Canada Recent Enforcement Initiatives and Future Directions of the Competition Bureau. In the past year we have already seen, and will continue to see significant developments. You will learn about them all through our stimulating and interactive mix of sessions, including:
The latest need to know enforcement trends and priorities of the Competition Bureau
An in-depth analysis of the Anti-Spam legislation – in anticipation of it being proclaimed into force
The noteworthy differences between our Anti-Spam legislation and the U.S. Can-Spam Act
A practical session on drafting disclaimers on all forms of media
The most up-to-date tips on running contests
Risk mitigation for all emerging and recently revived marketing & advertising techniques
The latest issues and trends from the U.S. and how they may affect you”
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For more information see:
The Canadian Institute – Advertising and Marketing Law Conference
We are pleased to announce the launch of our new Canadian advertising and marketing law blog: Canadian Advertising & Marketing Law.
Our new blog will include news and developments in Canadian advertising and marketing law, key resources and links and overviews of advertising law, the new anti-spam legislation (Bill C-28), comparative advertising, promotional contest law, misleading advertising, packaging and labeling laws and telemarketing.
The federal Canadian Radio-television and Telecommunications Commission (CRTC) announced today that, together with the Australian Communications and Media Authority (ACMA), it has assembled 12 international enforcement agencies to form an International Do Not Call Network.
For the CRTC’s complete news release see: CRTC announces creation of international network to facilitate cooperation on telemarketing enforcement.
The members of this newly created Do Not Call Network are: Australia, Canada, France, Hong Kong, Ireland, Israel, Korea, Mexico, New Zealand, Spain, the UK and the United States.
Under the new international Do Not Call Network, the CRTC and ACMA will act as the Network’s inaugural co-chairs, with the U.S. Federal Trade Commission hosting the secretariat.
In making the announcement, the CRTC said:
“Enforcement agencies face a common challenge in tracking down individuals and companies who violate telemarketing rules, but operate outside national borders,” said Konrad von Finckenstein, Q.C., Chairman of the CRTC. ‘A global problem calls for global solutions. Having a network that fosters collaboration will contribute to more effective cross-border enforcement activities and help reduce unwanted telephone calls to Canadians from foreign telemarketers.’
The International Do Not Call Network will facilitate cooperation between agencies that enforce telemarketing rules in their respective countries. Members will meet annually to establish best practices and encourage the development of robust telemarketing laws around the globe. The network will also work to harmonize telemarketing policies between countries to improve enforcement activities across different jurisdictions.”
On October 25, 2011, the Competition Bureau published the Commissioner of Competition’s speech given at the 2011 Canadian Bar Association’s Annual Competition Law Conference in Ottawa.
It is fair to say that the Commissioner’s recent speech presented a singular tone across the civil and criminal competition law areas: enhanced enforcement.
Of the Commissioner’s remarks, some of the more interesting points include the Bureau’s increased focus on reviewing non-notifiable mergers (i.e., transactions that do not trigger the notification thresholds under the Competition Act), the statement that the Bureau has begun to revoke markers in some immunity cases where in its view immunity applicants are not complying with its Immunity Program and a subtle suggestion that the Bureau was preparing to bring, but not quite yet in a position to commence, the first conspiracy cases under the amended section 45 (Canada’s new hard core criminal conspiracy offences). The following are some highlights from the Commissioner’s recent speech.
On December 15, 2010 Canada’s new anti-spam legislation received Royal Assent, which will, when it comes into force, be one of the strictest anti-spam regimes in the world:
An Act to promote the efficiency and adaptability of the Canadian economy by regulating certain activities that discourage reliance on electronic means of carrying out commercial activities, and to amend the Canadian Radio-television and Telecommunications Commission Act, the Competition Act, the Personal Information Protection and Electronic Documents Act and the Telecommunications Act (the “Anti-spam Act”).
Earlier this Fall, consultations on two sets of draft Regulations concluded and so the new law may come into effect later this Fall or in the Spring of 2012 (see coming into force information below).
On October 3, 2011, the Competition Bureau announced that a deceptive telemarketer has been sentenced to two years in prison in relation to a deceptive telemarketing scheme involving the sale of business directories (see: Deceptive Telemarketer Receives a 2-year Prison Sentence).
This is the most recently announced telemarketing case by the Bureau, which shows that the criminal deceptive telemarketing and misleading advertising provisions of the Competition Act remain top enforcement priorities the Bureau. The case is also a recent illustration that, while relatively uncommon for competition law offences in Canada, the Bureau will not hesitate to seek prison sentences for what in its view are clearly intentional or fraudulent marketing law offences.
The Bureau has brought and sought penalties in a number of deceptive telemarketing cases in the past several years, many of which have involved the alleged cross-border deceptive marketing of business directories (see for example: Criminal Charges Laid in a Competition Bureau Telemarketing Case, Five Alberta Individuals Sentenced in Deceptive Telemarketing Scheme, Competition Bureau Sues to Shut Down Business Directory Scam, Competition Bureau Warns Against Deceptive Business Directories and Directors of Infotel Charged With Deceptive Telemarketing).
On September 7, 2011, the federal Competition Bureau announced that it had reached a settlement with Nivea’s Canadian distributor, Beiersdorf Canada Inc., relating to allegedly false or misleading performance claims in its advertising.
In particular, the Bureau took issue with claims that suggested that the use of skin cream could lead to weight loss. Under the terms of the consent agreement negotiated with the Bureau, Beiersdorf has agreed to pay an “administrative monetary penalty” or “AMP” of Cdn. $300,000 (“AMPs” are essentially civil fines), refund Canadian customers and remove its products from Canadian shelves.
In making its announcement, the Bureau said:
“A Bureau investigation determined that Beiersdorf made a number of deceptive claims about its “My Silhouette” product. The misleading representations were displayed on the package and on Nivea’s Web site. The representations stated that:
use of the product could lead to a “reduction of up to 3 centimetres on targeted body parts, such as thighs, hips, waist and stomach”;
My Silhouette “contains a highly effective natural Bio-Slim Complex for a slimmer looking and more defined silhouette”; and
My Silhouette “combines high performance active ingredients for a dual effect of slimming & reshaping.”
Beiersdorf’s representations also created the misleading impression that use of the product could make the skin more toned and elastic.
““Beiersdorf misled consumers by claiming a person could slim down by simply applying a skin cream,”” said Melanie Aitken, Commissioner of Competition. ““Unfortunately, consumers who purchased My Silhouette learned the hard way that there was no such easy fix.””
Under the terms of the consent agreement registered with the Competition Tribunal today, Beiersdorf is also required to publish a corrective notice on Nivea’s Canadian Web site and in major Canadian newspapers, and to pay $80,000 to cover costs associated with the Bureau’s investigation.”
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.”
On June 28th, the Competition Bureau announced that Bell Canada has agreed to stop making allegedly misleading claims relating to the prices for its services and to pay an administrative monetary penalty of $10 million.
In making the announcement, the Bureau said:
“The Bureau determined that, since December 2007, Bell has charged higher prices than advertised for many of its services, including home phone, Internet, satellite TV and wireless. The advertised prices were not in fact available, as additional mandatory fees, such as those related to TouchTone, modem rental and digital television services, were hidden from consumers in fine-print disclaimers.
…
As an example, Bell’s Web site had been advertising a bundle for home phone, Internet and television services starting as low as $69.90 per month. However, it was impossible for customers to buy the bundle for the advertised price. In fact, the lowest possible price, including the mandatory fees, was $80.27—approximately 15% higher than advertised. Customers purchasing any of the services individually were also faced with the same misleading information, as additional fees were excluded from those advertised prices as well.”
In Canada, the federal Competition Act contains both civil and criminal provisions dealing with false or misleading representations and also governs a variety of specific forms of marketing conduct including “ordinary selling price” claims, selling above an advertised price, deceptive telemarketing, promotional contests and performance claims.
