disclaimer in ads - resting not dead?

Disclaimers in Ads – Resting Not Dead?

Recent Developments in Deceptive Advertising Law -What Advertisers Need to Know

Bill Hearn and Hubert Sibre, Davis LLP

Presentation to Association of Canadian AdvertisersOctober 29, 2012

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• Why are disclaimers in ads hotter than ever?

• What’s a disclaimer? Why and how are they used in advertising?

• When do disclaimers cause problems? What are the costs?

Overview

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• What are the rules for properly using disclaimers?

under federal statutes (like the Competition Act)

as enforced by regulators (like the Competition Bureau)*

as interpreted by Canadian courts

as administered by ASC

*May touch on requirements of other Canadian regulators – e.g., OMVIC

Overview

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• What did the Supreme Court of Canada recently say about disclaimers in Richard v. Time? and what are the implications of that judgment?

• Some conclusions (are disclaimers really dead?), Q&A and, time permitting, a discussion of some disclaimers in action

Overview

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Why Are Disclaimers In Ads So Hot?

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Truth Works!

• Tell the Truth: Honesty Is Your Most Powerful Marketing Tool, Sue Unerman and Jonathan Baskin

• Extreme Trust: Honesty as a Competitive Advantage, Don Pepper and Martha Rogers, Ph.D.

Disclaimers are commonplace but should not be an afterthought

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Competition Bureau’s Recent Record as “Strong Enforcer” –Bell’s Consent (June 2011)

• Bell Canada voluntarily (and without admitting liability) paid a $10 million administrative monetary penalty in a consent agreement following an investigation and allegations by the Competition Bureau that, despite the disclaimers in Bell’s ads being literally true, the general impression created by these ads was deceptive contrary to the false and misleading advertising provisions of the Competition Act

Disclaimers should be top of mind for advertisers

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Competition Bureau’s Recent Record as “Strong Enforcer” –Bell’s Consent (June 2011)• Advertised prices were not actually available to anyone due to extra fees. The Commissioner concluded that: consumers would be required to review disclaimers on Bell’s

website or elsewhere to identify the additional fees for which consumers were liable

the disclaimers were in any event insufficient to alter the general impression of the representations

• Consent Agreement required that Bell “make no price representation that uses a disclaimer that contradicts the general impression of the representation to which it relates”


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Competition Bureau’s Recent Record as “Strong Enforcer” –Commissioner’s Warning (October 2011)

• Canada’s then Commissioner of Competition Melanie Aitken warned in a speech to competition lawyers that: “Including a fine-print disclaimer is no license to advertise prices that are not available … We are investigating several industries where we are concerned that Canadians have been taken advantage of, in this or related ways. All I can say at this point is: stay tuned”


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Competition Bureau’s Recent Record as “Strong Enforcer” –Commissioner of Competition v. Yellow Page Marketing(March 2012)

• In an action brought by the Competition Bureau, the Ontario Superior Court of Justice found that 5 companies and 3 individuals had advertised deceptively and ordered them to (a) pay over $9 million in administrative monetary penalties (to date, the highest ever awarded in contested proceedings for deceptive advertising in Canada), (b) pay restitution to affected consumers and (c) publish corrective notices


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Competition Bureau’s Recent Record as “Strong Enforcer” –Commissioner of Competition v. Yellow Page Marketing(March 2012)• The advertising was mainly unsolicited faxes that deceived

recipients into believing they were dealing with the well-known “Yellow Pages Group” and were merely updating their existing records for its “telephone directory business”

• The fine print disclaimer, however, revealed that they were actually signing a new 2-year contract with the unknown “Yellow Marketing Group” for “internet business directory” services (which cost $2,856)


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Competition Bureau’s Recent Record as “Strong Enforcer” –Commissioner of Competition v. Yellow Page Marketing(March 2012)• The Court held that the advertising was intended to deceive and

did, in fact, deceive recipients into believing they were dealing with the Yellow Pages Group. The Court also held that• the fact that the fine print of the advertising stated that

returning the unsolicited fax would bind the recipient to a two-year contract did not reduce its deceptive nature

• the fine print did not clarify that the unsolicited faxes had not been sent by the Yellow Pages Group and the disclosure was insufficiently prominent


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Competition Bureau’s Recent Record as “Strong Enforcer” –Commissioner Announces Resignation (June 2012)

• On June 28, 2012, then Commissioner Aitken announced she would be stepping down on September 21, 2012

• Bureau press release listed as one of her accomplishments that “Canadians today .. are better protected against misleading representations, including those resulting from fine-print disclaimers.”


