Canadian COMPETITION LAW

SWEEPING CANADIAN COMPETITION ACT
AMENDMENTS (BILL C-59) PASSED JUNE 20, 2024

On June 20, 2024, Bill C-59 was passed (the Fall Economic Statement Implementation Act, 2023), which introduced the third of three significant rounds of amendments to Canada’s federal Competition Act in two years (together with Bill C-19 and Bill C-56). This new round of amendments to the Competition Act completes a sweeping overhaul of the Competition Act across virtually all key provisions of Canada’s competition legislation. These amendments are also the most significant changes to Canadian competition law since the modern Competition Act came into effect in 1986 replacing the former Combines Investigation Act.

The Bill C-59 amendments, among other things, strengthen the Competition Bureau’s powers to enforce key deceptive marketing provisions of the Competition Act (e.g., relating to drip pricing, performance claims and ordinary selling price (OSP) claims), strengthen private party rights to seek Competition Tribunal remedies (e.g., for civil deceptive marketing and violations of the civil agreements provisions of the Act), introduce new penalties (e.g., administrative monetary penalties for violating the civil agreements provisions of the Act and for reprisal actions penalizing individuals for complying with the Act) and introduce a new clearance regime for environmental protection related agreements. Canada’s Competition Act merger review regime was also substantially overhauled, eliminating the efficiency defence, introducing market share presumptions and a more restrictive remedial test for restoring competition.

These amendments, together with those enacted in June 2022 and December 2023 (Bill C-19 and Bill C-56), increase the potential competition law risk for companies, trade and professional associations and other entities, particularly those without credible and effective competition law compliance programs and that have not reviewed their business practices to reflect Canada’s new competition laws. For the Competition Bureau’s summary of the June 20, 2024 Bill C-59 amendments to the Competition Act, see: Guide to the June 2024 amendments to the Competition Act (June 25, 2024).

Our blogs will be updated to reflect these amendments.

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Advertising in Canada is primarily regulated at the federal and provincial levels. This includes laws of “general application” that can apply to any claim that is false or misleading (e.g., the general misleading advertising, provisions of the federal Competition Act and provincial and territorial consumer protection legislation) and legislation governing particular types of advertising, such as anti-spam law (CASL), promotional contests, testimonials/endorsements (i.e., influencer marketing), “ordinary selling price” (OSP) claims and sales, consumer packaging and labelling and performance claims, among others.

In addition to federal and provincial legislation, many sector-specific and profession-specific codes of conduct can apply to advertising and marketing (e.g., in the context of regulated professions, such as real estate services, dentistry, chiropractic, etc.), as well as social media platforms’ terms of use, depending on the type of marketing and medium. Specific types of products are also subject to advertising/marketing rules (e.g., alcohol, cannabis, cosmetics, drugs, food and medical devices).

Given the potential civil or criminal penalties and negative impact on a brand, advertisers and their agencies and counsel should ensure that marketing complies with Canadian laws, particularly in relation to potentially high risk areas including price claims, performance claims and electronic marketing (e.g., potential CASL issues under Canadian anti-spam law).

Some of the key areas of Canadian advertising law are summarized below and in the overview pages here on our blog.

COMPETITION ACT

Federally, the Competition Act is the primary legislation governing advertising and marketing in Canada. The Competition Act is enforced by the federal Competition Bureau, which is a federal enforcement agency based in Ottawa and headed by the Commissioner of Competition. The Competition Act contains both general criminal and civil misleading advertising provisions, which prohibit false or misleading representations made to the public to promote a product or any “business interest”.

In addition to the “general” misleading advertising provisions, the Competition Act also contains a number of other criminal and civil provisions that either prohibit (i.e., make criminal offences) or civilly regulate specific types of advertising/marketing practices.

These include: bait and switch selling (section 74.02(2)), deceptive prize notices (section 53), deceptive telemarketing (section 52.1), double ticketing (section 54), drip pricing (sections 52(1.3) and 74.01(1.1)), specific types of electronic advertising (section 74.011), multi-level marketing and pyramid selling schemes (sections 55 and 55.1), ordinary selling price (OSP) claims and sale claims (sections 74.01(2)-(3)), performance claims (sections 74.01(1)(b)-(b.2)), promotional contests/sweepstakes (section 74.06), selling products above advertised prices (section 74.05) and testimonials and endorsements (e.g., influencer marketing) (sections 52, 74.01 and 74.02).

Some of the Competition Bureau’s key advertising and marketing related enforcement priorities include false and misleading price claims, drip-pricing, misleading influencer marketing, performance claims and ordinary selling price (OSP) claims.

