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 “SCARCITY CUES”
UNDER THE COMPETITION ACT
“Scarcity cues tell consumers when an offering — be it a price, a product or a service — is in short supply. When these claims are true, they can provide consumers important information so that they don’t miss out on a deal. When untrue, they can mislead consumers into making purchases they might not have otherwise made or rushing them into purchases without considering competitive offers.”
Competition Bureau,
The Deceptive Marketing Practices Digest
Volume 6 (April 17, 2023)
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“Scarcity cues” are advertising/marketing claims that an offer for a product or service has limited availability. According to the Competition Bureau, when such claims are true, they can provide consumers with important information so that they don’t miss out on a deal. When untrue, however, they can mislead consumers into making purchases that they might not otherwise have made or rushing into purchases without considering competitive offers.
In its April 17, 2023 Deceptive Marketing Practices Digest, the Competition Bureau gives some examples of scarcity cues, including:
1. Claims that only a small amount of stock is left.
2. Claims that certain prices are available for only a limited time so consumers should “hurry” or “act fast”.
3. Claims that a certain percentage of stock has already been purchased (for example, 80% of available flight or other types of reservations are taken).
4. Countdown timers that tick toward a time where the product or limited time offer will no longer be available.
5. Countdown timers indicating that consumers have a limited time to complete a purchase or another rival consumer will gain access to the item that is in the consumer’s cart.
6. Pop-ups or other claims of how many people are currently viewing or interested in the same product.
Scarcity cues and related social proofing can also be automated and coded into online commerce websites using plug-ins and algorithms to falsely simulate demand and limited inventory levels.
“Social Proof” Marketing Tactics
Businesses can also add so-called “social proof tactics” to scarcity cue related marketing, using various methods to let consumers know that other consumers like or want the same product (e.g., that other consumers are considering buying a product that a customer already has in their virtual basket).
Scarcity Cues and the Competition Act
There are no specific scarcity or urgency cue provisions under the federal Competition Act.
However, the general civil and criminal misleading representation provisions of the Competition Act (sections 74.01 and 52) can apply to scarcity cues and other types of urgency related marketing claims where they are either literally false or misleading.
Like other types of advertising/marketing claims, the general impression of a scarcity claim is also relevant in determining whether a claim is false or misleading in a material respect.
In this regard, the Competition Bureau, in its April 2023 Deceptive Marketing Practices Digest, gives the example where a hotel or online travel accommodation platform claims that there are only five rooms left at the consumer’s preferred hotel for particular travel dates and that 10 people are interested in those same rooms. If the fact that 10 people are looking to book that hotel for completely different days (e.g., weeks or months away), while the claim may be literally true, the omission of the other consumers’ preferred dates may mean that the general impression of the claim is nevertheless false or misleading.
Competition Bureau
Scarcity and Urgency Cues Related Enforcement
Scarcity and urgency cues are one of the Competition Bureau’s misleading advertising related priorities.
For example, On September 27, 2023, the Competition Bureau announced that the Dufresne Group Inc. (TDG) (Dufresne Group), a Manitoba furniture and appliance retailer, had agreed to settle an ordinary selling price (OSP) and urgency cue marketing related case for $3.25 million (see: Competition Bureau, News Release, The Dufresne Group to pay $3.25 million penalty to settle Competition Bureau concerns over marketing claims). For our blog post on this case, see: Dufresne Group Settles Ordinary Selling Price (OSP) and Urgency Cue Marketing Case with Competition Bureau for $3.25 Million.
In making the announcement, the Bureau said that “tactics that pressure consumers to make a purchase quickly, like limited time offers, must be truthful”, that “all businesses in Canada should review their marketing practices and make sure they comply with the law” and that “taking action against deceptive marketing practices remains one of [its] highest priorities.”
According to the Competition Bureau, the Dufresne Group and its affiliates, which operate under retail brands Dufresne Group Furniture and Appliances and certain Ashley HomeStores, offered some of their products at inflated regular prices and then advertised them at big discounts, which suggested significant savings to consumers that were unavailable.
More specifically, the Competition Bureau found that the Dufresne Group did not sell a substantial volume of the relevant products at the advertised regular prices within a reasonable time before the claims were made, nor did they offer the products at the regular prices for a substantial period of time as required by the “volume” and “time” tests set out under the ordinary selling price (OSP) provisions of the Competition Act.
The Competition Bureau also challenged some of the Dufresne Group’s urgency cue related marketing claims, which, according to the Bureau, gave consumers a false or misleading impression that certain deals on products would no longer be available after a certain time when that was not the case (e.g., through the use of countdown timers).
For example, the Competition Bureau found that the Dufresne Group made claims, such as “40% OFF (Sale ends Sep 19 2022)”, that created the general impression that discounted prices on some products would no longer be available after a certain time, when that was not in fact the case.
The Dufresne Group agreed to settle this case with the Competition Bureau under a negotiated consent agreement, in which it agreed to pay a $3.25 million penalty, made commitments for their marketing to comply with the Competition Act and agreed to establish and maintain a competition law compliance program.
Potential Competition Act Penalties
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 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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SERVICES AND CONTACT
We are a Toronto based Canadian competition and advertising law firm that helps clients in Toronto, across Canada and the United States practically navigate Canada’s advertising and marketing laws and offers Canadian advertising/marketing law services in relation to print, online, new media, social media and e-mail marketing.
Our Canadian advertising/marketing law services include advice in relation to anti-spam legislation (CASL), Competition Bureau complaints, the general misleading advertising provisions of the federal Competition Act, Internet, new media and social media advertising and marketing, promotional contests (sweepstakes) and sales and promotions. We also provide advice relating to specific types of advertising issues, including performance claims, testimonials, disclaimers, drip pricing, astroturfing and native advertising.
For more information about our services, see: services
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For more information about our firm, visit our website: Competitionlawyer.ca
