On April 26, 2016, the Competition Bureau (Bureau) filed a Notice of Application (Application) against Moose International Inc. (Moose Knuckles), for alleged false or misleading "Made in Canada" claims in relation to its premium winter jackets. The Bureau is seeking, among other remedies, C$4-million in administrative monetary penalties (AMPs) as well as restitution for Moose Knuckles customers. This Application is yet another demonstration of the Bureau's willingness to use its investigative and litigation powers in relation to misleading advertising, and a trend towards seeking not only AMPs but also restitution for affected customers.
The Application relates to various "Made in Canada" representations on the Moose Knuckles website, hang tags and jacket labels. The Bureau alleges that Moose Knuckles represented and continues to represent to the public that its jackets are "Made in Canada" when, in fact, the jackets are imported from Vietnam and elsewhere in Asia in nearly finished form and only the finishing touches are done in Canada.
The Competition Act prohibits the making of materially false or misleading representations. Under the Bureau's Enforcement Guidelines — "Product of Canada" and "Made in Canada" Claims, a "Made in Canada" claim will generally not be considered false or misleading if each of the following conditions are met:
- The last substantial transformation of the goods occurred in Canada
- At least 51 per cent of the total direct costs of producing or manufacturing the goods have been incurred in Canada
- The "Made in Canada" representation is accompanied by an appropriate qualifying statement, such as "Made in Canada with imported parts" or "Made in Canada with domestic and imported parts"
The Bureau alleges that the Moose Knuckles "Made in Canada" claims fail on all three conditions above. First, the Bureau asserts that the work Canadian plants do to complete and finish the jackets do not constitute a substantial transformation. By adding the fur trim, zippers, snaps and labels to imported jackets that were nearly complete, the goods do not undergo a fundamental change in form, appearance or nature in Canada. Second, the Bureau asserts that the total direct costs to manufacture the jackets in Canada, including expenditures on materials, labour and overhead directly related to the manufacturing of the jackets, are less than 51 per cent of the overall costs. Finally, the Bureau asserts that most of the "Made in Canada" claims made in respect of these products were not appropriately qualified. According to the Bureau, the application of a single "Made in Canada with imported textiles" statement on the care labels did not change the otherwise false or misleading impression that the jackets are "Made in Canada".
None of the allegations have been proven in court, and based on media reports, it appears that Moose Knuckles rejects the allegations of the Bureau.
In the Application, the Bureau emphasized that a "Made in Canada" claim is material to some Canadian consumers who are willing to pay a premium for jackets made in Canada. Moose Knuckles jackets typically retail for C$595 to over C$1,000 each. According to the Bureau, Moose Knuckles jackets used to be entirely made in Canadian factories when the company was first created in 2009. However, since 2012, these jackets have been largely produced in Asia.
The Bureau also cited various aggravating factors to the alleged deceptive conduct that should be taken into account in determining the size of the AMP, such as: the national reach of Moose Knuckles' conduct; the fact that Moose Knuckles has made similar representations frequently over an extended period of time; the fact that the false or misleading representations were material; the fact that self-correction is unlikely to adequately remedy the conduct; and the volume of Moose Knuckles product sales (C$100-million in retail sales in 2014).
The Bureau also asserts that while Moose Knuckles has made some changes to its representations in 2016, the company continues to make false or misleading representations on both its jackets and on their website.
MISLEADING ADVERTISING ENFORCEMENT ACTIVITY
This is yet another demonstration of the Bureau's increased enforcement activities in recent years and its continued willingness to use investigative and litigation powers to enforce compliance with provisions of the Competition Act and its other statutes in relation to all forms of misleading advertising. Since 2015, the Bureau has:
- Taken action against car rental companies regarding price advertising, including under the new false or misleading representations provisions relating to electronic messages, and is seeking C$30-million in AMPs as well as restitution for customers
- Reached settlements with two parties in a text messaging case relating to unauthorized charges following agreements to provide over C$12-million in refunds to current and former customers
- Entered into a consent agreement with a manufacturer of hockey equipment in relation to performance claims
- Entered into a consent agreement with a national telecommunications provider over online reviews, which involved the payment of a C$1.25-million AMP
- Entered into a consent agreement with a retailer in respect of ordinary selling price advertising for custom and ready-made picture frames, which involved the payment of a C$3.5-million AMP
- Completed an inspection blitz of major department and chain stores in Toronto, Vancouver and Montreal in respect of precious metal marking and advertisement
With the "Made in Canada" Application, the Bureau looks to continue this trend.
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