Annual Report 1996/97 - Deceptive marketing scams a focus of the Marketing Practices Branch

In the Marketing Practices area, the Bureau continued to promote compliance with the misleading advertising and deceptive marketing practices provisions of the Competition Act through a variety of means including information contacts, educational seminars, publication of public bulletins, examination of complaints, formal inquiries, and prosecutions.

During this fiscal year, efforts were focussed, among other issues, on the deregulated long-distance telecommunications industry (especially "slamming" complaints), on complaints involving deceptive telemarketing, and on deceptive mail solicitations. In an effort to educate and encourage compliance and to enhance its effectiveness in eliminating deceptive marketing practices, the Bureau participated in several special activities during the fiscal year.

One of the high priorities was to increase the awareness of deceptive telemarketing practices which target thousands of Canadians every year, especially seniors. In May 1996, the Deceptive Telemarketing Prevention Forum was established with other key government, non-government, and private sector organizations. The purpose of this Forum is to maximize resources in order to gather and share intelligence in the area of deceptive and fraudulent telemarketing, to discuss and formulate educational measures that members and other stakeholders may implement to address deceptive and fraudulent telemarketing practices, and, via education, to suggest measures the public should employ to avoid being victimized.

Business practices governed by the Competition Act have been affected by the globalization of world markets. In 1992, an alliance of the enforcement agencies of a number of member countries of the Organization for Economic Co-operation and Development (OECD) created the International Marketing Supervision Network (IMSN). Members of the network are responsible in their respective jurisdictions for compliance with legislation and regulations affecting business practices. The mandate of the IMSN is to share information about activities taking place in several countries that affect markets, and to encourage countries to work together to resolve cross-border disputes. The Competition Bureau began a one-year term as chair of the IMSN in September 1996, and held meetings Hull, Quebec in September 1996, and in Paris, France in February 1997. In 1997, IMSN focussed on deceptive telemarketing, misleading postal solicitations and the international sale of lottery tickets.

In May 1996, a comprehensive four-part video entitled "Scam Alert" was released. This video was produced to assist in preventing fraud and deception targeting Canadians and Canadian businesses.

Another initiative was the inclusion of an insert with the March 1997 Canada Pension cheque, warning recipients of the perils of deceptive telemarketing fraud.

In February 1997, Marketing Practices officials attended the first of three OECD meetings dealing with issues related to electronic commerce.

In March 1997, Bureau investigators jointly organized, with members of provincial law enforcement organizations and the US Federal Trade Commission, an intensive search on the Internet, to look for various Internet web sites and user groups related to "Business Opportunities." The purpose of this exercise was to identify potential "business opportunities scams" which could raise an issue under the misleading advertising and deceptive marketing practices provisions of the Competition Act.

During the fiscal year, the following cases warranted the laying of criminal charges under the Act:

The Office Supply Centre (841299 Ontario Limited) and Richard Mellon

On May 17, 1996, one charge under paragraph 52(1)(a) was laid against The Office Supply Centre (841299 Ontario Limited) and Mr. Richard Mellon. Four additional charges were laid against The Office Supply Centre (841299 Ontario Limited). The charges relate to a telemarketing scheme involving the sale of photocopier toner that occurred between July 1989, and February 1996. A pre-trial conference was scheduled for September 3, 1997.

Integrity Group (Canada) Inc.

On May 27, 1996, a total of 13 charges were laid in Calgary under section 55 of the Competition Act against The Integrity Group (Canada) Inc. The charges relate to earning representations in a multi-level marketing plan without the accompanying disclosure of the amount of income received by a typical participant in the plan. One of the charges related to the use of the Internet, by the company, and earning representations were contained in the Internet promotion with no accompanying disclosure of the amount of income received by a typical participant in the plan. A preliminary trial was scheduled for September 15-17, 1997.

Click Modeling and Talent Agency of Canada c.o.b. as HMI International Model and Talent Agencies and Shannon Hoehn.

On September 27, 1996, nine charges under paragraph 52(1)(a) were laid against Mr. Shannon Hoehn and Click Modeling and Talent Agency of Canada, operating as HMI International Model and Talent Agencies. Six additional charges were laid against both the individual and company. The charges relate to advertise-ments placed in various newspapers for modeling and acting opportunities, however, the company was in the business of selling courses and photographs. A pretrial hearing was scheduled for April 3, 1997.

Marvin Fine and DFD Telebroadcasting Inc.

On October 3, 1996, Mr. Marvin Fine and DFD Telebroadcasting Inc. each pleaded guilty in the Ontario Court of Justice (General Division) in Toronto, Ontario, to two counts of misleading advertising under paragraph 52(1)(a) of the Competition Act.

Mr. Fine and DFD were each fined $11,000 per count for a total fine of $44,000, which was paid immediately following Mr. Fine's conviction. In addition, Mr. Fine agreed to donate two telephone systems to registered charities.

A prohibition order under subsection 34(1) of the Act was also entered against Mr. Fine and DFD, and Mr. Fine was placed on a two-year probation period.

The charges to which Mr. Fine and DFD pleaded guilty concerned advertisements that Mr. Fine had placed in several issues of the Toronto and Hamilton editions of the TV Guide between June 6 and July 11, 1992, and in The Employment News between April 5 and July 5, 1992, in which job opportunities were advertised to the public. These ads invited the reader to call a "976" telephone number in order to obtain additional details about these jobs. There was a $10 charge for phoning the "976" number and the amount of this charge was inadequately disclosed to the reader.

First Canadian Publisher/American Family Publishers (Vijay Sharma)

On March 21, 1997, charges under paragraph 52(1)(a) were laid against a total of 37 individuals and companies who were involved in a telemarketing scheme in which consumers were asked to send money for a prize that never existed. A preliminary inquiry was scheduled for October 16, 1997.