Misleading Advertising and Labelling

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Misleading Advertising and Labelling

The false or misleading representations and deceptive marketing practices provisions of the Competition Act contain a general prohibition against materially false or misleading representations. The purpose of the Competition Act is to maintain and encourage competition in the Canadian marketplace. The misleading representations and deceptive marketing practices provisions of the Act aim to improve the quality and accuracy of marketplace information and discourage deceptive marketing practices. The Act applies to most businesses in Canada, regardless of size.

THE COMPETITION BUREAU

www.competitionbureau.gc.ca

The Competition Bureau, as an independent law enforcement agency, ensures that Canadian businesses and consumers prosper in a competitive and innovative marketplace.

The misleading advertising and labelling provisions enforced by the Competition Bureau prohibit making any deceptive representations for the purpose of promoting a product or a business interest, and encourage the provision of sufficient information to allow consumers to make informed choices.

The Bureau investigates anti-competitive activities and promotes competition. It does not set prices or regulate businesses. The Bureau investigates suspected anti-competitive behaviour, which may violate the Competition Act. If, after investigation of a criminal matter, the Commissioner decides that there is enough evidence, cases are turned over to the Attorney General of Canada who decides whether to prosecute in the criminal courts.

Each year, the Bureau receives numerous complaints about gasoline prices. Complaints are examined to determine whether the provisions of the Competition Act have been violated.

The Competition Bureau encourages all Canadians to report suspected wrongdoing. Contact the Bureau at www.competitionbureau.gc.ca or toll free at 1-800-348-5358.

THE CANADIAN ANTI-FRAUD CENTRE (CAFC)

The Canadian Anti–Fraud Centre (formerly Phonebusters) plays a key role in educating the public about specific fraudulent telemarketing pitches. The CAFC is the central fraud repository in Canada that collects information and criminal intelligence on fraud schemes, referred to as mass marketing fraud, that target mass victims. Examples include advance fee fraud, job scams, lottery scams, emergency scams, false charities, and identity crime. Complaints are received from Canadian consumers and / or victims and others where there is a connection to Canada.

The call centre also plays a vital role in the collection and dissemination of victim evidence, statistics, documentation and tape recordings that are made available to outside law enforcement agencies. Contact the Canadian Anti–Fraud Centre (formerly Phonebusters) at 1-800-495-8501 or go to www.antifraudcentre.ca.

Although the CAFC is run by law enforcement agencies, they do not conduct investigations. The Centre gathers information on frauds and criminal organizations; then analyzes it for connections between suspects and between victims, then prepares investigative reports. The CAFC provides valuable assistance and intelligence to law enforcement and regulatory agencies in Canada, the United States and abroad to assist them in bringing enforcement action against fraudsters. You will have to contact your local police to file a report if you wish the matter to be investigated. You may not want or need the matter investigated, but filing a report with police will at least provide valuable data to Statistics Canada so that a true picture of the level of fraud in Canada can be seen. Nearly 9 in 10 victims don’t report so this makes it difficult for politicians and decision makers to see the true severity of the problem.

THE COMPETITION ACT

The Competition Act provides criminal and civil regimes to address false or misleading representations. Under both regimes, the Act prohibits the making, or the permitting of the making, of a representation to the public, in any form whatever, that is false or misleading in a material respect.

They also prohibit making performance representations which 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, double ticketing and the sale of a product above its advertised price. Further, the promotional contest provisions prohibit contests that do not disclose required information.

Price-related Representations

The Competition Act contains five provisions dealing specifically with price representations: four under the civil regime (false or misleading ordinary selling price representations [74.01(2) and 74.01(3)], bait and switch selling [74.04], sale above advertised price [74.05] ) and one under the criminal regime (double ticketing [54]). Price representations may also be addressed under the general provisions against false or misleading representations [section 52 or paragraph 74.01(1)(a)]. In addition to enforcing these provisions, the Bureau has endorsed the Scanner Price Accuracy Voluntary Code which provides a mechanism to provide redress to consumers when there is a scanner error.

The Consumer Packaging and Labelling Act, Textile Labelling Act and Precious Metals Marking Act all contain prohibitions regarding false or misleading representations. They also require certain labelling or marking information aimed at assisting consumers in making informed purchasing decisions.

