On August 2, 2013, the Competition Bureau (the "Bureau") obtained Consent Agreements (the "Agreements") from Hyundai Auto Canada Corp. ("Hyundai") and Kia Canada Inc. ("Kia"). These Agreements have the effect of a court order and formalize the consumer compensation plans the companies implemented in November 2012.

This case flows from a U.S. investigation by the Environmental Protection Association (the "EPA") that was initiated by several consumer complaints related to discrepancies between the advertised and actual fuel consumption of their Hyundai and Kia vehicles. The EPA's investigation identified material errors in the fuel consumption performance claims of several Hyundai and Kia models from 2011 and 2012. The errors resulted from procedural issues by a joint testing facility in South Korea. Hyundai and Kia based their gas mileage claims on this inaccurate test data, with the result being that their advertisements overstated the fuel efficiency of several car models. It is estimated that approximately 172,000 affected vehicles were sold in Canada (130,000 by Hyundai and 42,000 by Kia).

Historically, misleading advertising cases related to performance claims have been pursued under the civil regime. Under the non-criminal regime, the Bureau can seek orders that (i) prohibit the conduct at issue, (ii) require corrective notices be made, (iii) require the payment of restitution to affected customers, and/or (iv) impose administrative monetary penalties of up to $15 million. While the Competition Act also includes criminal misleading advertising provisions (with sanctions including discretionary fines or jail terms of up to 14 years, or both), these are typically reserved for more egregious situations where the misleading statements were made deliberately or recklessly.

Under the terms of the Agreements, Hyundai and Kia are required, among other things, to:

  1. compensate affected consumers for the cost associated with the difference between the affected vehicle's advertised and corrected fuel consumption ratings for the entire time the vehicle is or was owned;
  2. pay an additional 15% to affected consumers' compensation for the inconvenience caused to them; and
  3. pay the compensation in the form of personalized prepaid credit cards that will be issued each time an affected consumer makes a request, for as long as an affected consumer owns an affected vehicle.

It is worth noting that, despite the fact that Hyundai and Kia had pro-actively reached out to the Bureau when they learned of the errors at their testing facility and voluntarily launched their respective consumer compensation programs, the Bureau nonetheless required them to enter into the legally-binding Agreements.

The two key points of note from this case are:

  1. as in this case, the majority of misleading of advertising enforcement actions are initiated by consumer complaints; and
  2. even where companies voluntarily take steps to rectify any misleading representations, the Bureau will likely require them to be formalized in a Consent Agreement.

For a copy of our previous e-lert discussing recent misleading advertising enforcement actions. please click here.

For a copy of the Competition Bureau's press release, please click here.

For a copy of the Consent Agreements, please click here and here.

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.