A recent decision from the Ontario Superior Court of Justice
highlights the risks associated with a comparative advertising
In Direct Energy Marketing Limited v. National Energy
Corporation1, the Court held that National Energy
Corporation ("National Energy") was in breach of section
7(a) of the Trade-marks Act2 and its counterpart section
52 of the Competition Act3 by circulating a brochure
that contained a number of false or misleading statements about the
products and services offered by its competitor Direct Energy
Marketing Limited ("Direct Energy").
In particular, the Court found that:
In calculating Direct Energy's average rate increase,
National Energy only took into account approximately 40-60% of
Direct Energy's Residential Water Heater Portfolio;
The brochure incorrectly attributed a 12% increase for a
particular Direct Energy model when in fact the rate increase was
By placing the words "non Energy Star" in the manner
in which it did, the brochure mislead consumers into believing that
none of Direct Energy's water heaters were Energy Star
efficient and that Direct Energy did not offer Energy Star water
heaters when in fact about 40 of Direct Energy's 50 product
categories were eligible for Energy Star certification; and
Reference to Direct Energy's "promise to
increase" rates was inaccurate and misleading.
The Court also held that the brochure, which used the Direct
Energy trade-mark, was contrary to section 22 of the Trade-marks
Act, which prohibits use of a registered trade-mark in a manner
that is likely to have the effect of depreciating the value of the
goodwill attaching thereto.
The Court held that on its face, the brochure was likely to
leave consumers with a negative impression of Direct Energy and
found that the brochure was more directed at misleading consumers
with respect to Direct Energy than informing fairly and fully the
consumer with the information he or she required to make an
While National Energy argued that Direct Energy failed to
provide evidence that any of the brochures had a damaging effect on
Direct Energy's goodwill, the Court held that given the number
of brochures in circulation, it "defied logic" that not a
single customer or consumer of Direct Energy would have been swayed
by the publication. The Court held that Direct Energy had
demonstrated a prima facie case of damages which would be
quantified at a later reference.
In addition to the reference with respect to damages, the Court
enjoined National Energy from any further distribution of the
brochure. The Court declined to order that National Energy publish
a formal retraction in communities affected by the brochure finding
that too much time had passed and such a retraction would be of
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