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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“Turning now to the final question, whether the impugned advertisement evidences an offence, the first point is whether the one sentence in large type, ‘$5 in every pack of new Casino’, on which the Crown rests its case, can be considered completely divorced from its context in determining whether the advertisement contains ‘a statement that purports to be a statement of fact but that is untrue.’ I am of the opinion that it would be contrary to accepted tenets of common law to attribute to a phrase a meaning which it bears standing alone, when in the context in which it is used it bears a different meaning. Whether a statement purports to be one of fact can only be determined by reference to the circumstances and context in which it was made. I do not gather from the reasons for judgment of the learned trial Judge that he necessarily held a different view on this point.
Nevertheless, the determination would not be coerced one way or the other, either by narrow or by vague parameters. The issue is whether in the context of the whole advertisement, the statement purports to be true, and the question is the standard to be used in the determination. The learned trial Judge adopted as his a phrase appearing in Aronberg et al. v. Federal Trade Commission, 132 F. 2d 165 at 167. The paragraph in which that phrase occurs is in these terms: ‘The law is not made for experts but to protect the public – that vast multitude which includes the ignorant, the unthinking and the credulous, who, in making purchases, do not stop to analyze but too often are governed by appearances and general impressions … Advertisements must be considered in their entirety, and as they should be read by those to whom they appeal.’
On this point, the following passage appears in Federal Trade Commission v. Sterling Drug Inc., supra [-. 674]: ‘It is therefore necessary in these cases to consider the advertisement in its entirety and not to engage indisputatious dissection. The entire mosaic should be viewed rather than each tile separately. ‘[T]he buying public does not ordinarily carefully study or weigh each word in an advertisement. The ultimate impression upon the mind of the reader arises from the sum total of not only what is said but also of all that is reasonably implied.’”
R. v. Imperial Tobacco Products Ltd.
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OVERVIEW OF THE “GENERAL IMPRESSION” TEST
UNDER THE MISLEADING ADVERTISING PROVISIONS
OF THE CANADIAN COMPETITION ACT
The general civil and criminal misleading advertising provisions of Canada’s federal Competition Act prohibit materially false or misleading claims to the public to promote a product (including services) or any business interest (sections 52 and 74.01).
These sections can be violated both by literally false advertising/marketing claims (e.g., a false price or product performance claim) or by misleading claims (e.g., where part of the price of a product is not adequately disclosed upfront to consumers before they purchase a product).
In determining whether an advertising or marketing claim is false or misleading, the Competition Act provides that the “general impression” of representations, as well as the literal meaning, is relevant in determining whether an advertising claim is false or misleading in a material respect (sections 52(4) and 74.03(5)).
The “general impression” test is a very important concept in Canadian advertising law given that, as one example, literally true claims may nevertheless contravene either the civil or criminal general misleading advertising provisions of the Competition Act (e.g., where a material aspect of a claim is not sufficiently brought to the attention of consumers, such as additional fees that are not adequately disclosed).
Some examples of when the “general impression” of an advertising/marketing claim may be false or misleading include the following: (i) the claim is partially true and partially false; (ii) the claim is capable of having two meanings one of which is false; (iii) the claim is literally true on its face but fails to disclose certain material information (e.g., additional fees); and (iv) where one part of a claim is literally true (e.g., an oral or written part) but another part of the claim is false (e.g., a photo or image accompanying the claim).
Based on the “general impression” test under the Competition Act, it is very important for advertisers to assess not only the literal meaning of advertising/marketing claims, but also whether any material aspect of the advertising may be misleading.
Advertisers should also not assume that the Competition Bureau or a court will consider whether sophisticated consumers would find advertising misleading. In this regard, while many Canadian courts have held that the relevant test for materiality of an advertising claim is whether an ordinary consumer would likely be influenced into purchasing a product, there is some case law that courts may ask whether considerably less sophisticated consumers would be misled.
For example, in a Quebec contest law case, Richard v. Time, the court held that the relevant consumer to be considered under provincial consumer protection legislation was a credulous and technically inexperienced consumer (i.e., a very low test to be met).
Some of the kinds of information that is particularly important to be both true and not misleading include pricing claims, product performance claims and any material conditions/limitations related to an advertising offer that may influence a consumer’s purchasing decision and should be disclosed upfront before a purchase is made.
Importantly, even where contractual terms may be set out in detail in full online or by way of other agreement, or disclosed after a purchase is made, this may in many cases not be sufficient for Canadian advertising law purposes if the material terms relating to the advertising/marketing offer were not sufficiently disclosed upfront to consumers before a purchase was made.
That is to say that whether a contract may be enforceable from a contract law perspective may not be sufficient to ensure that an advertising/marketing law claim was not false or misleading under Canadian advertising law.
For more information about Canadian misleading advertising law rules, see: Canadian Advertising Law, Disclaimers, Internet and New Media Advertising, Misleading Advertising, Misleading Advertising FAQs and Performance 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
