Deceptive Marketing Practices

• Author: John S. Tyhurst
• Pages: 496-528

496

CHAPTER 10

DECEPTIVE MARKETING

PR ACTICES

A. INTRODUCTION

The Competition Act1contains an extensive scheme of deceptive prac-

tices provisions. The core provisions, with the longest lineage in the

legislation, are the prohibitions (criminal and civil) of misleading rep-

resentations. Other criminal provisions address deceptive telemarket-

ing, the awarding of pri zes, double ticketing, and pyra mid selling. Civil

deceptive practices provisions include those dealing with representa-

tions on tests and test imonials, bait and switch advertis ing, sale at above

advertised prices, and ordinary price claims.

These provisions may seem at f‌irst blush more suited to provincial

consumer protection or trade practices than competition legislation.

However, laws addressing misrepresentations and deceptive market-

ing promote competitive markets. Accurate information disclosure is

one of the cond itions for “workable competition.” The prescr iptions for

workable competition from economists include that there be no “unfai r,

exclusionary, predatory or coercive tactics,” and that sales promotion

be informative, or not misleading. 2

1 Competition Act, RSC 1985, c C-34 [Competition Act or Ac t].

2 Frederic M Schere r, Industrial Marke t Structure and Economic Perform ance

(Boston: Houghton Mii n, 1980) at 42. See also Ch apter 3, Section C(2)(c) and

Sect ion D(1)(e)(i).

Deceptive Marketing Practices497

Promoting competitive markets and eciency was cited as a ration-

ale for the amendments which expanded the misleading trade promo-

tion prohibitions in the Act in 1976.3 The Competition Bureau noted in

its supporting material for the amendments that promoting accurate

disclosure and inform ation about products reduces distortions t hat can

lead markets to function less eciently.4 The Federal Court of Appeal

in Canada (Commissioner of Competition) v Premier Career Management

Group Cor p echoed this view. Citing the purpose claus e, the court noted

that “the objective of the deceptive marketing provi sions in section 74.01

is to incent f‌irms to compete based on lower prices and higher quality,

in order ‘to provide consumers with competitive prices and product

choices.’”5 The court went on to observe that when “a f‌irm feeds mis-

information to potential consumers, the proper functioning of the mar-

ket is necessarily harmed, and the Act is rightly engaged.”6 The court

noted that “a focus on the consumer is not indicative of the objective of

the scheme, but is a consideration antecedent to the ultimate objective:

maintaining the proper functioning of the market in order to preserve

product choice and quality.”7

The Federal Court saw an elevated role for consumer protection in

the provisions in Lin v Airbnb. Citing the purpose clause reference to

the objective of competitive prices and product choices, Gascon J stated

that the Competition Act “has been recog nized as a consumer protection

legislation . . . to be interpreted . . . in favour of the consumer.”8 He relied

on Supreme Court authority to the eect that “consumer protection

laws are to be interpreted generously in favour of the consumers” and

gave a liberal interpretation of the double ticketing provisions that sup-

ported the certif‌ication of a class action founded on their breach.9

As noted in Chapter 3,10 the deceptive marketing provisions have

also been viewed from time to time as advancing marketplace fairness

and honesty. This rationale was referred to when Parliament was con-

sidering amendments which became the deceptive practice oences

covering such matters as misleading performance guarantees, bait and

switch advertising, py ramid schemes, misleading promotional contests,

3 Canada, Bur eau of Competition Policy, Stage I Competition Policy, Background

Pape rs (Ottawa, Consumer and Cor porate Aairs, 1976) at 38.

4 Ibid.

5 Canada (Commissioner of Competit ion) v Premier Career Management Group Corp,

2009 FCA 295 at para 61 [Premier Career Management].

6 Ibid at para 62.

7 Ibid at para 63.

8 Lin v Airbnb, Inc, 2019 FC 1563 at para 57 [Lin v Airbnb].

9 Ibid, citing Seidel v TELUS Communica tions Inc, [2011] 1 SCR 531 at para 37.

10S ee Chapter 3, Section C(2)(c).

CANA DIAN COMPETITION LAW AND POLICY498

and sale above advertising prices.11 It was envisioned that these provi-

sions would raise the level of conf‌idence of market participants, and

hence stimulate economic activity. The minister (André Ouellet) noted

that the amendments would establish rules to encourage the private

sector to conduct business in an orderly fashion and stimulate “public

conf‌idence in the eectiveness of the market system.”12

As the legislative material and jurisprudence indicates, these pro-

visions have thus been linked to several of the objectives found in the

purpose clause, and form part of the fabric of the Competition Act.

In the United States, deceptive marketing prohibitions a re similarly

enforced alongside antitrust laws. S ection 5(a) of the Federal Trad e Com-

mission Act provides that “unfair or deceptive acts or practices in or

aecting commerce are . . . declared unlawful.”13 While this covers a

wide scope of behaviour, “deceptive” practices were def‌ined in the com-

mis sion’s Policy Statement on Deception as “likely to mislead consumers

acting reasonably under the circumstances and . . . material to consum-

ers — that is, it would likely aect the consumer’s conduct or decisions

with regard to a product or service.” 14

B. HISTORY

While the Criminal Code contai ned certain prohibitions against mislead-

ing representations as early as 1914,15 it was only in 1960 that the f‌irst

oence for misleading advertising was added to the Combines Investiga-

tion Act.16The Code provisions were consolidated into the Combines Act

in 1969, and in 1976 they were substantially overhauled, with the addi-

tion of several new oences, as noted above.17For the following twenty-

11An Act to amen d the Combines Investigation Act and the Bank Act a nd to repeal an

Act to amend the Com bines Investigation Act and the Criminal Code, SC 1974-75-76,

c 76 [An Act to amend the Combines Invest igation Act 1976].

12Paul Goreck i & William T Stanbur y, The Objectives of Canadian Com petition

Policy 1888-1983 (Montreal: IRPP, 1984) at 137.

13 15 USC § 45(a)(1).

14US, Federal Trade Commission, FTC Policy Statem ent on Deception, 103 FTC 174

at 175 (1984).

15Bri an R Fraser, “Misleading Adver tising and Deceptive Market ing Practices

Under the Federal Competition Act: A Review of t he Last 25 Years and Recent

Developments” (2012) 25 Canadian Competition L aw Review 485 at 496–97 [Fra-

ser ]; An Act to amend the Criminal Code, SC 1914, c 24, s 1.

16An Act to amen d the Combines Investigation Act and the Criminal Cod e, SC 1960,

c45, s 13.

17An Act to ame nd the Combines Investigation Act 1976, above note 11, s 18(1).