It's one thing to see a company falsely advertise its
product with gross exaggerations – lose 10 pounds in two days
with our supplement! Undo 40 years of wrinkles with one
It would seem to be another matter entirely when a company
asserts its product's superior performance in a commercial and
only verifies the assertion after the commercial airs.
But in Canada, even if a company's claims about its product
in its advertising turn out to be completely accurate, this can
still land a business with a hefty Competition Act
The problem? Violating the Competition
Act's stringent testing requirements for products before
advertising how they perform.
Specifically Advertising how a product performs before
you're finished testing – even if your claims are
In the case of (Commissioner of Competition) v. Chatr
Wireless Inc., 2014 ONSC 1146, the Ontario Superior Court of
Justice made it clear that there will be financial consequences for
any business that does not conduct "adequate and proper
testing," as required under the Competition Act, before making
claims about their products.
Chatr Wireless, a service owned by Rogers, claimed in its ads
that it had "Fewer dropped calls than new wireless
carriers." This claim turned out to be accurate – but
the trouble was that Rogers and Chatr had to prove its claim in
each market that the ad aired in, and against each relevant new
wireless carrier. But the claims were made in commercials
before Rogers had completed the "adequate and
proper" testing against all new carriers in every city, as
required by the Competition Act. (For further details on
the background of this case, see Todd Greenbloom's article for
the December 2013 issue of Blaneys on Business at
The Commissioner of Competition asked the Ontario Superior Court
of Justice to charge Rogers a $5-7 million penalty for violating
the Deceptive Marketing Practices provisions of the Competition
Act. While the Court ultimately agreed that Rogers and Chatr
had indeed run afoul of section 74.01 of the Act, the fact
"that the false or misleading advertising portion of the
application was not established and that subsequent testing
substantiated the fewer dropped calls claim" helped
Rogers' cause. The court noted that: "The fewer dropped
calls claim may have been harmful to the new wireless carriers but,
if that was the case, the harm was not inflicted in a manner which
caused harm to consumers because the claim was substantiated.
Equally, because the claim was substantiated, any harm inflicted on
Wind Mobile and Public Mobile was appropriate." Roger's
cause was also aided by the conduct of the other wireless carriers
who tried to capitalize on the Competition Commissioner's
On the other hand the fine may have been higher than Rogers
would have liked because of its past conduct. TELUS obtained an
injunction preventing Rogers' claim that it had
"Canada's Most Reliable Network" before testing its
network against Telus' HSPA/HSPA + network. The Court concluded
that the injunction "is some evidence that Rogers has been
willing to make aggressive representations prior to testing when it
believes those untested representations are true."
The Court also did not issue a prohibition order against Rogers.
A prohibition order would have had a significant impact on any
future breaches by Rogers. The Court rejected the prohibition order
in part because of the competitors' actions and because the
publicity from the case itself resulted in reputational harm to
The Court levied a $500,000 penalty against Rogers – chump
change compared to the $5-7 million asked but certainly something
that would shine a spotlight and encourage compliance with the
In addition, it was obviously important for the Court to
reinforce the idea that just because a company's claims about
the performance, efficacy or length of life of a product or service
may be true, the company is still obliged to comply with the
adequate and proper testing requirements of section 74.01 of the
So, even if a business is acting in good faith and is not
attempting to be false or misleading in its advertiing, running ads
prior to completing product testing will land that business in hot
and expensive water, especially if they have a history.
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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