consumer protection: recent developments and trends

Consumer Protection:Recent Developments & Trends

By Bill Hearn*

The Law Society of Upper CanadaThe Six-Minute Business Lawyer 2013

Toronto, June 6, 2013

* The author acknowledges, with thanks, that Jennifer Saville, a law student summering at Davis LLP, helped prepare this presentation.

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• Do your clients advertise, market or sell to consumers?

• In the context of consumer protection laws, “consumers” are individuals who purchase for personal, family or household purposes (not for business purposes)

Overview

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• Bill 55, Stronger Protection for Ontario Consumers Act, 2013 - protection against unscrupulous (a) door-to-door salespersons, (b) real estate and business brokers and (c) collection agencies

• Richard v. Time (SCC, 2012) - the “credulous person” standard under Quebec’s consumer protection legislation

• Canada’s Anti-Spam Legislation (CASL) - protection of consumers against deception with respect to locator, sender information or subject matter of an electronic message sent to promote a business interest or supply/use of a product

Overview

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• Digital Advertising Alliance of Canada’s (DAAC) “Ad Choices Icon” program - protecting consumers by increasing transparency of, and giving consumers choices for, online behavioural advertising (OBA)

• Commissioner of Competition v. Bell, Rogers, Telus and CWTA (Ontario litigation commenced September 2012) - emerging consumer protection issues (such as alleged “subscription traps” and “mobile cramming”)

• US Federal Trade Commission (FTC)’s Dot.Com Disclosures, March 2013 - revised guidance on effective disclosures in digital advertising

Overview

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Ontario Bill 55, Stronger Protection for Ontario Consumers Act, 2013

Source: http://www.waterheaterdoortodoor.com/

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• 1st Reading April 18, 2013

• Schedule 2 of the Bill amends the Consumer Protection Act, 2002

• The existing 10-day cooling-off period is extended to 20 days, providing consumers with more time to consider their purchases under so-called “direct agreements” - i.e., agreements concluded at a place other than the supplier’s place of business or at a marketplace, an auction, trade fair, agricultural fair or exhibition - e.g., door-to-door sales

Ontario Bill 55

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• A supplier under a direct agreement cannot supply a water heater, or any other goods or services prescribed by regulation, to a consumer until the 20-day cooling-off period has expired

• If goods or services are supplied to a consumer in contravention of this restriction, the goods or services are deemed to be “unsolicited” (meaning, among other things, that the consumer has no legal obligation in respect of their use or disposal)

Ontario Bill 55

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• Schedule 3 of the Bill amends the Real Estate and Business Brokers Act, 2002 (REBBA)

• A registered brokerage acting for a seller is required to retain, for the period of time prescribed by the regulations, copies of all written offers that it receives to purchase real estate

• A person who has made a written offer to purchase real estate may request that the registrar inquire into and disclose the number of written offers that a brokerage acting for a seller has received to purchase the real estate

• Amends the REBBA so that commission or other remuneration can be a combination of both an amount and a percentage

Ontario Bill 55

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• Schedule 1 of the Bill amends the Collection Agencies Act to regulate the debt settlement services that a collection agency provides to a debtor for remuneration. In particular, a collection agency must enter into an agreement with the debtor

• With respect to that agreement, the regulations will specify what representations a collection agency is prohibited from making and what representations it must make. The regulations may also restrict the amount of any advance payment the collection agency may require from the debtor

• The debtor may cancel the agreement within 10 days of receiving a copy or within one year of the date of entering into it if the debtor does not receive that copy

Ontario Bill 55

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Richard v. Time, SCC 2012

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Richard v. Time

SCC’s Decision, 2012

► Held that the “general impression” test for deceptive advertising under Quebec’s Consumer Protection Act is as follows:

“… that of the first impression … the one a person has after an initial contact with the entire advertisement, and it relates to both the layout of the advertisement and the meaning of the words used.”

► Ignored the disclaimers that were “inconspicuous” and “buried in a sea of text” and, with respect to the average consumer for determining the general impression of an ad, expressly rejected the standards of:

• the consumer with an average level of intelligence, skepticism and curiosity,

• the careful and diligent consumer

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SCC’s Decision, 2012► Instead, applied the “credulous person” standard describing it as the standard 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”, and

“… the credulous and inexperienced consumer - i.e., not “a well-informed person” … but “someone who is not particularly experienced at detecting falsehoods and subtleties found in commercial representations”.

