Canadian COMPETITION LAW

General impression.

A term used in the context of advertising and marketing law, and in particular in relation to misleading advertising under the Competition Act.  In general, an advertising or marketing claim may contravene the “general” criminal (section 52) or civil (section 74.01) misleading advertising provisions of the Competition Act if it is literally false or misleading or if the “general impression” of the claim is false or misleading.

In this regard, subsection 52(4) of the Competition Act provides: “In a prosecution for a contravention of [the criminal misleading advertising section], the general impression conveyed by a representation as well as its literal meaning shall be taken into account in determining whether or not the representation is false or misleading in a material respect.”  The general civil misleading advertising provisions contain a similar section (subsection 74.03(5)).  As such, when reviewing advertising and marketing for compliance with the misleading advertising provisions of the Act, the entire context of a claim or representation must be considered, including the association and placement of words, the placement and choice of images, graphics and pictures, and as well consideration of whether the omission of material information (e.g., relating to price, quality, scope of services, important conditions, limitations, etc.) may mean that the “general impression” of the overall claim or representation could be seen as false or misleading.

The Competition Bureau’s 2001 Misleading Advertising Guidelines provided one of the most detailed and relevant discussions of the “general impression test”, despite having been since replaced by updated misleading advertising guidelines by the Bureau since:  “Section 52(4) requires a court to take into account the general impression conveyed by a representation, in addition to its literal meaning. … The application of the general impression test is particularly important where: the representation is partially true and partially false, or the representation is capable of two meanings, one of which is false; the representation is literally true but is, in fact, misleading since it fails to reveal certain essential information … the representation is literally or technically true but creates a false impression, for example where the advertised results of a test of a product may not be significant to its use or efficacy but the representation makes it appear otherwise … ; the representation is literally true insofar as the oral or written statements are concerned but the visual part of the representation may create a false impression, for example where it depicts a model which is different from the advertised product …”

Richard v. Time Inc., 2012 SCC 8:  “The general impression test provided for in [the Quebec Consumer Protection Act (the “CPA”)] must be applied from a perspective similar to that of ‘ordinary hurried purchasers’, that is, consumers who take no more than ordinary care to observe that which is staring them in the face upon their first contact with an advertisement.  The courts must not conduct their analysis from the perspective of a careful and diligent consumer. … In applying the general impression test provided for in [the CPA] the Quebec courts have traditionally used the words ‘credulous’ and ‘inexperienced’ to describe the consumer in issue in the Act. … In sum, it is clear that … the ‘general impression’ referred to in [the CPA] is the impression of a commercial representation on a credulous and inexperienced consumer. … Thus, in Quebec consumer law, the expression ‘average consumer’ does not refer to a reasonably prudent and diligent person, let alone a well‑informed person.  To meet the objectives of [the CPA] the courts view the average consumer as someone who is not particularly experienced at detecting the falsehoods or subtleties found in commercial representations.”

Professor Claude Masse, Loi sur la protection du consommateur: analyse et commentaires (1999), at p. 828:  “Commercial advertising often plays on the general impression that may be conveyed by an advertisement and even on the literal meaning of the terms used.  Information in advertisements is transmitted quickly.  Advertising relies on the image and the impression of the moment.  This general impression is often what is sought in advertising.  By definition, consumers do not have time to think at length about the real meaning of the messages being conveyed to them or about whether words are being used in their literal sense.  The content of advertising is taken seriously in consumer law.  Consumers do not have to wonder whether or not the promises made to them or the undertakings given are realistic, serious or plausible.  Merchants, manufacturers and advertisers are therefore bound by the content of messages actually conveyed to consumers.”

