canadian advertising and competition law: compliance
TRANSCRIPT
Canadian Advertising and
Competition Law: Compliance Strategies Avoiding Misleading Advertising Violations Amid Increased Enforcement and New Rules
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TUESDAY, JANUARY 8, 2013
Presenting a live 90-minute webinar with interactive Q&A
Mark C. Katz, Partner, Davies Ward Phillips & Vineberg, Toronto, Canada
Steve Szentesi, Steve Szentesi Law Corporation, Vancouver, Canada
Anita Banicevic, Partner, Davies Ward Phillips & Vineberg, Toronto, Canada
Christopher A. Cole, Partner, Crowell & Moring, Washington, D.C.
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FOR LIVE EVENT ONLY
Canadian Advertising and Competition Law: Compliance Strategies
Anita Banicevic & Mark Katz – Davies Ward Phillips & Vineberg LLP Christopher Cole – Crowell & Moring LLP Steve Szentesi – Steve Szentesi Law Corporation
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Agenda
• Key Elements of Misleading Representations
• Canadian Competition Bureau Enforcement and Trends
• Key Differences and Similarities between US/Canada
• Best Practices: Managing and Mitigating Risk – General best practices
– Performance claims
– Price claims
– Ordinary selling price provisions
– On-line advertising and social media
– Promotional contests
– Anti-spam legislation
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Misleading Representations: Key Elements
• Criminal and civil misleading representations provisions (52, 74.01)
• Prohibit representations to the public that are materially false or misleading
• Promotion of product or business interest
• Need to assess literal meaning and general impression
• Includes print, oral, Internet, social / new media claims
• Bureau generally proceeds civilly (but criminal charges possible)
• Bureau enforcement priority
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Misleading Representations: Key Elements
• In addition to general misleading representation provisions, Competition Act also regulates or prohibits: – Deceptive telemarketing, double ticketing, multi-level marketing, pyramid
selling schemes, performance claims, ordinary selling price claims, bait and switch selling, sales above advertised price, misleading/unauthorized tests/testimonials, promotional contests
• Penalties – Administrative monetary penalties (AMPS) up to $10 million
– Restitution (compensation for consumers)
– Corrective notices
– Imprisonment (criminal)
– Civil / class actions are also likely (ss. 36, 52)
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Misleading Representations an Enforcement Priority
• "Continued area of concern" for Bureau
• Closely watching several industries
• Fits with Commissioner's previously stated "relevance" agenda
• Strategy of active enforcement, including litigation combined with more active monitoring of settlements
• No new written guidance provided or expected in near term – guidance through enforcement
• Recent signals by Interim Commissioner that could be more criminal enforcement
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What's Hot at the Bureau
• Price advertising – "All-in" pricing
– Additional fees disclosed in fine print
• Disclosure in digital marketplace – Competition Bureau has stated e-commerce area "ripe for more work"
– Bureau participated in recent sweep of e-commerce sites with ICPEN for disclosure issues
• Performance and comparative claims
• Green and health claims
• Administrative monetary penalties – Repeatedly asking for highest maximum penalties
– Constitutionality has been questioned
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Recent Bureau Statements
• Interim Commissioner (2012) – "… we will continue to listen to Canadian consumers' concerns and
investigate in strategic areas"
• Former Commissioner (2012) – "In [recent] challenges … we have signaled how importantly we regard
misleading advertising by seeking the maximum Administrative Monetary Penalties now available"
• Fair Business Practices Branch (2012) – "You may want to review advertising to ensure that clients are not relying on
fine print to contradict the general impression of the advertisement as a whole. This is especially important when developing advertisements viewed on mobile devices."