Generally speaking, the “general” civil misleading advertising provisions of the Act prohibit representations to the public, for the purpose of promoting a product or business interest, that are false or misleading in a material respect. The criminal provisions, which are substantially similar, prohibit false or misleading representations that are made intentionally (i.e., knowingly or recklessly).
The maximum penalties under the civil misleading advertising provisions of the Act were also dramatically increased in 2009, as a result of sweeping amendments to the Competition Act (up to $10 million for corporations). Parties can, however, and in a number of past cases have agreed to, settle misleading advertising cases for amounts exceeding the statutory maximum fines provided under the Act – for example, to avoid potential criminal liability (as misleading advertising can be reviewed by the Bureau as either a civil matter or criminal offence).
In this case, the Bureau challenged the accuracy of price claims made by Bell, as well as hidden fees and fine-print disclaimers. According to the Bureau, its concerns were based primarily on allegedly literally false claims (i.e., services that were not available at all at the advertised prices, including for Bell’s home phone, Internet, satellite TV and wireless services).
Advertising and marketing claims can violate the misleading advertising provisions of the Act where they are either literally false or merely misleading (e.g., true claims can also violate the Act in some cases where they fail to disclose essential information).
Not surprisingly, courts and the Bureau have, as in this case, for the most part raised concerns with either literally false or misleading claims that relate to price, performance or other essential product aspects, which are the most likely to be found to be “material” for the purposes of the misleading advertising provisions of the Act (to constitute misleading advertising under the Act a claim must be shown to be not only false or misleading but also “material” – i.e., likely to cause an average consumer to purchase the product).
This most recent case involving Bell follows other recent enforcement efforts by the Bureau against high profile companies including its $10 million misleading advertising claim against Rogers (see: Competition Bureau Takes Action Against Rogers Over Misleading Advertising).
Misleading advertising and other deceptive marketing also continues to be an enforcement priority for the Bureau. For example, in a recent speech, the Commissioner of Competition Melanie Aitken said:
“We are also on the watch for misleading and fraudulent representations in areas that hit close to home for Canadians. Our goal is to address and redress such unlawful conduct and, at the same time, to build confidence in the marketplace and demonstrate the relevance of the Bureau’s work to Canadians in their everyday lives.”
See: Remarks by Melanie Aitken, Commissioner of Competition to the CBA Spring Conference: Focus on Civil.
For the complete Bureau news release in the Bell case see:
For a copy of the consent agreement filed with the Competition Tribunal see:
For more about misleading advertising law in Canada see:
The U.S. Federal Trade Commission has announced that it has filed a $450 million internet fraud civil suit against an Alberta online operator.
According to the FTC, Jesse Willms, an online operator with ten marketing companies, has:
“… raked in more than $450 million from consumers in the United States, Canada, the United Kingdom, Australia, and New Zealand by luring them into ‘free’ or ‘risk-free’ offers, and then charging them for products and services they did not want or agree to purchase. … The defendants used the lure of a ‘free’ offer to open an illegal pipeline to consumers’ credit card and bank accounts.” See: FTC Charges Online Marketers with Scamming Consumers out of Hundreds of Millions of Dollars with “Free” Trial Offers.
The FTC’s complaint alleges, among other things, that Willms and the companies he controls:
- Used deceptive tactics in offering “free trials” for various online products, including acai berry weight-loss pills, teeth whiteners and health supplements.
- Obtained consumers’ credit or debit card account numbers, by enticing them with “bogus ‘free’ or ‘risk-free’ trial offers that supposedly required only small shipping and handling fees, and also promised phony ‘bonus’ offers just for signing up” (and were charged for trial and bonus products plus recurring monthly fees).
- Made false claims about the total cost of products, recurring charges and the availability of refunds.
- Made false weight loss and cancer cure claims in relation to products.
- Provided merchant banks with false or misleading information to acquire and maintain credit and debit card processing services from the banks in light of “mounting chargeback rates and consumer complaints.”
- Concealed important terms and conditions relating to product sales.
According to the FTC, it worked closely with Canadian law enforcement officials, including the federal Competition Bureau, the Royal Canadian Mounted Police, the Alberta Partnership Against Cross Border Fraud and the Edmonton Better Business Bureau.
In Canada, the federal Competition Act contains both civil and criminal provisions dealing with false or misleading representations and also governs a variety of specific forms of marketing conduct including “ordinary selling price” claims, selling above an advertised price, deceptive telemarketing, promotional contests and performance claims.
Generally speaking, the civil misleading advertising provisions of the Act prohibit representations to the public, for the purpose of promoting a product or business interest, that are false or misleading in a material respect. The criminal provisions, which are substantially similar, prohibit false or misleading representations that are made intentionally (i.e., knowingly or recklessly).
Some of the types of claims that have been of concern for Canadian courts and the Competition Bureau in the past include literally false claims, omitting key information relating to the price or terms of sale of products and false claims regarding the performance of products (product performance claims must be supported by “adequate and proper” tests before any claim is made).
As with the FTC claims, the Competition Bureau has also pursued companies for inaccurate use of the term “free” in connection with marketing claims (see: False or Misleading Representations and Deceptive Marketing Practices and Misleading Advertising Guidelines) and has also issued specific guidelines setting out its enforcement position for online marketing and advertising (see: Application of the Competition Act to Representations on the Internet).
As a result of amendments to the Act in 2009, it is also not necessary to show that a misleading claim was made to Canadian consumers or was made in a publicly accessible place. These changes were recently made to address perceived gaps in the Act and to specifically address misleading claims made in Canada targeting foreign consumers (as is alleged in this FTC case, albeit from a U.S. enforcement perspective) and claims originating in places without direct consumer contact (e.g., in the context of online marketing operations).
For copies of the FTC’s complaint and motion for injunction see:
Complaint for Permanent Injunction and Other Equitable Relief
Motion for Preliminary Injunction and Memorandum of Points and Authorities in Support
For Jessie Willms’ news release in reply to the FTC’s allegations see:
For more information about Canadian misleading advertising law see:
Interviewed – dealReporter – Maple/TMX merger (2011)
Business News Network (BNN) – Maple/TMX merger: BNN Interview (2011)
Quoted – Globe and Mail Report on Business: Competition Watchdog presents high hurdles for Maple (2011)
Quoted – Globe and Mail Report on Business: “Aitken an ‘aggressive no nonsense Commissioner’” (2011)
Quoted – Globe and Mail Report on Business: High hurdles face Maple bid from Competition watchdog (2011)
Quoted – CTV News – “Competition watchdog presents high hurdles for Maple” (2011)
“Competition Bureau Steps Up Criminal Price-Fixing Investigations in Canada”, with Christine Duhaime, Business in Vancouver (BIV) (2011)
“New Competition Rules for Trade Associations”, The Lawyers Weekly (2010)
“Canada’s New Competition Law”, REM Magazine (2010)
“Trade associations face tough new competition rules”, The Lawyers Weekly (2010)
Quoted – Fox Business (2010)
Quoted – MSN (2010)
Quoted – Reuters (2010) – China Tells State Companies to Explore Potash Bid
Quoted – Reuters (2010) – Analysis: China Posturing on Potash Sector Deals
Quoted – BusinessDay (2010) – China Anxious to Block Potash Deal
Quoted – “CREA Seeks Settlement Over MLS Policies”, REM Magazine (2009)
Quoted – Globe and Mail Report on Business: Telus sues Rogers over ad claims (November 18, 2009)
“Bureau Appeals Tribunal Decision Allowing Labatt/Lakeport Merger”, Business in Vancouver (2007)
On May 24th, the European Commission announced that it had fined Suez Environment and Lyonnaise des Eaux €8 million for breaching a seal during a regulatory inspection.
In making the announcement, the Commission stated:
“Joaquín Almunia, Vice President of the Commission in charge of competition policy, said: ‘Inspections are a key tool in the fight against cartels as companies rarely voluntarily hand over evidence of anti-competitive practices. Even when a company does give evidence in return for immunity, the Commission must still prove the participation of others, the practices themselves and their duration. It is therefore important that companies do not break seals, which may be necessary when there is more than one office to inspect or a day is not enough.’