Competition Bureau, Ensuring Truth in Advertising, Additional Information About the Competition Act, The General Scope of the False or Misleading Representations and Deceptive Marketing Practices Provisions of the Competition Act:  “Subsections 52(4), 52.1(4) and 74.03(5) [of the Competition Act] require a court to take into account the general impression conveyed by a representation, in addition to its literal meaning. This test applies to the following provisions: subsection 52(1) — false or misleading representations; subsection 52.1(3) — deceptive telemarketing; paragraph 74.01(1)(a) — false or misleading representations; paragraph 74.01(1)(b) — performance representations not based on adequate and proper tests; paragraph 74.01(1)(c) — misleading warranties and guarantees; subsections 74.01(2) and 74.01(3) — false or misleading ordinary selling price representations; and section 74.02 — untrue, misleading or unauthorized use of tests and testimonials.  General impression is also an element of subsection 53(1), which prohibits deceptive notices of winning a prize.  The application of the general impression test is particularly important where: the representation is partially true and partially false, or the representation is capable of two meanings, one of which is false; the representation is literally true but is, in fact, misleading since it fails to reveal certain essential information [i.e., the non-disclosure of material information]; the representation is literally or technically true but creates a false impression, for example where the advertised results of a test of a product may not be significant to its use or efficacy but the representation makes it appear otherwise  …; the representation is literally true insofar as the oral or written statements are concerned but the visual part of the representation may create a false impression, for example where it depicts a model which is different from the advertised product  …”

Competition Bureau, Enforcement Guidelines, “Product of Canada” and “Made in Canada” Claims: “When determining whether a ‘Product of Canada’ or ‘Made in Canada’ declaration has been made that is false or misleading, the [Competition Act] requires that the general impression conveyed by a representation as well as its literal meaning, be taken into account.  Thus, when examining a particular representation, the Bureau will consider the general impression conveyed through a combination of words, visual elements, illustrations and overall layout that may alter the plain meaning of a representation.”

R. v. Imperial Tobacco Products Ltd., [1971] 5 W.W.R. 409, 3 C.P.R. (2d) 178 (Alta. S.C.), quoting Federal Trade Commission v. Sterling Drug Inc., 317 F.2d 669 (2^nd Cir. 1963) at 674: “It is therefore necessary in these cases to consider the advertisement in its entirety and not to engage in disputatious dissection.  The entire mosaic should be viewed rather than each tile separately.  The buying public does not ordinarily carefully study or weigh each word in an advertisement.  The ultimate impression upon the mind of the reader arises from the sum total of not only what is said but also of all that is reasonably implied.”

Geofencing.

Wall Street Journal:  “The idea behind geofencing is to target consumers when they are nearby—and the promotions can get hyper-local, like beaming a special on umbrellas to people within a 10-mile radius during a rainstorm, or touting a markdown on aisle 6 when a customer is walking down aisle 3.”

Geo Targeting.

An advertising industry term.

Interactive Advertising Bureau (IAB): “Basic geo-targeting allows targeting Internet users (targeting online or mobile devices) by means of cross referencing their IP address with a global ISP IP address directory. This permits ad servers that are connected to this database to target devices based on their IP address’ geographic location: state/province, city/municipality, telephone area code and postal/zip code. Really this allows reaching someone whose device is connected through Internet access based on that Internet access’s point of origin. It is not always as precise as we’d like it to be, nor is it always what we expect it to be though it’s quite logical why it isn’t.”

Gift card.

Financial Consumer Agency of Canada: “There are two main types of prepaid cards.  Both require you to pay up front to ‘load’ money on to a card for later use and both are sometimes referred to as ‘gift cards’.  Prepaid cards from retailers can only be used at a single store or group of stores, such as a chain or shopping mall.  Other prepaid cards, usually branded with a payment card network operator’s logo, such as American Express, MasterCard or Visa, can be used at most merchants that display the specific network’s logo.”

Datacard Group: “A gift card is a type of stored-value payment card commonly issued by retailers and banks.  Gift cards are preloaded with a set value.  There are two major types of cards – those that can be used only at one store chain or one location (closed loop) and those that can be used anywhere (open loop).  Closed loop gift cards generally carry no fees or expiration date – the issuing store makes its money off the profit from selling merchandise.  Open loop gift cards always carry fees.  Because they are issued by banks or credit card transaction processors, such as Visa or MasterCard, fees are the only way they can profitably issue gift cards.”

