ARCHIVED—Misleading Representations and Deceptive Marketing Practices
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What Is the Competition Bureau?
The Competition Bureau is an independent law enforcement agency responsible for the administration and enforcement of the Competition Act, the Consumer Packaging and Labelling Act, the Textile Labelling Act and the Precious Metals Marking Act. Its role is to promote and maintain fair competition so that Canadians can benefit from competitive prices, product choice and quality services. Headed by the Commissioner of Competition, the organization investigates anti-competitive practices and promotes compliance with the laws under its jurisdiction.
What Is the Competition Act?
The Competition Act is a federal law governing most business conduct in Canada. It contains both criminal and civil provisions aimed at preventing anti-competitive practices in the marketplace.
Misleading Representations and Deceptive Marketing Practices Provisions of the Competition Act
The Competition Act contains provisions addressing false or misleading representations and deceptive marketing practices in promoting the supply or use of a product or any business interest. All representations, in any form whatever, that are false or misleading in a material respect are subject to the Act. If a representation could influence a consumer to buy or use the product or service advertised, it is material. To determine whether a representation is false or misleading, the courts consider the "general impression" it conveys, as well as its literal meaning.
The Competition Act specifically prohibits deceptive telemarketing, deceptive prize notices and schemes of pyramid selling, and sets out the responsibilities for operators and participants in multi-level marketing plans. Also addressed are deceptive marketing practices including, but not limited to, advertising at a bargain price a product that is not available in reasonable quantities; selling a product at a price above the advertised price; and conducting a contest, lottery, or game of chance or skill, without making adequate and fair disclosure of facts that materially affect the chances of winning.
Misleading representations and deceptive marketing practices can have serious economic consequences, especially when directed toward large audiences or when they take place over a long period of time. They can affect both business competitors who are engaging in honest promotional efforts, and consumers.
What Are the Possible Penalties?
The Act provides two adjudicative regimes to address misleading representations and deceptive marketing practices. Under the criminal regime, certain practices are brought before the criminal courts, requiring proof of each element of the offence beyond a reasonable doubt. On summary conviction, the person is liable to a fine of up to $200 000 and/or imprisonment for up to one year. If convicted on indictment, the person is liable to a fine at the discretion of the court and/or imprisonment for up to five years.
Under the civil regime, certain practices may be brought before the Competition Tribunal, the Federal Court or the superior court of a province and require that each element of the conduct be proven on a balance of probabilities. The court may order a person to cease the activity, publish a notice and/or pay an administrative monetary penalty. On first occurrence, individuals are liable to penalties of up to $50 000 and corporations are liable to penalties of up to $100 000. These amounts may double for second and subsequent occurrences.
The Bureau conducts its investigations in private and keeps confidential the identity of the source and the information provided. However, if someone has important evidence about a contravention under the Act, that person may be asked to testify in court.
Advertising Dos and Don'ts
The following "Dos and Don'ts" will help businesses comply with the Competition Act.
- Do avoid fine print disclaimers. They often fail to change the general impression conveyed by an advertisement. If you do use them, make sure the overall impression created by the ad and the disclaimer is not misleading.
- Do fully and clearly disclose all material information in the advertisement.
- Do avoid using terms or phrases in an advertisement that are not meaningful and clear to the ordinary person.
- Do charge the lowest of two or more prices appearing on a product.
- Do ensure that you have reasonable quantities of a product advertised at a bargain price.
- Do, when conducting a contest, disclose all material details required by the Act before potential participants are committed to it.
- Do ensure that your sales force is familiar with these "Dos and Don'ts." Advertisers may be held responsible for representations made by employees.
- Don't confuse "regular price" or "ordinary price " with "manufacturer's suggested list price" or a like term. They are often not the same.
- Don't use "regular price" in an advertisement unless the product has been offered in good faith for sale at that price for a substantial period of time, or a substantial volume of the product has been sold at that price within a reasonable period of time.
- Don't use the words "sale" or "special" in relation to the price of a product unless a significant price reduction has occurred.
- Don't run a "sale" for a long period or repeat it every week.
- Don't increase the price of a product or service to cover the cost of a free product or service.
- Don't use illustrations that are different from the product being sold.
- Don't make a performance claim unless you can prove it, even if you think it is accurate. Testimonials usually do not amount to adequate proof.
- Don't sell a product above your advertised price.
- Don't unduly delay the distribution of prizes when conducting a contest.
- Don't forget that no one actually needs to be misled for a court to find that an advertisement is misleading.
How Do I File a Complaint?
If you believe that someone has in some way contravened any of the legislation enforced and administered by the Bureau and you want to complain, you can telephone, fax, e-mail or write the Bureau at the numbers listed at the end of this publication.
The Bureau conducts its investigations in private and keeps confidential the identity of the source and the information provided. However, if someone has important evidence about a contravention of any of the acts the Bureau administers, that person may be asked to testify in court.
The Competition Bureau facilitates compliance with the law by providing various types of written opinions subject to fees. Company officials, lawyers and others are encouraged to request an opinion on whether the implementation of a proposed business plan or practice would raise an issue under the Competition Act. These written opinions are binding on the Commissioner of Competition when all the material facts have been submitted by or on behalf of an applicant for an opinion and when they are accurate. A specific written opinion will be based on information provided by the requestor and will take into account previous case law, prior opinions and the stated policies of the Bureau.
The Bureau produces CD-ROMS and publications on various aspects of the Competition Act, the Consumer Packaging and Labelling Act, the Textile Labelling Act and the Precious Metals Marking Act. To find out more about our CD-ROMs and publications, contact the Information Centre:
50 Victoria Street
Gatineau QC K1A 0C9
This publication is only a guide. It provides basic information about the Competition Bureau and the acts it administers. For further information, you should refer to the full text of the acts or contact the Competition Bureau at one of the numbers listed above.
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