Richard v. Time

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Richard v. Time - Possible Implications

► The SCC’s decision has possible implications for (i) the “general impression” test in determining whether ads are deceptive and (ii) the appropriate use of disclaimers in ads

► Arguably, (i) the “credulous” person standard in Richard v. Time should be limited to Quebec’s Consumer Protection Act and (ii) it is bad law and bad policy to extend that standard to the deceptive advertising provisions of the Competition Act

SHOULD LIMIT DECISION TO QUEBEC CONSUMER PROTECTION LAW

► Strictly speaking, in Richard v. Time, all the SCC did was apply the longstanding “credulous person” standard under Quebec’s Consumer Protection Act that the Quebec Court of Appeal mistakenly ignored when it applied the “reasonable person” standard

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► For many years, the “reasonable person” approach to ad interpretation has been taken by courts and regulators in Canada*, excluding Quebec (as well as in the US, UK, & EU) - i.e., attributing at least a “reasonable degree of sophistication” to the notional “average consumer” when determining the general impression of the ad being interpreted

* Again, not only under federal Competition Act but also under Canada’s provincial consumer protection laws outside Quebec (e.g., in British Columbia, Alberta and

Ontario)

Richard v. Time - Some Observations

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► Historically, the leading cases and the Competition Bureau’s enforcement policies have imputed to the notional “average purchaser” a level of discernment that has varied based on factors such as:

• the type and complexity of the product/service/offer, and

• the sophistication/vulnerability of the audience targeted and of the audience likely to be reached by the ad

Richard v. Time - Some Observations

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What standard applies under the provincial consumer protection laws elsewhere in Canada?

Ontario

• A false, misleading or deceptive representation, defined under Ontario’s Consumer Protection Act, 2002 includes "a failure to state a material fact if such failure deceives or tends to deceive", which is determined objectively, by reference to what would be conveyed to a reasonable person. See Matoni v CBS Interactive Multimedia Inc, 2008, ON Sup. Ct.

Richard v. Time

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Alberta

•Section 6(4) of Alberta’s Fair Trading Act states that an unfair practice includes “a supplier’s doing or saying anything that might reasonably deceive or mislead a consumer.” Case law has interpreted this section as setting out an objective standard, and the consumer is defined as a “reasonable” consumer. See Bagh v Danish Design Inc, 2009, AB Prov. Ct.

Richard v. Time

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British Columbia

•Section 4 of British Columbia’s Business Practices and Consumer Protection Act defines a deceptive act or practice as any conduct by a supplier that has the capability, tendency or effect of deceiving or misleading a consumer or guarantor. In determining whether an unfair practice has been committed, courts use an objective standard and view the average consumer as a “reasonable person”. See Wakelam v Johnson & Johnson, 2011 BCSC

Richard v. Time

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Canada’s Anti Spam Legislation (CASL)

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• CASL creates new and broader standalone criminal offences and reviewable practices in the Competition Act for deceptive advertising in the locator, sender information or subject matter of an electronic message sent to promote a business interest or supply/use of a product (PEM)

• These apply to any false or misleading representations made in the locator, sender information or subject matter of a PEM

• The standard for deception is not limited to representations that are false or misleading in a material respect. The materiality qualifier has been dropped

CASL

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• This creates a higher standard for defending claims about allegedly deceptive representations in PEMs

• This may chill the use of enticing representations being made in the subject line that are intended to be read in the context of the entire body of the PEM

• Digital advertisers will have to consider whether the subject line of a PEM is deceptive when viewed in isolation of the rest of the PEM

CASL

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DAAC’s “Ad Choices Icon” Program

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• Online Behavioural Advertising (OBA) - or Interest Based Advertising (IBA) - involves tracking consumers’ online activities over time to deliver ads targeted to their inferred interests

• Once launched, the Ad Choices Icon will appear in or around OBA ads. Consumers will click on the Icon to find out more about OBA from those serving OBA ads or collecting info for OBA. Links will be provided to various levels of opt-outs and to full opt-out

• Advertising Standards Canada (ASC) will monitor the program to ensure the Icon is being displayed correctly, that opt-outs are set correctly, and that privacy policies have not changed without user notification


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•This is a consumer opt-out tool and self-regulatory best practices effort

•The Ad Choices Icon is in line with Canada’s current privacy law and the Federal Privacy Commissioner’s December 2011 and June 2012 OBA guidelines

•The program is set to launch this summer; when available, get your clients to sign up for info webinars explaining program to prospective Canadian business users