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Competition Bureau’s Recent Record as “Strong Enforcer” –Bureau Sues Carriers and CWTA for Allegedly Deceptive Ads (September 2012)

• On September 14, 2012, following a 5-month investigation, the Competition Bureau sues Bell, Rogers, Telus and the Canadian Wireless Telecommunications Association in the Ontario Superior Court of Justice seeking full customer refunds and administrative monetary penalties totaling $31 million for premium text messaging and rich content services (such as trivia questions and ring tones) the advertising for which the Bureau alleges has been deceptive


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Competition Bureau’s Recent Record as “Strong Enforcer” –Bureau Sues Carriers and CWTA for Allegedly Deceptive Ads (September 2012)

• Bureau alleges that customers were misled into believing this content was free when it was not.

• Lisa Campbell, Deputy Commissioner, Fair Business Practices Branch stated “We want to ensure that consumers are not misled and have greater control over third-party charges on their wireless invoices.”


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Competition Bureau’s Recent Record as “Strong Enforcer” –Commissioner’s Remarks (September 2012)

• On September 20, 2012, then Commissioner Aitken (in her last public speech in that capacity) emphasized the importance of the Competition Bureau being and remaining “a strong enforcer”

• “Canadians benefit from a rigorous competition framework, combined with a Bureau that has teeth and is not afraid to bite, when required.”


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Competition Bureau’s Recent Record as “Strong Enforcer” –Commissioner’s Remarks (September 2012)

• “By looking at cases through the lens that we must always be ready for litigation – as much as we would rather not go that route – has allowed us to enhance our credibility, many times over, as a principled and active enforcement agency.”

• “Today, right across the spectrum, we have an unprecedented number of contested cases in progress. We have taken steps internally to increase and improve our capacity to suitably aggressively support our pursuit of these cases.”


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Competition Bureau’s Recent Record as “Strong Enforcer” –New Sheriff in Town (September 2012)

• On September 26, 2012 Minister of Industry Christian Paradis appointed John Pecman as Interim Commissioner of Competition to replace former Commissioner Aitken

• Commissioner Pecman is an economist by training and a 28-year veteran of the Bureau who has worked in every enforcement branch, most recently as Senior Deputy Commissioner of Competition of the Criminal Matters Branch enforcing the price-fixing and bid-rigging provisions of the Competition Act


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Competition Bureau’s Recent Record as “Strong Enforcer” –ICPEN Sweep (September 2012)

• On September 28, 2012, the Competition Bureau announced it had “coordinated a joint internet sweep by members of the International Consumer Protection and Enforcement Network (ICPEN) targeting fraudulent and deceptive advertising in the rapidly growing online and mobile markets.”

• Consumer protection agencies worldwide participated in this initiative aiming to increase consumer confidence in online transactions by improving their ability to make informed purchases


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Competition Bureau’s Recent Record as “Strong Enforcer” –ICPEN Sweep (September 2012)

• Sweep intended to identify vendors who do not properly disclose the terms of online and mobile transactions that can result in consumers facing recurring charges, usage fees and contract terms that they did not intend to accept

• “The results of the ICPEN sweep will be analyzed and follow-up enforcement action will be taken, as necessary.”

• Both ICPEN and the Bureau have set-up “complaint hotline” centres for consumers who believe they have been victims of deceptive online or mobile practices


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Competition Bureau’s Recent Record as “Strong Enforcer” –New Sheriff, Same Mandate and Priorities (October 2012)

• Appears the Bureau will keep fighting deceptive advertising as an enforcement priority

• Appears the Bureau will continue to use all of the powers at its disposal, including seeking significant penalties and restitution to pursue instances of deceptive advertising


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Competition Bureau’s Recent Record as “Strong Enforcer” -Former Commissioner Aitken’s “Exit Interview” (October 2012)

• On October 26th, in the November 2012 edition of The Globe and Mail Report on Business Magazine, former Commissioner Aitken said that, “[t]here was the Bell Canada case in the summer of 2011, for misleading advertising. They were hiding important elements of the prices of phone, Internet and TV services in fine-print disclaimers, and they were advertising prices that simply weren’t available. By entering into a consent agreement to pay the maximum fine possible – and most importantly, stopping the conduct – they helped us send a signal to others in the industry.”


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Other Regulators –Competition Bureau Not Alone with Concerns – e.g., OMVIC(August 2012)

• August 2012, Ontario Motor Vehicle Industry Council (OMVIC) Dealer Bulletin “Problematic Trends in Dealer Advertising”

• Do not advertising using font or print that is not clear or legible because of size/contrast/orientation on page (e.g., vertical)


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Other Regulators –Competition Bureau Not Alone with Concerns – e.g., OMVIC(August 2012)

• “Vertical fine print is not acceptable.”