From 13 to 16 April 2010 the Commission conducted an inspection at the premises of water management companies in France, including LDE, over suspicions of anti-competitive behaviour (see MEMO/10/134). Coming back the morning of the second day, the Commission officials found that a seal had been broken at LDE’s headquarters. The Commission immediately started an investigation (see IP/10/691). LDE and Suez Environnement admitted that an LDE employee breached the seal, arguing an unintentional act
Breaches of seals are a serious infringement of competition law. The Commission however took into account the immediate and constructive cooperation of Suez Environnement and LDE, which provided more information than was its obligation, when setting the fine.
The investigation into suspected anticompetitive practices in the water and waste water markets is still on-going (see MEMO/10/134).”
Like the European Commission, the Competition Bureau has a wide range of enforcement powers available to it to investigate potential violations of competition law under the Competition Act. These include the power to obtain search warrants, document production orders, orders compelling testimony under oath and wiretaps. The Bureau is increasingly resorting to these powers, particularly in relation to its enforcement priorities that include the detection and investigation of criminal cartels and deceptive and fraudulent marketing.
The Competition Act also contains obstruction provisions, which make it a criminal offence to impede or prevent (or attempt to impede or prevent) inquiries or examinations under the Act[1] (see for example: Morgan Companies Fined $1 Million for Obstruction and Price-fixing).
As such, companies and organizations that may realistically face the prospect of a competition law investigation or search at some point – for example, companies in higher risk industries including construction, oil and gas, trade associations, etc – are well advised to adopt basic search and seizure guidelines to reduce the likelihood of breaching Canadian competition law in the event of a search.
These commonly include guidelines dealing with how to deal with Bureau officials during a search, advising company/organization personnel, the control of information and PR, inspecting the search warrant and reducing the risk of breaching the obstruction provisions of the Act which can lead to additional liability (such as by breaching sealed boxes or rooms or impeding Bureau officers during a search).
For the full news release see: Commission Fines Suez Environnement and Lyonnaise des Eaux €8 Million for the Breach of a Seal During an Inspection.
For more information about the Competition Bureau’s enforcement powers see: Competition Bureau Enforcement.
[1] Obstruction of an inquiry or examination is a criminal offence under the Act, with potential penalties, on summary conviction, of a fine up to $100,000, imprisonment for up to 2 years, or both and, on indictment, an unlimited fine (i.e., in the discretion of the court), imprisonment for up to 10 years, or both (Act, subsections 64(1), (2)). Failure to comply with sections 11 (section 11 orders) or 15 (search warrants) are also criminal offences, with potential penalties, on summary conviction, of a fine up to 100,000, imprisonment for up to 2 years, or both and, on indictment, an unlimited fine (i.e., in the discretion of the court), imprisonment for up to 2 years, or both (Act, subsections 65(1), (2)). In addition, destruction or alteration of records that are sought by the Bureau under section 11 (section 11 orders) or 15 (search warrants) is punishable, on summary conviction, by fines up to 100,000, imprisonment for up to 2 years, or both and, on indictment, by unlimited fines (i.e., in the discretion of the court), imprisonment up to 10 years, or both (Act, subsection 65(3)). The Act also provides that corporate officers, directors or agents may be liable independently of whether a company is prosecuted for a failure to comply (Act, subsection 64(4)).
The Competition Bureau has announced that it has reached a settlement with two spa retailers in relation to allegedly false energy savings claims (see: Spa Retailers Required to Stop Making False ENERGY Star Claims). According to the Bureau, the retailers had made misleading representations incorrectly conveying the impression that their hot tubs or insulation met the criteria of the ENERGY STAR Program.
This case is the most recent example of the Bureau taking action against allegedly false performance claims in the spa retailing sector (see for example: Competition Bureau Takes Action Against Spa Retailers For False Energy Efficiency Claims, Competition Bureau Reaches Further Agreements with Hot Tub Retailers on Unsupported Claims and Competition Bureau Cracks Down on Unsupported Energy Savings Claims). Somewhat curiously, the Bureau has moved from investigating fuel energy savings devices a few years ago to enforcement against the (not immediately clear) evils of spa performance claims.
The Competition Bureau and Canadian Standards Association (CSA) have also jointly published enforcement guidelines addressed specifically to environmental marketing (see: Environmental Claims: A Guide for Industry and Advertisers) which, according to the Bureau, are intended to “provide the business community with the necessary tools to ensure that environmental marketing is not misleading, while providing consumers with greater assurance about the accuracy of environmental claims.”
In making the announcement, the Bureau said:
“Under the terms of a consent agreement filed today with the Competition Tribunal, which has the force of a Tribunal order, “EcoSmart Spas” and “Dynasty Spas”, as well as a director of both retailers, Brent Marsall, have agreed to cease making misleading representations and to pay an administrative monetary penalty of $130,000. Corrective notices will also be published in all stores, and on their Web site, to inform customers of the misleading representations. In addition, a corporate compliance program will be developed and implemented for both retailers. …
On June 29, 2010, the Bureau announced that it had filed an application with the Competition Tribunal seeking to prohibit Mr. Marsall and his companies from making claims that the products were eligible for ENERGY STAR certification. The ENERGY STAR Program is an international standard for energy efficient and environmentally friendly consumer products. No hot tubs, spas, or insulation products for sale in Canada are eligible for certification by, or in association with, the ENERGY STAR Program.
Since announcing a crackdown on unsupported energy savings claims in June 2009, the Bureau has reached agreements with all Canadian hot tub and spa retailers identified as having made similar false or misleading claims, except EcoSmart Spas and Dynasty Spas. The Bureau was forced to start enforcement action against Mr. Marsall, EcoSmart Spas and Dynasty Spas. The consent agreement resolves the matter with respect to these final violations.
Canadian and American government agencies cooperated in the Bureau’s investigation. This includes the United States Environmental Protection Agency, which owns and manages the ENERGY STAR Program, and the Office of Energy Efficiency of Natural Resources Canada, which administers the program in Canada.”
While misleading advertising and deceptive marketing practices are (and generally have been) an enforcement priority for the Competition Bureau, it has frequently focused on false performance claims made by distributors and retailers to ground its claims. In this regard, false product performance claims can violate the “general” criminal (section 52) or civil (section 74.01) misleading advertising provisions of the Competition Act (i.e., where a claim is either literally false merely the “general impression” of a performance claim is misleading).
The Competition Act also prohibits false performance claims (prohibiting 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”), which can be particularly relevant to the advertising and marketing of products where the speed, efficiency or other performance is a key marketing component.
While performance claims themselves are not prohibited, any testing or verification must be conducted before a claim is made and the onus, if challenged, is on the person making the claim to show that it is based on an “adequate and proper test”. As such, while performance claims are a common and often legitimate means to distinguish products from competitors, it is important that proper testing be performed (or appropriate statistics or support are obtained) before performance claims are made.
In this regard, the Competition Tribunal recently held that a non-exhaustive list of factors are relevant to determine whether testing is “adequate and proper”. In Canada (Commissioner of Competition) v. Imperial Brush Co. (2008), 2008 Comp. Trib. 2 (Comp. Trib.), the Tribunal held:
“[i]n summary, and in respect of this case, I conclude that a ‘proper and adequate’ test depends on the claim made as understood by the common person; must be reflective of the risk or harm which the product is designed to prevent or assist in preventing; must be done under controlled circumstances or in conditions which exclude external variables or take account in a measurable way for such variables; are conducted on more than one independent sample wherever possible; results need not be measured against a test of certainty but must be reasonable given the nature of the harm at issue and establish that it is the product itself which causes the desired effect in a material manner; and must be performed regardless of the size of the seller’s organization or the anticipated volume of sales.”
In order to be “adequate and proper”, however, testing does not need to be 100% reliable or the best scientific testing that could have been performed (i.e., testing does not need to meet a test of certainty).
