Canadian Advertising and Competition Law: Compliance Strategies Avoiding Misleading Advertising Violations Amid Increased Enforcement and New Rules Today’s faculty features: 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific 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. 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 Avoiding Misleading Advertising Violations Amid Increased Enforcement and New Rules
• 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
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."
• 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
"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