• “All disclosure in advertisements appearing in newspapers, periodicals and other publications must be printed in a font that is, at a minimum, the same as that normally used in classified advertising by the publication where the advertisement appears.”


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Supreme Court of Canada - Jean-Marc Richard v. Time Inc. –New Standards for Consumer Protection?

• In February 2012, the Supreme Court of Canada ignored disclaimers that were “inconspicuous” and “buried in a sea of text” (lowering the bar for deceptive advertising in the consumer protection context and moving from a “buyer beware” to a “seller beware” standard)

Disclaimers should be top for mind for advertisers

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Supreme Court of Canada - Jean-Marc Richard v. Time Inc.New Standard for Consumer Protection?

• The SCC expressly rejected the standards of

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

the careful and diligent consumer


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Supreme Court of Canada - Jean-Marc Richard v. Time Inc.New Standard for Consumer Protection?

• Instead, the SCC applied, in the consumer protection context, the standards of

the credulous and inexperienced consumer – i.e., someone who is not particularly experienced at detecting falsehoods and subtleties found in commercial representations, and

the ordinary hurried purchaser – i.e., not the person who never notices anything but the person who takes no more than ordinary care to observe that which is staring them in the face


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Why thinking like a comedian might help with legal compliance

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Disclaimers In Ads: 101

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• Dictionaries define a disclaimer as a renunciation or denial – a statement that negates or limits in some way*

*Marketers should not use a disclaimer to negate the main message of an ad

• Marketers often make use of disclaimers in ads to disclose important information that is required by law or is necessary for the reader to better understand the ad

• This is commonly done by marking the headline with an asterisk signaling to the reader that a footnote to the headline is to be found elsewhere in the ad

Disclaimers – What, Why and How

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• Disclaimers often serve a useful purpose and are usually necessitated by the complexity of the offers being advertised, by space restrictions in the ad medium being used, and/or by financial constraints – e.g., there are different compliance challenges for mobile marketing vs. outdoor advertising

• In most cases, the text that is asterisked is the main message and is in large easy-to-read print

• A disclaimer that properly adds information is not a problem so long as the ad, taken as a whole, is not materially deceptive

Disclaimers – What, Why and How

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• Problems arise when the asterisk refers to important information which may negate or otherwise limit the plain meaning of the main message

• Disclaimers that restrict rather than expand upon, or contradict rather than clarify, the main message usually raise legal concerns about deceptive advertising

Disclaimers – Problems

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• Costs to business and brand include loss of consumer trust and bad PR associated with deceptive advertising

• Federal regulators (such as the Competition Bureau) may take enforcement action and impose substantial fines and jail terms

• Provincial regulators (in specialized areas such as OMVIC for Ontario motor vehicle dealers and MTCU for Ontario private career colleges) may take enforcement action and impose sanctions including fines and revocation of marketers’ licenses/registrations

Disclaimers – Costs

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• ASC may seek compliance in response to consumer and/or competitor complaints

• Competitors (especially where comparative claims are being made and deceptively disclaimed) may seek injunctive relief and/or substantial damages in private court actions

• Consumers (as individuals and, more troubling, as a class) may seek substantial damages in private court actions

Disclaimers – Costs

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Federal Ad Laws of General Application under Competition Act*

The basic rule prohibiting deceptive advertising is whether the general impression created by the ad is false or misleading in a material respect

* There are numerous federal ad laws that apply to specific products (e.g., food, drugs and pesticides) that are enforced by specialized regulators. There are also many provincial/territorial ad laws and specialized regulators (e.g., in the motor vehicle dealer and career college sectors).

Disclaimers – Rules for Proper Use

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Federal Ad Laws of General Application under Competition Act• This basic rule raises many questions, including What level of consumer sophistication may marketers assume? What is the general impression created? Is it materially false

and misleading or not? What is the impression without the disclaimer? Will the

disclaimer actually be noticed? Is the “main message” so strong that the disclaimer can’t alter it?

