Canada: Appeal Underway In Travel Industry Misleading Advertising Case

The parties in Maritime Travel Inc. v. Go Travel Direct.com Inc.,¹ a misleading advertising private action decided earlier this year, have recently filed their initial appeal and cross-appeal submissions.²

At trial, Maritime Travel, an established Canadian east-coast travel agency, alleged that upstart tour operator Go Travel Direct.com Inc. ran materially misleading newspaper advertisements. Maritime Travel claimed damages based on section 36 of the Competition Act, which provides a civil remedy for damages suffered as a result of a breach of a criminal provision of the Act. In this case, Maritime Travel alleged that Go Travel had knowingly or recklessly made representations to the public that were false or misleading in a material respect, contrary to section 52 of the Act. Developments in the law around sections 36 and 52 of the Act are important, because these sections provide the only basis for private damages for misleading advertising under the Act.

Go Travel was found liable at trial for one price comparison ad. Go Travel had lowered its price on a travel package for up to a four-day period and had advertised on one of those days both a price comparison with the Maritime Travel posted price on the same package, and a claim that ". Go Travel offers vacations for less by eliminating the travel agent middleman .". There was no question that the posted price of Maritime Travel had been higher than the advertised price of Go Travel during the period, and Go Travel had made it clear that the price comparison was made only for a particular date (albeit in small print). But the evidence also showed that, at some point prior to advertising, Go Travel had become aware that Maritime Travel agents had the discretion to match Go Travel's prices.

The trial judge was not prepared to conclude that the ad was false, because the single-day price comparison was not incorrect as regards posted prices and because it was not clear that Maritime Travel always matched Go Travel prices. However, in the judge's view, the ad was misleading because it left the reader with the "overall impression" that Maritime Travel was always more expensive that Go Travel Direct, because commissions increased the Maritime Travel package price. The judge also concluded that Go Travel had "knowingly" created the misleading impression, due to its prior knowledge of discretionary price matching by its competitor.

In its appeal, Go Travel argues that the trial judge erred in finding that the overall impression was misleading when the specific price comparison was technically correct. It further argues that even if its ad was misleading, Go Travel did not make the misrepresentation "knowingly or recklessly," and also that Maritime Travel did not prove any damages.

Of particular importance for Canadian jurisprudence will be the appeal court's determination as to whether Go Travel knowingly created a false overall impression, apparently without direct evidence of actual intent in this regard.

The question of just what the plaintiff must show in terms of damages is also a significant question in this case. In connection with an ad that ran for a single day, the trial judge was willing to award estimated lost profits for a period of weeks, based on an estimate of lost sales which was itself based on a year-over-year comparison of broad market data.

If the trial judge's decision is upheld on appeal, it could establish a relatively low threshold for plaintiffs to obtain significant damages in respect of misleading advertising under the Competition Act.

Footnotes

1. 2008 NSSC 163

2. Nova Scotia Court of Appeal, 2008, C.A. No. 297729.

3. The Competition Act also contains civil prohibitions against misleading advertising, but private parties can only sue for damages incurred as a result of allegedly criminal violations of the Act. Unless the misrepresentations are made knowingly or recklessly, therefore, private parties harmed by a competitor's misleading advertising have no access to damages.

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