Oliver borgers lexpert misleading advertising

McCarthy Tétrault LLP /
mccarthy.ca
McCarthy Tétrault
Advance™
Building Capabilities for
Growth
Canadian Anti-Spam
Legislation –
The Competition Act
Lexpert Conference
13392663
Oliver Borgers
McCarthy Tétrault LLP
oborgers@mccarthy.ca
416-601-7654 April 30, 2014

mccarthy.ca
Agenda
1. General overview of Competition Act
2. General review of Competition Act Marketing
& Advertising Laws
1. Specific CASL amendments to Competition
Act marketing laws
2

mccarthy.ca
Overview of the Competition
Act
¬ A single federal statute
¬ Purpose: to promote competition in order
to improve productivity, ensure that small
and medium-sized enterprises have an
equal opportunity to participate in the
Canadian economy, and provide
consumers with competitive prices and
product choices
¬ Contains criminal and civil provisions on
false and misleading advertising and
deceptive marketing practices
3

mccarthy.ca
Administration of the
Competition Act
¬ Administered by the Commissioner of
Competition, who heads the Competition
Bureau
¬ Fair Business Practices Branch administers
misleading advertising and deceptive
marketing
¬ Inquiries initiated further to Bureau’s own
initiative or complaints
¬ Collaboration with antitrust authorities in
other jurisdictions, most notably the U.S.,
provincial consumer protection agencies
and consumer groups
4

mccarthy.ca
Enforcement of the
Competition Act
¬ Aggressive enforcement on all aspects of
competition law, including misleading
advertising
¬ High profile industries/companies
¬ Commissioner recently brought a number of
matters before the courts
¬ Leon’s/The Brick – “buy now, pay later”
¬ Bell/Rogers/Telus/CWTA – premium text
messaging
¬ Rogers/Chatr Wireless – “fewer dropped calls”
¬ Steep penalties in recent civil cases
¬ Bell Canada – $10 million (Consent Agreement)
¬ Business directory scam (Yellow Pages) – $9
million, including $1 million for individuals
¬ Beiersdorf/Nivea - $300,000 and restitution
(Consent Agreement)
5

mccarthy.ca
Enforcement of the
Competition Act
¬ Extensive investigative powers
¬ Search warrants (to seize documents,
including electronic records) – criminal
provisions only
¬ Document production orders
¬ Examinations under oath
¬ Civil provisions (sections 74.01 to 74.19)
¬ By the Commissioner of Competition
¬ Before the Superior Court or the Competition
Tribunal
¬ Criminal provisions (sections 52 to 62)
¬ By the Director of Public Prosecution
¬ Before the Superior Court
6

mccarthy.ca
Private litigation
¬ Has also recently intensified
¬ Private actions for misleading advertising
¬ S. 36 of the Competition Act allows for recovery
of damages for violation of the criminal
misleading advertising provisions in Part VI
(which will include new CASL prohibition)
¬ Damages awarded in Maritime Travel v. Go
Travel Direct
¬ “Offers vacations for less”, where disclaimer
indicated that price comparison was for on very
limited time and one specific destination
¬ Class actions
¬ Follow-on class actions to Bureau
enforcement
¬ Copy-cat actions from U.S.
7

mccarthy.ca
Civil provisions -
consequences
¬ Order to discontinue the impugned practice
¬ Publication of corrective notice
¬ “Administrative monetary penalty” (AMP)
¬ Company: up to $10 million ($15 million if
recidivist)
¬ Individual: up to $750,000 ($1 million if recidivist)
¬ Constitutional validity of AMPs upheld by the
Ontario Superior Court in the recent Chatr case
¬ Restitution to consumers – new since 2009 and only
for the general representation provision (does not
apply to new CASL regulations)
¬ AMPs and restitution not available where respondent
establishes exercise of due diligence
¬ Underscores importance of diligence in ensuring that
advertising, promotional materials are accurate and
supported
8

mccarthy.ca
Representation that is false or
misleading in a material respect
(s. 74.01(1)(a))
¬ General prohibition that applies to any representation
made to the public, by any means (print, oral,
internet, social media), for the purpose of supplying
any product or service
¬ Reviewable if:
¬ The representation is false or misleading
¬ In a material aspect
¬ Could the representation influence a
consumer to buy a product or service?
¬ Test is objective – no need to establish that
any person was actually deceived (s.
74.03(4))
¬ Omitting relevant information can be material
¬ To determine whether false and misleading, must
consider both
¬ The literal meaning, and
¬ The general impression conveyed by the
representation (s. 74.03(5))
9