• You can’t use disclaimers like you would defined terms in a contract


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Some Guidance from the Competition Bureau• Use of Disclaimers, Misleading Advertising Bulletin, 1986

• Asterisks, Disclaimers and Other Fine Print, Misleading Advertising Bulletin, 1990

• Application of the Competition Act to Representations on the Internet, Enforcement Guidelines, 2003 (updated 2009) Section on disclaimers with principles applicable to offline

ads too

• Remarks By Commissioner of Competition, CBA Conference, 2011


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Bureau’s 1986 Bulletin

• Disclaimers may properly clarify ambiguity or provide qualification

• Main body of advertisement apart from the disclaimer should be capable of standing alone

• It is unlikely that a disclaimer can change the general impression of a misleading advertisement


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Bureau’s 1990 Bulletin• A practical well-written summary

• Concludes with following observation:“Advertisers considering using disclaimers and other fine print should ask themselves the following questions: (1) Were there any footnotes in this article? (2) Did you bother to read them? and (3) Do you remember what they said?”

• Surprisingly, this article is not available on Bureau’s website


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Bureau’s 1990 Bulletin

• Covers print, television and radio advertising and addresses:

Disclaimer content, placement and format

Use and placement of symbols

Size of fine print


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Bureau’s 1990 Bulletin• Not sufficient for disclaimer to be present – disclaimer must be

likely to be read and likely to alter the general impression

On TV, need to keep disclaimer on screen long enough to read and comprehend in one normal viewing

When determining appropriate size of text for disclaimer, should take context of ad and nature of target audience into account

The 7 point font rule:“It is the [Bureau’s] position that disclaimers in print size smaller than 7 points will not save a representation from being misleading … At the same time, this should not be taken to mean that disclaimers in 7 point or larger sizes will be sufficient to affect the general impression in every case. This determination depends on the circumstances of each case.”


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Caution: Happy Fun Ball may suddenly accelerate to dangerous speeds. Happy Fun Ball contains a liquid core, which if exposed due to rupture should not be touched, inhaled, or looked at. Do not use Happy Fun Ball on concrete. Discontinue use of Happy Fun Ball if any of the following

Disclaimers – This is 7 point font

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occurs: Itching, Vertigo, Dizziness, Tingling in extremities, Loss of balance or coordination, Slurredspeech, Temporary blindness, Profuse Sweating, or Heart palpitations. If Happy Fun Ball begins tosmoke, get away immediately. Seek shelter and cover head. Happy Fun Ball may stick to certain types of skin. When not in use, Happy Fun Ball should be returned to its special container and kept under refrigeration. Failure to do so relieves the makers of Happy Fun Ball, Wacky Products Incorporated, and it's parent company, Global Chemical Unlimited, of any and all liability. Ingredients of Happy Fun Ball include an unknown glowing substance which fell to Earth, presumably from outer space. Do not taunt Happy Fun Ball. May cause any of the aforementioned effects and/or death. Articles are ribbed for your pleasure. Possible penalties for early withdrawal. Offer valid only at participating sites. Slightly higher west of the Rockies. Allow four to six weeks for delivery. Must be 18 to read. Disclaimer does not cover misuse, accident, lightning, flood, tornado, tsunami, volcanic eruption, earthquake, hurricanes and other Acts of God, neglect, damage from improper reading, incorrect line voltage, improper or unauthorized reading, broken antenna or marred cabinet, missing or altered serial numbers, electromagnetic radiation from nuclear blasts, sonic boom vibrations, customer adjustments that are not covered in this list, and incidents owing to an airplane crash, ship sinking or taking on water, motor vehicle crashing, dropping the item, falling rocks, leaky roof, broken glass, mud slides, forest fire, or projectile (which can include, but not be limited to, arrows, bullets, shot, BB's, shrapnel, lasers, napalm, torpedoes, or emissions of X-rays, Alpha, Beta and Gamma rays, knives, stones, etc.). Seek help immediately if you are actually reading this! This product is meant for educational purposes only. Any resemblance to real persons, living or dead is purely coincidental. Void where prohibited. Some assembly required. List each check separately by bank number. Batteries not included. Contents may settle during shipment. Use only as directed. No other warranty expressed or implied. Do not use while operating a motor vehicle or heavy equipment. Postage will be paid by addressee. Subject to CAB approval. This is not an offer to sell securities. Apply only to affected area. May be too intense for some viewers. Do not stamp. Use other side for additional listings. For recreational use only. Do not disturb. All models over 18 years of age. If condition persists, consult your physician. No user-serviceable parts inside. Freshest if eaten before date on carton. Subject to change without notice. Times approximate. Simulated picture. No postage necessary if mailed in the United States. Breaking seal constitutes acceptance of agreement. For off-road use only. As seen on TV. One size fits all. Many suitcases look alike. Contains a substantial amount of non-tobacco ingredients. Colors may, in time, fade. We have sent the forms which seem right for you. Slippery when wet. For office use only. Not affiliated with the American Red Cross. Drop in any mailbox. Edited for television. Keep cool. process promptly. Post office will not deliver without postage. List was current at time of printing. Return to sender, no forwarding order on file, unable to forward. Not responsible for direct, indirect, incidental or consequential damages resulting from any defect, error or failure to perform. At participating locations only. Not the Beatles. Penalty for private use. See label for sequence. Substantial penalty for early withdrawal. Do not write below this line. Falling rock. Lost ticket pays maximum rate. Your canceled check is your receipt. Add toner. Place stamp here. Avoid contact with skin. Sanitized for your protection. Be sure each item is properly endorsed. Sign here without admitting guilt. Slightly higher west of the Mississippi. Employees and their families are not eligible. Beware of dog. Contestants have been briefed on some questions before the show. Limited time offer, call now to ensure prompt delivery. You must be present to win. No passes accepted for this engagement. No purchase necessary. Processed at location stamped in code at top of carton. Shading within a garment may occur. Use only in a well-ventilated are. Keep away from fire or flames. Replace with same type. Approved for veterans. Booths for two or more. Check here if tax deductible. Some equipment shown is optional. Price does not include taxes. No Canadian coins. Not recommended for children. Prerecorded for this time zone. Reproduction strictly prohibited. No solicitors. No alcohol, dogs or horses. No anchovies unless otherwise specified. Restaurant package, not for resale. List at least two alternate dates. First pull up, then pull down. Call toll free before digging. Driver does not carry cash. Some of the trademarks mentioned in this product appear for identification purposes only. Record additional transactions on back of previous stub. Unix is a registered trademark of AT&T. Do not fold, spindle or mutilate. No transfers issued until the bus comes to a complete stop. Package sold by weight, not volume. Your mileage may vary. This article does not reflect the thoughts or opinions of either myself, my company, my friends, or my cat. Don't quote me on that. Don't quote me on anything. All rights reserved. You may distribute this article freely but you may not make a profit from it. Terms are subject to change without notice. Illustrations are slightly enlarged to show detail. Any resemblance to actual persons, living or dead, is unintentional and purely coincidental. Do not remove this disclaimer under penalty of law. Hand wash only, tumble dry on low heat. Do not bend, fold, mutilate, or spindle. No substitutions allowed. For a limited time only. This article is void where prohibited, taxed, or otherwise restricted. Caveat emptor. Article is provided "as is" without any warranties. Reader assumes full responsibility. An equal opportunity article. No shoes, no shirt, no articles. quantities are limited while supplies last. If any defects are discovered, do not attempt to read them yourself, but return to an authorized service center. Read at your own risk. Parental advisory - explicit lyrics.Text may contain materials you find