Ontario Consumer Protection Act Regulations: “’Gift card’ means a voucher in any form, including an electronic credit or written certificate, that is issued by a supplier under a gift card agreement and that the holder is entitled to apply towards purchasing goods or services covered by the voucher.”

Government advertising.

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

Greenwashing.

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

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SERVICES AND CONTACT

We are a Toronto based competition and advertising law firm offering business and individual clients efficient and strategic advice in relation to competition/antitrust, advertising, Internet and new media law and contest law. We also offer competition and regulatory law compliance, education and policy services to companies, trade and professional associations and government agencies.

Our experience includes advising clients in Toronto, across Canada and the United States on the application of Canadian competition and regulatory laws and we have worked on hundreds of domestic and cross-border competition, advertising and marketing, promotional contest (sweepstakes), conspiracy (cartel), abuse of dominance, compliance, refusal to deal and pricing and distribution matters. For more information about our competition and advertising law services see: competition law services.

To contact us about a potential legal matter, see: contact

For more information about our firm, visit our website: Competitionlawyer.ca

419 scam (aka Nigerian scam, West African scam or advance fee fraud).

Competition Bureau, The Little Black Book of Scams (2012): “The Nigerian scam (also called the 419 fraud) has been on the rise since the early-to-mid 1990s in Canada. Although many of these sorts of scams originated in Nigeria, similar scams have been started all over the world (particularly in other parts of West Africa and in Asia). These scams are increasingly referred to as ‘advance fee fraud’.  In the classic Nigerian scam, you receive an email or letter from a scammer asking your help to transfer a large amount of money overseas. You are then offered a share of the money if you agree to give them your bank account details to help with the transfer. They will then ask you to pay all kinds of taxes and fees before you can receive your ‘reward’. You will never be sent any of the money, and will lose the fees you paid.”

RCMP, Internet Security: “Fraud letters from Nigeria (and other African countries) is a type of scam that has been around for a number of years. Businesses, educational institutions and government departments were originally the prime targets of electronic messages bearing the promise of substantial amounts of money from alleged government or company officials in Nigeria. The general public is now also targeted, and thousands of people like you receive similar e-mail messages in their personal mail boxes. In some cases, con artists even send stolen or forged cheques to their victims. This scam can also be done by phone and from many countries. In addition to money you can be asked for confidential information against the promise of profits.”

Joewein.de LLC: “The so-called ‘419’ scam (aka ‘Nigeria scam’ or ‘West African’ scam) is a type of fraud named after an article of the Nigerian penal code under which it is prosecuted. It is also known as ‘Advance Fee Fraud’ because the common principle of all the scam format is to get the victim to send cash (or other items of value) upfront by promising them a large amount of money that they would receive later if they cooperate. In almost all cases, the criminals receive money using Western Union and MoneyGram, instant wire transfer services with which the recipient can’t be traced once the money has been picked up. These services should never be used with people you only know by email or telephone!  Typically, victims of the scam are promised a lottery win or a large sum of money sitting in a bank account or in a deposit box at a security company. Often the storyline involves a family member of a former member of government of an African country, a ministerial official, an orphan or widow of a rich businessman, etc. Variants of the plot involving the Philippines, Taiwan, China, Hong Kong, Korea, Iraq, Kuwait, UAE, Mauritius, etc. are also known. Some emails include pictures of boxes stuffed with dollar bills, scans of fake passports, bank or government documents and pictures of supposedly the sender.”

Facial recognition technology.

A technology used for targeted marketing.