For more information about misleading advertising law in Canada see: Misleading Advertising, Misleading Advertising FAQs and Misleading Advertising News.
The Competition Bureau announced earlier today that it has commenced legal proceedings against Rogers to stop what, according to the Bureau, constitutes misleading advertising in connection with Rogers’ Chatr discount cell phone service.
In making the announcement, the Bureau said:
“Rogers’ Canada-wide advertising campaign claims that consumers subscribing to Rogers’ Chatr brand would experience “fewer dropped calls than new wireless carriers” and have “no worries about dropped calls”.
The Bureau’s investigation, which involved an extensive review of technical data, obtained from a number of sources, led the Bureau to conclude that there is no discernible difference in dropped call rates between Rogers/Chatr and new entrants.
“We take misleading advertising very seriously,” said Melanie Aitken, Commissioner of Competition. “Consumers deserve accurate information when making purchasing decisions and need to have confidence they are not being misled by false advertising campaigns.”
The Government of Canada opened up the domestic cell phone market in 2008 with a spectrum auction that made additional frequencies available to new wireless service providers.”
The legal proceedings begun by the Bureau are being brought in the Ontario Superior Court of Justice. In its claim, the Bureau is seeking an order that Rogers: (i) stop its advertising campaign, (ii) pay an administrative monetary penalty of $10 million, (iii) pay restitution to affected customers and (iv) issue a corrective notice.
The Bureau’s announcement follows 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).
The proceedings commenced against Rogers appear to be based on complaints made by Wind Mobile about Rogers advertising claims for its Chatr brand. For example, the Globe and Mail reported that Wind Mobile had filed a complaint with the Bureau and quoted Wind Mobile’s Chairman Anthony Lacavera as saying 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.” See: Wind Mobile Files Competition Bureau Complaint Against Rogers.
In this regard, the Commissioner of Competition, Melanie Aitken, stated:
“The spectrum auction was intended to enhance competition in the wireless sector,” Ms. Aitken said. “New entrants attempting to gain a foothold in the market should not be discredited by misleading claims made by their competitors.”
The Bureau’s recent announcement, with allegations against Rogers that have not been proven, is a sober reminder of the new penalties for misleading advertising under the Competition Act, which were enacted as part of sweeping amendments to the Act in 2009. As a result of the amendments, significantly increased penalties for civil false or misleading representations were 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.
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”).
Promotional contests in Canada are primarily governed by the Competition Act, the Criminal Code, privacy legislation (Personal Information Protection and Electronic Documents Act, PIPEDA) and the common law of contract.
In addition, Quebec has separate legislation that applies to promotional contests (the Act respecting lotteries, publicity contests and amusement machines). As such, promotional contest law in Canada is combination of federal and provincial regulatory law, criminal law and common law contract law.
Moreover, given that the improper operation of a promotional contest can lead to civil and/or criminal liability under the Competition Act, the Criminal Code, based on a contractual (i.e., common law) challenge or failure to comply with Quebec legislative requirements, it is critical to review proposed promotional contests for legal compliance. Failure to properly structure a promotional contest in Canada can have disastrous consequences.
For example, a Manitoba real estate investment company recently paid a penalty of more than $150,000 for operating a promotional contest allegedly in contravention of the promotional contest provisions of the Act. See: Resort Company Penalized for Running Misleading Contests.
Competition Act
Short Rules
The Competition Act for the most part requires that certain disclosure be made when conducting “any contest, lottery, game of chance or skill, or mixed chance and skill, or otherwise disposes of any product or other benefit …” Some of the key requirements under the Act include: (i) disclosing the number and approximate value of prizes, (ii) disclosing the area (or areas) to which they relate and (iii) any fact that may materially affect the odds of winning. In addition, the Act provides that the distribution of prizes cannot be unduly delayed.
As a result of the disclosure requirements set out in the Act, most contest organizers provide a short version of a contest’s terms (frequently referred to as “short rules”) in all point-of-purchase materials regardless of media (i.e., in all print, online and other electronic media), with a full version of the contest rules available on request (and often on the contest organizer’s website). Point-of-purchase disclosure often includes the number and approximate value of prizes, any regional allocation, the skill testing question requirement, information relating to the odds of winning, the closing date for the contest and information relating to the odds of winning.
While short, and usually straightforward, it is critical that the required statutory disclosure be drafted precisely and correctly. It is also important that the timing for the launch of a contest and promotional materials ensure that the necessary disclosure be included in all public marketing materials.
General Misleading Advertising Provisions
In addition to specific rules relating to promotional contests, the “general misleading advertising” provisions of the Competition Act also apply to the operation of promotional contests, and should not be underestimated.
In this regard, the criminal and civil false or misleading representation provisions of the Competition Act prohibit representations to the public, for the purpose of promoting a product or any business interest, that is false or misleading in a material respect. The penalties for contravention of the misleading advertising provisions of the Competition Act can also be severe, including civil fines of up to $750,000 (for individuals) and $10 million (for corporations) and orders to cease the conduct, publish corrective notices or make restitution to consumers.
In sum, the penalties under the Competition Act can be significant if you don’t get a contest right. For example, a Manitoba real estate investment company recently paid a penalty of more than $150,000 for operating a promotional contest allegedly in contravention of the promotional contest provisions of the Act. See: Resort Company Penalized for Running Misleading Contests.
As such, it is important that the terms of promotional contests (i.e., short rules, long rules and any other advertising or marketing materials) not be false or misleading in a material respect (i.e., do not raise issues under the general misleading advertising provisions of the Competition Act, which means that in addition to the detailed statutory disclosure, the overall impression of contest claims must practically be considered as part of a review).
Internet Contests & Promotions – Special Considerations
The Competition Bureau also takes the position that the promotional contest provisions of the Competition Act, as well as the general misleading advertising provisions, apply to Internet marketing and advertising (see:Application of the Competition Act to Representations on the Internet (Enforcement Guidelines)). In this regard, the Bureau states that special considerations may apply in the online environment to ensure that the required statutory disclosure for promotional contests is met:
“Pursuant to section 74.06 of the Act, in contests designed to promote a product or business interest, adequate and fair disclosure must be made of certain information, including facts which materially affect the chances of winning. … The Bureau takes the position that all required disclosures must be displayed in such a way that they are likely to be read. In the context of representations made on-line, what is considered adequately displayed will depend on the format and design of the Web site. For example, a notice of a contest should not require readers to take an active step, such as sending an e-mail or placing a phone call, in order to obtain the required information. The Bureau does not consider clicking on a clearly labelled hyperlink as being an ‘active step.’”
Criminal Code
In addition to the promotional contest provisions in the Competition Act, the federal Criminal Code also governs promotional contests in Canada (sections 206 and 207 of the Code). In particular, the Criminal Codemakes it a criminal offence to operate illegal lotteries.
While the relevant provisions of the Criminal Code are complex and somewhat archaic, in general an illegal lottery consists of: (i) a prize, (ii) chance and (iii) consideration (i.e., something of value provided by contestants as a condition for eligibility or participation in a contest).
Based on the Criminal Code requirements, promotional contest organizers often remove either the consideration element (e.g., providing that “no purchase is necessary”), 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 Criminal Code.
It is worth noting, however, that the determination of what constitutes “consideration” and “chance” can be challenging and complex in some cases, and that what little case law exists is inconsistent and old.
Common Law of Contract
In addition to the regulatory requirements set out in the federal Competition Act and Criminal Code, promotional contests have also been held to be contracts. For this reason, promotional contests are also governed by the common law of contract in Canada.
As such, in addition to ensuring compliance with the statutory requirements of the Competition Act and Criminal Code, as well as Quebec legislation if applicable and privacy legislation, it is also important that the terms and conditions of a promotional contest be carefully structured to reduce potential contractual liability.