mccarthy.ca
General impression test
¬ The Supreme Court of Canada recently held in a
Quebec Consumer Protection Act matter that courts
must assess the general impression that the
representation is likely to convey to the “average
consumer, who is credulous and inexperienced”
(Richard v. Time Inc., 2012 SCC 8)
¬ Lower test than the U.S. “reasonable consumer standard”
¬ A single reading of the entire text should provide the
general impression
¬ Must consider entire context, including layout, pictures and
font size
¬ Competition Bureau has argued that the “credulous and
inexperienced” standard applies under the Competition
Act
¬ In Chatr, the Ontario Superior Court accepted the
credulous standard, but assessed the representation
from the perspective of the consumer interested in
purchasing the specific product
¬ Ad related to the technical performance of the wireless
telephone network
¬ Court applied standard of the “credulous and technically
inexperienced consumer of wireless services”
10

mccarthy.ca
Bureau enforcement and
priorities – price advertising
¬ Bell Consent Agreement - $10 million in
AMPs
¬ Bundle for home phone, internet and
television services “starting as low as
$69.90 per month”
¬ Publicly available information
indicates that
¬ The advertised price was not available to
any consumers at all
¬ Additional mandatory fees were hidden in
fine-print disclaimers
¬ Lowest possible price was 15% higher
than advertised
11

mccarthy.ca
¬ Leon’s/The Brick
¬ deferred payment options
¬ “Plus! You can pay nothing for 18 months!”
(print ad)
¬ Alleges consumers were required to pay
various fees and surcharges for deferred
payments - as high as 33% of purchase price
¬ Also alleges “drip pricing”
¬ Addition of various price-parts during buying
process, once consumers “anchor” to the initial
advertised price
¬ Commissioner asks for publication of notice,
restitution and AMPs
12

mccarthy.ca
¬ Avis/Budget production Order
¬ Various “non-optional fees” added to the
initial advertised rental price – as high as
34% of initial price
¬ Description of various fees gives impression
that fees are imposed by a third party, e.g. a
governmental authority
¬ E.g. “car tax” and “Ontario Environmental Fee”
¬ Price representations on websites and mobile
applications
¬ 4 “clicks” to get to total price
13

mccarthy.ca
¬ Implications
¬ “Clear and conspicuous” disclosure of
material terms and applicable
conditions
¬ How to disclose applicable charges,
financing terms, etc.?
¬ Mandatory vs. optional fees?
¬ “Drip pricing” - online and apps
¬ Recent Speech from the Throne
¬ “Canadians are tired of hidden fees”
14

mccarthy.ca
priorities – others
¬ E-commerce
¬ Premium text messages – contested
¬ Proceedings against Bell, TELUS, Rogers
and the Canadian Wireless
Telecommunications Association
¬ Commissioner alleges that
representations gave impression that
services were available for free, when in
fact charges apply
¬ Seeking $31 million in AMPs
¬ False online testimonials/reviews
(“astroturfing”)
¬ No specific guidelines similar to FTC’s
15

mccarthy.ca
Disclaimers - content
¬ Representations on the Internet
Guidelines (2009)
¬ Cannot contradict or materially limit
the literal meaning and general
impression conveyed by the ad
¬ Main body of the ad must stand alone
¬ May only qualify general impression
of the representation
¬ Add information, clarify ambiguities or
provide “reasonable qualifications”
¬ Determine whether the disclaimer
“significantly restricts or contradicts”
the main claim
16

mccarthy.ca
Disclaimers – appearance
¬ Representations on the Internet Guidelines
¬ Generally, disclaimer should appear on same
screen
¬ Hyperlinks not appropriate when information is
critical
¬ Hyperlink to disclaimer must be clearly labelled
and displayed in format consistent with other
links
¬ Design should encourage consumers to read
them
¬ Should not be hidden or buried
¬ Attention-grabbing tools on page should not
distract attention away from disclaimer
¬ Text prompt should be explicit and convey
importance of information
¬ DON’T “see below for details”
¬ DO “see below for restrictions on eligibility”
17

mccarthy.ca
Disclaimers – recent
enforcement
¬ Leon’s/The Brick
¬ “Deferred payment” ads accompanied by
disclaimers that reveal various fees
¬ Content
¬ Commissioner alleges that disclaimers are
inconsistent with and directly contradict the
literal meaning and general impression
conveyed
¬ Appearance
¬ Commissioner alleges that disclaimers are
¬ Lengthy
¬ In fine-print
¬ Situated far-away from associated
representations
18

