SERVICES
I help clients practically navigate Canada’s advertising and marketing laws and offer a full range of Canadian advertising and marketing law services in relation to print, online, new media and e-mail marketing and telemarketing, including performance claims.
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“Businesses should not make any performance claims unless they can back them up. The Competition Act prohibits any representation in the form of a statement, warranty or guarantee of the performance, efficacy or length of life of any given product, not based on adequate and proper testing. The onus is on advertisers to prove that the representation is based on an adequate and proper test. The test must have been concluded before the representation is made and the data must be readily available upon request by the Bureau.”
(Competition Bureau, Ensuring Truth in Advertising, Misleading Advertising and Labelling)
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“[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.”
(Canada (Commissioner of Competition) v. Imperial Brush Co. (2008))
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“Misleading representations continue to be an area of concern for the Bureau, as consumers need accurate information in order to make informed choices. It’s very simple – don’t mislead the public by hiding charges or conditions in fine print, or by making claims you can’t back up.”
(Commissioner of Competition speech, October, 2011)
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In addition to the “general” misleading advertising provisions, the Competition Act also regulates a variety of specific types of advertising and marketing practices. These include promotional contests, bait and switch sales, sales above advertised price, multi-level marketing and pyramid selling schemes, ordinary sale price claims and telemarketing.
The Competition Act also contains a standalone civil provision that prohibits performance claims that are not based on an “adequate and proper test”. In this regard, the Competition Act prohibits representations made to the public, in the form of a statement, warranty or guarantee, of the performance, efficacy or length of life of a product that is not based on an adequate and proper test (the proof of which lies on the person making the claim).
Some of the types of performance claims that may fall under this provision include claims relating to the performance of a product (e.g., speed, reliability, sales performance, etc.), comparative advertising (e.g., where one firm’s product’s performance is being compared to another company’s products or services) and claims relating to preferences or perceptions.
While performance claims themselves are not prohibited, any testing or verification must be conducted before the claim is made. Also, the onus, if challenged, is on the person making the claim to show that it is based on an adequate and proper test.
The federal Competition Tribunal has set out a non-exhaustive list of factors relevant to determining whether testing is “adequate and proper”. Testing also does not need to be 100% reliable or the best scientific testing that could have been performed (i.e., it has been held that testing does not need to meet a test of certainty).
Given that the Competition Bureau has challenged performance claims in a wide variety of industries over the years, including in relation to weight loss products (diet patches, skin care cream, sauna belts, weight loss devices and natural products, etc.), clothing (alleged therapeutic benefits of some types of clothing), fuel saving devices, chimney cleaning products, UV ray protection, anticorrosion devices, disease cures (e.g., cancer, AIDS, etc.) and therapeutic benefits of tanning, among others, it is incumbent on companies and their external advisors and agencies to take steps to ensure that testing is conducted before performance claims are made.
Written advisory opinions are also available from the Competition Bureau in relation to proposed performance claims.
LINKS AND RESOURCES
Competition Act
Competition Tribunal
Competition Bureau
Enforcement Guidelines and Bulletins
Bulletin, Corporate Compliance Programs
Bulletin, Fee and Service Standards Handbook for Written Opinions
Pamphlet, False or Misleading Representations and Deceptive Marketing Practices
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BOOKS
The Competition Law Guide for Trade Associations in Canada is a practical and concise summary of Canadian competition law for trade, professional and other associations and their advisors
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
For more see: ACRE