False or misleading ordinary selling price representations

The false or misleading ordinary selling price provisions of the Competition Act are designed to ensure that when products are promoted at sale prices, consumers are not misled by reference to inflated regular prices. The Act prohibits false or misleading representations to the public as to the ordinary selling price of a product, in any form whatsoever. Ordinary selling price is validated in one of two ways: either a substantial volume of the product was sold at that price or higher, within a reasonable amount of time (volume test); or the product was offered for sale, in good faith, for a substantial period of time at that price or a higher price (time test).

Subsections 74.01(2) and 74.01(3) of the Competition Act are civil provisions. They prohibit the making, or the permitting of the making, of any materially false or misleading representation, to the public, as to the ordinary selling price of a product, in any form whatever. The ordinary selling price is determined by using one of two tests: either a substantial volume of the product was sold at that price or a higher price, within a reasonable period of time (volume test); or the product was offered for sale, in good faith, for a substantial period of time at that price or a higher price (time test).

  • In the event that the represented ordinary price refers to the ordinary price of suppliers in the market, unless these suppliers have sold a substantial volume of the product at the represented ordinary price, or alternatively, these suppliers have offered the product for sale in good faith at the represented ordinary price, this price can not be referenced as the ordinary price, and an issue is raised under subsection 74.01(2).
  • In the event that the represented ordinary price refers to the supplier’s ordinary price, unless the supplier has sold a substantial volume of the products at the represented ordinary price, or alternatively, the supplier has offered the product for sale in good faith at the represented ordinary price, this price can not be referenced as the ordinary price, and an issue is raised under subsection 74.01(3).

Under these provisions, 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 subsection 74.01(2) or 74.01(3), 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.

Performance representations not based on adequate and proper tests

Businesses should not make any performance claims unless they can back them up. The Competition Act prohibits any representation in the form of a statement, warranty or guarantee of the performance, efficacy or length of life of any given product, not based on adequate and proper testing. The onus is on advertisers to prove that the representation is based on an adequate and proper test. The test must have been concluded before the representation is made and the data must be readily available upon request by the Bureau.

Sale above Advertised Price

Section 74.05 of the Competition Act is a civil provision. It prohibits the sale or rent of a product at a price higher than its advertised price. The provision does not apply if the advertised price was a mistake and the error was immediately corrected.

If a court determines that a person has engaged in conduct contrary to section 74.05, 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.

Scanner Price Accuracy Code

There is no federal legislation governing price-scanning accuracy. However, some types of price representations that result in overcharges to consumers may be examined under the Competition Act. The Bureau also endorses the Scanner Price Accuracy Voluntary Code, which provides participating retailers of four major associations with a mechanism to provide redress to consumers when there is a scanner error. When the scanned price of an item without a price tag is higher than the shelf price, or any other displayed price, the customer is entitled to receive the item free when it is worth less than $10, or receive a $10 reduction for more expensive items.

Bait and switch selling

The Competition Act prohibits “bait-and-switch” selling which occurs when a product is advertised at a bargain price, but is not available for sale in reasonable quantities. The provision does not apply if the advertiser can establish that the non-availability of the product was due to circumstances beyond its control, the quantity of the product obtained was reasonable, or the customer was offered a rain check when supplies were exhausted.

Section 74.04 of the Competition Act is a civil provision. It prohibits “bait-and-switch” selling which occurs when a product is advertised at a bargain price, but is not available for sale in reasonable quantities. The provision does not apply if the advertiser can establish that the non-availability of the product was due to circumstances beyond its control, the quantity of the product obtained was reasonable, or the customer was offered a rain check when supplies were exhausted.

If a court determines that a person has engaged in conduct contrary to section 74.04, 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.

Double ticketing

Section 54 of the Competition Act is a criminal provision. It prohibits the supply of a product at a price that exceeds the lowest of two or more prices clearly expressed in respect of the product.

Any person, who contravenes section 54, is guilty of an offence and liable to a fine of up to $10,000 and/or imprisonment up to one year on summary conviction.

Promotional contests

The Competition Act prohibits any promotional contest that does not disclose the number and approximate value of prizes, the area or areas to which they relate and any important information relating to the chances of winning, such as the odds of winning.

Section 74.06 of the Competition Act is a civil provision. It prohibits any promotional contest that does not disclose the number and approximate value of prizes, the area or areas to which they relate and any important information relating to the chances of winning such as the odds of winning. It also stipulates that the distribution of prizes cannot be unduly delayed and that participants be selected or prizes distributed on the basis of skill or on a random basis. It should be noted that in addition to complying with section 74.06 of the Act, a contest must be lawful as it relates to other federal statutes such as the Criminal Code, as well as other relevant provincial statutes and local by-laws. The possible applicability of these statutes and by-laws should be explored.

