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Legal Systems on Unfair Competition in CANADAOverview of

• Public Remedies– Criminal – Civil

• Private Remedies– Suits– Trade Mark Enforcement Actions

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Public RemediesThe Competition Act. R.S. 1985, c. C-34,

http://laws.justice.gc.ca/en/C-34/ • CANADIAN Federal law governing

business conduct which is applicable to all businesses.

• Misleading Advertising Guidelines (written pre 1999 amendments to the Act )

• Internet advertising guidelines 2003

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The Competition Tribunal may examine two broad categories of the

Act: • 1.Criminal Offences such as:

• materially false or misleading representations made knowingly or recklessly,

• multi-level marketing, pyramid selling, double ticketing, deceptive telemarketing

are addressed only through the criminal courts.

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Civil Matters

• 2.non-criminal (or so-called "civil") matters.• In 1999, changes to the Competition Act created a

civil process which is intended to be faster and more effective in putting a stop to misleading advertising and other deceptive marketing practices.

• Its not a softening in the Bureau's enforcement policy. The Bureau will enforce the criminal provision in the the most serious cases of deliberate misrepresentation.

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WHAT MATTERS ARE CIVIL? • PART VII.1 DECEPTIVE MARKETING

PRACTICES; Sections 74.01 to 74.06 of the Competition Act.

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Reviewable Conduct occurs when someone:

• promoting the supply or use of a product, makes a representation to the public that is false or misleading in a material respect

• makes a representation to the public in the about the performance, efficacy or life of a product not based on proper tests

• during the period to which the advertisement relates, sells the product at a price that is higher than the price advertised

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Reviewable Conduct

• Runs a contest, or otherwise disposes of any product or other benefit by any mode of mixed chance and skill whatever, where you do not follow Rx rules designed to give disclosure and fair chance

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Reviewable Conduct

• One uses fictitious "regular prices" as deceptive sales ploys.

• advertises at a bargain price a product that the person does not supply in reasonable quantities having regard to the nature of the advertisement.

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Misleading Representation and Deceptive Marketing• Both the criminal and civil provisions

prohibit misleading representations and deceptive marketing practices in promoting the supply or use of a product or any business interest.

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False or Misleading Material Representations• A representation will be false or misleading in a

material respect if,:• in the context in which it is made, it readily conveys

an impression to the ordinary citizen which is, in fact, false or misleading and

• that ordinary citizen would likely be influenced by that impression in deciding whether or not he would purchase the product being offered”.

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Substance not Means of the Representation• The Act address the substance of a

false or misleading representation rather than the means by which it is made.

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Which Track to Proceed?

• In those situations where the Commissioner has a choice of proceeding on either the civil or criminal track, most often the civil track will be pursued.

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TAKING THE CRIMINAL TRACK• In order to proceed on a criminal track

both of the following criteria must be satisfied:

• (a) clear and compelling evidence suggesting that the accused knowingly or recklessly made a false or misleading representation to the public, and

• (b) that criminal prosecution would be in the public interest.

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Choosing Criminal or Civil

• simple task in cases where the Act creates specific criminal offences involving, and

• deceptive telemarketing where no precise civil equivalent is available.

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Deceptive Telemarketing

• New Section 52.1 is part of the misleading representations and deceptive marketing practices provisions of the Act.

• These provisions aim to require strict disclosure of marketplace information and discourage deceptive marketing practices.

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"Interactive telephone communications”• live voice communications between two or

more persons• The Bureau will not consider "interactive

telephone communications" to have occurred with regard to:

• fax communications;• Internet communications; • or a customer's interaction with automated

prerecorded messages.

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Internet Communication

• CAUTION: fax, Internet and pre-recorded messages will still be subject to the general provisions concerning misleading representations.

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What are the Criminal Stream Penalties?• 52(5) of the Competition Act

• On summary conviction under the general criminal provision, a person is liable to a fine of up to $200,000, imprisonment for up to one year or both.

• If convicted on indictment, the person is liable to a fine at the discretion of the court, imprisonment for up to five years or both.

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CIVIL SANCTIONS• The Bureau attempts to resolve matters

through information contacts, negotiated undertakings and consent orders.

• the Commissioner may apply for an order requiring the person to cease the activity, publish a corrective notice and/or pay an administrative monetary penalty.

• individuals are liable to penalties of up to $50,000 and corporations are liable to penalties of up to $100,000.

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OTHER FEDERAL LAWS• False or misleading representations

pertaining to prepackaged non-food products, consumer textile fibre products and precious metals articles are also captured under the Consumer Packaging and Labeling Act (CPLA), the Textile Labeling Act (TLA), and the Precious Metals Marking Act (PMNA) respectively.

• these statutes would also extend to representations that are made via the Internet.

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PROVINCIAL LAWS• Consumer protection and Business practices

laws• The Canadian Code of Practice for Consumer

Protection in Electronic Commerce endorsed by federal, provincial and territorial ministers responsible for consumers affairs on January 16th, 2004. establishes benchmarks for good business practice for merchants conducting commercial activities with consumers online.

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OECD

• Guidelines for Consumer Protection in the Context of Electronic Commerce developed by the OECD

• CANADA is a member

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Conflict of law rules

• As a general rule, national laws on competition are limited to the territory of the country making them, although some countries feel free to give extraterritorial scope to measures taken under such laws.

• claim jurisdiction over such matters when substantial impacts are felt in the Canadian marketplace,

• international cooperation

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Bilateral Agreements

• for a list of Bilateral Agreements that Canada has entered into relating to the reciprocal enforcement of their respective competition laws including deceptive marketing.

