In the final months of 2023, the Commissioner made it clear that misleading online advertising continues to be a focus of enforcement for the Competition Bureau, registering two consent agreements with the Competition Tribunal to address allegations of deceptive or misleading advertising under the Competition Act. In this article, we review these recent cases (TicketNetwork, Inc. and Amp Me Inc.) and outline a list of key takeaways for Canadian businesses.
TicketNetwork’s Unattainable Prices and Misleading Impressions
Following an investigation, the Commissioner concluded that TicketNetwork engaged in deceptive or misleading advertising and reached a consent agreement with TicketNetwork to address the Commissioner’s concerns. TicketNetwork operates as a platform to facilitate the reselling of concert, sports, theater, and entertainment event tickets. The Commissioner reached two conclusions in his investigation of TicketNetwork’s online advertising:
- TicketNetwork allowed ticket advertisements at prices unattainable to customers due to additional non-optional fees. Customers often ended up paying 38% more (and sometimes 53% more) than the advertised price due to these fees.
- TicketNetwork’s website created the impression among its customers that they were purchasing tickets directly from primary vendors (e.g., directly from the Rogers Centre for a concert), whereas customers were buying resale tickets from third parties instead.
The Commissioner concluded that both practices constituted misleading advertising and violated the Competition Act. TicketNetwork did not contest these conclusions for purposes of settlement, and agreed to stop the offending practices, pay a monetary penalty of C$825,000, and implement a compliance program to prevent future violations.
Amp Me’s Astroturfing and “Free” Representations
Following an investigation, the Commissioner concluded that Amp Me engaged in deceptive or misleading advertising and reached a consent agreement with Amp Me to address the Commissioner’s concerns. Amp Me offers a mobile application for download on the Apple App Store which enables users to change the volume of music by synchronizing devices together. The Commissioner reached two conclusions in his investigation of Amp Me’s online advertising:
- Amp Me retained at least one third party to publish positive reviews of the mobile application on the Apple App Store in the United States (a practice known as “astroturfing”). These “fake” reviews induced customers to purchase a subscription to Amp Me’s application.
- Some of Amp Me’s advertisement used phrases like “completely free”, “it’s free”, and “free app”, even though the mobile application required a paid subscription and a limited “free trial”.
The Commissioner concluded that both practices constituted misleading advertising. Amp Me did not contest these conclusions for purposes of settlement, and agreed to stop the offending practices, pay a monetary penalty of C$1,500,000 (partially suspended to only pay $310,000 based on Amp Me’s claim of financial hardship), pay costs of C$40,000, and establish a compliance program to prevent future breaches of the Competition Act.
Misleading Advertising – Continued Area of Enforcement
These two cases highlight the Commissioner’s ongoing focus on misleading online advertising as a key area of enforcement, following on the heels of another consent agreement also resolving allegations of misleading online advertising. The Commissioner recently issued useful guidance on how online advertisers can comply with the Competition Act, strongly suggesting that this will continue to be an area of focus in 2024 and beyond.
This is especially true in the context of the changing regulatory paradigm in Canada. The TicketNetwork consent agreement is the first case involving drip pricing resolved via consent agreement since the Competition Act was amended to expressly recognize drip pricing as deceptive marketing (noting however that to win a full litigated case, the Commissioner must make out that drip pricing (as defined in the Competition Act) has occurred, that the drip pricing representations are “material” and that the advertising in question fails the general impression test).
Key Takeaways for Canadian Businesses
It is incumbent on Canadian businesses to ensure they stay onside of advertising laws in Canada, especially considering the Commissioner’s willingness to use his recently expanded powers to target potentially deceptive or misleading online advertising. In this light, there are several actions Canadian businesses can take to proactively mitigate potential misleading advertising risks:
- Conduct an audit of online checkout procedures for different products to ensure that all advertised prices are attainable.
- Review online checkout procedures to ensure they are not confusing or misleading in any respect (such that, e.g., customers could mistakenly believe they are purchasing products from a different vendor, or otherwise do not understand the nature of the transaction they are entering into).
- Do not engage in “astroturfing” by paying third parties (or employees) to publish “fake” or otherwise misleading reviews on online platforms to induce customers to purchase a product.
- To the extent an advertisement uses words like “free”, “complimentary”, or other similar language to describe a product or service, ensure that that description accurately describes the offer.
The Canadian Government has also introduced amendments that would allow third parties to launch a private action under the deceptive marketing scheme of the Competition Act and receive a share of any monetary penalty issued. These amendments will expand the risks businesses face from claims of online misleading advertising. Canadian businesses should stay up to date regarding online advertising best practices and can contact Stikeman Elliott regarding additional strategies to mitigate this risk.
We will continue to monitor and highlight enforcement updates as they become available. As always, do not hesitate to reach out to any member of Stikeman Elliott LLP’s Competition & Foreign Investment Group for more information or to request a consultation call regarding conducting an internal audit of marketing representations.
***
Peter Flynn is a partner in the Competition & Foreign Investment Group. His practice focuses on the review of transactions under the Competition Act and the Investment Canada Act, with a particular emphasis on obtaining required regulatory approvals for cross-border mandates.
Under the Competition Act, Peter advises on all aspects of competition law, including complex merger review, joint ventures and strategic alliances, criminal and civil investigations, regulatory compliance matters and misleading advertising. Peter has particular expertise in obtaining approvals in the telecommunications, software, media, fintech, consumer goods, life sciences, mining, and oil and gas industries.
Under the Investment Canada Act, Peter specializes in obtaining economic and cultural net benefit approvals and providing strategic advice to foreign investors undergoing national security reviews. Peter has significant experience working with government relations and public relations advisors to secure approval for high-profile transactions.
Professional Activities
Peter is the Chair of the Canadian Bar Association Competition Law and Foreign Investment Review Section's Foreign Investment Review Committee and a member of the American Bar Association Antitrust Law Section. He is also a member of the Law Society of Ontario.
Background
Prior to practicing law, Peter volunteered in politics and worked as a Member’s Assistant for a Member of Parliament and as a Research Assistant for Professor Jacob Ziegel.
Peter’s competition and foreign investment practice is enhanced by his master’s degree in economics from the University of Toronto.
***
Warren Ferguson is an associate in the Competition & Foreign Investment Group. His practice focuses primarily on the review of transactions under the Competition Act and the Investment Canada Act. He also advises clients on a broad range of regulatory issues, including sanctions, AML, and anti-terrorist financing matters.
Professional Activities
Warren is a member of the Law Society of Ontario and the Canadian Bar Association and is currently serving as the first vice chair of the Young Lawyer’s Committee of the Canadian Bar Association.
Background
Warren was the Director of Legal Affairs on the Board of Directors for the Queen’s Grad Club between 2019 and 2021 during law school. He competed on the Queen’s University Law School’s competitive moot team in the Adam F. Fanaki Competition Law Moot, and his team received the Runner-up Best Team - Appellant Award. Outside of work, Warren has been a minor league ice hockey referee since 2009, during that time refereeing more than 1,000 minor league hockey games.