This includes a careful review of short rules, long rules and winner release documentation (e.g., winner release forms) to ensure that the terms are precise, enforceable and to reduce the likelihood of a credible contractual challenge. As well, potential technical problems and other contingencies should also be addressed, including in relation to unavailability of prizes as disclosed, technical problems relating to the operation of the contest (e.g., computer, Internet or server issues), as well as typically giving contest organizers broad and unilateral discretion to resolve contingencies that may arise.
Privacy Legislation
Canadian privacy legislation also applies to promotional contests. In this regard, contest organizers should be cognizant of federal privacy legislative requirements under PIPEDA, which include requiring consent for the collection, use, storage and disclosure of personal information collected in relation to the operation of a contest. Such requirements may include, for example, advising contestants of how their personal information will be used, as well as the contest organizer’s practices and policies in relation to the security (and destruction) of contestants’ personal information once a contest has closed.
Conclusion & Practical Considerations
As promotional contests in Canada are, generally speaking, governed by the Competition Act, Criminal Code, contract law, privacy law and Quebec regulation if operated in Quebec, it is critical that promotional contest documentation and marketing materials (e.g., point-of-purchase marketing) be prepared with care, and to ensure that the key legal requirements are met.
Some of the key practical aspects in effectively designing a promotional contest in Canada, and to avoid disasters, include attention and care in the drafting of mandatory short rules (short statutory disclosure required under the Competition Act), long rules (which raise many similar issues as drafting effective contracts), reviewing all print and electronic disclosure to ensure that the statutory disclosure requirements are met (and that no significant misleading advertising issues are raised) and that the basic, but important, requirements of the Criminal Code are met (including removing either the chance element, consideration element, or both).
In sum, while the basic law of promotional contests is Canada is not generally complex, the devil is in the details and it is critical that care be taken to ensure that all of the key legal requirements are met.
RECENT CANADIAN PROMOTIONAL CONTEST CASES
On November 23, 2009 the Competition Bureau announced that Elkhorn Ranch & Resort Ltd., a Manitoba-based company that sells vacation property time shares, agreed to pay Cdn. $170,000 for operating promotional contests in alleged contravention of the promotional contest provisions of the federal Competition Act. In its News Release, the Bureau stated:
“After conducting an investigation into Elkhorn’s 2006 and 2007 promotional contests, the Bureau concluded that the company had run contests without fair disclosure of accurate odds of winning and without ensuring that winners were selected on a random basis. Elkhorn’s contests also gave the misleading impression that the grand prize was a brand new SUV, when the prize, if awarded, was a one or two–year lease on an SUV, with stringent conditions. The contests were primarily associated with the marketing of Elkhorn’s time share properties in Western Canada. Consumers were solicited by phone, at trade shows and at time share presentations.”
As part of its settlement with the Bureau, under a consent agreement with the Bureau, Elkhorn is required to: (i) pay an administrative monetary penalty of $150,000, (ii) pay the costs of the Bureau’s investigation in the amount of $20,000, (iii) ensure that all of its future contests are conducted fairly and with full disclosure, (iv) publish corrective notices in select newspapers and on its websites and (v) adopt a corporate compliance program to ensure compliance with the deceptive marketing provisions of the Competition Act.
In addition to general misleading advertising provisions, the Competition Act also contains a number of other provisions that regulate a range of marketing activities including bait and switch selling, selling above advertised price, multi-level marketing plans, pyramid selling schemes, deceptive telemarketing and the “ordinary selling price” provisions (dealing with sales) and promotional contests.
While enforcement of the promotional contest rules under the Competition Act is relatively uncommon, the Bureau does commence investigations for breaches of these rules from time to time and this most recent case is a sober reminder of the potential dangers of being offside the rules. It is also worth noting that, as a result of recent amendments, the penalties for contravention of the civil false or misleading representation provisions of the Competition Act have also been significantly increased to up to $750,000 (for individuals) and $10 million (for corporations) (and higher for subsequent orders).
The Canadian Commissioner of Competition recently addressed the Canadian Bar Association Fall Competition Law Conference.
Her recent remarks, about a year and a half following the most significant amendments to the Competition Act since 1986 and in some cases since competition law was adopted in Canada, provide a bit of a road map to the Bureau’s enforcement priorities. Her remarks also contain a few surprises.
The following are some of the highlights:
Mergers
Perhaps somewhat predictably, the Commissioner indicated satisfaction with Canada’s new U.S.-style two-stage merger control process, and in particular the Bureau’s increased ability to control the merger review process and timetable (as a result of Canada’s adoption of a second phase review process and supplementary information request powers for the Bureau).
The Commissioner also indicated that, with respect to mergers, the Bureau has a genuine interest in narrowing second requests for information by “refining” its practice of pre-issuance dialogue with merging parties. Interestingly, the Commissioner said that since the 2009 Competition Act amendments, the Bureau has issued ten supplementary information requests to merging parties (out of more than 300 pre-merger notification filings).
The Commissioner also described the Bureau’s recently announced public consultations, with a view to updating its Merger Enforcement Guidelines (not updated since 2004).
Cartels
On the criminal side, the Commissioner focused on Canada’s new criminal conspiracy regime, saying that the Bureau was “seizing the opportunity” to begin work under the new criminal conspiracy rules (which have resulted in a lower enforcement burden and significantly increased penalties). The Commissioner said: “… we are working to move from a jurisdiction often disproportionately focused on pleas – especially with respect to international cartels – to one that is appropriately aggressive in using our new tools to ensure that consumers and those who carry on business in Canada can be confident that the criminality of this activity is recognized.” While the Commissioner’s enforcement remarks are not new, and accord with the Bureau’s longstanding view that cartels are a top enforcement priority, the Bureau’s work became significantly easier following the coming into force of Canada’s new conspiracy regime earlier this year.
The Commissioner also emphasized the Bureau’s increasing reliance on wiretaps and other powers in criminal investigations under the Competition Act, as well as its interest in promoting the Bureau’s formal Immunity and Leniency Programs. In this regard, the Bureau recently issued its new Leniency Bulletin, which outlines the factors and principles the Bureau considers in making a leniency recommendation to the Public Prosecution Services for leniency from sentencing for criminal offences committed under the Act.
Perhaps most importantly, the Commissioner also referred to the Bureau’s recent issuance of its Competitor Collaboration Guidelines, which set out the Bureau’s enforcement approach to collaborations between actual and potential competitors. While the Commissioner remarked that the Bureau could not simply “flick a switch” to interpret Canada’s new cartel regime in light of the new guidelines, there has been significant debate as to how the new conspiracy rules will be applied by Canadian courts and the Bureau in reality to a wide variety of commercial agreements including joint ventures, franchise and licensing arrangements, non-compete provisions in commercial agreements and collective purchasing arrangements. Perhaps most challenging for Canadian courts and the Bureau under the new rules will be determining whether some forms of agreements and restraints that are not clearly harmful at the outset (i.e., without further analysis) should be reviewed under section 45 (criminal conspiracy offences) or 90.1 (the new civil agreements provision). These include, for example, standard setting agreements (or agreements to fix product quality), group boycott arrangements and a variety of restrictions that can arise in common commercial activities (e.g., trade association activities).
Enforcement
With respect to enforcement, the Commissioner made several interesting points, including the fact that the Bureau currently has 42 ongoing criminal investigations underway and that it was investigating a number of cases under the new civil agreements provision of the Act (section 90.1). The Commissioner also took a stronger stance than in the recent memory on abuse of dominance as an enforcement priority, saying that “pursuing abuse of dominance cases and seeking to provide clarity on [the Bureau’s] enforcement approach to section 90.1” were Bureau priorities.
The Commissioner also referred to recent enforcement efforts against retailers making unsupported environmental claims, and described the recent record $15 million fine against a Toronto business directory marketing company.
For a copy of the Commissioner’s speech, see: Remarks by Melanie L. Aitken, Commissioner of Competition, to CBA Annual Fall Competition Law Conference.
Promotional contests can be a fun, entertaining and commercially effective way to market an existing or new product. They are also common and straightforward right? Well, not quite.
