Canada: An Overview Of The Rules, The Regulators And Their Powers

Last Updated: February 13 2017
Article by Bill Hearn

Canadian advertising and marketing law can sometimes be reduced to simple rules of thumb such as "tell the truth", "be clear", "play fair" and "get consent". But often "the devil is in the details" and such generalities may be a trap for the unwary.

In an increasingly connected digital world, Canadian advertising and marketing law is a complex mix dealing with a multitude of issues including protections for consumers and competitors against deceptive representations, privacy violations, data breaches, spam, and intellectual property infringement, to name a few. It comprises a myriad of federal and provincial/territorial statutes and regulations, court decisions, and government regulatory body decisions, directives, enforcement guidelines and policies. It also comprises scores of industry and other self-regulatory body decisions, principles, guidance and codes of practice. In some instances, these laws and practices are of general application. In others, they apply only to those promoting a specific kind of good, service or interest, or in a specific sector of the economy.

This bulletin provides a general overview of the principal rules, key regulators, and main powers of these regulators that govern Canadian advertising and marketing.

Principal Rules

The principal, but by no means only, federal statute regulating advertising and marketing in Canada is the Competition Act, which is a law of general application and applies to both business and consumer advertising and marketing. It includes both civil and criminal provisions prohibiting representations to the public promoting the supply or use of a good or service or any business interest that are false or misleading in a material respect.

Other civil provisions under the Competition Act specifically prohibit performance representations that are not based on adequate and proper tests, misleading warranties and guarantees, deceptive ordinary selling price representations, untrue, misleading or unauthorized use of tests and testimonials, bait and switch selling, the sale of a good or service above its advertised price, and promotional contests that do not disclose required information.

Other criminal provisions under the Competition Act specifically prohibit deceptive telemarketing, deceptive notices of winning a prize, double ticketing, schemes of pyramid selling, and certain types of representations relating to compensation in multi-level marketing programs.

Generally speaking, all ten Canadian provinces and all three Canadian territories regulate advertising to consumers (but not to businesses) through their respective consumer protection statutes which include provisions relating to unfair practices (i.e., deceptive or unconscionable representations which include false advertising), cancellation/cooling-off periods for goods and services sold through certain types of consumer contracts (including future performance, direct, remote and internet agreements), unsolicited goods, gift cards, and the advertising of offers for credit or lease agreements. The names of these statutes vary by province or territory. For example, in Ontario, the statute is called the Consumer Protection Act; in Alberta, it is called the Fair Trading Act. While there are many similarities between these statutes, there are important differences (especially, although not exclusively, respecting the laws of Quebec).

Other sources of the rules regulating advertising and marketing include federal and provincial privacy and data protection laws, and federal anti-spam and intellectual property protection laws. These rules will be discussed in future issues of this bulletin.

Key Regulators

There are several federal and provincial/territorial governmental authorities with primary responsible for regulating advertising and marketing as well as self-regulatory bodies.

The Commissioner of Competition ("Commissioner") is the individual vested with primary authority for enforcing the Competition Act. The Commissioner heads the Competition Bureau ("Bureau"), an independent law enforcement agency located within Industry Canada, a federal government department. The Commissioner, supported by the Bureau investigates both criminal and civilly reviewable matters under the Competition Act.

In terms of enforcing the civil provisions, the Commissioner has the power to refer matters either to the Competition Tribunal ("Tribunal") or to the Federal Court or superior courts of the provinces (collectively, the "Courts") depending on the nature of the conduct in question. The Tribunal has exclusive jurisdiction to hear applications in respect of "restrictive trade practices" under the Competition Act (such as price maintenance, exclusive dealing, tied selling and market restriction, and abuse of a dominant position). The Tribunal and the Courts have concurrent jurisdiction in respect of "deceptive marketing practices".

Criminal matters under the Competition Act are tried in the courts of criminal jurisdiction as defined in the Criminal Code of Canada. Prosecution is by the Director of Public Prosecutions ("DPP"). If, as a result of an inquiry, the Commissioner concludes that there are sufficient grounds to believe that a criminal offence has been committed, the Commissioner may recommend to the DPP that charges be laid. The initiation and conduct of all criminal prosecutions are the responsibility of the DPP. The DPP has an independent decision-making power to determine whether to prosecute in the criminal courts or take such other action (including negotiation of a plea agreement) as the DPP deems appropriate and in the public interest.

The administration and enforcement of provincial/territorial consumer protection laws is the primary responsibility of the applicable provincial/territorial ministry. In Ontario, this is the Ministry of Consumer Services, acting through the Minister of Consumer Services and the Director under the Consumer Protection Act.

Advertising Standards Canada ("ASC"), the advertising industry's self-regulatory body, maintains the Canadian Code of Advertising Standards (the "ASC Code"), by which advertisers must abide.

The ASC Code is the advertising industry's principal instrument of advertising self-regulation. Advertisers' violations of the ASC Code may be reported by consumers or advertisers by filing a complaint with ASC, each with its own distinct complaint resolution process. ASC will not accept as a "consumer complaint" a complaint that is, in fact, a "disguised advertiser complaint". Rather, ASC will refer the complainant to the advertising dispute procedure. Further, ASC will not accept a complaint (whether from a consumer or an advertiser) if it is already before the Commissioner/Bureau, the Tribunal or the Courts.

The Canadian Marketing Association ("CMA") is a national non-profit corporation that embraces Canada's major business sectors and all marketing disciplines, channels and technologies. Compliance with the CMA's Code of Ethics and Standards of Practice (the "CMA Code") is compulsory for its members. The CMA Code is enforced through the process described below.

