The Competition Bureau (the “Bureau”) has recently been increasing its oversight over false and misleading representations made in connection with charitable claims. The Bureau is the government regulator responsible for investigating and enforcing deceptive marketing and advertising practices in Canada. The Bureau’s mandate is broad, and, notably, the scope of its oversight includes potentially false or misleading claims made in the course of raising funds for charitable or other non-profit purposes.
Most recently, the Bureau announced that it sent warning letters to two clothing donation bin operators in the Montreal area. Unadministered bins are often used by charitable or not-for-profit organizations seeking donations of clothing or other goods. Typically these donations are then re-sold, with the proceeds benefiting a social cause. In this instance, however, the Bureau alleged that the proceeds were in fact being used for commercial purposes, notwithstanding that the claims on the bins gave the impression that all or part of the proceeds would be given to charitable organizations. Further, some of the bins may have even imitated the donation bins of real charities, to further mislead consumers as to the donation recipients.
The warning letters are part of a larger drive by the Bureau to identify and decrease fraud against consumers. Increasingly, the Bureau has been focusing its enforcement on false or misleading representations that have a significant impact on consumers and not just the market generally. Penalties for non-compliance with the Competition Act (Canada) can be up to $10 million for the first order, and $15 million for any subsequent orders.
This is not the first time that the Bureau has targeted fake donation bins. In 2014, the Bureau sent similar letters to for-profit bin donation organizations operating in the Vancouver area, for similarly misleading claims that gave the general impression that the recipients of the donations would be charities. As was apparently the case with some of the targeted Montreal operators, the bins in Vancouver made claims that the operators were “a proud sponsor” or “in support” of certain named charities. While these claims might not have technically been false, the context gave the misleading impression that the donation would directly benefit these named charities.
Donation bins are not the only area of charitable claims recently under the Bureau’s scrutiny. Following the recent devastation in Fort McMurray, Alberta, many Canadians sought to donate funds to assist the wildfire evacuees and their communities. At the time, the Bureau issued an alert warning Canadians of fraudulent solicitations for donations from fake charities and scammers posing as legitimate social impact groups. While the details of their investigation were not made public, it is likely that the Bureau identified the significant occurrence of this type of donation fraud and sought to limit its success. One takeaway is that charitable advertising claims certainly seem to be a current enforcement priority for the Bureau.
Canadians do not need to sit and wait for the Bureau to identify and challenge potentially fraudulent solicitations and claims. Consumers are able to report instances of suspected fraud directly to the Canadian Anti-Fraud Centre, and can also report instances of misleading or deceptive marketing practices to the Bureau using its online complaint form. Charities and not-for-profits are also able to make use of the Bureau’s online complaint form to flag potential violations of advertising laws. Further, where a scammer is using a charity or a not-for-profit’s logo or other intellectual property, there are certain legal measures that the organization can take to force the scammer to stop its behaviour. For example, organizations could send a cease and desist letter to the scammer regarding the use of its trademarks and other intellectual property, or formally file an action for trademark infringement, depreciation of goodwill or passing off.
Beyond legal recourse, there are steps that an organization can take to ensure that its name is not used as part of a scam. Organizations should stay informed of possible charitable donation scams and consider increasing communication with donors about events of fraudulent or other deceptive practices, confirming that the organization is not a part of these scams. Flagging the potential for donation fraud helps to ensure that donations are instead directed to legitimate channels. Unfortunately, with increasing donation fraud and other false and misleading advertising claims, consumers and donors may be becoming increasingly suspicious of certain marketing claims, even those that are legitimate. Charities and not-for-profits should be mindful of this possibility when designing their promotions, materials and solicitations – particularly those leveraging the digital economy – so as to reassure donors that their donations will be making an impact with the correct organization.