In an unprecedented move, the Federal Government has included as part of its 2009 Budget Implementation Act (Bill C-10) a radical overhaul of the Competition Act and a number of important amendments to the Investment Canada Act. Budget bills are enacted quickly and with few revisions. A new era in Canadian competition law is on the horizon.

This McMillan Bulletin discusses the proposed amendments relating to Advertising and Marketing and their implications for business. The proposed amendments related to Competitor Agreements, Mergers, and Pricing Practices are dealt with in separate Bulletins.

Bill C-10 significantly increases the consequences for violating the advertising and marketing provisions of the Competition Act (“Marketing Provisions”) and expands the reach of the Marketing Provisions to various areas not currently covered.

Increased Penalties

The amendments will make violations of the Marketing Provisions a much more expensive proposition. Bill C-10 increases the potential monetary consequences of non-criminal violations by 10-15 times for individuals and 75-100 times for businesses sentenced as well as raising criminal penalties. To view a table of this information click here.

In the past, many civil track cases (especially cases involving alleged violation of the ordinary selling price provisions of the Act) were resolved before a Tribunal hearing. However, businesses that settled cases typically agreed to pay more than the statutory maximum, because the commission could allege multicount violations. It remains to be seen whether the Bureau will use the increase in maximum penalties to justify a demand for even higher consent settlement agreements.

Restitution / Asset Freeze Added as Further Consequence

Bill C-10 empowers the Competition Tribunal to require businesses to pay restitution to victims of deceptive marketing practices. Depending on the harm the Tribunal determines was caused to consumers, the repayments could be larger than potential maximum penalties set out above. Amounts paid for restitution are to be taken into account by the Tribunal when it establishes the amount of the penalties that will be imposed. As a result, where restitution is not feasible, we expect that the Bureau will seek and the Tribunal may impose relatively high monetary penalties.

The Tribunal also will be authorized to freeze assets and prevent the disposal of property pending determination of whether misleading representations have been made, in order to ensure assets are available to satisfy restitution orders. We expect that the Bureau will use this type of interim remedy in cases where the respondent is not a sizeable and reputable business.

Substantive Amendments Make it Easier to Prove an Offence

Bill C-10 amends the Marketing Provisions by expressly providing in both the criminal and reviewable practice provisions that it is not necessary to establish that:

  • any person was deceived or mislead – this codifies existing case law in which courts have held that a representation can be misleading even if no one is actually misled;
  • any member of the public to whom the representation was made was within Canada – this overturns case law which found that the Marketing Provisions did not apply to representations made by Canadians outside of Canada (although that case recently was overturned on appeal); or
  • the representation was made in a place to which the public had access – this amendment clarifies uncertainty in the law to ensure that businesses cannot ignore the Marketing Provisions merely because they are making a representation in a place where the public does not have access.

Implications for Business

The new advertising and marketing regime will make it easier for offences to be proven and will make noncompliance more costly. Businesses should review and update their marketing law compliance programs to ensure that these risks are avoided.