mccarthy.ca
Performance claims not
based on adequate and
proper test (74.01(1)(b))
¬ Any claim on the performance or efficacy of a
product must be based on “adequate and proper”
test
¬ Burden of proof on person making the
representation
¬ Test must be completed prior to performance
claim being made
¬ Test results must actually support the specific
claim
¬ “Adequate and proper”
¬ Flexible and contextual - varies on the nature of
the claim as understood by the common person
¬ Subjectivity should be eliminated as much as
possible – but no requirement to validate by a
third-party
¬ Test must establish that result is not a mere
chance; but does not amount to testing required for
publication in a scholarly journal
19

mccarthy.ca
Bureau enforcement –
performance claims
¬ Contested “fewer dropped calls” case
against Rogers/Chatr
¬ Expert evidence on adequate testing
¬ Bureau alleged claim was misleading
because differences in dropped call rates
were not discernible to consumers
¬ Court held claim was valid even if not
discernible
¬ Misleading claims limited to ads made prior
to testing
¬ Bureau asked for maximum $10 million
AMPs and restitution
¬ $500K AMP ordered for representations
made prior to testing
20

mccarthy.ca
Bureau enforcement –
performance claims
¬ Consent Agreement with Beiersdorf re
Nivea slimming cream
¬ Followed U.S. FTC settlement
¬ Remove products, corrective notice,
$300,000 AMP and restitution
¬ Consent Agreements with Hyundai and
Kia on inaccurate fuel consumption
ratings
¬ Following parties’ acknowledgement
of incorrect fuel consumption
representations
¬ Restitution programs volunteered by
the parties
21

mccarthy.ca
Other Civil Provisions
¬ Misleading warranties and guarantees (s.
74.01(1)(c))
¬ Promotional Contests (s. 74.06)
¬ Misleading ordinary selling price
representations (s. 74.01(2) and (3))
¬ Volume test: substantial volume of the
product (50%) was sold at reference price
within a reasonable period of time (12 last
months); OR
¬ Time test: the product was offered for sale
for a substantial period of time at the
reference price (more than 50% of the time
during last six months)
¬ Sale of a product above advertised price (s.
74.05)
¬ No case since 1999
¬ However, alleged by the Commission in
Leon’s/The Brick and Avis/Budget
22

mccarthy.ca
Criminal vs. Civil – choice of
track
¬ Civil regime in most cases
¬ Criminal provisions for most egregious
conduct
¬ No duplication of proceedings
¬ Bureau Guidelines
¬ Clear and compelling evidence that accused
knowingly or recklessly made misleading
representations
¬ E.g. continued after consumer complaints
¬ Criminal prosecution is in public interest
¬ Targeting vulnerable groups (e.g., children,
seniors)
¬ Continued after corporate officials became
aware
¬ Recidivist
23

mccarthy.ca
Criminal provisions
¬ Consequences include
¬ Fines at the discretion of the
Court
¬ Up to 14 years in jail
¬ Restitution
¬ S. 36 - damages
24

mccarthy.ca
General criminal provision
¬ False or misleading representations (s. 52(1))
¬ Knowingly or recklessly making, or permitting
the making of a representation to the public,
in any form, that is
¬ False or misleading
¬ In a material respect
¬ Must also consider literal meaning and
general impression
25

mccarthy.ca
Criminal provisions - others
¬ Deceptive telemarketing (s. 52.1)
¬ Multi-level marketing plan (s. 55)
¬ Accurate disclosure of
¬ Compensation actually received by typical
participants
¬ Compensation likely to be received by
typical participants
26

mccarthy.ca
Amendments to the
Competition Act regarding
CASL
Amendments to the Competition Act
prohibiting false or misleading
representations in
¬ electronic messages,
¬ sender information in electronic
messages,
¬ subject matter information in
electronic messages,
¬ locators
27

mccarthy.ca
New Definitions (s. 70(2))
28
¬ “sender information” means the part of an electronic
message — including the data relating to source,
routing, addressing or signalling — that identifies or
purports to identify the sender or the origin of the
message
¬ “subject matter information” means the part of an
electronic message that purports to summarize the
contents of the message or to give an indication of
them
¬ “locator” means a name or information used to identify
a source of data on a computer system, and includes a
URL (uniform resource locator …. web address).
¬ “electronic message” is widely defined, same as in
CASL

mccarthy.ca
New Section 52.01
2913341939
False or misleading representation — sender or
subject matter information
52.01 (1) No person shall, for the purpose of promoting,
directly or indirectly, any business interest or the supply
or use of a product, knowingly or recklessly send or
cause to be sent a false or misleading representation in
the sender information or subject matter information of an
electronic message.
False or misleading representation — electronic
message
(2) No person shall, for the purpose of promoting, directly
or indirectly, any business interest or the supply or use of
a product, knowingly or recklessly send or cause to be
sent in an electronic message a representation that is
false or misleading in a material respect.
False or misleading representation — locator
(3) No person shall, for the purpose of promoting, directly
or indirectly, any business interest or the supply or use of
a product, knowingly or recklessly make or cause to be
made a false or misleading representation in a locator.