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objectionable, parental guidance is advised. Keep away from sunlight. Keep away from pets and small children. do not attempt to read them yourself, but return Keep away from sunlight. Keep away from pets and small children. Limit one-per-family please. No money down. No purchase necessary. You need not be present to win. Some assembly required. Batteries not included. Instructions are included. Action figures sold separately. No preservatives added. Slippery when wet. Safety goggles may be required during use. Sealed for your protection, do not read if safety seal is broken. Call before you dig. Not liable for damages arising from use or misuse. For external use only. If rash, irritation, redness, or swelling develops, discontinue reading. Read only with proper ventilation. Avoid extreme temperatures and store in a cool dry place. Keep away from open flames. Avoid contact with eyes and skin and avoid inhaling fumes. Do not puncture, incinerate, or store above 120 degrees Fahrenheit. Do not place near a flammable or magnetic source. Smoking this article could be hazardous to your health. The best safeguard, second only to abstinence, is the use of a condom. No salt, MSG, artificial color or flavoring added. If ingested, do not induce vomiting, and if symptoms persist, consult a physician. Warning: Pregnant women, the elderly, and children should avoid prolonged exposure to Happy Fun Ball. Caution: Happy FUn Ball may suddenly accelerate to dangerous speeds. Happy Fun Ball contains a liquid core, which if exposed due to rupture should not be touched, inhaled, or looked at. Do not use Happy Fun Ball on concrete. Discontinute use of Happy Fun Ball if any of the following occurs: Itching, Vertigo, Dizziness, Tingling in extremities, Loss of balance or coordination, Slurred speech, Temporary blindness, Profuse Sweating, or Heart palpitations. If Happy Fun Ball begins to smoke, get away immediately. Seek shelter and cover head. Happy Fun Ball may stick to certain types of skin. When not in use, Happy FunBall should be returned to its special container and kept under refrigeration. Failure to do so relieves the makers of Happy Fun Ball, Wacky Products Incorporated, and it's parent company, Global Chemical Unlimited, of any and all liability. Ingredients of Happy Fun Ball include an unknown glowing substance which fell to Earth, presumably from outer space. Happy Fun Ball has been shipped to our troops in Saudi Arabia and is also being dropped by our warplanes on Iraq. Do not taunt Happy Fun Ball. May cause any of the aforementioned effects and/or death. Articles are ribbed for your pleasure. Possible penalties for early withdrawal. Offer valid only at participating sites. Slightly higher west of the Rockies. Allow four to six weeks for delivery. Must be 18 to read. Disclaimer does not cover misuse, accident, lightning, flood, tornado, tsunami, volcanic eruption, earthquake, hurricanes and other Acts of God, neglect, damage from improper reading, incorrect line voltage, improper or unauthorized reading, broken antenna or marred cabinet, missing oraltered serial numbers, electromagnetic radiation from nuclear blasts, sonic boom vibrations, customer adjustments that are not covered in this list, and incidents owing to an airplane crash, ship sinking or taking on water, motor vehicle crashing, dropping the item, falling rocks, leaky roof, broken glass, mud slides, forest fire, or projectile (which can include, but not be limited to, arrows, bullets, shot, BB's, shrapnel, lasers, napalm, torpedoes, or emissions of X-rays, Alpha, Beta and Gamma rays, knives, stones, etc.). Other restrictions may apply.

