Canada: Supreme Court Of Canada: Average Consumer Is "Credulous And Inexperienced" For Misleading Advertisement Purposes

In February 2012, the SCC released its decision in Richard v. Time Inc., a case brought forward from the Quebec Court of Appeal, which considered the "general impression" test in relation to the misleading advertising provisions of the Quebec Consumer Protection Act (CPA). Given the recently increased enforcement activity of the Competition Bureau with respect to deceptive marketing practices, companies that advertise to consumers anywhere in Canada should take heed of the SCC decision. The misleading advertising provisions of the Quebec CPA are based, to a large extent, on what is now the federal Competition Act, and similar types of consumer protection laws exist in the other Canadian provinces. Accordingly, the impact of the SCC decision will go beyond the CPA, affecting enforcement of deceptive marketing practices under both federal and provincial consumer protection laws in Canada.

The SCC decision provides clear guidance on how to assess an advertisement's target audience for purposes of the "general impression" test, and clarifies that both the layout of the advertisement and the meaning of the words, taken in their entirety, form the general impression of an advertisement. As such, regulators and companies now have a firmer understand of what test to consider when determining whether an advertisement is misleading in a material respect.

The case began in 1999 when Richard, a native French speaker and resident of Quebec, received an English letter in the mail addressed to him, alleging that he had won a sweepstakes. The layout of the letter, with certain sentences bolded and in a larger font than others, was designed to catch the reader's attention by suggesting that he or she had won a large cash prize. There were also certain graphic details on the letter that led him to believe the letter came from Time magazine. Upon closer scrutiny of the letter, it became clear that the letter was in fact notifying the recipient of a chance to enter to win the grand prize. The instructions also provided that, if the recipient subscribed to Time magazine for a period of time, he became eligible to receive a free camera and photo album. After reviewing the letter carefully, and seeking input from colleagues at work about its content, Richard concluded that he had in fact won the grand prize. Accordingly, he sent in the required response (which in fact was the entry ballot), and subscribed to Time magazine. A short time later, he received his free camera and photo album, but did not receive anything with respect to the grand prize. After several failed attempts to contact officials at Time magazine, Richard launched an action before the Quebec Superior Court.

The Quebec Superior Court decided in favour of Richard, arguing that the general impression of the letter contained misleading and even false representations contrary to the Quebec CPA. The decision was then appealed to the Quebec Court of Appeal, where it was overturned on the basis that the letter did not contain false or misleading representations, and that the average Quebec consumer would not have been given the general impression that the recipient was the grand prize winner. The decision was further appealed to the SCC. In hearing the case, the SCC considered the proper approach in Quebec for determining whether an advertisement constitutes a false or misleading representation for purposes of the CPA.

The SCC held that the letter was in fact false or misleading in a material respect. In its decision, it explained that both the "literal meaning" of the words that are simply interpreted in their ordinary sense, and the "general impression" given by a representation must be considered when making this determination. The SCC held that the general impression test is one of first impression, which is distinct from a rushed or partial reading of an advertisement. The general impression is the one a person has after an initial contact with the entire advertisement, and incorporates both the physical layout and the meaning of the words used.

The SCC further explained that the general impression must be analyzed from the perspective of the average consumer, without considering his/her personal attributes, who is "credulous and inexperienced" and takes "no more than ordinary care to observe that which is staring him or her in the face". The method for assessing the general impression is therefore two-fold: (1) describe the general impression that the representation is likely to convey to a credulous and inexperienced consumer; and (2) determine whether that general impression is true to reality. The court also confirmed that there is a presumption of prejudice to the consumer such that the consumer does not have to prove that the merchant intended to mislead.

Given the recently increased enforcement activity of the Competition Bureau with respect to deceptive marketing practices, companies should take heed of the SCC decision. To avoid running into problems once an advertisement has been put to market, companies should implement appropriate checks and balances in their advertising review process to ensure their marketing and legal teams understand both the general impression test, as it has now been defined, and that the lens used to interpret the test is that of the credulous and inexperienced consumer.

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.

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