Presenting a live 90-minute webinar with interactive Q&A Canadian Advertising and Competition Law: Compliance Strategies Avoiding Misleading Advertising Violations Amid Increased Enforcement and New Rules TUESDAY, JANUARY 8, 2013 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: 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. The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
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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
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 5
Misleading Representations Key Elements
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 7
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) 8
Competition Bureau Enforcement and Trends
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 10
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 11
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." 12
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 13
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 14
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 15
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 16
Key Differences/Similarities Between US/Canada
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 18
Best Practices: Managing and Mitigating Risk
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 20
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