Last week, the Ontario Superior Court of Justice (the "Court") dismissed the false and misleading advertising allegations in the case brought by the Commissioner of Competition (the "Commissioner") against Rogers Communications Inc. ("Rogers") and Chatr Wireless Inc. ("Chatr"). The Court also found that although Rogers/Chatr had conducted "adequate and proper" testing in several Canadian cities, the required testing had not been completed in every city where the service was offered prior to the use of the "fewer dropped calls" claims in a national advertising campaign.
Background
In 2010, following a complaint by competitor Wind Mobile, the Commissioner brought proceedings against Rogers/Chatr in respect of its national advertising campaign promoting its Chatr service as having a more reliable network resulting in fewer dropped calls than any of the new wireless carriers.
The Commissioner argued that the Chatr claims created a false or misleading general impression regarding the quality of the Chatr wireless network as compared to the other new wireless carriers. The Commissioner further alleged that, in some instances, the Chatr claims were not supported by "adequate and proper" testing and sought remedies including a $10 million administrative monetary penalty ("AMP"), restitution payment to affected customers, and issuance of a corrective public notice.
False and Misleading Claims
The Court found that the claims made by Rogers/Chatr were not false or misleading. In other words, the Court found that evidence supported the Rogers/Chatr statements that their network did in fact have fewer dropped calls than those of the new wireless carriers.
Credulous and Inexperienced Consumer
The Court relied on the general impression standard that the Supreme Court of Canada recently articulated in Richard v. Time Inc. It found, for the purposes of the enforcement of the Competition Act, that the applicable standard can be modified based on the characteristics of the target audience for the advertisement. In this case, the Court held that the appropriate standard in this case was that of the "credulous and technically inexperienced consumer".
Adequate and Proper Testing
As the claims at issue were found to have been valid, the Court focussed on the issue of whether Rogers/Chatr began its national "fewer dropped calls" advertising campaign prior to conducting adequate and proper testing. On this issue, the Court concluded that the "fewer dropped calls" claims were made to consumers in some cities where adequate and proper testing had not yet been conducted. This is relevant because, under the Competition Act, performance claims must be substantiated by testing conducted prior to the making of the claim – regardless of the accuracy of the claim.
Charter Issues
Rogers/Chatr had argued that the civil false and misleading advertising provision of the Competition Act is inconsistent with the company's right under subsection 2(b) the Canadian Charter of Rights and Freedoms (the "Charter") to the "freedom of thought, belief, opinion, expression, [...]".The Court held that the provision of the Competition Act only minimally impairs the fundamental freedom guaranteed by the Charter.
Rogers/Chatr also challenged the constitutionality of AMPs on the grounds that, given their magnitude, they are penal in nature. On this issue, the Court concluded that the AMPs at issue were not "true penal consequences" and therefore not contrary to section 11 of the Charter. In addition to affirming the constitutionality of AMPs in the context of deceptive marketing practices, this decision also supports the use of AMPs under the other civil provisions of the Competition Act (e.g., abuse of dominance provisions).
Summary
The key takeaways for businesses are:
- While the general impression standard under the Competition Act is a relatively low one, it may be modified depending on the sophistication of the intended audience, as well as the nature of the claims and product at issue;
- Performance claims must be substantiated by adequate and proper testing prior to being made to the public; and
- In industries such as telecommunications where technical testing results may vary from one region to another, care must be taken to ensure that (a) testing is done in all relevant regions or (b) that the test results apply equally to all of the regions in which the claims are made.
For a copy of the Ontario Superior Court of Justice's decision, please click here.
For a copy of the Competition Bureau's press release, please click here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
