Canadian Advertising and Competition Law: Compliance Strategies - - PowerPoint PPT Presentation

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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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

5

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

Misleading Representations Key Elements

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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)

Competition Bureau Enforcement and Trends

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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

12

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
• n mobile devices."

13

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

14

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

15

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

• f action

Key Differences/Similarities Between US/Canada

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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

Best Practices: Managing and Mitigating Risk

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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

21

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

22

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

25

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.)

26

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

27

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

28

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

29

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)

30

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

31

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

32

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 abanicevic@dwpv.com mkatz@dwpv.com

CONTACT

Christopher A. Cole Crowell & Moring LLP www.crowell.com 202.624.6701 ccole@crowell.com

CONTACT

Steve Szentesi www.competitionlawcanada.com 604.601.2047 (Vancouver) 416.993.8852 (Toronto) Twitter: @Canadaattorney

Thank You