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 DISCLAIMERS
UNDER THE COMPETITION ACT
“Disclaimers, the less conspicuous, fine print elements of advertisements, are often used to add information or clarifications that are not integrated into the design of the main body. Sometimes these disclaimers add details or expand on what is being offered. At other times, when the main message is designed in such a way that it could mislead consumers, advertisers might try to rely on fine print disclaimers to restrict or even contradict the more prominent message. It is this last type of usage that often gets advertisers into trouble.”
(Competition Bureau,
The Deceptive Marketing Practices Digest)
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Advertisers commonly use disclaimers to add additional information to or clarify an advertising claim. In general, a disclaimer may be used to add more information to a headline claim, clarify a claim or disclose important (i.e., material) conditions or limitations related to an offer.
While disclaimers can be a very useful and legitimate tool for advertising to add information to a headline claim or where space does not permit full disclosure of all terms and conditions, they can also in some cases violate the general civil or criminal misleading advertising provisions of the federal Competition Act (sections 52 and 74.01) or other Canadian advertising and marketing legislation (e.g., provincial consumer protection legislation or federal consumer packaging and labelling legislation).
POTENTIAL DISCLAIMER RELATED ISSUES
UNDER THE COMPETITION ACT
Some of the potential ways that a disclaimer can raise misleading advertising law issues under the Competition Act include where the disclaimer:
1. Is itself false or misleading.
2. Contradicts the headline marketing claim.
3. Fails to correct an overall misleading general impression of a headline advertising claim.
4. Discloses additional fixed obligatory charges/fees for a product that a customer must pay (other than fees imposed by federal or provincial law, such as sales tax) (a potential drip pricing issue).
COMPETITION BUREAU
DISCLAIMER RELATED GUIDANCE
Some of the Competition Bureau’s guidance for using disclaimers has included:
1. Ensure that the literal meaning and general impression of advertising are not false or misleading.
2. That a disclaimer can expand or clarify a headline claim (assuming the overall general impression of the advertisement is not otherwise misleading).
3. A disclaimer can only qualify a headline claim but cannot cure or retract an otherwise false or misleading claim.
4. Advertising, including disclaimers, should fully and clearly disclose all material information to consumers (i.e., all information likely to influence a purchasing decision).
5. A disclaimer should be in close proximity to the headline claim it qualifies.
6. A disclaimer should be clear for consumers to understand (e.g., not use industry jargon or abbreviations that may be unclear to consumers).
OTHER COMPETITION ACT PROVISIONS
THAT CAN APPLY TO DISCLAIMERS
In addition to the general misleading advertising sections, the Competition Act also contains a number of specific provisions that either prohibit or set out specific requirements for particular types of advertising practices (for more information, see Canadian Advertising Law).
A number of these sections require that specific types of disclosures be made, which should be reviewed before launching a marketing campaign or promotion.
These include sections 52.1 (deceptive telemarketing), 53 (deceptive prize notices), 55 (multi-level marketing plans) and 74.06 (promotional contests), among others.
DRIP PRICING
In June 2022, the general criminal and civil misleading advertising provisions of the Competition Act under sections 52 and 74.01 were amended to prohibit drip pricing (i.e., failing to disclose the full price of a product or service upfront, such as only in a long disclaimer or later in an online checkout process).
The drip pricing provisions were further strengthened on June 20, 2024 under amendments to the Competition Act (Bill C-59) that make it clear that the only additional fees that a seller can “drip” (i.e., not disclose upfront) are those imposed directly on a purchaser by provincial or federal legislation (e.g., sales taxes).
The Competition Act now defines drip pricing as follows: “… the making of a representation of a price that is not attainable due to fixed obligatory charges or fees … unless the obligatory charges or fees represent only an amount imposed on a purchaser of the product … by or under an Act of Parliament or the legislature of a province”.
Drip pricing has been one of the Competition Bureau’s deceptive marketing enforcement priorities over the past several years, together with false or misleading performance claims, ordinary selling price (OSP) claims and misleading endorsements/testimonials.
For more information about drip pricing, see: Drip Pricing.
DISCLAIMER AND DISCLOSURE RELATED
COMPETITION BUREAU ENFORCEMENT
The Competition Bureau has commenced many enforcement proceedings in relation to disclaimers and other advertising disclosure issues. These have included enforcement in relation to:
1. False or misleading price claims (e.g., drip pricing cases).
2. Influencer marketing (e.g., endorsements and testimonials that failed to disclose a material connection with a brand, such as where the person giving the testimonial was paid, received free product or was an employee).
3. Promotional contests and other types of promotions that failed to adequately disclose the material terms and conditions of the contest/promotion.
Importantly, even if all of the material terms of an offer are included in full terms and conditions, advertising may still violate the Competition Act or other marketing legislation where material terms (e.g., price, product performance or other material conditions and limitations) are not clearly disclosed upfront to consumers.
The failure to make adequate upfront disclosures has been a particularly significant issue for the Bureau in a series of drip pricing related cases over the past few years, including in the event ticket, theatre ticket, car rental and airline ticket sectors.
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 (under 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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SERVICES AND CONTACT
We are a Toronto based Canadian competition and advertising law firm that helps clients in Toronto, 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
To contact us about a potential legal matter, see: contact
For more information about our firm, visit our website: Competitionlawyer.ca
