December 7, 2016
Earlier today, the Competition Bureau (Bureau) announced that Moose Knuckles has entered into a settlement to resolve alleged false or misleading “Made in Canada” claims relating to its down-filled parkas (see: Competition Bureau resolves Made in Canada advertising concerns with Moose Knuckles and Consent Agreement).
Moose Knuckles has agreed to donate $750,000 to Canadian charities (e.g., those that provide winter jackets to needy children), qualify its country of origin claims (by stating “Made in Canada with Canadian and imported components), not make any advertising claims that create the general impression that its parkas are made exclusively with Canadian inputs and implement an internal competition compliance program.
The Bureau had commenced an inquiry into Moose Knuckles’ “Made in Canada” claims and filed an application before the Competition Tribunal (Tribunal) last spring under the civil misleading advertising section of the Competition Act (section 74.01(1)(a)). The Bureau’s position was that the company’s claims created a materially false or misleading general impression that its parkas were wholly made in Canada, when manufacturing begins in Asia and is continued in Canada. In this respect, while not law, the Bureau has set out its enforcement position regarding “Made in Canada” claims in its “Product of Canada” and “Made in Canada” Claims Enforcement Guidelines.
This is also the second case that has been resolved through the Tribunal’s recently adopted mediation process. Under the new mediation process, which the Tribunal issued a Practice Direction in relation to in June, 2016, parties to Tribunal proceedings may participate in mediation with a judicial member of the Tribunal to attempt to resolve a proceeding or any outstanding issues.
Mediations, which are available in all contested proceedings (including private access applications) require consent of all parties and are intended to fulfill section 9(2) of the Competition Tribunal Act, to deal with civil competition law matters before the Tribunal as informally and expeditiously as the circumstances and fairness permit.
This case has several implications for brands. They include:
1. False and misleading advertising continues to be an enforcement priority for the Bureau.
2. Advertisers should remember that the false and misleading provisions of the Competition Act are broad, can apply to a wide range of marketing claims including not only where literally false claims are made, but also where some material information is not clearly and adequately disclosed.
3. The “general impression” of an advertising claim is relevant to determining whether it is false or misleading.
4. While the Bureau consistently brings advertising cases in high-consumer impact sectors, it has indicated a clear willingness to reach negotiated resolutions rather than litigate.
5. Competition compliance programs and negotiated penalties continue to be key elements in advertising related settlements with brands.
6. The Tribunal’s recently adopted mediation process appears to be gaining traction with parties in contested cases before the Tribunal.
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