One recent online contest that we saw looked great at first blush, but on closer review revealed a number of key legal defects. While in this case the contest rules were literally less than a half page in length, there were a number of issues that could result in the organizers facing competition, contract or regulatory law liability.
The following are ten things we saw in the contest that were either unlawful or could have been improved to reduce potential liability for the contest organizers.
Number of prizes
The Competition Act sets out certain required disclosure for promotional contests. This includes “adequate and fair disclosure” of the number and approximate value of the prizes. The online contest we recently saw disclosed neither.
Odds of winning
The Competition Act also requires the disclosure of “any fact within the knowledge of the person that affects materially the chance of winning” (i.e., requires that the odds of winning be disclosed). The online contest didn’t disclose any odds of winning and, in fact, was unclear as to how exactly an entrant could win the contest (which also raises misleading advertising issues).
Regional allocation of prizes
Where there is a regional allocation of prizes (e.g., one prize per province, etc.), this must also be disclosed. While the online contest we saw said that the contest was open to residents of Canada and the United States, it was not clear whether or not there was any regional allocation of prizes.
Open to Quebec residents?
Another important element for contest organizers to consider is whether a contest is to be open to all of Canada or Canada excluding Quebec. The reason this is important is because Quebec has distinct and standalone regulatory requirements for promotional contests that can, if adequately complied with raise the cost of designing a contest and, if not complied with, potentially lead to liability. The online contest we recently saw was unclear whether Quebec contest requirements had been complied with (despite the fact that the contest stated that it was open to residents of “Canada” and the United States). As a practical matter, contest organizers that wish to avoid the additional regulatory expense of complying with Quebec’s requirements typically exclude Quebec (e.g., “Contest is open to Canadian residents excluding Quebec”).
Open to minors?
The online contest we recently saw also did not address minors. Contest organizers will often specify that a contest is only open to contestants that are of age of majority. This is because, as contests have been held to be contracts, minors cannot contract (and may have the right, depending on the jurisdiction, to avoid a contract if entered). While in some cases it may not matter much whether a legally binding contract is achieved with a contestant, in others ensuring that there is an enforceable contract may be very important (e.g., in the case of a significant prize or a contest that could lead to significant liability for the organizer if the contest goes wrong – a water drinking contest where a contestant died comes to mind).
Intellectual property issues
It is also sometimes important to give some consideration to intellectual property issues (i.e., copyright and trade-mark issues), particularly if another company’s trade-marks, images or products may be mentioned or awarded as prizes. In the contest we recently saw online, Apple iPads were to be given away as prizes and images of iPads were included in the promotional materials (though it was not clear if, for example, the Apple product images were being reproduced with permission or if consent from Apple had been obtained).
Delay awarding prizes
The online contest we recently saw also stated that prizes would be awarded within 60 days. While this may not necessarily be a problem, the Competition Act requires that distribution of prizes in a promotional contest not be “unduly delayed”. As such, it is prudent for contest organizers to ensure that prizes are awarded according to the contest’s rules and awarded promptly. In this regard, the 60 day time-frame for award of prizes made us a little uneasy.
Open to U.S. residents
The online contest also stated that it was “open to residents of Canada and the United States”. This is a risky proposition, unless the contest has been vetted in the various U.S. states. While in Canada, the regulation of contests is generally at the federal level (governed for the most part, though not exclusively, by the Competition Act and Criminal Code), both in Canada and the U.S. other local laws apply. As such, prudent contest organizers will frequently either have a contest vetted in all the jurisdictions in which it is open, or exclude those in which it has not (e.g., “Contest is only open to residents of Canada, excluding Quebec”).
No long rules
Finally, the online contest we recently saw indicated that the “short rules” on the bottom of the promotional materials were the rules, the whole rules and nothing but the rules. This is also a potential source of risk, given that contest organizers commonly include short rules (for marketing and point-of-purchase materials), long rules (to attempt to cover off as many potential liability and contractual issues as possible) and winner release forms. In this particular case, shorter is not necessarily better.
For more about Canadian contest law see: Promotional Contest Law in Canada.
Our Services
We practice in all areas of Canadian competition law including mergers, criminal conspiracies and competitor collaborations (e.g., joint ventures and strategic alliances), Competition Bureau investigations, misleading advertising and competition law compliance. We also regularly counsel marketing clients on the preparation of promotional contests to comply with Canadian laws and reduce the potential pitfalls and liability that can result from a poorly designed contest.
What Law Governs Promotional Contests in Canada?
Promotional contests in Canada are primarily governed by the Competition Act, the Criminal Code, privacy legislation (Personal Information Protection and Electronic Documents Act, PIPEDA) and the common law of contract. In addition, Quebec has separate legislation that applies to promotional contests (the Act respecting lotteries, publicity contests and amusement machines). As such, promotional contest law in Canada is combination of federal and provincial regulatory law, criminal law and common law contract law.
What are the Potential Penalties for Non-compliance?
The improper operation of a promotional contest can lead to civil and/or criminal liability under the Competition Act, the Criminal Code, based on a contractual (i.e., common law) challenge or failure to comply with Quebec legislative requirements, it is critical to review proposed promotional contests for legal compliance.
The penalties for contravention of the misleading advertising provisions of the Competition Act can also be severe, including civil fines of up to $750,000 (for individuals) and $10 million (for corporations) and orders to cease the conduct, publish corrective notices or make restitution to consumers.
For example, a Manitoba real estate investment company recently paid a penalty of more than $150,000 for operating a promotional contest allegedly in contravention of the promotional contest provisions of the Act. See: Resort Company Penalized for Running Misleading Contests.
What Provisions of the Competition Act Apply to Contests?
The Competition Act for the most part requires that certain disclosure be made when conducting “any contest, lottery, game of chance or skill, or mixed chance and skill, or otherwise disposes of any product or other benefit …” Some of the key requirements under the Act include: (i) disclosing the number and approximate value of prizes, (ii) disclosing the area (or areas) to which they relate and (iii) any fact that may materially affect the odds of winning. In addition, the Act provides that the distribution of prizes cannot be unduly delayed.
What are Short Rules? Are they Mandatory?
As a result of the disclosure requirements set out in the Act, most contest organizers provide a short version of a contest’s terms (frequently referred to as “short rules”) in all point-of-purchase materials regardless of media (i.e., in all print, online and other electronic media), with a full version of the contest rules available on request (and often on the contest organizer’s website). Point-of-purchase disclosure often includes the number and approximate value of prizes, any regional allocation, the skill testing question requirement, information relating to the odds of winning, the closing date for the contest and information relating to the odds of winning.
While short, and usually straightforward, it is critical that the required statutory disclosure be drafted precisely and correctly. It is also important that the timing for the launch of a contest and promotional materials ensure that the necessary disclosure be included in all public marketing materials.
Do Other Competition Act Provisions Apply to Contests?
Yes. In addition to specific rules relating to promotional contests, the “general misleading advertising” provisions of the Competition Act also apply to the operation of promotional contests, and should not be underestimated.
What is the Scope of the Competition Act’s Misleading Advertising Provisions?
In this regard, the criminal and civil false or misleading representation provisions of the Competition Act prohibit representations to the public, for the purpose of promoting a product or any business interest, that is false or misleading in a material respect. The penalties for contravention of the misleading advertising provisions of the Competition Act can also be severe, including civil fines of up to $750,000 (for individuals) and $10 million (for corporations) and orders to cease the conduct, publish corrective notices or make restitution to consumers.
What are the Potential Penalties for Contravening the Competition Act?
The penalties under the Competition Act can be significant if you don’t get a contest right. For example, a Manitoba real estate investment company recently paid a penalty of more than $150,000 for operating a promotional contest allegedly in contravention of the promotional contest provisions of the Act. See: Resort Company Penalized for Running Misleading Contests.
As such, it is important that the terms of promotional contests (i.e., short rules, long rules and any other advertising or marketing materials) not be false or misleading in a material respect (i.e., do not raise issues under the general misleading advertising provisions of the Competition Act, which means that in addition to the detailed statutory disclosure, the overall impression of contest claims must practically be considered as part of a review).
