SWEEPING CANADIAN COMPETITION ACT
AMENDMENTS (BILL C-59) PASSED JUNE 20, 2024
On June 20, 2024, Bill C-59 was passed (the Fall Economic Statement Implementation Act, 2023), which introduced the third of three significant rounds of amendments to Canada’s federal Competition Act in two years (together with Bill C-19 and Bill C-56). This new round of amendments to the Competition Act completes a sweeping overhaul of the Competition Act across virtually all key provisions of Canada’s competition legislation. These amendments are also the most significant changes to Canadian competition law since the modern Competition Act came into effect in 1986 replacing the former Combines Investigation Act.
The Bill C-59 amendments, among other things, strengthen the Competition Bureau’s powers to enforce key deceptive marketing provisions of the Competition Act (e.g., relating to drip pricing, performance claims and ordinary selling price (OSP) claims), strengthen private party rights to seek Competition Tribunal remedies (e.g., for civil deceptive marketing and violations of the civil agreements provisions of the Act), introduce new penalties (e.g., administrative monetary penalties for violating the civil agreements provisions of the Act and for reprisal actions penalizing individuals for complying with the Act) and introduce a new clearance regime for environmental protection related agreements. Canada’s Competition Act merger review regime was also substantially overhauled, eliminating the efficiency defence, introducing market share presumptions and a more restrictive remedial test for restoring competition.
These amendments, together with those enacted in June 2022 and December 2023 (Bill C-19 and Bill C-56), increase the potential competition law risk for companies, trade and professional associations and other entities, particularly those without credible and effective competition law compliance programs and that have not reviewed their business practices to reflect Canada’s new competition laws. For the Competition Bureau’s summary of the June 20, 2024 Bill C-59 amendments to the Competition Act, see: Guide to the June 2024 amendments to the Competition Act (June 25, 2024).
Our blogs will be updated to reflect these amendments.
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OVERVIEW OF MISLEADING ADVERTISING
IN CANADA
“The Competition Act is the expression of a social purpose, namely the establishment of more ethical trade practices calculated to afford greater protection of the consuming public. It represents the will of the people of Canada that the old maxim caveat emptor, let the purchaser beware, yield somewhat to the more enlightened view caveat venditor – let the seller beware.”
(Matheson J.,
R. v. Colgate-Palmolive Ltd.)
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“The general impression test … must be applied from a perspective similar to that of ‘ordinary hurried purchasers’, that is, consumers who take no more than ordinary care to observe that which is staring them in the face upon their first contact with an advertisement. The courts must not conduct their analysis from the perspective of a careful and diligent consumer. … In sum, it is clear that … the ‘general impression’ test … is the impression of a commercial representation on a credulous and inexperienced consumer. … courts view the average consumer as someone who is not particularly experienced at detecting the falsehoods or subtleties found in commercial representations.”
(Supreme Court of Canada,
Richard v. Time)
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OVERVIEW OF MISLEADING ADVERTISING
IN CANADA
The federal Competition Act is the principal legislation governing misleading advertising in Canada. In addition to this federal framework legislation that applies to most businesses and industries in Canada and marketing to Canadians, many other federal and provincial laws can also apply to advertising and marketing practices in Canada, depending on the type of claim and industry sector.
These include provincial consumer protection laws (e.g., the Ontario Consumer Protection Act and other provincial and territorial consumer protection statutes), sector specific legislation (e.g., relating to food and drugs, cosmetics, liquor and cannabis) and federal packaging and labelling legislation (e.g., the Consumer Packaging and Labelling Act, Textile Labelling Act and Precious Metals Marking Act).
In addition, many professional bodies and trade/professional associations self-regulate their members’ advertising and marketing activities (e.g., lawyer advertising under professional rules of conduct, other professionals including architects, chiropractors, dentists, doctors, real estate agents and brokers and others and Ad Standards, which regulates its voluntary advertising/marketing industry members through The Canadian Code of Advertising Standards).
GENERAL MISLEADING ADVERTISING SECTIONS
OF THE COMPETITION ACT
The federal Competition Act, which is the primary legislation governing advertising and marketing in Canada, contains both civil and criminal misleading representation provisions that apply to false or misleading claims made to promote the supply or use of products (including services) or business interests.
Under the general civil misleading advertising section (section 74.01), it must be proven that: (i) a representation has been made; (ii) to the public; (iii) to promote a product or business interest; (iv) that is literally false or misleading (or with a false or misleading general impression); and (v) that the claim is “material” (i.e., likely to influence an average consumer into buying or using a product or otherwise altering their conduct).
Criminal misleading advertising in Canada under section 52 of the Competition Act is substantially similar, but in addition also requires that a false or misleading claim be made “knowingly or recklessly” (i.e., intentionally).
A few key points about Canadian misleading advertising law include:
1. The misleading advertising sections of the Competition Act are broad enough to apply to claims made relating to services or any business interest. The term “business interest” has been broadly interpreted by Canadian courts to include virtually any business related purpose, including by charities and non-profits.
