Canada: Regulator's Reach Extends To Sales Outside The Jurisdiction

​This one is about pharmacists, but has general implications for other regulators concerned about internet sales with a connection to a Canadian province (hello, securities commissions): Ontario College of Pharmacists v 1724665 Ontario Inc, 2012 ONSC 5804, aff'd 2013 ONCA 381.

​RXP operated a call centre in Mississauga, Ontario which processed orders for prescription drugs on behalf of Global Pharmacy Canada Inc. (GPC), a Belize-based corporation. The drugs were made in India and sold to consumers outside Canada. The Ontario College of Pharmacists brought regulatory proceedings against RXP, GPC and the two Canadian owners of RXP, arguing that the sale of drugs occurred at the Ontario location, conferring jurisdiction on the College to regulate (and terminate) the activities of the call centre. The fact that customers and RPX's principal were outside Ontario should not matter, in the College's view. For one thing, Canadian consumers with a bit of tech savvy could use a web proxy service in order to appear to be ordering drugs from another country via the GPC web site (access from Canadian IP addresses being blocked) and a postal address in that jurisdiction for delivery.

J Wilson J of the Ontario Superior Court held that the activities of both RXP and GPC were sufficiently connected to Ontario. The two companies were either not really distinct entities or else agent and principal. There was merit to the argument that the arrangements between the two had been deliberately structured to avoid the College's regulatory reach. The fact that the targeted public for drug sales was outside Canada also didn't matter: the College has powers to regulate in the public interest which are not limited to the Canadian public if there is a link between an offence and this jurisdiction. On the facts, drug sales actually occurred in Ontario -- not India or Belize, as contended by the respondents. There was clearly an intention to suggest that the business was a regulated Ontario pharmacy, given references in promotional materials to offices in Canada and the respected status of Ontario pharmacists, the use of the Mississauga location and the word 'Canada' in GPC's name. The sale of prescription drugs was in breach of various provisions of applicable legislation because no one in the operation was an accredited pharmacist or operated a properly licensed pharmacy in selling drugs. The College was granted a permanent injunction shutting down the operations of RXP and GPC from any location in Ontario, unless they could demonstrate regulatory compliance. The respondents were also prohibited from using the designated terms 'drugs' and 'pharmacy' in relation to their business in Ontario.

The Ontario Court of Appeal has upheld the decision of the trial judge. Gillese JA focused on the regulatory context of pharmacy in Ontario, which she described as 'highly regulated'. She agreed with the trial judge that the place of sale in a regulatory context may not be the same as it would be under commercial law; in light of the regulatory aspect of this case, it was correct to take a purposive approach and conclude that GPC's sales of drugs occurred in Ontario. The substance of the transactions at issue took place in the province, given the central role of RXP as intermediary. There was no error in the finding that the College's regulatory reach extended to GPC; there was a sufficient connection between GPC and Ontario, again based on the regulatory context and in light of the 'blurred organizational distinctions' between RXP and GPC. In the end, 'If a company trades on Ontario's reputation for quality and strong regulatory standards, and sites a critical part of the sales process in Ontario, it will be subject to Ontario's regulation.'

http://www.canlii.org/en/on/onsc/doc/2012/2012onsc5804/2012onsc5804.html

http://www.ontariocourts.ca/decisions/2013/2013ONCA0381.htm

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