ONE | GLOBAL EXPANSION
Anyone who has shopped at Walmart, enjoyed a cappuccino at Starbucks or purchased home furnishings from Crate & Barrel recognizes the impact that global expansion (particularly from the U.S.) has had on Canadians’ shopping habits. As foreign retailers and consumer products manufacturers come to appreciate our economic stability and ever-increasing desire for new brands, the number of retailers and new brands coming to Canada will continue to grow in 2014 and beyond.
In recent years, many Canadian provinces have made it easier for foreign companies to carry on business in Canada by reducing or eliminating the Canadian director residency requirements and expanding the types of legal structures that are available. However, as in many other jurisdictions, regulatory oversight has increased recently, especially in the areas of consumer protection, anti-bribery, product safety, product origin, labelling and privacy. Recent high-profile prosecutions demonstrate the devastating impact criminal and regulatory investigations and prosecutions can have on companies, their officers, directors, employees and shareholders. To avoid a similar fate, new entrants to Canada, as well as existing retailers and consumer products companies sourcing goods from other jurisdictions, should familiarize themselves with the applicable regulatory regimes.
TWO | CANADA’S ANTI-SPAM LEGISLATION
As customers seek direct engagement with their favourite retailers and consumer brands, companies are responding by embracing social media, using direct electronic communication and adopting or expanding loyalty incentive programs. Retailers and consumer brands using these means to reach or get closer to their customers will need to comply with the stringent requirements of Canada's Anti-Spam Legislation (CASL). Most of Canada’s anti-spam legislation will come into force on July 1, 2014. The provisions relating to the installation of computer programs will come into force on January 15, 2015. The legislation will substantially restrict the use of electronic messages for commercial activities and will have a considerable impact on the electronic communication practices of companies in the retail and consumer products sectors.
CASL will apply to all commercial electronic messages (CEMs), unless the message is of a type or class that is covered by an exemption. Essentially, companies will not be permitted to send a CEM unless the recipient has expressly consented to its receipt and the message meets certain form and content requirements. Retailers and consumer product suppliers looking to leverage customer databases to advertise directly through electronic channels, whether by email, text message, social media or mobile applications, must meet these requirements or risk substantial fines. Notably, as of July 1, 2017, individuals who receive a CEM in contravention of CASL can bring an action against the sender, which increases the possibility of class action litigation.
THREE | MOBILE APPS AND PAYMENTS
Consumers want to purchase and pay for goods and services using their mobile devices, a trend that will likely increase in 2014. Even traditional retailers are moving aggressively into the e-commerce space and have, or are developing, specialized apps, including mobile payments apps. Connecting with customers through mobile apps raises a host of compliance issues that may not necessarily arise in the in-store marketing and sales context. Retailers and consumer products companies need to understand these laws.
Although regulation in Canada has been slow following the advent of mobile device use, some regulatory guidance exists and should be considered when developing and distributing mobile applications (and engaging in mobile payments). In October 2012, the Office of the Privacy Commissioner (OPC) published guidance on its website that sets out key considerations for developing mobile apps from a privacy perspective and stresses the requirement to obtain “meaningful consent” from consumers. It makes recommendations regarding obtaining consent and avoiding “notice fatigue” – where users ignore recurring notices or warnings. The OPC guidance notes that timing of user notice and consent is critical to ensure that consent remains relevant and meaningful and that users should be told how their personal information is handled when they download an app, first use it and throughout the app experience.
Although no other specific regulations address mobile payments or mobile apps, legislation of general application applies and must be complied with in the app world. Beyond privacy requirements, businesses must comply with data protection, consumer protection, e-commerce and advertising laws, as well as legislation applicable to their industries or products. As mobile commerce evolves, especially in terms of mobile payments, a regulatory framework will likely be introduced to address the unique challenges of the mobile space. In fact, in the federal budget tabled in April 2013, the federal government indicated an intention to develop a comprehensive financial consumer code to better protect consumers of financial products.
FOUR | FOCUS ON WELL-BEING
Consumers’ increased focus on adopting a healthy lifestyle is having a significant impact on their purchasing decisions. As a result, consumer products companies are making a wide array of health and wellness claims, and retailers are expanding the shelf space dedicated to healthy products.
The health and wellness trend is perhaps most apparent in the food sector, where consumers are increasingly looking to purchase natural, organic and/or nutrient-fortified foods that are believed to have health benefits. Consumers want “healthier” versions (lower in fat, sugar and salt) of their favourite products. In response, manufacturers are eager to advertise the health benefits of their products.
Health Canada is responsible for ensuring that health claims are accurate, consistent and not misleading. A health claim is any representation that states, suggests or implies that a relationship exists between consumption of a food or an ingredient and a person’s health, such as the statement “a healthy diet low in saturated and trans fat may reduce the risk of heart disease.” There are several classes of health claims and each is regulated differently. For some food categories, such as meat and fresh and processed fruit and vegetable products, federal law imposes mandatory country-of-origin declarations. Recently, new regulation requires product labels to disclose ingredients that are considered to be food allergens.
Canadians are also purchasing more vitamins and minerals, herbal remedies, and probiotics, all of which require Health Canada approval. There have been a number of important developments relating to these products over the past year. Most notably, all natural health products sold in Canada will be required to have a natural product number (NPN) or homeopathic medicine number (DIN-HM) on their label as the regulation that allowed for an exemption number (EN) for certain natural health products is no longer available. Health Canada has developed a transition plan that gives companies time to make necessary adjustments to their business practices and/or to phase out non-compliant products. At the retail level, companies must phase out natural health products that do not have a NPN or DIN-HM by August 31, 2014.