With the rise of digital ads, influencer promotions, plus the traditional media that the public still use, understanding Canadian false marketing law has become more crucial. As the law is intended for the protection of the public, it’s important that businesses understand what they can (and cannot) do according to law.
What is false marketing law in Canada?
Canadian laws against deceptive, misleading, and false marketing practices come from different federal, provincial or territorial statutes. At the federal level, the following laws contain provisions that prohibit false marketing:
- Competition Act
- Consumer Packaging and Labelling Act
- Textile Labelling Act
- Precious Metals Marking Act
Competition Act of Canada
The main source for federal false marketing law in Canada is the Competition Act. This is in addition to the consumer protection laws of different provinces and territories.
Anita Banicevic, a partner at Davies Ward Phillips & Vineberg LLP, says that the Competition Act is a federal statute that applies to false or misleading representations. “[It] is arguably the one statute that is of most importance these days (as contraventions can result in either significant civil penalties or, in certain cases, even criminal penalties). Each of the provinces also has consumer protection legislation which also prohibits certain types of false representations.”
Regulator for false marketing law
Federal marketing laws are enforced by the Competition Bureau, among other laws. Here’s a video from the Bureau to give you an overview about these deceptive marketing and advertising activities:
Businesses and their officers, including marketing and advertising companies, are obliged to learn these laws before engaging in any consumer-related activities. For this, you can consult with the best advertising and marketing lawyers in Canada as ranked by Lexpert.
What should businesses do to comply with these false marketing laws?
When learning about false marketing, the first step is to know the specific acts that are considered deceptive, misleading, or misrepresenting. To understand the gravity of these offences, companies can also check out the penalties that can be imposed upon them when violating Canada’s false marketing law.
From a compliance perspective, businesses would be wise to ensure that their marketing and advertising personnel can watch out for emerging risks, Banicevic says. “For example, with the passage of Bill C-59 on June 20, 2024, there are now two new provisions aimed at cracking down on greenwashing (false or misleading environmental claims).” These were added to the civil misleading representations provisions in the Competition Act. Those provisions introduce specific requirements regarding the substantiation required for certain environmental claims.
Offences tantamount to false marketing, and penalties
To ensure fair competition among businesses through truthful advertising, the Competition Act of Canada listed many offences related to false marketing. Not to mention that it has separate provisions prohibiting anti-competition offences.
Its provisions on false marketing offences can be divided into two categories according to their penalties: civil or criminal. Note that this only covers the provisions of the Competition Act.
Civil provisions on false marketing (Competition Act)
Civil penalties include injunction, administrative monetary penalties, and payment of damages to the consumers affected.
- Making false or misleading representation [s. 74.01(1)]: ads that directly or indirectly promote the supply or use of a product using:
- false or misleading representations
- warranties or guarantees on the product’s performance, efficacy, or length of life, that are not based on adequate and proper tests
- warranties, guarantees, and promises for replacement, maintenance, or repair, that are misleading and with no intent of executing it
- Drip pricing [s. 74.01(1.1)]: products with unattainable price, as consumers must pay additional, fixed charges or fees to buy a product or service; unless it’s the price imposed by law
- Electronic messages and web addresses [s. 74.011]: misrepresentations in an electronic message’s sender or subject, or its locator information (e.g., URLs)
- Misrepresentation of conducted tests [s. 74.02]: ads using misleading tests purportedly conducted on the product’s performance, efficacy, or length of life; unless the representation was published before, or was approved, and follows the results of the test
- Misrepresentation of testimonials [s. 74.02]: misrepresentations through testimonials about the product; unless the testimonial was given previously, and the representation is truthful to the testimonial
- Bait and switch selling [s. 74.04(2)]: products are advertised at a bargain price, but are really not available for sale in reasonable quantities, considering the producer’s business, its nature and size, and the ads’ nature
- Sale above advertised price [s. 74.05 (1)]: when products are sold or rented above its advertised price, within the same period it was advertised
- Promotional contests [s. 74.06]: when contests, lotteries, or games of chance:
- don’t disclose the prize’s value and the necessary information on chances of winning
- delays the distribution of prizes
- do not choose their winners randomly or based on a particular skill
Criminal provisions on false marketing (Competition Act)
For the following crimes, fines may also be imposed by the court, aside from imprisonment.
- False or misleading representation [s. 52 (1)]: knowingly or recklessly making material representations about a product to the public that is false or misleading
- Drip pricing [s. 52 (1.3)]: products with unattainable price, as consumers must pay additional, fixed charges or fees to buy a product or service; unless it’s the price imposed by law
- Deceptive telemarketing [s. 52.1 (3)]: failing to disclose material facts at the beginning of a telemarketing transaction; or making false or misleading claims to promote a product through forms of telecommunications (e.g., by phone, recorded messages, etc.)
- Notice of winning a prize [s. 53 (1)]: sending prize notices, claiming that the recipient won or will win a prize, but subject to conditions such as payment of fees; unless the recipient is actually a winner and the sender makes specific disclosures
- Double ticketing [s. 54 (1)]: when ads display two or more prices, but the product is supplied at a price higher than the lowest of these two or more advertised prices
- Multi-level marketing (MLM) [ss. 55 (1) and (2)]: MLM becomes illegal when MLM plans make any misleading compensation claims; unless these claims disclose the amount that a participant will likely earn
- Pyramid selling [ss. 55.1 (1) and (2)]: the establishment, operation, advertising, or promoting a pyramid selling scheme is illegal
Tips to avoid the pitfalls of false marketing law
When promoting your product or services, here are the tips to keep in mind so that you won’t violate Canada’s false marketing law:
- be clear on ads and promotions: show prices that are according to law, using realistic and science-based tests and testimonials, and use facts in ads
- have a compliance program: ensure that your marketing team knows the law and is strict in monitoring your compliance with it
- check the exceptions of each offence: as not all offences are absolute, use their exceptions or “saving” provisions as your guide on the correct way of doing things
How can lawyers help in relation to Canada’s false marketing laws?
Advertising and marketing lawyers can guide businesses on how to comply with false marketing law in Canada. This applies not only to domestic businesses, but especially to foreign and non-resident companies that want to do business in the country. If the proactive process of compliance has already passed, a lawyer’s representation in any stage of a court or administrative proceeding is important.
One way that lawyers can assist is by conducting compliance training for their clients and by understanding what types of marketing claims are important to them and are on the horizon, says Banicevic. “By working closely with the client to plan marketing/advertising campaigns, you can help identify risks (such as relating to environmental claims) well in advance and suggest alternatives as necessary to mitigate any such risks.”
If you’re from Toronto or Ottawa and want to know more about Canada’s false marketing law, reach out to the best advertising and marketing lawyers in Ontario.