Does Canadian Competition Law Apply to the Internet?
Yes. The Competition Bureau also takes the position that the promotional contest provisions of the Competition Act, as well as the general misleading advertising provisions, apply to Internet marketing and advertising (see: Application of the Competition Act to Representations on the Internet (Enforcement Guidelines)). In this regard, the Bureau states that special considerations may apply in the online environment to ensure that the required statutory disclosure for promotional contests is met:
“Pursuant to section 74.06 of the Act, in contests designed to promote a product or business interest, adequate and fair disclosure must be made of certain information, including facts which materially affect the chances of winning. … The Bureau takes the position that all required disclosures must be displayed in such a way that they are likely to be read. In the context of representations made on-line, what is considered adequately displayed will depend on the format and design of the Web site. For example, a notice of a contest should not require readers to take an active step, such as sending an e-mail or placing a phone call, in order to obtain the required information. The Bureau does not consider clicking on a clearly labelled hyperlink as being an ‘active step.’”
What Criminal Code Provisions Apply to Contests?
In addition to the promotional contest provisions in the Competition Act, the federal Criminal Code also governs promotional contests in Canada (sections 206 and 207 of the Code). In particular, the Criminal Code makes it a criminal offence to operate illegal lotteries.
What is an Illegal Lottery?
While the relevant provisions of the Criminal Code are complex and somewhat archaic, in general an illegal lottery consists of: (i) a prize, (ii) chance and (iii) consideration (i.e., something of value provided by contestants as a condition for eligibility or participation in a contest).
Why is a “No Purchase Necessary” Option Typically Included? Why is a Skill-testing Question Requirement also typically Included?
Based on the Criminal Code provisions prohibiting illegal lotteries, promotional contest organizers often remove either the consideration element (e.g., providing that “no purchase is necessary”), 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 Criminal Code.
It is worth noting, however, that the determination of what constitutes “consideration” and “chance” can be challenging and complex in some cases, and that what little case law exists is inconsistent and old.
Are Contests Contracts? If So, What are the Legal Requirements?
In addition to the regulatory requirements set out in the federal Competition Act and Criminal Code, promotional contests have also been held to be contracts. For this reason, promotional contests are also governed by the common law of contract in Canada.
As such, in addition to ensuring compliance with the statutory requirements of the Competition Act and Criminal Code, as well as Quebec legislation if applicable and privacy legislation, it is also important that the terms and conditions of a promotional contest be carefully structured to reduce potential contractual liability.
This includes a careful review of short rules, long rules and winner release documentation (e.g., winner release forms) to ensure that the terms are precise, enforceable and to reduce the likelihood of a credible contractual challenge. As well, potential technical problems and other contingencies should also be addressed, including in relation to unavailability of prizes as disclosed, technical problems relating to the operation of the contest (e.g., computer, Internet or server issues), as well as typically giving contest organizers broad and unilateral discretion to resolve contingencies that may arise.
Does Canadian Privacy Law Apply to Contests?
Yes. Canadian privacy legislation also applies to promotional contests. In this regard, contest organizers should be cognizant of federal privacy legislative requirements under PIPEDA, which include requiring consent for the collection, use, storage and disclosure of personal information collected in relation to the operation of a contest. Such requirements may include, for example, advising contestants of how their personal information will be used, as well as the contest organizer’s practices and policies in relation to the security (and destruction) of contestants’ personal information once a contest has closed.
What are Some of the Key Legal Points for Promotional Contests in Canada?
As promotional contests in Canada are, generally speaking, governed by the Competition Act, Criminal Code, contract law, privacy law and Quebec regulation if operated in Quebec, it is critical that promotional contest documentation and marketing materials (e.g., point-of-purchase marketing) be prepared with care, and to ensure that the key legal requirements are met.
Some of the key practical aspects in effectively designing a promotional contest in Canada, and to avoid disasters, include attention and care in the drafting of mandatory short rules (short statutory disclosure required under the Competition Act), long rules (which raise many similar issues as drafting effective contracts), reviewing all print and electronic disclosure to ensure that the statutory disclosure requirements are met (and that no significant misleading advertising issues are raised) and that the basic, but important, requirements of the Criminal Code are met (including removing either the chance element, consideration element, or both).
In sum, while the basic law of promotional contests is Canada is not generally complex, the devil is in the details and it is critical that care be taken to ensure that all of the key legal requirements are met.
Are There any Examples of Recent Promotional Contest Cases?
Yes. On November 23, 2009 the Competition Bureau announced that Elkhorn Ranch & Resort Ltd., a Manitoba-based company that sells vacation property time shares, agreed to pay Cdn. $170,000 for operating promotional contests in alleged contravention of the promotional contest provisions of the federal Competition Act. In its News Release, the Bureau stated:
“After conducting an investigation into Elkhorn’s 2006 and 2007 promotional contests, the Bureau concluded that the company had run contests without fair disclosure of accurate odds of winning and without ensuring that winners were selected on a random basis. Elkhorn’s contests also gave the misleading impression that the grand prize was a brand new SUV, when the prize, if awarded, was a one or two–year lease on an SUV, with stringent conditions. The contests were primarily associated with the marketing of Elkhorn’s time share properties in Western Canada. Consumers were solicited by phone, at trade shows and at time share presentations.”
As part of its settlement with the Bureau, under a consent agreement with the Bureau, Elkhorn is required to: (i) pay an administrative monetary penalty of $150,000, (ii) pay the costs of the Bureau’s investigation in the amount of $20,000, (iii) ensure that all of its future contests are conducted fairly and with full disclosure, (iv) publish corrective notices in select newspapers and on its websites and (v) adopt a corporate compliance program to ensure compliance with the deceptive marketing provisions of the Competition Act.
In addition to general misleading advertising provisions, the Competition Act also contains a number of other provisions that regulate a range of marketing activities including bait and switch selling, selling above advertised price, multi-level marketing plans, pyramid selling schemes, deceptive telemarketing and the “ordinary selling price” provisions (dealing with sales) and promotional contests.
While enforcement of the promotional contest rules under the Competition Act is relatively uncommon, the Bureau does commence investigations for breaches of these rules from time to time and this most recent case is a sober reminder of the potential dangers of being offside the rules. It is also worth noting that, as a result of recent amendments, the penalties for contravention of the civil false or misleading representation provisions of the Competition Act have also been significantly increased to up to $750,000 (for individuals) and $10 million (for corporations) (and higher for subsequent orders).
PROMOTIONAL CONTEST AND MISLEADING ADVERTISING LINKS & RESOURCES
Competition Bureau Guidelines
Application of the Competition Act to Representations on the Internet (Enforcement Guidelines)
Bait and Switch Selling (Pamphlet)
Consumer Packaging and Labelling Act
Consumer Rebate Promotions (Enforcement Guidelines)
Deceptive Notices of Winning a Prize (Enforcement Guidelines)
Deceptive Prize Notices (Pamphlet)
Enforcement Guidelines for “Product of Canada” and “Made in Canada” Claims
False or Misleading Representations and Deceptive Marketing Practices (Pamphlet)
Guidance on Labelling Textile Articles Derived From Bamboo (Enforcement Guidelines)
Guide for the Labelling and Advertising of Pet Foods
Guide to the Consumer Packaging and Labelling Act
Guide to the Textile Labelling and Advertising Regulations
Misleading Representations (Pamphlet)
Multi-level Marketing Plans and Schemes of Pyramid Selling (Enforcement Guidelines)
Multi-level Marketing and Pyramid Selling (Pamphlet)
Multi-level Marketing and the Competition Act (Multi-media)
Ordinary Price Claims: Subsections 74.01(2) and 74.01(3) (Enforcement Guidelines)
The Ordinary Selling Provisions of the Competition Act (Bulletin)
Promotional Contests (Pamphlet)
Promotional Contests – Section 74.06 (Enforcement Guidelines)
Telemarketing: Section 52.1 of the Competition Act (Enforcement Guidelines)
Understanding How the Ordinary Selling Provisions of the Competition Act Apply to Your Business
What You Should Know About Telemarketing (Pamphlet)
Federal & Provincial Legislation
Act respecting lotteries, publicity contests and amusement machines (Quebec)
OUR SERVICES
We offer a full range of promotional contest law services and have assisted clients design and operate many promotional contests, including assistance with the preparation of short rules, long rules, statutory disclosure, winner release documentation and print and online marketing in compliance with the Competition Act and federal Criminal Code. Our promotional contest services include:
- Application of the Competition Act and Criminal Code to promotional contests.
