Canada: Changes To Loyalty Programs And Rewards Points In Ontario And Québec

On January 1, 2018, Ontario's Protecting Rewards Points Act (the "Act") came into force along with its Regulations (the "Regulations"). As noted in our previous article, " Are reward points expiry dates unenforceable in Ontario?" regarding this legislation, the key provision of the Act is that it prohibits rewards points from expiring due to the passage of time alone. However, as anticipated, the Regulations outline many exceptions to, and exemptions from, this prohibition.

Regarding the latter, the Regulations have narrowed the definition of rewards points by stipulating that in order to be subject to the prohibition, rewards points must be accumulated across multiple transactions. As such, rewards points that are earned pursuant to a single transaction (and that do not accrue) are exempt from the prohibition. Further, the Regulations clarify that the prohibition does not apply if the rewards points at issue cannot be redeemed for a service or good (or single set thereof) that has a value of more than $50. The Regulations also clarify that the prohibition does not apply when the consumer is not required to purchase goods or services in order to earn the rewards points.

As anticipated, the Regulations provide an exception that rewards points can expire due to account inactivity. Specifically, if the consumer has not earned or redeemed points during a specified period of time, the rewards points may expire after such specified time.

"Exchange units" (defined as any form of benefit granted to a consumer that has an exchange value under a loyalty program) and loyalty programs will similarly be regulated in Québec. While the proposed new rules governing loyalty programs will prohibit exchange units from expiring on a set date or by the simple lapse of time, the draft Regulations published on April 18, 2018 contemplate an exception to this rule. Under the draft Regulations, exchange units will be permitted to expire in cases where: (i)  the loyalty program terms and conditions stipulate that exchange units can expire due to account inactivity, which account inactivity must be for a period of not less than 1 year; (ii) the merchant sends an inactivity notice to the consumer, which notice must exclusively set out the fact that the customer's inactivity will result in the expiry of his/her exchange units and specify the date of said expiry; and (iii) the inactivity notice is sent at least 30 days, but not more than 60 days, before the date upon which the exchange units are set to expire.

Merchants offering loyalty programs will also be required to provide consumers with pre-disclosure information prescribed by Regulation, which include the terms and conditions applicable to earning and exchanging exchange units, as well as the terms surrounding the expiry of exchange units. Unilateral amendments to indefinite-term loyalty programs may also be permitted, provided that the program terms include the prescribed amendment clause, the merchant complies with the amendment notice requirements and the amendment does not concern the number of exchange units received and not yet redeemed by the consumer or the conversion factor used to convert the exchange units already received and not yet redeemed by the consumer.

The foregoing clarifications regarding the scope and application of the prohibition will certainly be welcomed by many businesses that offer loyalty programs that include rewards points. With that being said, particular care needs to be exercised to ensure new, or existing, loyalty programs are structured and administered in full compliance with the law in Ontario and in other jurisdictions where rewards points are offered. It remains to be seen whether the proposed Québec Regulations will be revised before their coming into force date, which date has yet to be confirmed. Gowling WLG's Advertising & Product Regulatory Group will continue to monitor these developments and provide further updates as they become available.

Read the original article on GowlingWLG.com

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