U.S. Federal Trade Commission, Report, Facing Facts: Best Practices for Common Uses of Facial Recognition Technologies (October, 2012): “In the 2002 film Minority Report, Steven Spielberg imagined a world in which companies use biometric technology to identify us and serve us targeted ads.  Ten years later, that vision is coming closer to reality. Having overcome the high costs and poor accuracy that once stunted its growth, one form of biometric technology – facial recognition – is quickly moving out of the realm of science fiction and into the commercial marketplace.  Today, companies are deploying facial recognition technologies in a wide array of contexts, reflecting a spectrum of increasing technological sophistication. At the simplest level, the technology can be used for facial detection; that is, merely to detect and locate a face in a photo. Current uses of facial detection include refining search engine results to include only those results that contain a face; locating faces in images in order to blur them; ensuring that the frame for a video chat feed actually includes a face; or developing virtual eyeglass fitting systems and virtual makeover tools that allow consumers to upload their photos online and ‘try on’ a pair of glasses or a new hairstyle.  A more refined version of facial recognition technology allows companies to assess characteristics of facial images.  For instance, companies can identify moods or emotions from facial expressions to determine a player’s engagement with a video game or a viewer’s excitement during a movie. Companies can also place cameras into digital signs to determine the demographic characteristics of a face – such as age range and gender – and deliver targeted advertisements in real-time in retail spaces.  In the most advanced application, companies can use the technology to compare individuals’ facial characteristics across different images in order to identify them. In this application, an image of an individual is matched with another image of the same individual. If the face in either of the two images is identified – that is, the name of the individual is known – then, in addition to being able to demonstrate a match between two faces, the technology can be used to identify previously anonymous faces. This is the use of facial recognition that potentially raises the most serious privacy concerns because it can identify anonymous individuals in images.  One prevalent current use of this application is to enable semi-automated photo tagging or photo organization on social networks and in photo management applications. On social networks this feature typically works by scanning new photos a user uploads against existing “tagged” photos. The social network then identifies the user’s “friends” in the new photos so the user can tag them.”

Fake news website.

Competition Bureau, news release, “Advertising on the Internet – Use of ‘Fake News Websites’”: “A recent trend in misleading Internet advertising has been to make product advertisements appear to be legitimate and reputable news websites. These sophisticated advertisements, disguised as investigative news stories seem to contain all the attributes of a legitimate news website. However, many scammers create fake news websites to promote bogus products with unfounded and misleading claims. Such advertisements may be used to promote a variety of products and services, from health products to job opportunity scams.  A typical fake news website uses deceptive testimonials and fabricated reader comments, false endorsements by celebrities, and illegitimately inserts web logos from trusted mainstream media, or popular television programs. Almost every aspect of the website is fake, with multiple hyperlinks inserted, encouraging consumers to buy, or sign up for a ‘free’ trial of a product. Affiliate marketers are using these fake news websites to manipulate consumers’ trust in legitimate news organizations.”

Fidelity discount.

OECD, Policy Roundtable, Fidelity and Bundled Rebates and Discounts (2008):  “For the purposes of this roundtable, single-product loyalty discount refers to the practice of offering discounts or rebates on all units purchased of a single-product conditioned upon the level (or share) of purchases — the discounts or rebates apply to all units of the buyer’s purchases of the product rather than just the units beyond the level (or share) of purchases needed to obtain them. These discounts are also referred to as loyalty discounts or rebates. In this paper, we use the terms ‘fidelity’ and ‘loyalty’ interchangeably and the terms ‘rebate’ and ‘discount’ interchangeably.”

OFT Draft Guidelines on Assessment of Conduct (2004): “Aris[ing] where a supplier (e.g., a manufacturer) effectively offers a customer (e.g., a wholesaler or a retailer) a discount that is conditional not on the size of the customer’s order, but on the share of the customer’s needs purchased from the supplier.”

