Canada: Two Copycat Misleading Advertising Class Actions Settle And One More Launched

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

Bottom Line: If you're getting the feeling that class action counsel in Canada have become bosom buddies with their counterparts in the US and that getting hit in the south may well presage another blow in the north, you're not just being paranoid. That's exactly what's going on. While a number of copycat class actions have been filed, two recently settled in Canada, following settlements in the US: Reebok and Gaiam. Skechers is still in progress.


The Canadian Reebok class actions were filed in Ontario and Quebec, alleging, respectively, that Reebok Canada Inc., Reebok International Ltd. and Adidas Canada Limited (collectively, "Reebok") made false or misleading representations regarding the toning and strengthening benefits of Reebok's toning shoes and, in addition in Ontario, the health benefits of certain Reebok toning apparel. After reportedly intense negotiations, the settlement was approved by the Superior Court of Quebec and the Ontario Superior Court on July 10, 2012, in hearings held simultaneously via teleconference.

Reebok denies the allegations and any liability but, in the settlement agreement, has agreed to pay up to $2.2 million to residents of Canada who purchased the products from December 5, 2008 to July 10, 2012. This was significantly less than the US $25 million (inclusive of administrative expenses) payable under Reebok International Ltd.'s September 2011 settlement with the US Federal Trade Commission (which would also pay out US class action claimants) – although in line with the fact that we have roughly 10% of the US's population.


Just prior to a $40 million Federal Trade Commission settlement in the US on May 16, 2012 with Skechers USA Inc., a national class action was filed in the Superior Court of Quebec by the Consumer Law Group (April 21, 2012). The Canadian action alleged similar misleading claims at issue down south – i.e., that Skechers' Canadian advertising was misleading when claiming that SKECHERS Shape-ups® shoes and certain other footwear could, among other things, firm buttocks, thigh and calf muscles and tighten abs (Angell v. Skechers U.S.A. Inc., Skechers U.S.A. Inc. II and Skechers U.S.A. Canada Inc.: 12 April 2012, Montreal 500-06-000608-121 (S.C.) (Motion for Authorization).

The settlement with the FTC was part of a broader agreement, resolving a multi-state investigation. As of the time of writing, the Canadian matter has not yet settled. Below is one of the ads shown on the FTC website relating to the US settlement.


As for Gaiam, Inc. ("Gaiam"), back in 2009, its spring catalogue advertised its reusable aluminium water bottles as Bisphenol A-free ("BPA"). Mr. Rosen bought one. Apparently, however, the internal surface of the bottle was lined with an epoxy resin, which allegedly contained BPA that leached into the water. In the fall of 2009, Gaiam removed the BPA-free representation but, according to the lawsuit, the company failed to inform consumers, at any time, about the presence of BPA.

When Jeffrey Rosen, a resident of Quebec, heard of the BPA, he commenced a motion to authorize a class action in Quebec on behalf of all Canadians who purchased similar bottles. This was on January 28, 2010, approximately three months after two class actions were filed in the US.

Mr. Rosen wanted the Court to order Gaiam to cease its allegedly unfair and deceptive conduct and affirmatively notify class members of the presence of BPA in the bottles. He was also requesting that the class members be given the opportunity to exchange or be reimbursed for their water bottle purchases and be awarded damages for the prejudice suffered (purchase price, loss of use and enjoyment and trouble and inconvenience) as well as punitive damages.

The parties settled the case. Rosen v. Gaiam, Inc., No. 500-06-000498-101 (Superior Court of Québec). On June 12, 2012 – about 2 ½ years after Mr. Rosen's motion was filed, the Court approved the parties' out-of-court settlement (in which Gaiam admits to no wrongdoing). While the decision does not disclose the full settlement, the Court mentions that Gaiam will create an exchange program according to which consumers will be able to get Gaiam's new water bottle, although no monetary damages. Gaiam will only pay the legal fees of the petitioner, amounting to $75,765. The two US class actions were also settled out of-court (in April 2011) on reportedly similar terms.

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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