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Recent Enforcement Activity
• Bell Canada (negotiated resolution) – All-in pricing / "hidden" fees
– Bell agreed to pay $10 million penalty
• Beiersdorf Canada Inc. / NIVEA (negotiated resolution) – Performance claims / enforcement of consent agreement
– Beiersdorf agreed to pay $300,000 penalty
• Rogers Communications Inc. (contested) – Performance claims regarding dropped calls
– Bureau seeking maximum monetary penalties and restitution
– Proceedings are ongoing
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Recent Enforcement Activity (Cont'd) • Business Directory Case (contested)
– Subscription obligation in fine print / passing off as Yellow Pages
– Bureau proceeded under civil provisions
– Court ordered corporate penalties totalling $8 million
– Individual penalties of $500,000 for each of two principals
– Restitution also ordered
– Important reminder that misleading representation provisions apply to promotion of any business interest
• Premium Texting (contested) – Proceedings brought against Bell, Telus, Rogers and CWTA
– Commissioner suing carriers and industry association for "permitting" representations of others
– Commissioner seeking > $30 million in administrative monetary penalties
– Significant potential ramifications for wireless and mobile commerce industry
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Other Relevant Decisions
• Richard v. Time Inc. (S.C.C.) Feb. 2012 – Complaint under Quebec consumer protection legislation regarding direct
mail solicitation
– Commercial solicitations assessed from perspective of "credulous and inexperienced consumer" not from perspective of careful and diligent consumer
– A single reading of entire text should provide general impression
– Format of advertisement (incl. pictures and font size) will be part of forming general impression
– Possible implications:
• Should not assume sophisticated consumers
• Bureau has taken position in contested proceeding that this "credulous and inexperienced" standard applies under Competition Act
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Lessons and Implications
• Aggressive enforcement stance – High profile cases/industries; media coverage; large penalties; attracts
attention of private and class plaintiffs
• Coordinated enforcement with other jurisdictions
• Use of enforcement discretion varies; unpredictable
• Reliance on civil consent agreements – Strict compliance monitoring by Bureau (e.g., Beiersdorf)
– Breach of consent agreement is a criminal offence and creates private right of action
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Key Differences/Similarities Between Canada/U.S.
• US FTC also has active enforcement agenda – digital marketplace/privacy - see FTC report re: Mobile Applications
– "up to" claims
– green claims
– financial products (mortgage/debt relief)
– health-related claims (weight loss, fitness, dietary supplements)
• Significant guidance available from FTC in variety of areas
• Active self-regulatory body (NAD) – NAD decisions also provide guidance and apply FTC doctrine
• Penalties – Broad injunctive relief: (cease and desist, fencing-in, corrective advertising,
bans and bonds)
– Civil penalties for violation of FTC orders and trade regulations
– Consumer redress, disgorgement
– Criminal contempt penalties
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Best Practices: Misleading Representations
• Disclose all relevant facts and information up front (particularly price)
• Take care with use of "disclaimers" and fine print – Disclaimers must be clear and conspicuous
– May qualify a representation but cannot cure or correct a misleading representation
– Avoid disclaimers that materially limit or contradict the main text
• Consider general impression from the perspective of a "credulous and inexperienced consumer"
• Consider font size/layout/pictures when assessing general impression
• Don't assume external ad/marketing agencies or generalists will catch potential issues/nuances
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Best Practices: Performance Claims
• Claims about product performance / attributes must be based on "adequate and proper" tests before being made – Bureau: vindicating post-claim tests will not avoid liability
– Lack of pre-claim substantiation risks exposure to $10 million penalty
• Bureau says "adequate and proper" test means: – Based on sound scientific principles
– Methodology must be valid and reliable
– Based on representative samples
– Accounts for normal conditions of use
– Uses sound statistical analysis in interpreting the data
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Best Practices: Price Claims
• Take care to disclose all mandatory charges up front in advertised price
• Bureau has said it is looking at number of industries for lack of disclosure – See also FTC letters to hotels re: charges
• Do not omit material facts in public representations re: price – Failure to specify that a promotional price applies for a limited time or that
there are limited quantities available
– Failure to specify minimum purchase requirement
– Failure to specify that there are limits on the quantity that can be purchased
– Failure to specify that an offer applies only to certain styles or colours
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Best Practices: Ordinary Selling Prices
• Ordinary selling price claims – i.e., "reg…sale" / "was…now" / "compare at"
– Regular price representations and related savings claims are powerful marketing tools and can be misleading if "inflated" regular prices are used
– Time or volume test must be met
– Watch for "reg. price" with:
• new products
• promotional products
• comparison to MSRP
• "clearance sales"
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Best Practices: Green Claims
• Environmental Claims guide (June 2008) – Bureau / CSA / ASC collaboration
– Informs their review and treatment of "green" claims
• To minimize risk – Avoid vague terms implying environmental responsibility (e.g., "green",
"environmentally friendly", "all natural") – difficult to substantiate
– Use claims that product is "… free" (e.g., phosphate free) only if substance less than "trace" + not if substance never in product
– Use environmental symbols sparingly and appropriately: use only for recycled content/recyclable materials; any explanations must be close to symbol
– Use natural objects (e.g., fish, trees) only if direct & verifiable link to benefit being claimed
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Best Practices: Online & Social Media
• General principles for print advertising apply online
• Disclose differences between online / in-store purchases
• Disclaimers should be clear and conspicuous
• Important information should be clear and conspicuous (i.e., not too small and likely to be read)
• General impression can depend on medium (e.g., mobile devices, social media, etc.)
