False or Misleading Representations and Deceptive Marketing Practices

False or Misleading Representations and Deceptive Marketing Practices Under 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 Act provides two adjudicative regimes to address false or misleading representations and deceptive marketing practices.

Under the criminal regime, the general provision prohibits all materially false or misleading representations made knowingly or recklessly. Other provisions specifically forbid deceptive telemarketing, deceptive notices of winning a prize, double ticketing, and schemes of pyramid selling. The multi-level marketing provisions prohibit certain types of representations relating to compensation.

Under the civil regime, the general provision prohibits all materially false or misleading representations. Other provisions specifically prohibit performance representations that are not based on adequate and proper tests, misleading warranties and guarantees, false or misleading ordinary selling price representations, untrue, misleading or unauthorized use of tests and testimonials, bait and switch selling, and the sale of a product above its advertised price. The promotional contest provisions prohibit contests that do not disclose required information.

False or 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?

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 14 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 $750,000 and corporations are liable to penalties of up to $10,000,000. For subsequent occurrences, the penalties increase to a maximum of $1,000,000 for indidividuals and $15,000,000 for corporations. In situations where a person has made materially false or misleading representations about a product to the public, the court may also make an order for restitution, requiring the person to compensate consumers who bought such products, and an interim injunction to freeze assets in certain cases.

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.

Dos

• 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'ts

• 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 make any materially misleading product warranty or guarantee, or promise to replace, maintain or repair an article.
• Don’t use the results of product performance tests and/or testimonials in your advertising unless you are authorized to use them; or if you are authorized to use them, don’t distort test results or the scope of testimonials.
• Don't forget that no one actually needs to be deceived or misled for a court to find that an advertisement is misleading.

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The Competition Bureau is an independent law enforcement agency that contributes to the prosperity of Canadians by protecting and promoting competitive markets and enabling informed consumer choice.

Headed by the Commissioner of Competition, the Bureau is 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.

For more information:

www.competitionbureau.gc.ca

Toll-free: 1-800-348-5358
National Capital Region: 819-997-4282
       TTY (for hearing impaired): 1-800-642-3844
       Fax: 819-997-0324

Information Centre
Competition Bureau
       50 Victoria Street
       Gatineau, QC K1A 0C9