2. A representation to a single person can be sufficient to be “to the public”.
3. Both the literal meaning and the “general impression” of an advertising or marketing claim are relevant in determining whether the claim is false or misleading in a material respect (e.g., an advertising/marketing claim that is literally true may, nevertheless, be false or misleading if the “general impression” of the claim is misleading). As such, advertisers not only need to consider whether advertising is literally true but whether the general impression of any of the material aspects of the advertising may be misleading (particularly, relating to price claims, product/service performance claims and sales claims, all of which are consistently Canadian Competition Bureau enforcement priorities).
4. It is not necessary to show that any person has actually been deceived or misled as a result of a false or misleading marketing/advertising claim. Similarly, the monetary value of a sale is not relevant to whether a claim is materially false or misleading.
5. It is not necessary to prove that an advertising/marketing claim was made to Canadian consumers (i.e., cross-border misleading advertising by Canadians to international consumers can be caught) or was made in a publicly accessible place (i.e., the general criminal and civil misleading advertising sections of the Competition Act, sections 52 and 74.01, can apply to more “private” type of marketing events/seminars, telemarketing activities, etc.).
In general, the Bureau will in most cases follow the civil misleading advertising law track under section 74.01 of the Competition Act in its enforcement unless certain criteria are satisfied to pursue a criminal law track, including clear and compelling evidence that misleading advertising was engaged in intentionally and that a criminal prosecution would be in the public interest.
OTHER COMPETITION ACT
ADVERTISING/MARKETING LAW SECTIONS
In addition to the “general” misleading advertising provisions discussed above, the Competition Act also contains a number of other criminal and civil provisions that either prohibit (i.e., criminal offences) or civilly regulate specific types of marketing practices.
These include bait and switch selling (section 74.02(2)), deceptive prize notices (section 53), deceptive telemarketing (section 52.1), double ticketing (section 54), drip pricing (sections 52(1.3) and 74.01(1.1)), some specific types of electronic advertising (section 74.011), multi-level marketing and pyramid selling schemes (sections 55 and 55.1), ordinary selling price (OSP) and sales claims (section 74.01(2)-(3)), performance claims (section 74.01(1)(b)), promotional contests (i.e., sweepstakes) (section 74.06), selling products above advertised prices (section 74.05) and testimonials and endorsements (i.e., influencer marketing) (sections 52, 74.01 and 74.02).
PENALTIES
The potential penalties for violating the Competition Act’s criminal or civil misleading advertising provisions can be severe.
Some of the potential penalties for violating the civil deceptive marketing practices provisions under Part VII.1 of the Competition Act include Competition Tribunal or court orders to stop the conduct, publish a corrective notice, pay restitution to consumers and orders to pay AMPs.
Following 2022 amendments to the Competition Act, the maximum AMPs for civil deceptive marketing increased: (i) for individuals, up to the greater of $750,000 ($1 million for each subsequent order) and three times the value of the benefit derived from the deceptive conduct; and (ii) for corporations, up to the greater of $10 million ($15 million for each subsequent order) or three times the value of the benefit derived from the deceptive conduct or, if the latter amount cannot be reasonably determined, 3% of the corporation’s annual worldwide gross revenues.
In addition, as a result of June 2024 amendments to the Competition Act (under Bill C-59), starting on June 20 2025, private parties will also be able to seek leave from the Competition Tribunal to commence proceedings under the civil deceptive marketing practices provisions (Part VII.1 of the Competition Act) with the only leave requirement for standing being that the proceedings are in the “public interest”.
The potential penalties for violating the general criminal misleading advertising section of the Competition Act (section 52) include, on indictment, a fine in the discretion of the court and/or imprisonment for up to 14 years and, on summary conviction, a fine of up to $200,000 and/or imprisonment for up to one year.
The Competition Bureau also commonly negotiates civil consent agreements (i.e., settlements) with parties, which can include remedies not expressly set out under the Competition Act such as the requirement to adopt a competition law compliance program, or seeks a prohibition order under the criminal provisions of the Competition Act.
The enforcement of the criminal and civil deceptive marketing provisions of the Competition Act is also an ongoing priority for the Competition Bureau, particularly false or misleading price claims, performance claims and ordinary selling price claims.
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For more about Canadian advertising law visit: Canadian Advertising & Marketing Law.
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CONTEST RULES/PRECEDENTS
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Also available are individual Canadian contest/sweepstakes precedents, including short rules (“mini-rules”), long rules, winner releases and a Canadian contest law checklist.
For more information and to order see: Canadian Contest Forms and Precedents.
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CANADIAN CONTEST & ADVERTISING LAW SERVICES
We are a Toronto based competition and advertising law firm that offers business and individual clients efficient and strategic advice in relation to Canadian competition and advertising laws, including contests/sweepstakes and other types of promotions. Our experience includes advising Canadian and U.S. clients in relation to Canadian contest/sweepstakes, advertising/marketing and competition/antitrust laws.
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For more information about our firm, visit our website: Competitionlawyer.ca