OECD, Policy Roundtable, Loyalty and Fidelity Discounts and Rebates (2002): “… fidelity discounts are defined to be pricing structures offering lower prices in return for a buyer’s agreed or de factocommitment to source a large share of his requirements with the discounter.  Fidelity discounts could have both pro- and anticompetitive effects … It is sometimes difficult to distinguish a fidelity discount from a straightforward quantity discount.  For example, a 50 percent discount conditional on some minimum purchase quantity over a certain period of time, offered on exactly the same terms to all buyers, may or may not be a fidelity discount.  The determining factor would be whether the minimum purchase quantity corresponds to a significant number of buyers’ probable total or near total requirements in the period referred to. … Most fidelity discounts make use of what we will refer to as a ‘reference period’ in calculating the percentage discount awarded.  The reference period will typically be considerably longer than the time normally elapsing between buyers’ purchases.  For example, a taxi operator working an average of 24 days per month and purchasing 40 litres of gasoline a day, might receive a ten percent fidelity discount if it purchases more than 900 litres a month from a particular petroleum distributor.  The reference period would be one month and the taxi company’s requirements would be stated as 960 litres per month.  More formally, a buyer’s requirements are his estimated total purchases of some properly defined product (i.e. including appropriate substitutes) over the reference period used to determine eligibility for a particular fidelity discount.  Fidelity discounts can take a wider range of forms than simply a lower price or a percentage reduction. Sometimes they are offered in the form of ‘complimentary’ goods. In return for a purchase of 20 or more litres of petrol, a service station might, for example, give away a statuette belonging to a set of twenty well-known football players.  The desire to obtain a complete set could make this function like a fidelity discount, especially if the offer will be terminated in say six months. The same applies to many toys offered by breakfast cereal producers.”

Hoffman-La Roche v. Commission [1979] ECR 461: “… discounts conditional on the customer’s obtaining all or most of its requirements – whether the quantity of its purchases be large or small – from the undertaking in a dominant position.”

Field marketing.

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

First Party Targeted Ads.

One form of Internet advertising.  Office of the Privacy Commissioner of Canada, Policy Position on Online Behavioural Advertising:  “The first party with which an individual has a relationship creates a profile about an individual, and serves them advertisements based on this profile. The user is not tracked over different unrelated websites.”

Foreign Lottery Schemes.

Canadian Department of Justice, Report of the Canada – United States Working Group on Telemarketing Fraud (Updated December 1, 2011): “Telemarketers offer victims the opportunity to “invest” in tickets in well-known foreign lotteries (e.g., Canada or Australia), or give them a ‘one in six’ chance of winning a substantial prize.  This is a common cross-border offence, since it plays upon the ignorance of victims of the rules (or even the existence) of foreign lotteries.  If offenders purport to sell real lottery chances but deceive victims about their chances of winning, it may be both a gambling offence and fraud; if real chances are sold without deception, it may still be a gambling offence.”

For more information about Canadian contest/sweepstakes law, see: Contests, Contests and CASL, Contest FAQs, Contest Tips and Contests and Social Media.

For information about the Canadian contest/sweepstakes precedents (template rules) and checklists that we offer for sale, see: Canadian Contest Forms/Precedents.

Fraudulent misrepresentation / tort of deceit

XY, Inc. v. International Newtech Development Incorporated, 2012 BCSC 319 (CanLII): “The tort of deceit, also known as civil fraud, is concerned with the intentional inducement of another person to rely upon a representation that the representor knows to be untrue.  The elements that make up this tort are: (1) a false representation of fact by the defendant; (2) made with the knowledge of its falsity or recklessly, i.e., not caring whether it is true or not; (3) made with the intention that the plaintiff would act on it; (4) with the intention that the plaintiff would act on it; and (5) the plaintiff suffered damages.”

Derry v. Peek (1889) 14 App. Cas. 337 (H.L.) [Combining the fourth and fifth elements]: “(1) A false representation or statement made by the defendant; (2) the statement was knowingly false; (3) the statement was made with the intention to deceive the plaintiff; and (4) the statement materially induced the plaintiff to act, resulting in damage.”

Spencer Bower, Turner and Handley, Actionable Misrepresentation (4^th ed., 2000): “An action for damages for fraudulent misrepresentation at common law was an action for deceit.  The Court of Chancery exercised a concurrent jurisdiction with the Courts of Law in cases of actual fraud, and could award equitable compensation on similar, but not identical, principles, and also specific relief.  In either case a representee must allege and prove: (1) a representation; (2) that the defendant was the representor; (3) that the plaintiff was a representee; (4) inducement; (5) falsity; (6) alteration of position; (7) fraud; (8) damage.  The first six matters are common to all claims for misrepresentation … The seventh and eighth, fraud and damage, are peculiar to actions in deceit.  From the earliest times it has been recognized that the concurrence of fraud and damage is essential to a claim for damages for fraudulent misrepresentation.”