This supersedes all previous notices.


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Bureau’s Online Reps Enforcement Guidelines (2003 & 2009)• Relevant qualifying information must be presented in ads

clearly and conspicuously – consumer must receive clear and accurate information to make an informed choice

• Disclaimers may expand upon and add information to the main message

• A disclaimer can only qualify a representation; it cannot cure or retract a false or misleading representation


47

Bureau’s Online Reps Enforcement Guidelines (2003 & 2009)

• Generally the disclaimer should appear on the same screen and close to the representation to which it relates (but not always possible)

• Design of page should highlight the existence of disclaimers (use of colour or contrast may assist)

• “See below for details” generally not explicit enough; instead say … “restrictions on eligibility”


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Bureau’s Online Reps Enforcement Guidelines (2003 & 2009)

• Attention-grabbing tools should not distract a consumer’s attention away from disclaimers

• Audio disclaimer may not be sufficient; if audio disclaimers used, volume and cadence are important

• Visual disclaimers need to be displayed long enough to be read and understood

• Consider making clicking through a disclaimer compulsory


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Bureau’s Online Reps Enforcement Guidelines (2003 & 2009)• For “required disclosures” (such as contest rules and mini-

rules) disclosures must be made in a way that they are likely to be read

• What is considered adequately displayed will depend on the format and design of the website

• Readers should not be required to take an “active step” (such as sending an email or placing a phone call) – clicking on a clearly labelled hyperlink is not considered by the Bureau to be an active step


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Commissioner Aitken’s CBA Speech, 2011• “It’s very simple - don’t mislead the public by

hiding charges or conditions in fine print.”

• “It’s pretty easy - when a price is offered to consumers, it better be accurate. Including a fine-print disclaimer is no license to advertise prices that are not available.”

• Is it really that simple and easy?


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R. v. Viceroy Construction Co. (1975) – D Ignored• Catalogue for suburban houses

• Text and picture suggested two storey house

• Examination of specification sheet showed a one story house

• Court held that “average person” would be fooled by the ad

Disclaimers – Rules for Proper Use: What Some Courts Have Said

52

R. v. International Vacations Ltd. (1980) – D Upheld• Advertisement published the full schedule of the carrier

• Disclaimer noted that individual flight availabilities had to be checked

• Court held that disclaimer (warning of flights being sold out) was effective

• The disclaimer was “an integral part of the advertisement.”

Disclaimers – Rules for Proper Use:What Some Courts Have Said

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Purolator v. UPS (1995) – D Upheld• Disclaimers were right in the main text of ad – i.e., “Usually at

rates up to 40% less than other couriers charge”

• Court held that “A disclaimer does not automatically nullify a misleading impression created by an ad. Its effect will depend on several factors, including the degree to which a representation misleads the public without the disclaimer, the prominence which it is given in the context of the entire advertisement, the degree of sophistication that the public to whom the advertisement is directed exhibits, and the likelihood that the audience would recognize the disclaimer.”


