Competition Act Amendments 2009:Misleading Advertising

By Bill Hearn, McMillan LLP

Canadian Marketing Association WebinarApril 14, 2009

Outline

• Overview of misleading advertising prohibition in Competition Act

• Where Bill C-10 has tightened the rules

• How Bill C-10 has increased fines, penalties and remedies for consumers

• Implications for marketers

Truth in Advertising 101

Misleading Advertising

• Tell the truth

• Have support for what you say

• Keep your promise

• In the heat of battle, make good decisions

MISLEADING ADVERTISING

Misleading Advertising

• Offence under Competition Act

• Both criminal and civil prohibitions

• Seriousness of offence and whether misrepresentation made “knowingly” or “recklessly” determines whether Bureau goes criminal track

Misleading Advertising

• “Representation” – broadly defined

• “Made to the public”

• Bill C-10 tightened rules/closed possible loopholes, making it not necessary to establish that:

- any person was misled

- anyone in Canada misled: Sticking it to Mr. Stucky, Ontario Court of Appeal decision February 17, 2009

- representation was made in a place where public had access: Competition Tribunal’s July 2008 decision in Premier Career Management Group case

Misleading Advertising

• False or misleading in a material respect

• Tests: False = Objective…Misleading = Subjective

• Literal meaning and general impression

• Disclaimers

MISLEADING ADVERTISING

Offence/Reviewable Practice

Maximum Penalty

Old New

Misleading Advertising (criminal)

Fine at the discretion of the court and/or five years imprisonment

Fine at the discretion of the court and/or 14 years imprisonment

Deceptive Marketing First OffenceSubsequent

OffencesFirst Offence

Subsequent Offences

Individuals 50,000 100,000 750,000 1,000,000

Businesses 100,000 200,000 10,000,000 15,000,000

Increased Penalties

Misleading Advertising

• Big penalty for civil offence

- Prospects for Charter challenge

- Implications for consent settlement agreements

- Avoiding litigation costs, personal criminal sanctions and multi-count violations

Other Consumer Remedies

• Competition Tribunal may:

- order restitution to victims of deceptive marketing practices

- freeze assets of accused business and prevent disposal of property before finding

• interim order likely where accused is not a sizeable and reputable business

Implications for Marketers

• Easier to prove offences

• Non-compliance more costly (in terms of liability for penalties imposed by regulator and damages awarded in private lawsuits)

• Should review and update marketing law compliance programs to mitigate risks

Bill HearnMcMillan LLPBrookfield Place181 Bay StreetSuite 4400Toronto, ON M5J 2T3

Tel: 416.865.7240Fax: 416.865.7048Email: bill.hearn@mcmillan.ca