• see http://strategis.ic.gc.ca/epic/internet/incb-bc.nsf/en/h_ct02124e.html

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E-consumer.gov

• Canada participated in the launch of the "econsumer.gov" web site initiative by International Marketing Supervision Network a network of 29 governmental organizations involved in the enforcement of fair trade practice laws and other consumer protection activities The site allows consumers from all over the world to file complaints against foreign companies concerning transactions on the Internet.

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Liability of the Vendor and/or the ISP • In its enforcement efforts, the Bureau

focuses on the party who "causes" the representation to be made.

• ascertain which player possesses decision-making authority or control over content and to assess the nature and degree of their authority or control made on a case-by-case

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What if the party making the misrepresentation is outside Canada?

• Where a person making a representation is outside Canada, the representation is deemed to be made to the public by the person who imports into Canada the article, thing or display.

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Who is Deemed to make Rep?

• responsibility for advertising content should also be examined in the context of the deeming provisions found in subsections 52(2) i.e., examine packaging, attachments, point of sale context deemed made by who caused it to be made

• electronic commerce are governed by these provisions to the same extent as traditional media

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Manufacturer&/or Vendor vs. ISP• businesses which are responsible for

content or have a degree of control over that content, (MANUF/VENDOR)

• not businesses operating as a conduit, that is, a disseminator or distributor of the content. (ISP)

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• The manufacturer has control over the content of the Web site. The manufacturer would be the focus of any investigation by the Bureau.

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ACTIVE INVOLVEMENT OR CONTROL• A retailer, or other businesses in the

supply chain of the product, could also be the subject of such an investigation if they are actively involved or have a degree of control over the making of representations about the product.

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Consumers ISP

• The consumer's Internet service provider has no control over the content on the manufacturer's Web site

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WEB HOST and ISP

• The manufacturer's Web host would not typically screen content before it is posted to the site and thus would not likely be the focus of the Bureau's investigation.

• Enforcement might occur, for example, where the third party is aware that an advertiser has been convicted of misleading advertising with respect to a particular representation, but continues to disseminate the representation on behalf of the advertiser.

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Publisher’s Defense:

• A defense analogous to a newspaper or magazine publisher.

• Is found for a person who merely "prints or publishes or otherwise disseminates a representation. The required conditions which must be met under this exception are:

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Required Defense Conditions• The disseminating person accepted the

representation for dissemination in good faith and in the ordinary course of its business; and

• The person on whose behalf the representation is being made is in Canada, and the disseminating party recorded its name and address.

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RECOL - Reporting Economic Crime On-Line• www.RECOL.ca• RECOL will recommend the appropriate law

enforcement or regulatory agency and/or private commercial organization for potential investigation.

• This service is administered by the National White Collar Crime Centre of Canada and is supported by the Royal Canadian Mounted Police and other participating agencies

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HOW TO AVOID LIABILITY FOR MISLEADING REPRESENTATIONS AND DECEPTIVE MARKETING PRACTICES

• Don’t assume that consumers read an entire Web site.

• Representations should be presented in such a fashion as to make it noticeable and likely to be read

• a court will take into account the general impression conveyed by the representation, in addition to its literal meaning

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HOW TO AVOID LIABILITY FOR MISLEADING REPRESENTATIONS AND DECEPTIVE MARKETING PRACTICES

• A disclaimer can only qualify a representation; it cannot cure or retract a false or misleading representation.

• LOCATION: the disclaimer should appear on the same screen and close to the representation to which it relates

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1. Disclaimers

• Size and colour

• Monitors, operating systems, wireless devices etc

• alert consumers to the existence of the disclaimer Visual clues etc.

• Use of attention-grabbing tools• "see below for restrictions on eligibility" may

be appropriate, whereas "see below for details" may not.

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Representations about the BusinessThe Bureau recommends that the businesses

ensure that:• (a) The Web site in question does not create

a false or misleading impression as to the physical location or identity of the business.

• (b) The use of text, graphics, logos, marks, seals or trustmarks, accreditations or other representations do not create false impressions of affiliation, sponsorship, endorsement or popularity.

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Representations about the Business

• (c) The representations do not mislead consumers as to the type of organization making the representations or as to the purpose of the representations.

• (d) The representations do not mislead consumers as to the relationship between the party making the representation and the supplier of the product or service

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Venues For Legal Remedies Against The Vendor And/Or The Provider

• Whose law should apply in B2C e-commerce transactions?

• a)The Law of the Consumer -- consumers won’t shop online unless they enjoy local protections, or

• b)The Law of the Seller -- businesses won’t sell unless they enjoy legal certainty and limited liability

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Zippo Mfg. Co. v. Zippo Dot Com, Inc., test:• DEFENDANT CLEARLY DOES BUSINESS OVER

THE INTERNET personal jurisdiction is proper.

• DEFENDANT [WHO] HAS SIMPLY POSTED INFORMATION ON AN INTERNET WEB SITE WHICH IS ACCESSIBLE TO [FORUM RESIDENT] USERS no jurisdiction.

• . . . The middle ground is occupied by interactive Web sites where a user can exchange information with the host computer.”

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• It was followed in Canada in Braintech Inc. v. Kostiuk (1999).

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Targeting Test

• Courts then moved to the “targeting test” which examines whether the online conduct in question — potentially defamatory postings or e-commerce transactions — are targeted toward the locale being asked to assert jurisdiction.

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Trade Mark Enforcement Actions

• function of the Trade-marks Office is to prevent anyone else from registering a mark that is the same as or confusingly similar to existing mark. It does not, however, keep an eye out for cases of infringement.

• It is owner’s responsibility to monitor the marketplace and, someone using your registered trade-mark or a mark or a trade name that is confusing with your mark, to take legal action.

• Someone who infringes on trade-mark rights may be accountable to owner by way of an injunction, i.e., an order to cease the infringing activity and/or damages.

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The enforcement of judgments

• Criminal

• Civil

• Trademark