Misleading warranties and guarantees
Paragraph 74.01(1)(c) of the Competition Act is a civil provision. It prohibits the making, or the permitting of the making, to the public, of any materially misleading product warranty or guarantee, or promise to replace, maintain or repair an article. This includes circumstances in which there is no reasonable prospect that the warranty, guarantee or promise will be carried out. Under this provision, it is not necessary to demonstrate that any person was deceived or misled; that any member of the public to whom the representation was made was within Canada; or that the representation was made in a place to which the public had access. Subsection 74.03(5) directs that the general impression conveyed by a representation, as well as its literal meaning, be taken into account when determining whether or not the representation is false or misleading in a material respect.
If a court determines that a person has engaged in conduct contrary to paragraph 74.01(1)(c), it may order the person not to engage in such conduct, to publish a corrective notice and/or to pay an administrative monetary penalty of up to $750,000 in the case of a first time occurrence by an individual and $10,000,000 in the case of a first time occurrence by a corporation. For subsequent orders, the penalties increase to a maximum of $1,000,000 in the case of an individual and $15,000,000 in the case of a corporation.
Although paragraph 74.01(1)(b) also relates to warranties and guarantees, and is considered in the Performance representations not based on adequate and proper tests section, paragraph 74.01(1)(c) operates where the warranty or guarantee is itself misleading or where there is no reasonable prospect that it will be honoured. It also covers warranties that deceptively reduce a purchaser's usual rights as well as guarantees that are otherwise useless.
A tire warranty contains the representation "adjustment prices are intended to, but may not in all cases, represent current average selling prices" and, in 85 percent of the cases, the adjustment prices are higher than the average selling prices.
Court actions under this provision and former paragraph 52(1)(c) have rarely occurred.
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