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Maritime Travel Inc. v. Go Travel Direct.com Inc. (2009) – D Ignored

• Claim was “Go Travel Direct offers vacations for less by eliminating the travel agent and passing the savings on to you”

• Small print disclaimer that the price comparison was to one destination on one date

• Disclaimer not sufficient to overcome the general impression that prices were generally lower

• Contrast with 1980 International Vacations case


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Commissioner of Competition v. Yellow Page Marketing (2012) – D Ignored

• The Court found the advertising deceptive and, with respect to the disclaimers, held that

• the fact that the fine print of the advertising stated that returning the unsolicited fax would bind the recipient to a two-year contract did not reduce its deceptive nature, and

• the fine print did not clarify that the unsolicited faxes had not been sent by the Yellow Pages Group and the disclosure was insufficiently prominent


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THE NEW LEADING CASE IN CONSUMER PROTECTION*

Richard v. Time, Supreme Court of Canada (2012)

* Restricted to Quebec and/or provincial/territorial consumer protection laws or applicable generally including to the federal Competition Act?


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Richard v. Time: How far can advertisers go

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Jean-Marc Richard v. Time Inc.

• Hearing before Supreme Court in January 2011Claim for US $833,337

• Claim for US $833,337

January 2011

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• Introductory facts Richard receives « Sweepstakes Notification » in 1999 The Sweepstakes says:

• « Our sweepstakes results are now final: Mr. Jean Marc Richard has won a cash prize of $833,337.00!

• We are now authorized to pay $833,337.00 in cash to Mr. Jean Marc Richard!

• A bank cheque for $833,337.00 is on its way to xxxx st!• You will forfeit the entire $833,337.00 if you fail to

respond to this notice! » • The justification from Time: « If you have and return the Grand Prize winning entry»

Jean-Marc Richard v. Time Inc.

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• No contract between Time and Richard to pay the amount promised, but:

• Many infractions to the Consumer Protection Act –Title II – illegal commercial practices

• $100,000 of punitive damages and $1,000 of compensatory damages (moral damages)

Judgment of Carole Cohen, j.c.s.

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• Reverses first instance judgment

• Confirms that the Consumer Protection Act applies to the relationship between Time and Richard, whether a contract exists or not

• Modifies definition of average consumer

Judgment of the Quebec Court of Appeal

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Other subjects discussed

• Punitive damages under sec. 272 of the Act• Obligations imposed by the Act• Average consumer in relation with the criteria to

determine illegal practices• Quantum• Compensatory damages • Legal costs

Judgment of the Court of Appeal

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• To justify the reversal of the first instance decision, the Quebec Court of Appeal states the following (translated) « The average consumer is not more naive that the average person. I imagine him to be of average intelligence, of average scepticism and of average curiosity. »

• In addition, the Court of Appeal states: « He knows, I believe, that advertisement is, somewhat by definition, boastful. »


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Consequently, the criteria of the average consumer, as compared to the traditional definition of an inexperienced and credulous consumer, was substantially modified by the Court of Appeal


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• The impact of the Court of Appeal judgment on the definition of the average consumer

• Leave to appeal allowed

Leave to appeal to the Supreme Court of Canada

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Two main subjects

• The average consumer as applied to advertising

• Quantum of punitive damages

Hearing before the Supreme Court of Canada

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• Reversal of the judgment of the Quebec Court of Appeal

• History of consumer protection

• Review on prohibited practices General impression Abstract analysis

Judgment of the Supreme Court of Canada - February 2012

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On the subject of the average consumer:• Advertising and consumer law must protect more that

simply the average – a credulous and inexperienced consumer

• Average consumer is not particularly experienced at detecting falsehoods and subtleties

• The document from Time was purposefully drafted to be misleading

• Proof of contract between Richard and Time was necessary (here it existed because Richard subscribed to Time magazines)

Judgment of the Supreme Court of Canada

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On the subject of punitive damages:

• Consumer Protection Act allows for punitive damages (Section 272 of the Act) Contract is needed (Sections 1e, 2 and 272 of the Act) Independence of the recourse in damages

• Criteria as established continues to apply • Quantum must be dissuasive, but proof of capability of

impugned person must be made• No need to consider the Charter of the French Language for

quantum• Costs awarded in favour of Richard because of the importance of

the questions raised before the Court

Judgment of the Supreme Court of Canada

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• Cornerstone of advertising self-regulation

• Sets criteria for truthful and acceptable advertising

• Consumers’ complaints − Consumer Complaint Procedure

• Disputes between adver sers − Advertising Dispute Procedure

Canadian Code of Advertising Standards

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Clause 1: Accuracy and Clarity

• Ads must not make inaccurate or misleading claims about a product/service

• General impression conveyed by an ad is important in assessing truthfulness of a message