•Future home of DAAC’s Self-Regulatory Program For Online Behavioral Advertising: http://youradchoices.ca/


http://youradchoices.ca/

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Commissioner of Competition v. Telcos and CWTA:

Emerging Issues in Mobile Sector

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• On September 14, 2012, the Competition Bureau began legal proceedings against Bell Canada, Rogers Communications, Inc., TELUS Corporation and the Canadian Wireless Telecommunications Association (CWTA) alleging misleading advertising that promotes "premium text messaging” and “rich content” services

• The Bureau is seeking full customer refunds and administrative monetary penalties (AMPs) — $10 million each from Bell, Rogers and Telus, and $1 million from the CWTA

Competition Litigation Against Telcos and CWTA

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• From statements made by Competition Bureau officials at conferences over the past 9 months, this case seems to have been brought out of a growing concern over so-called online “subscription traps”

• Among consumer protection and competition authorities internationally, there has also been a growing concern over so-called “mobile cramming” (i.e., the emerging practice of unauthorized third-party charges on mobile phone bills)

• The FTC hosted a Roundtable on May 8, 2013 to explore how mobile cramming occurs and how best to protect consumers from this practice

Competition Litigation Against Telcos and CWTA

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FTC’s Revised Guidance onDot.Com Disclosures - How to Make

Effective Disclosures in Digital Advertising, March 2013

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• The FTC recently updated its 2000 guidelines for disclosures in digital media. The guide addresses the expanding use of smart phones, tablets, and other mobile devices by consumers, as well as the increased use of social media marketing by businesses

• “Dot.Com Disclosures: How to Make Effective Disclosures in Digital Advertising” - http://www.ftc.gov/os/2013/03/130312dotcomdisclosures.pdf

FTC’s Dot.Com Disclosures

http://www.ftc.gov/os/2013/03/130312dotcomdisclosures.pdf

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Scrolling: Preferably, design ads so that “scrolling” is not necessary to find a disclosure

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• Well-labeled hyperlinks may be used for disclosures that are not integral to a claim

• Hyperlinks should be clearly labeled to communicate the importance, nature, and relevance of the information to which they lead

• A hyperlink should take consumers directly to the disclosure

Information about Hyperlinks

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•Hyperlinks should not be used to disclose core information that is an inseparable part of the claim, such as certain cost and safety disclosures •Disclosures necessary to prevent deception should never be relegated to “terms of use” and similar contractual agreements

•Hyperlinks can be useful if a disclosure is lengthy, has complicated details, or if it needs to be repeated frequently on a website

Information about Hyperlinks

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•If a space-constrained ad contains a claim that requires qualification, the advertiser disseminating it is not exempt from disclosure requirements

•When a disclosure is necessary, a brief effective one can often be incorporated into a tweet itself. For example, if a tweet is paid for, it can start with “Ad:” to inform consumers that they’re seeing a paid ad

@Tweets and other #space-constrained-ads

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•When a necessary disclosure won’t fit into a tweet or other ad, there are circumstances when it may be okay for the disclosure to be on the click-through:

• when a teaser ad does not actually identify the product being advertised, so the consumer must click through to learn its identity, or

• when the advertised product is sold only through the advertiser’s own website and the consumer must click through in order to take any action

•In other circumstances, if a necessary qualification to a claim won’t fit in the tweet itself, then the claim shouldn’t be made in a tweet

@Tweets and other #space-constrained-ads

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• These recent developments & trends suggest an increase in consumer protection initiatives in terms of new legislation, regulations, guidance documents and strategic enforcement action

• Given the global nature of the online and mobile marketplace, regulators are acting in concert with other regulators internationally - conducting so-called consumer protection “sweeps” - e.g., see the good work of the International Consumer Protection and Enforcement Network (ICPEN), an organization composed of consumer protection authorities from over 50 countries:

https://icpen.org/

Wrap Up

https://icpen.org/

https://icpen.org/

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• Canadian regulators are leading the charge in this area - e.g., in September 2012, the Competition Bureau coordinated a joint internet sweep by members of ICPEN targeting deceptive advertising in the rapidly growing online and mobile markets

• The focus of the sweep was on suppliers who did not properly disclose the terms of online and mobile transactions that can result in consumers facing recurring charges, usage fees and contract terms they did not intend to accept

• The Bureau has warned that the results of the ICPEN sweep will be analyzed and follow-up enforcement action will be taken, as necessary

Wrap Up

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Bill HearnDavis LLP, [email protected]

416.369.5298

Questions?

mailto:[email protected]