If a court determines that a person has engaged in conduct contrary to section 74.06, 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.

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.

Untrue, misleading or unauthorized use of tests and testimonials

Section 74.02 of the Competition Act is a civil provision. It prohibits the unauthorized use of tests and testimonials, or the distortion of authorized tests and testimonials. The provision also prohibits a person from permitting such representations to be made to the public. 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 section 74.02, 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.

Labelling

The Consumer Packaging and Labelling Act, Precious Metals Marking Act and Textile Labelling Act are regulatory statutes. They prohibit false or misleading representations in specific sectors, namely pre-packaged consumer products, articles made of precious metals, and textiles and apparel. These laws set out requirements for basic, standardized labelling information, such as bilingual product descriptions, metric measurement declarations and dealer identity, all of which help consumers to make informed choices.

Consumer Packaging and Labelling Act

The Consumer Packaging and Labelling Act prohibits false or misleading representations on prepackaged consumer products and requires that these products bear accurate and meaningful labelling information to help consumers make informed purchasing decisions. The Act also sets out specifications for mandatory label information such as the product’s name, net quantity and dealer identity.

Textile Labelling Act

The Textile Labelling Act prohibits false and misleading representations on consumer textile articles and requires that these articles bear accurate and meaningful labelling information to help consumers make informed purchasing decisions. The Act also sets out specifications for mandatory label information such as the generic name of each fibre present and the dealer’s full name and postal address or a CA identification number.

Precious Metals Marking Act

The Precious Metals Marking Act prohibits false or misleading representations related to precious metal articles (articles made with gold, silver, platinum or palladium) and provides for the uniform description and quality marking of these articles to help consumers make informed purchasing decisions. It also requires that dealers who choose to mark their articles with representations related to the precious metal quality, do so as prescribed by the Act and the Regulations.

ENFORCEMENT GUIDELINES

http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/h_00168.html

Enforcement guidelines are an articulation of the Bureau’s enforcement policy with respect to the various provisions of the Competition Act, the Consumer Packaging and Labeling Act, the Textile Labeling Act, the Precious Metal Marking Act and the Criminal Code based on the Bureau’s past experience, jurisprudence and accepted economic theory.

  • Merger Enforcement Guidelines
  • Hostile Transactions Interpretation Guidelines
  • Pre-Merger Notification Interpretation Guidelines — Table of Contents
  • Application of the Competition Act to Representations on the Internet
  • Competitor Collaboration Guidelines
  • Consumer Rebate Promotions
  • Deceptive Notices of Winning a Prize – Section 53 of the Competition Act
  • Guidance on Labelling Textile Articles Derived from Bamboo
  • Merger Review Process Guidelines
  • Multi-level Marketing Plans and Schemes of Pyramid Selling – Sections 55 and 55.1 of the Competition Act
  • Ordinary Price Claims – Subsections 74.01(2) and 74.01(3) of the Competition Act
  • “Product of Canada” and “Made in Canada” Claims
  • Promotional Contests – Section 74.06 of the Competition Act
  • Telemarketing – Section 52.1 of the Competition Act
  • Updated Enforcement Guidelines on the Abuse of Dominance Provisions — Sections 78 and 79 of the Competition Act
  • Predatory Pricing Enforcement Guidelines
  • Environmental Claims: A Guide for Industry and Advertisers
  • Guidance on the Labelling of Textiles for Businesses
  • Guide to the Precious Metals Marking Act and Regulations
  • Labelling of Prepackaged Firewood
  • The Merger Enforcement Guidelines as Applied to a Bank Merger
  • What Every Jewellery Dealer Needs to Know about the Precious Metals Marking Act and Regulations
  • The Abuse of Dominance Provisions (Sections 78 and 79 of the Competition Act) as Applied to the Retail Grocery Industry
  • Enforcement Guidelines on the Abuse of Dominance Provisions
  • Guide for the Labelling and Advertising of Pet Foods
  • Guide to the Labelling of Down and Feathers
  • Guide to the Textile Labelling and Advertising Regulations
  • Intellectual Property Enforcement Guidelines
  • Accuracy Requirements for Net Quantity Declarations
  • Guide to the Consumer Packaging and Labelling Act and Regulations
  • What Every Jewellery Dealer Needs to Know about the Marketing of Imported Platinum Articles
  • Federal Labelling Requirements for Upholstered Furniture
  • Labelling of Fabric Sold at Retail
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