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Best Practices: Online & Social Media
• Use hyper-links carefully (e.g., one / several clicks, avoid including critical information for a claim, label links to flag nature of conditions / limitations, etc.)
• Purchasers can't inspect merchandise online so extra care required to ensure that customers are not misled
• Only genuine / verifiable testimonials should be used
• Key Bureau concerns: – Scrolling marquees
– Distant sub-pages for conditions/limitations
– Disclosure not tailored for new media / mobile devices
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Best Practices: Promotional Contests
• Competition Act / Bureau point-of-purchase disclosure: – Number and retail value of prizes, regional allocation, any purchase
requirement, skill testing question requirement, odds of winning contest closing date, where complete rules can be found
• Prepare detailed rules that accurately reflect promotion, reduce risk and anticipate contingencies
• Review and avoid application of Criminal Code lottery provisions
• Review marketing materials for Competition Act misleading advertising compliance
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Best Practices: Promotional Contests
• Ensure Quebec requirements are met (or exclude promotion from Quebec)
• Consider potential IP (e.g., reproduction of 3rd party IP) & privacy issues (e.g., adequate consent and disclosure of use of information collected)
• Review and comply with social media sites' terms of use (e.g., Facebook promotions rules)
• Obtain U.S. advice if operating a contest outside Canada
• One size does not fit all – factual / jurisdictional issues
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Anti-spam Legislation: Overview
• Federal anti-spam legislation (CASL) – Expected to come into force 2013
– Industry Canada regulations being finalized
– Will require advance opt-in consent for "commercial electronic messages" unless implied consent / exception
• "commercial electronic message" – electronic message that encourages participation in a commercial activity
– Will broadly apply to electronic marketing including e-mail, text messaging, social media
• "Electronic message" – message sent by any means of telecommunication, including text, sound, voice or image message
– Penalties up to $1 million / $10 million (individuals / corporations)
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Anti-spam Legislation: Overview
• Implied consent – Existing business relationships
– Existing non-business relationships
– Business card exceptions (B2B)
• Exceptions (may change, regulations being finalized) – Personal / family relationships
– Inquiries for commercial goods / services
– Telemarketing
– Other exceptions to be set out in Regulations
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Anti-spam Legislation: Best Practices
• Add anti-spam compliance to existing programs
• Review marketing for "commercial electronic messages"
• Review existing marketing lists for consents, implied consent & where consents required
• Prepare consent notices to obtain express consent where required
• Establish process to document and periodically refresh consents
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Anti-spam Legislation: Best Practices
• Prepare electronic messages that comply with form and unsubscribe requirements
• CRTC Regulations and guidelines set out consent, form and unsubscribe requirements
• See CRTC Regulations and guidelines: www.fightspam.gc.ca
• Monitor status of Industry Canada regulations (final regulations prior to coming into force) and coming into force of CASL
U.S. Anti-Spam Legislation • CAN-SPAM (penalties of up to $16,000 per violation)
– Requires honest header information, e.g., originating domain name and email address must be accurate
– No deceptive subject lines; identify message as an ad if appropriate.
– Include your valid physical postal address
– Must include clear and conspicuous opt-out and honor opt-outs promptly.
• TCPA (penalties of up to $1,500 per unsolicited message)
– Constrains telemarketing calls in time
– Establishes national "do not call list" and requires telemarketers to honor any request to not be called again
– Calls for charity, for non-commercial purposes, or pursuant to established business relationships are exempt
– Law cover unsolicited faxes, use of autodialers and and text messages.
• Both laws provide for private right of action and have spawned voluminous class action litigation
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CONTACT
Anita Banicevic / Mark Katz
Davies Ward Phillips & Vineberg LLP
www.dwpv.com
416.863.0900
CONTACT
Steve Szentesi
www.competitionlawcanada.com
604.601.2047 (Vancouver)
416.993.8852 (Toronto)
Twitter: @Canadaattorney
