Effective October 1, 2016, amendments to the Canadian Code of Advertising
Standards (the "Code") will come into effect, along with
an Interpretation Guideline. The
Interpretation Guideline expressly requires influencers, endorsers,
and the like to clearly and prominently disclose any material
connection they have with the entity who supplies the products and
services they endorse. Although the Code has Clause 7 dealing with
testimonials, the current clause does not expressly address payment
or other material benefit received by the endorser. The amendments
address this issue squarely.
The existence of "influencers" and
"tastemakers" is not new. Diana Vreeland, the iconic
columnist at Harpers Bazaar and Vogue through the
forties, fifties and sixties famously said "What these
magazines gave was a point of view. Most people haven't got a
point of view; they need to have it given to them—and
what's more, they expect it from you..." While Ms.
Vreeland may have had the power to raise and lower hemlines, her
reach was arguably not as broad or as instant as her contemporaries
who have social media at their helm. Today, fashion bloggers can
generate an "out of stock" notice on third party
retailers' website within hours after posting about a clothing
If Ms. Vreeland was right: that we want to be told what to wear,
what to eat, where to dine, where to shop, where to live, then
there seems to no shortage of people dispensing advice and
recommendations. The terms "tastemakers" and
"influencers" have never been more ubiquitous, and these
titles are viable careers in the new economy. But it begs the
question: is an opinion impartial if the provider is being paid to
give it. The answer may be "no", and regulators have
stepped in to require that any material connection be disclosed to
the consumer so that they can decide for themselves.
Clause 7 of the Code, which is administered by Advertising
Standards Canada ("ASC"), currently states that
testimonials, endorsements and representations of opinion or
preference must reflect the genuine, reasonably current opinion of
the individual, group or organization making such representations,
and must be based upon adequate information about or experience
with the product or service, and must otherwise not be
The amendments to the Code include a new "Interpretation
Guideline to Clause 7". It states that if a "material
connection" exists between an influencer and an entity
providing a product or service, the fact and the nature of the
material connection must be clearly and prominently disclosed in
close proximity to the representation about the product or service.
The amendments to the Code include a definition of "material
connection" as being "any connection ... that may affect
the weight or credibility of the representation", and
includes: "benefits and incentives, such as monetary or other
compensation, free products with or without any conditions
attached, discounts, gifts, contest entries, and any employment
relationship". There is an exception if the material
connection is one that a consumer would reasonably expect to exist,
which does introduce a shade of grey. The Interpretation Guideline
gives the example of a television advertisement in which a
celebrity publicly endorses a product or service. To what extent
celebrities, particularly those known for paid endorsements, will
be relieved of the obligation to disclose a "material
connection" will be clarified as complaints arise.
For guidance on how to disclose material connections, the
Interpretation Guideline refers to the Federal Trade
Commission's "Guide to Testimonials &
Endorsements", published in 2009, and the Word of Mouth
Marketing Association's White Paper called, "Ethical Word
of Mouth Marketing Disclosure of Best Practices in Today's
ASC joins other regulators who have taken issue with the lack of
transparency by endorsers. In October 2015, the Competition Bureau
reached a consent agreement with Bell Canada, which required Bell
Canada to pay $1.25 million in penalties after employees were
encouraged to post positive reviews about Bell and Virgin mobile
apps in various app stores, without disclosing that they work for
Bell. Although Bell removed the reviews and took steps to ensure it
would not happen again, the Competition Bureau took issue with the
reviews while they were posted because they gave the impression of
being made by independent and impartial consumers.
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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The British Columbia Court of Appeal in Vancouver Community College v Vancouver Career College (Burnaby) Inc., 2017 BCCA 41 has reversed a lower court decision involving whether the use of keywords in online advertising constitutes passing off.
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