In general, it is important before conducting a particular type of advertising/marketing campaign to review whether any provisions of the Competition Act may apply – for example, to ensure that endorsements/testimonials are not false or misleading and that adequate disclosures are made, that performance claims meet the statutory test of adequate and proper testing, that OSP claims meet the legislative test or that the statutory information required to be disclosed for contests or telemarketing is included in marketing materials.

Potential Competition Act Penalties

Some of the potential penalties for violating the civil deceptive marketing practices provisions under Part VII.1 of the Competition Act include Competition Tribunal or court orders to stop the conduct, publish a corrective notice, pay restitution to consumers and orders to pay AMPs.

Following 2022 amendments to the Competition Act, the maximum AMPs for civil deceptive marketing increased: (i) for individuals, up to the greater of $750,000 ($1 million for each subsequent order) and three times the value of the benefit derived from the deceptive conduct; and (ii) for corporations, up to the greater of $10 million ($15 million for each subsequent order) or three times the value of the benefit derived from the deceptive conduct or, if the latter amount cannot be reasonably determined, 3% of the corporation’s annual worldwide gross revenues.

In addition, as a result of June 2024 amendments to the Competition Act (under Bill C-59), starting on June 20 2025, private parties will also be able to seek leave from the Competition Tribunal to commence proceedings under the civil deceptive marketing practices provisions (Part VII.1) with the only leave requirement for standing being that the proceedings are in the “public interest”.

The potential penalties for violating the general criminal misleading advertising section of the Competition Act (section 52) include, on indictment, a fine in the discretion of the court and/or imprisonment for up to 14 years and, on summary conviction, a fine of up to $200,000 and/or imprisonment for up to one year.

Other laws that can apply to advertising in Canada include federal anti-spam law (CASL), privacy law, intellectual property law and provincial and territorial consumer protection statutes. Some of these laws are discussed in more detail below.

Other laws that can apply to advertising in Canada include federal anti-spam law (CASL), privacy law, intellectual property law and provincial and territorial consumer protection statutes. Some of these laws are discussed in more detail below.

For more information about Canadian competition law, see Canadian Competition Law.

CONSUMER PROTECTION LEGISLATION

In addition to the federal Competition Act, provincial consumer protection legislation exists across Canada in the provinces and territories.

Canadian provincial consumer protection rules differ depending on the particular province/territory, but generally include both general misleading advertising rules (i.e., that prohibit false, misleading or deceptive representations about products or services) and rules governing specific industry sectors, such as direct selling, gift cards, auto repairs, fitness clubs and payday loans.

ANTI-SPAM LAW (CASL)

On July 1, 2014, Canada’s federal anti-spam law (CASL) came into force. In general, CASL requires express or implied consent to send Canadians “commercial electronic messages” (CEMs) and imposes sender identification and opt-out (i.e., unsubscribe) requirements for CEMs.

CASL impacts individuals, companies and other organizations that engage in electronic marketing, such as e-mail, text messaging, instant messaging and some types of social media marketing (e.g., where messages are sent to electronic addresses, such as via some social media platforms’ messaging services).

CASL is often relevant when running contests or other promotions in Canada, including if electronic distribution lists will be used to market the contest/promotion, the contest/promotion will include the collection of e-mails for marketing unrelated to administration of the promotion, if participants’ e-mail addresses will be shared with third parties (e.g., related entities or affiliate marketers) or participants are encouraged or required to “share” information about the promotion with friends or family.

The potential penalties for violating CASL include AMPs of up to $1 million (for individuals) and $10 million (for corporations).

For more information about CASL, see: CASL, CASL Compliance , CASL Compliance Tips, CASL FAQs, CASL Compliance Errors and Contests and CASL.

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Do you need a precedent or checklist
to comply with CASL (Canadian anti-spam law)?

We offer Canadian anti-spam law (CASL) precedents and checklists to help electronic marketers comply with CASL. These include checklists and precedents for express consent requests (including on behalf of third parties), sender identification information, unsubscribe mechanisms, business related exemptions and types of implied consent and documenting consent and scrubbing distribution lists. We also offer a CASL corporate compliance program.

For more information or to order, see: Anti-Spam (CASL) Precedents/Forms. To discuss CASL legal advice or for other advertising or marketing in Canada, including contests/sweepstakes, contact us: contact.

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PROMOTIONAL CONTESTS
(SWEEPSTAKES)

Promotional contests in Canada are largely governed by the federal Competition Act (mandatory disclosures for advertising), Criminal Code (avoiding the illegal lottery offences under section 206) and contract law (the terms and conditions between the contest sponsor and entrants).