• Ads must not omit relevant information

• Details of an offer must be clearly stated

• All claims must be supportable

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• Consumers critically scrutinizing advertising

• 2011-2012 – misleading ads remains top complaint issue

• Rise in number of complaints re: illegible disclaimers in automobile, telecommunications and financial services commercials

Canadian Code of Advertising Standards

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Internet Ad: Telecommunications Service Provider“Unlimited” service advertised at a specified monthly price

Complaint: Ad did not disclose important limitations on the service

Decision: • “Unlimited” meant no limitations or restrictions, but in reality the service

was limited. Limitations were not found on the main page, but elsewhere on the advertiser’s website. Limitations should have been disclosed on the main page

• Ad found to contain an inaccurate claim and omitted relevant information

Infraction: Clauses 1(a) and (b)

Standards Council Decision

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Cosmetic Advertisements – 7 separate cases Advertisements implied that the models’ very long eyelashes resulted from using the advertised products

Complaints: Depicted results could not have been achieved unless false lashes or lash inserts were used in addition to the product

Decision: The use of false eyelashes/inserts in mascara commercials is important information that must be, but wasn’t, clearly communicated so that viewers did not understand the basis for the depiction and claim

Infractions: Clauses 1(a) and (d)

Standards Council Decision

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Disclaimers In Ads: Wrap Up

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• Advertisers must take seriously the use of disclaimers; given the consequences, they can’t be an afterthought

• Advertisers must carefully think through the nature, content, placement, format, size and prominence of disclaimers

• Competition Bureau has been consistent in articulating the principle that the disclaimer cannot contradict the main message

Some Conclusions

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• Canadian courts have not been as consistent – one challenge is that it is always easy to discern what’s a contradiction

• But now have the SCC’s articulation of the “general impression” test in Richard v. Time for determining when an advertisement is deceptive which, in the context of at least the Quebec Consumer Protection Act, applies a low standard of discernment/sophistication for the notional “average consumer”

Some Conclusions

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• Historically, the level of discernment/sophistication imputed to the notional “average purchaser” under the deceptive advertising provisions of the Competition Act has varied based on the type of product and the target audience

• It is an open question whether the “general impression” test in Richard v. Time will be applied to the federal Competition Act or whether it will be restricted to Quebec (or at least provincial/territorial) consumer protection laws

Some Conclusions

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• In a presentation to the Canadian Bar Association’s Competition Law Conference in Ottawa on September 20, 2012, Lisa Campbell Deputy Commissioner, Fair Business Practices Branch, suggested that the Bureau’s view is that the lower standard enunciated in Richard v. Time may well apply (or, depending on the context, at least ought to apply) to the interpretation of the deceptive advertising provisions of the Competition Act

Some Conclusions

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• As a practical matter, therefore, while there may be good legal arguments that the standard of average consumer in Richard v. Time under the Quebec Consumer Protection Actshould not apply to cases under the Competition Act, the risk averse, prudent advertiser will, to the greatest extent possible, put the disclaimers in its advertising under the scrutiny of this pro-consumer, harsher-on-the-advertiser test

Some Conclusions

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• In any event, fair to say that the SCC’s ruling on the “general impression” test in determining whether an ad is deceptive may influence interpretation of the deceptive advertising provisions of the Competition Act

• Even if the reasoning in the Richard v. Time case is not adopted in future Competition Act cases, it will likely be argued to be relevant

Some Conclusions

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• Disclaimers are not dead, and it would be silly for advertisers to stop using them completely … But don’t be cute!

• Recent Bureau enforcement actions should put to rest the idea, if it ever crosses an advertiser’s mind, that fine print disclaimers are effective, convenient and costless devices to trick consumers … That’s bad business and bad law!

• Disclaimers remain relevant and an important arrow in an advertiser’s quiver if they are prominent, easy to read and do not contradict main message of the advertising

Some Conclusions

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Disclaimers in ads should

• enlighten, not confuse consumers

• expand upon main message or clarify ambiguity

• not contradict or negate the main message

• be consistently placed and marked with symbols throughout the ad

• be placed close to the main message to which it relates

Some Rules of Thumb

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Why thinking like a comedian might help with legal compliance

• SNL’s “Happy Fun Ball” Spoof TV Commercial

Saturday Night Live - Happy Fun Ball - Video - NBC.com

Happy Fun Ball (old SNL spoof commercial) - YouTube

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Bill Hearn, CounselDavis LLP, [email protected]

Hubert Sibre, PartnerDavis LLP, [email protected]

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