Canada: Supreme Court Of Canada: "Average Consumer" Is "Credulous and Inexperienced"

Last Updated: November 30 2012
Article by Marketing, Advertising & Regulatory Group

Bottom Line: Determining whether the general impression of your advertising is false or misleading can be tricky. For one thing, whose "general impression" is it that counts – the suspicious consumer or the credulous consumer? The Supreme Court of Canada ("SCC") considered this exact issue in the context of the Quebec Consumer Protection Act ("CPA") in its February 28, 2012 decision of Richard v. Time Inc., 2012 SCC 8. Surprising many, the SCC went for the latter standard – i.e., the "credulous consumer."

THE SOLICITATION

In this case, Mr. Jean-Marc Richard received a personalized "Official Sweepstakes Notification" from Time Inc. ("Time") in the mail. It contained several sentences in bold upper case letters announcing that he had won a cash prize of $833,337. These statements, however, were conditioned, in smaller print, upon the recipient having the grand prize winning entry and returning it by the deadline provided. Mr. Richard, believing he had won the amount indicated, returned the reply card and subscribed to receive Time Magazine for a period of two years. While he began receiving his magazine, he did not receive the money he expected. The SCC considered whether, in this context, the solicitation Mr. Richard had received amounted to false and misleading advertising contrary to the CPA.

At issue were the following provisions of the CPA. Section 218 states that: To determine whether or not a representation constitutes a prohibited practice, the general impression it gives, and, as the case may be, the literal meaning of the terms used therein must betaken into account. (emphasis added)

And section 219 states as follows:

No merchant, manufacturer or advertiser may, by any means whatever, make false or misleading representation to a consumer.

ROLLER COASTERING THROUGH THE COURTS

En route to the SCC, the Quebec Superior Court determined that Time had contravened these provisions, finding that the document "was specifically designed to mislead the recipient" and contained false and misleading representations contrary to the CPA. The Superior Court concluded that the general impression conveyed by the document was that Mr. Richard had won the grand prize. The Superior Court also noted that it was not necessary for anyone to have actually been misled, but rather it was sufficient to find that the "average consumer, that is, the one who is credulous and inexperienced, could be misled." The Superior Court set the value of the moral injuries suffered by Mr. Richard at $1,000 and imposed punitive damages of $100,000.

On appeal, the Court of Appeal disagreed and concluded that Time had not violated the CPA as there were no false or misleading representations in the notification. The Court of Appeal suggested that it was up to the reader to be suspicious of advertisements that seem too good to be true and, finally, that the notification would not mislead a consumer "with an average level of intelligence, scepticism and curiosity." The award of damages was set aside.

The SCC reversed the decision again, adopting the stricter, earlier view of the Superior Court. The SCC considered the approach for determining whether a representation is false or misleading in light of the legislative intent which, in this case, is to protect consumers from fraudulent advertising practices. The SCC provided several guidelines for evaluating the general impression of an advertisement:

  • The general impression must be analyzed from an objective standpoint without regard to the level of intelligence, or lack thereof, of a specific consumer.
  • Whether a representation actually misled someone is not relevant
    • the issue is whether the advertisement could mislead.
  • The general impression test must take into account the entire context of the ad including the layout (i.e., the images used, the placement, style and size of the text).
  • Perhaps most importantly, the general impression test must be applied from the perspective of the average consumer, who is "credulous and inexperienced" and "takes no more than ordinary care to observe that which is staring him or her in the face upon first contact with an advertisement." To protect vulnerable persons from the dangers of certain advertising techniques, the average consumer must be someone who is not particularly experienced at detecting falsehoods or subtleties found in commercial representations.

WHAT THE AVERAGE CONSUMER WOULD THINK HERE

The SCC went on to outline a two-part test that involves: (i) describing the general impression that the representation is likely to convey to a credulous and inexperienced consumer; and (ii) determining whether that general impression is true to reality. A finding of "no" at the second stage would mean the ad is offside. In this case, the SCC determined that the average consumer (as they defined it) reading the notification would have been under the general impression that he had the winning entry and, in order to receive the funds advertised, needed only to return the reply coupon within the time period provided. The rest of the communication, in the view of the SCC, was not sufficient to dispel the general impression conveyed by the more prominent sentences. The SCC did, however, reduce the amount of punitive damages payable from $100,000 to $15,000.

THE LESSONS

Keep in mind the following takeaways when creating advertisements in the future:

  • Don't rely upon smaller print text to clarify a potentially false or misleading general impression. Any explanatory text or conditional/clarifying language must be prominent, clear and connected to the representation being qualified.
  • Don't rely on an assumption that consumers will read the fine print. Consider what leaps out at you when looking at the entire ad.
  • Don't assume that your consumers are intelligent, skeptical or curious. You must view the ad from the point of view of the credulous and inexperienced consumer who takes "no more than ordinary care to observe that which is communicated by the advertisement upon a single viewing."

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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