Other laws that frequently also apply to the operation of contests in Canada include CASL (Canadian anti-spam law) (if entrant information will be used for electronic marketing), intellectual property law (e.g., if entrants will submit original material as part of participating or a sponsor uses third party IP) and privacy law (relating to the collection and use of entrants’ personal information).

On October 27, 2023, the province of Quebec made significant changes to its rules relating to publicity contests open to Quebec residents. In this regard, it repealed the provisions of the Act respecting lotteries, publicity contests, and amusement machines relating to publicity contests and repealed its former rules regarding publicity contests. As such, sponsors of contests open to Quebec residents no longer must formally file their contests with the Régie des alcools, des courses et des jeux (Régie) or pay duty (essentially a fee) to the Régie based on the value of contest prizes, file a winners report at the end of a contest or post security in Quebec, where which was formerly required in some cases. Other requirements applying to publicity contests run in Quebec were also eliminated, including the necessity to include specific Quebec-related disclosure language in contest rules and seek permission for contest modifications after launch.

Given that running a promotional contest without following Canadian laws can result in civil or criminal liability or, what is often worse for brands, negative publicity or negative goodwill, it is important to review proposed contest rules and marketing materials for Canadian legal compliance prior to launching a contest.

In this regard, the main components of a Canadian contest are generally to include both short and long contest rules setting out the rules for the contest, a winner release form (which is particularly important in higher risk promotions, such as trip contests), review of draft creative materials before the contest is launched to ensure that they are not false or misleading and, if the sponsor wants to use entrant information for e-mail or other electronic marketing, complying with the consent and other requirements of CASL (Canadian anti-spam law).

In some cases, sponsors also enter into co-sponsor agreements (e.g., where there are multiple sponsors or prize sponsors) or indemnification agreements with third parties involved in the contest (e.g., where a sponsor only contributes prizes and/or brand assets, such as its name/trademarks, and another party, such an in influencer or contest administrator, is largely responsible for the marketing and operation of the contest). Such agreements can be useful to shift risk where a sponsor wants to limit potential liability, particularly with unsophisticated co-sponsors or marketing partners. For more information, see: Influencer/Co-Sponsor Agreements.

For more information about Canadian contest/sweepstakes laws, see: Contests, Contests & CASL, Contest FAQs, Contest Forms, Contest Tips and Contests and Social Media.

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INDUSTRY CODES OF CONDUCT

In addition to federal and provincial advertising laws, some sectors, particularly regulated professions such as real estate, law, dentistry and chiropractors, have industry codes of conduct that include advertising and marketing rules.

While such rules are generally not legislation (unless a regulator has regulatory powers relating to advertising), it can be very important to review industry rules before launching an advertising campaign – especially where there may be professional discipline for violating and industry code or other rules.

Canada also has a national not-for-profit advertising self-regulatory body, Advertising Standards Canada, which has published the Canadian Code of Advertising Standards (the Code). The Code includes rules relating to many types of advertising and marketing practices, including price claims, bait and switch advertising, comparative advertising and testimonials. While the Code is only binding on Ad Standards’ members, it can be helpful in providing guidance for specific types of advertising and marketing practices and is, in many instances, consistent with the federal Competition Act and Competition Bureau guidance.

SOCIAL MEDIA PLATFORM RULES

Most advertising and marketing campaigns now include some (and commonly many) social media sites, which may include Facebook, Twitter, Instagram, Pinterest, TikTok or other social sites.  Social media platforms, however, commonly include detailed terms of use, including rules governing their use for advertising and marketing and some specific types of promotions (e.g., contests).

As such, it is prudent for advertisers to review the terms of use for the social platforms to be used for a promotion before launch.

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SERVICES AND CONTACT

We are a Toronto based competition and advertising law firm offering business and individual clients efficient and strategic advice in relation to competition/antitrust, advertising, Internet and new media law and contest law. We also offer competition and regulatory law compliance, education and policy services to companies, trade and professional associations and government agencies.

Our experience includes advising clients in Toronto, Canada and the United States on the application of Canadian competition and regulatory laws and we have worked on hundreds of domestic and cross-border competition, advertising and marketing, promotional contest (sweepstakes), conspiracy (cartel), abuse of dominance, compliance, refusal to deal and pricing and distribution matters. For more information about our competition and advertising law services see: competition law services.

To contact us about a potential legal matter, see: contact

For more information about our firm, visit our website: Competitionlawyer.ca