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Improvements to the Competition Act...Civil Track for Misleading Advertising

March 18, 1999

Competition Bureau to use civil courts to fast track misleading advertising cases

Changes to the Competition Act create a civil process that will be faster and more effective in putting a stop to misleading advertising and other deceptive marketing practices. Under the new law, the Competition Bureau can apply for civil court orders to halt deceptive conduct, rather than seek conviction in the criminal courts.

The civil process does not signal a softening in the Bureau's enforcement policy. The Bureau is committed to vigorously enforce the criminal provision in the Competition Act reserved for the most serious cases of deliberate misrepresentation.

Key points

Civil court orders

Under the new civil process, the Bureau can apply to the Competition Tribunal (or other court with jurisdiction) for an order prohibiting a person from engaging in deceptive conduct. In certain circumstances, persons found to have engaged in deceptive conduct can be ordered to:

publish an information notice directed to affected parties, and/or
pay an administrative monetary penalty of up to $50,000 for an individual and $100,000 for a corporation on first occurrence, and of up to $100,000 for an individual and $200,000 for a corporation on second and subsequent occurrences.

Criminal offence remains for the most serious cases

It remains a criminal offence to make a false or misleading representation knowingly or recklessly. Criminal law offences have also been retained relating to multi-level marketing and pyramid selling.

Several courts of jurisdiction, to ensure access

Applications can be heard by any provincial superior court and by the Federal Court - Trial Division, as well as by the Competition Tribunal. This is to ensure fast access to the process in all regions.

Deceptive marketing practices
Retained as Criminal Offences

s. 52 General criminal provision making a false or misleading representation knowingly and recklessly(2)
s. 55.1Pyramid selling (unchanged)
s. 54 Double ticketing(3)

Deceptive marketing practices
Moved to Civil Track(1)

s. 74.01(a) General civil provision making a false or misleading representation
s. 74.01(b)(c) Ineffective warranty / guarantee
s. 74.01(2), (3)Ordinary price claims
s. 74.02 Reasonable test and testimonials
s. 74.04 Bait and switch
s. 74.05 Sale above advertised price
s. 74.06 Promotional contests

Types of conduct subject to the civil track

making a representation to the public that is false or misleading in a material respect;
making a performance claim not based on an adequate and proper test;
giving a warranty, guarantee or promise to replace, maintain or repair, if there is no reasonable prospect that it will be carried out;
making a false or misleading representation as to the ordinary selling price of a product;
making a representation concerning a test or testimonial made by another person without that person's permission;
advertising at a bargain price a product that is not available in reasonable quantities ("bait and switch");
selling a product at a price above the advertised price;
conducting a contest, lottery, game of chance or skill, without making fair and adequate disclosure of facts that materially affect the chances of winning.

Temporary orders

The Tribunal or court may issue a short term (effective for up to fourteen days, with a possible extension of up to fourteen days) cease-and-desist order where there is a strong prima facie case that a person is engaging in reviewable conduct and serious harm will or is likely to result if the order is not issued.

Consent orders

Where the Bureau and the person agree on the terms of the order dealing with reviewable conduct, the "consent order" may be filed with the Tribunal (or court) and upon filing, will have the same effect as if the order had been issued by the Tribunal.

Contravention of orders is a criminal offence

Persons who contravene an order of the Tribunal (or court), whether it was contested or consented to, have then committed a criminal offence punishable on summary conviction to a fine up to $25,000 and/or a term of imprisonment up to one year. On conviction on indictment, the maximum penalties are a fine in the discretion of the court and/or up to five years in prison.

A fast, effective process for securing compliance

The provisions that establish the civil process include clear guidance to the courts that their orders should be made with a view to promoting compliance with the Act, not with a view to punishment. The new civil regime with a lower standard of proof will allow most misleading advertising and deceptive marketing practices to be settled more expeditiously through civil remedies, rather than criminal prosecution. The provisions will also allow misleading advertising messages to be corrected more rapidly.

Guidelines

The Competition Bureau has issued Draft Guidelines entitled "Misleading Advertising and Deceptive Marketing Practices, Choice of Criminal or Civil Track" which set out the factors the Bureau will consider in determining which route to follow in a given case.

There will be broad consultation on these guidelines before they are finalized. Anyone interested in obtaining a copy of the guidelines or providing comments, may do so by calling the Bureau's Information Centre at: 1-800-348-5358 or 819-997-4282.

To report false or misleading advertising, call
1-800-348-5358

(1) Due diligence defence: orders may not be made against persons who establish that they exercised due diligence to prevent the conduct from occurring.

(2) Changed to require the false and misleading representation to be made "knowingly and recklessly".

(3) Retained as a summary conviction offence.