With respect to the handling of concurrent jurisdiction, there are a couple of general rules. First, as in the case of ASC, a self-regulatory body will generally not get involved in a complaint when the complaint is already before the Commissioner/Bureau, the Tribunal or the Courts. And second, as between government regulatory bodies: (a) in the case of a complaint where both a federal body and a provincial/territorial body have appropriate constitutional and jurisdictional authority, there is no impediment to both dealing with it (although in practice this is rare); and (b) in the case of two bodies within one or more levels of government, there are often memoranda of understanding which help determine which body will take charge. For instance, since March 2015, the Bureau and Ontario's Ministry of Government and Consumer Services have had an MOU to notify each other about enforcement activities, advise on strategic priorities, trends and policies, and coordinate communications to the public on consumer protection and competition matters.

Anti-spam, privacy and data protection laws are administered by other regulators including federal and provincial privacy commissioners and the Canadian Radio-television and Telecommunications Commission ("CRTC"). These other regulators and their respective jurisdictions will be discussed in future issues of this bulletin.

Main Powers of Regulators

The powers (including the remedies and penalties that may be imposed) vary by regulator.

The investigative process open to the Commissioner is broad and need not involve the exercise of formal powers. Parties will often volunteer information. The Commissioner may also use informal measures to investigate such as collecting information by contacting customers or industry data sources or even inviting responses from interested parties in the absence of any formal order or authorization. The Commissioner conducts their investigations in private and keeps confidential the identity of the source and the information provided. However, if someone has important evidence about a contravention under the Competition Act, that person may be asked to testify in court.

The Commissioner also has significant formal powers of investigation under the Competition Act. Among these powers are statutory mechanisms to gather evidence, compel testimony and execute formal search and seizure actions. However, when formal powers of investigation are to be exercised under the Competition Act, they are required to be commenced through the initiation of an inquiry. An inquiry may be initiated whenever the Commissioner believes that reasonable grounds exist that a person has or is about to violate the Competition Act.

If, in the course of an inquiry, the Commissioner proceeds by way of the civil track, and if, in turn, the Tribunal/Court determines that a person has engaged in conduct contrary to any of the civil deceptive marketing practices provisions of the Competition Act, the Tribunal/Court may order the person not to engage in such conduct, to publish a corrective notice, to pay an administrative monetary penalty ("AMP") and/or to pay restitution to purchasers. When the Tribunal/Court orders the payment of an AMP, on first occurrence, individuals are subject to penalties of up to $750,000 and corporations, to penalties of up to $10,000,000. For subsequent orders, the penalties increase to a maximum of $1,000,000 in the case of an individual and $15,000,000 in the case of a corporation. The Tribunal/Court also has the power to order interim injunctions to freeze assets in certain cases.

In practice, the majority of civil track matters are resolved before they ever reach the stage of a Tribunal/Court hearing. The Competition Act provides for consent agreements between the Commissioner and the party alleged to have violated the civil misleading advertising provisions. Consent agreements may include any or all of the terms that could be imposed in a Tribunal/Court order, but may also include other terms to which the parties agree. Typically, consent agreements include some combination of an AMP, the required publication of corrective notices and an undertaking not to engage in similar conduct for a period of several years. In addition, many consent agreements do not include any admission that there has been a violation of the Competition Act. The consent agreement approach may be acceptable to advertisers caught up in a Bureau investigation who wish to bring an end to the matter without devoting substantial time and resources to protracted litigation.

With respect to the criminal track, any person who contravenes the criminal false or misleading advertising provision of the Competition Act is guilty of an offence and liable to a fine of up to $200,000 and/or imprisonment up to one year on summary conviction, or to fines in the discretion of the criminal court and/or imprisonment up to 14 years upon indictment.

In Ontario, the Director under the Consumer Protection Act has the power to order a person engaging in misleading advertising to cease and order the person to retract the advertisement or publish a correction. In addition, an individual who is convicted of an offence under the Consumer Protection Act is liable to a fine of not more than $50,000 or to imprisonment for a term of not more than two years less a day or both, and a corporation that is convicted of an offence is liable to a fine of not more than $250,000.

With respect to the ASC Code, in the case of the consumer complaints procedure, if an advertiser fails to voluntarily comply with a Standards Council decision, ASC has the power to advise exhibiting media of the advertiser's failure to co-operate and request the media's support in no longer exhibiting the advertising in question. ASC also has the discretion to publicly declare that the advertising and the advertiser in question have been found to have violated the ASC Code. In the case of the advertising dispute procedure, in addition to the above noted powers, ASC may also refer to the Bureau a written summary of the facts and outcome of the hearing where the defendant advertiser either has declined to participate or if ASC believes the defendant advertiser will not comply with the Advertising Dispute Panel's decision that is unfavourable to the defendant.

If a consumer makes a complaint to the CMA that a member has violated the CMA Code, the CMA has internal mediation procedures that involve working with the member to resolve the complaint in a manner consistent with the CMA Code. If that effort fails or the member refuses to remedy the problem and comply with the CMA Code, the CMA may refer the case to an independent third party to obtain further mediation and recommendations to resolve the complaint. Following completion of one or both of these steps in the process, failure of a member to abide by the recommendations for resolving the complaint will result in a review of the case by the CMA Board of Directors which may order corrective action or expel the member and make a broad public announcement that it has done so. The CMA has never invoked its third party mediation procedure because all consumer complaints involving CMA Code violations have been satisfactorily resolved by members upon being informed of the complaints by the CMA.

The powers of the regulators responsible for enforcing Canada's anti-spam, privacy and data protection laws will be discussed in future issues of this bulletin.

Conclusion

While Canadian advertising and marketing law can be reduced to simple rules of thumb, such generalities are only a starting point. Effective legal compliance turns on creatively navigating the complex mix of rules enforced by various regulators with distinct but, at times, overlapping powers. Future issues of this bulletin will discuss this mix in more detail.

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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