Free.

Competition Bureau, Pamphlet, False or Misleading Representations and Deceptive Marketing Practices: “Don’t increase the price of a product or service to cover the cost of a free product or service.”  Competition Bureau, Ensuring Truth in Advertising, False or Misleading Representations: “… where article A is advertised as being free with the purchase of article B, but article B is available at a discount or lesser price if the ‘free’ article is foregone, then article A is not if fact free. … Nor is it ‘free’ in a ‘two-for-one’ situation where the price of the first article is inflated to cover the cost of the second.”

U.S. Federal Trade Commission, FTC Guide Concerning Use of the Word “Free” and Similar Representations:  “Meaning of “Free” … The public understands that, except in the case of introductory offers in connection with the sale of a product or service … an offer of ‘Free’’ merchandise or service is based upon a regular price for the merchandise or service which must be purchased by consumers in order to avail themselves of that which is represented to be ‘Free’. In other words, when the purchaser is told that an article is ‘Free’ to him if another article is purchased, the word ‘Free’ indicates that he is paying nothing for that article and no more than the regular price for the other.  Thus, a purchaser has a right to believe that the merchant will not directly and immediately recover, in whole or in part, the cost of the free merchandise or service by marking up the price of the article which must be purchased, by the substitution of inferior merchandise or service, or otherwise.”

Future performance agreement.

Ontario Consumer Protection Act: “future performance agreement” means a consumer agreement in respect of which delivery, performance or payment in full is not made when the parties enter the agreement.”

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SERVICES AND CONTACT

We are a Toronto based competition and advertising law firm offering business and individual clients efficient and strategic advice in relation to competition/antitrust, advertising, Internet and new media law and contest law. We also offer competition and regulatory law compliance, education and policy services to companies, trade and professional associations and government agencies.

Our experience includes advising clients in Toronto, across Canada and the United States on the application of Canadian competition and regulatory laws and we have worked on hundreds of domestic and cross-border competition, advertising and marketing, promotional contest (sweepstakes), conspiracy (cartel), abuse of dominance, compliance, refusal to deal and pricing and distribution matters. For more information about our competition and advertising law services see: competition law services.

To contact us about a potential legal matter, see: contact

For more information about our firm, visit our website: Competitionlawyer.ca

Election advertising.

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

Electronic message (CASL).

In general, Canada’s federal anti-spam legislation (CASL) requires that senders have express or implied consent (as defined by the legislation) to send unsolicited commercial electronic messages (CEMs) to Canadians, unless an exemption under CASL applies. With respect to “electronic messages”, CASL is technologically neutral.  It defines electronic messages as those sent by any means of telecommunication, including text, sound, voice or image messages.  As such, CASL can apply to a variety of types of electronic media, including e-mail, text messaging, instant messaging and direct messages (e.g., via social media platforms).

For more information about CASL, see: CASL (Anti-Spam Law), CASL Compliance, CASL Compliance Tips, CASL Compliance Errors, CASL FAQs, Contests and CASL.

For more information about the CASL compliance checklists and precedents that we offer for sale, see: CASL Compliance Checklists and Precedents.

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SERVICES AND CONTACT

We are a Toronto based competition and advertising law firm offering business and individual clients efficient and strategic advice in relation to competition/antitrust, advertising, Internet and new media law and contest law. We also offer competition and regulatory law compliance, education and policy services to companies, trade and professional associations and government agencies.

Our experience includes advising clients in Toronto, across Canada and the United States on the application of Canadian competition and regulatory laws and we have worked on hundreds of domestic and cross-border competition, advertising and marketing, promotional contest (sweepstakes), conspiracy (cartel), abuse of dominance, compliance, refusal to deal and pricing and distribution matters. For more information about our competition and advertising law services see: competition law services.

To contact us about a potential legal matter, see: contact

For more information about our firm, visit our website: Competitionlawyer.ca