mccarthy.ca
New Section 52.01
3013341939
Proof of deception not required
(4) For greater certainty, in establishing that any of
subsections (1) to (3) was contravened, it is not
necessary to prove that any person was deceived or
misled.
General impression to be considered
(5) In a prosecution for a contravention of any of
subsections (1) to (3), the general impression conveyed
by a representation as well as its literal meaning are to be
taken into account.
Offence and punishment
(6) Any person who contravenes any of subsections (1)
to (3) is guilty of an offence and
(a) liable on conviction on indictment to a fine in the
discretion of the court or to imprisonment for a term
not exceeding 14 years, or to both; or
(b) liable on summary conviction to a fine not
exceeding $200,000 or to imprisonment for a term
not exceeding one year, or to both.

mccarthy.ca
New Section 52.01
3113341939
Reviewable conduct
(7) Nothing in Part VII.1 is to be read as excluding the
application of this section to the making of a
representation that constitutes reviewable conduct within
the meaning of that Part.
Where application made under Part VII.1
(8) No proceedings may be commenced under this
section against a person on the basis of facts that are the
same or substantially the same as the facts on the basis
of which an order against that person is sought under
Part VII.1.
Interpretation
(9) For the purposes of this section,
(a) an electronic message is considered to have
been sent once its transmission has been initiated;
and
(b) it is immaterial whether the electronic address to
which an electronic message is sent exists or
whether an electronic message reaches its intended
destination.

mccarthy.ca
New Section 74.011
3213341939
False or misleading representation — sender or subject
matter information
74.011 (1) A person engages in reviewable conduct who, for
the purpose of promoting, directly or indirectly, any business
interest or the supply or use of a product, sends or causes to
be sent a false or misleading representation in the sender
information or subject matter information of an electronic
message.
False or misleading representation — electronic
message
(2) A person engages in reviewable conduct who, for the
purpose of promoting, directly or indirectly, any business
interest or the supply or use of a product, sends or causes to
be sent in an electronic message a representation that is
false or misleading in a material respect.
False or misleading representation — locator
(3) A person engages in reviewable conduct who, for the
purpose of promoting, directly or indirectly, any business
interest or the supply or use of a product, makes or causes
to be made a false or misleading representation in a locator.

mccarthy.ca
New Section 74.011
3313341939
General impression to be considered
(4) In proceedings under this 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 person who made the representation
engaged in the reviewable conduct.
Interpretation
(5) For the purposes of this section,
(a) an electronic message is considered to have
been sent once its transmission has been initiated;
and
(b) it is immaterial whether the electronic address to
which an electronic message is sent exists or
whether an electronic message reaches its intended
destination.

mccarthy.ca
SUMMARY of new section
52.01 & 74.011
34
¬ prohibits representation that is false or
misleading in a material respect in electronic
message
¬ prohibits false or misleading representation (not
in a material respect) in
¬ sender information in electronic message
¬ subject matter information in electronic
message
¬ locator
¬ CRIMINAL (14 years jail, unlimited fine) if
“knowingly or recklessly” made

mccarthy.ca
SUMMARY of new section
52.01 & 74.011
35
¬ No need to prove there has been actual
deception
¬ look at general impression and literal meaning
¬ only first prohibition states “in a material
respect”
¬ no “to the public” concept
¬ no concept of exception for consent or
existing business relationship

mccarthy.ca
CASL discussion examples
36
Sender Information
¬ Advisor@DoubleYourMoney.com
Locator
¬ www.lose20poundsin5days.com
Subject Matter Information
¬ Fly Ottawa to Calgary for $299 return
¬ Lose 20 Pounds in 5 days
¬ Our best sale of the year
¬ Exclusive Upgrade Offer
Aggressive e-mail subject matter language poses
substantial risk to senders

mccarthy.ca
Questions & Discussion
3713341939

mccarthy.ca
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13341939

Oliver borgers lexpert misleading advertising

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