Canada: "Technically True" Is Not True Enough: Product Claims And Hidden Terms Are Major Traps In Advertising

Last Updated: March 18 2015
Article by Burtley Francis and Laura Rhodes

In the digital economy, the ability to advertise across multiple platforms has exponentially increased the opportunities to market to consumers by removing the limits that exist in the physical marketplace (only so many billboards can be displayed along a highway, but how many more can be displayed on a single website?) As a result, consumers face intensified exposure to ads attempting to grab their attention. Businesses may now have only seconds to make positive impressions on consumers, putting more pressure to make impactful ads with bold claims to convince the viewer why they should consider a particular product or service over that of a competing business. What cannot be forgotten though is the legal requirement for both the impression and content of any ads to be accurate and substantiated.

The Competition Bureau in Canada (the "Bureau") under the Competition Act is the principal regulator of false and misleading advertising in Canada and seeks to protect the consumer's right to truth in advertising. In recent years, the Bureau has been particularly active with an increased scrutiny and pursuit of offending advertisers.

Below we highlight several recent investigations and decisions by the Bureau, to illustrate two key traps businesses may easily fall into in profiling their products and services; Product Claims and Hidden Terms.

Product Claims

The Bureau protects consumers against inaccurate or unsubstantiated product claims.

  • In 2007, the Bureau ordered clothing retailer Lululemon Athletica to remove tags from its VitaSea product line that made unproven claims that seaweed content in the material reduced the consumer's stress level, and provided anti-inflammatory, antibacterial, hydrating and detoxifying benefits.
  • In 2011, the Bureau ordered the manufacturer of Nivea brand products to cease making unsubstantiated claims that Nivea's "My Silhouette" product slims and reshapes a consumer's body. The manufacturer was also ordered to offer a refund for any consumer purchases of the product.
  • In 2014, home retailer JYSK Canada discontinued sales and offered a full consumer refund on two of its duvet brands, following inspections by the Bureau that found misleading labeling with regard to the actual down content of the duvets.
  • In 2014, the Bureau ordered that Bauer Hockey Corp. cease running advertisements creating the impression that Bauer's hockey helmets offer protection from concussions, as hockey helmet testing standards are not currently aimed at protecting players from concussions. In a settlement with the Bureau, Bauer agreed to donate $500,000 worth of equipment to a charity that supports youth participation in sport.

The take-away is that advertising claims that promise improvements to the consumer's health, attractiveness, or safety should be examined with great care, as should any claims regarding the quality of the product. Accuracy is the hallmark, and businesses must validate claims made with the support of proper testing.

Hidden Terms

The Bureau wants to ensure consumers access clear and precise information when making their purchase decisions, including upfront information about any additional fees.

In 2013, the Bureau took action against home retailers Leon's Furniture Limited and its subsidiary The Brick for "drip pricing", in which consumers are not presented with the full price of a good or service until later in the purchase process. In the case, the retailers buried details of additional up-front fees in their fine print, which led to the final price of a product being higher than the advertised price for consumers who used a deferred payment option. This was characterized by the Bureau as a deceptive marketing practice.

In 2015, along similar lines, the Bureau announced action against Aviscar and Budgetcar, and their parent company, Avis Budget Group Inc., for the companies' practice of collecting fees labeled as government surcharges and fees that the companies impose to recoup their own costs of doing business. The companies' advertised rental prices were characterized by the Bureau as deceptive marketing because after paying these fees, consumers end up paying higher prices or receiving lesser discounts than advertised.

The take-away is that the advertised price should reasonably reflect the "full" price of the product or service, inclusive of any additional fees that most consumers would typically pay for the product or service.

Going forward, it will be interesting to see which other areas may be targeted by the Competition Bureau. In a speech made in 2014, Matthew Boswell, the Senior Deputy Commissioner of Competition, comments that although privacy issues do not fall squarely within the Bureau's mandate, he believes that privacy issues "tie in" to the Bureau's work in the digital economy. For example, the Bureau has taken increased interest in advertisers' access to metadata and geolocations as recent innovations, but whether these will be targeted as the next priorities for the Bureau is a matter that remains to be seen.

This post is intended for informational purposes only and does not constitute legal advice or an opinion on any issue. We would be pleased to provide additional details or advice about specific situations if desired.

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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Burtley Francis
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