- Drafting short and long contest rules.
- Drafting required statutory point-of-purchase disclosure.
- Reviewing promotional contest marketing and advertising materials.
- Drafting winner release documentation.
- Compliance with the misleading advertising provisions of the Competition Act.
CONTACT US
We provide a full range of Canadian competition/antitrust law and consulting services to domestic and international clients. Contact Us
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.
Misleading Advertising & Deceptive Marketing – Links & Resources
For more information about misleading advertising and deceptive marketing law in Canada see:
Misleading Advertising, Bait and Switch Selling (Pamphlet), Consumer Packaging and Labelling Act, Consumer Rebate Promotions (Enforcement Guidelines), Deceptive Notices of Winning a Prize (Enforcement Guidelines), Deceptive Prize Notices (Pamphlet), Enforcement Guidelines for “Product of Canada” and “Made in Canada” Claims, False or Misleading Representations and Deceptive Marketing Practices (Pamphlet), Guidance on Labelling Textile Articles Derived From Bamboo (Enforcement Guidelines), Guide for the Labelling and Advertising of Pet Foods, Guide to the Consumer Packaging and Labelling Act, Guide to the Textile Labelling and Advertising Regulations, Misleading Representations (Pamphlet), Misleading Representations and Deceptive Marketing Practices: Choice of Criminal or Civil Track (Bulletin), Multi-level Marketing Plans and Schemes of Pyramid Selling (Enforcement Guidelines), Multi-level Marketing and Pyramid Selling (Pamphlet), Multi-level Marketing and the Competition Act (Multi-media), Ordinary Price Claims: Subsections 74.01(2) and 74.01(3) (Enforcement Guidelines), The Ordinary Selling Provisions of the Competition Act (Bulletin), Promotional Contests (Pamphlet), Promotional Contests – Section 74.06 (Enforcement Guidelines), Telemarketing: Section 52.1 of the Competition Act (Enforcement Guidelines), Textile Labelling Act, Understanding How the Ordinary Selling Provisions of the Competition Act Apply to Your Business, What You Should Know About Telemarketing (Pamphlet).
CONTACT US
We provide a full range of Canadian competition/antitrust law and consulting services to domestic and international clients. Contact Us.
Earlier today, the Competition Bureau announced that it was participating, together with members of the International Consumer Protection and Enforcement Network (ICPEN), in a joint Internet advertising sweep, focused on fraudulent and deceptive advertising on social media sites. In making its announcement, the Bureau said:
“More than 16 million Canadians are active users of social media sites. Marketers and advertisers have targeted these platforms. The international sweep is designed to identify unscrupulous fraudsters who may use social media sites to target those most likely to fall victim to their scams.
Here are some tips on how to avoid getting caught up in an Internet scam: be vigilant when evaluating ads, sending money or giving credit card or account details; know who you are dealing with. Be aware of any unsolicited phone calls, emails, text messages or letters from unknown sources; search for the company, the individuals, the product or the offer on the Internet and verify any contact and company details; trustworthy businesses will rarely contact you, particularly by email, phone or text message, to ask for personal details, banking or financial information; keep in mind that wiring money is like sending cash – the sender has no protection against loss; beware of ads that promise too much – if it sounds to good to be true, it probably is!
Consumers should also take measures to protect themselves in the online environment. It is important to install reputable computer security software and keep it up to date. Use a spam filter and a firewall to avoid malicious software damaging your computer and stealing your personal information. Consumers should also avoid clicking on links to Web sites contained in unsolicited emails or online messages.”
This latest Internet sweep by the Bureau is a reminder that the general misleading advertising provisions of the Competition Act apply to advertising and marketing claims regardless of form, including print, oral, online and social media claims, and also shows that the Bureau is increasingly focused on new media in its enforcement efforts. Recent Internet sweeps by the Bureau include one completed late last year (see: Competition Bureau Participates in International Internet Sweep (November 30, 2009)). The Bureau has also recently updated its Internet advertising enforcement guidelines (see: Application of the Competition Act to Representations on the Internet (October 16, 2009)). Unlike some other international antitrust agencies, the enforcement of misleading advertising and deceptive marketing represents a significant portion of the Bureau’s enforcement efforts and continues to be a top enforcement priority for the Bureau.
For a copy of the Bureau’s news release in connection with this latest Internet advertising sweep see: Social Media Sites Targeted by Competition Bureau in International Sweep.
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”).
In addition to the “general” misleading advertising provisions, the Competition Actalso contains a number of other criminal and civil provisions that prohibit or regulate specific types of marketing practices. These include provisions in relation to deceptive telemarketing (section 52.1), deceptive prize notices (section 53), double ticketing (section 54), multi-level marketing (section 55), pyramid selling schemes (section 55.1), representations that are not based on adequate and proper tests (subparagraph 74.01(1)(b)), false or misleading ordinary selling price representations (subsections 74.01(2) and (3)), misleading or unauthorized use of tests and testimonials (section 74.02), bait and switch selling (section 74.04), the sale of a product above its advertised price (section 74.05) and promotional contests (section 74.06).
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.
Misleading Advertising & Deceptive Marketing – Links & Resources
For more information about misleading advertising and deceptive marketing law in Canada see:
Misleading Advertising, Bait and Switch Selling (Pamphlet), Consumer Packaging and Labelling Act, Consumer Rebate Promotions (Enforcement Guidelines), Deceptive Notices of Winning a Prize (Enforcement Guidelines), Deceptive Prize Notices (Pamphlet), Enforcement Guidelines for “Product of Canada” and “Made in Canada” Claims, False or Misleading Representations and Deceptive Marketing Practices (Pamphlet), Guidance on Labelling Textile Articles Derived From Bamboo (Enforcement Guidelines), Guide for the Labelling and Advertising of Pet Foods, Guide to the Consumer Packaging and Labelling Act, Guide to the Textile Labelling and Advertising Regulations, Misleading Representations (Pamphlet), Misleading Representations and Deceptive Marketing Practices: Choice of Criminal or Civil Track (Bulletin), Multi-level Marketing Plans and Schemes of Pyramid Selling (Enforcement Guidelines), Multi-level Marketing and Pyramid Selling (Pamphlet), Multi-level Marketing and the Competition Act (Multi-media), Ordinary Price Claims: Subsections 74.01(2) and 74.01(3) (Enforcement Guidelines), The Ordinary Selling Provisions of the Competition Act (Bulletin), Promotional Contests (Pamphlet), Promotional Contests – Section 74.06 (Enforcement Guidelines), Telemarketing: Section 52.1 of the Competition Act (Enforcement Guidelines), Textile Labelling Act, Understanding How the Ordinary Selling Provisions of the Competition Act Apply to Your Business, What You Should Know About Telemarketing (Pamphlet).
CONTACT US
We provide a full range of Canadian competition/antitrust law and consulting services to domestic and international clients. Contact Us.
OUR BOOKS
The Competition Law Guide for Trade Associations in Canada is a practical and concise summary of Canadian competition law as it applies to trade, professional and other associations.
OUR COURSES
Competition Law and REALTORS®: What You Say and Do Matters was designed by ACRE with the assistance of CREA to help Canadian REALTORS® understand and comply with Canadian competition law.
This course is available
to members of Canadian
real estate boards.
For more information see ACRE