We are affected and sometimes bombarded by advertisements every day. Businesses make many claims in advertisements but are they necessarily true?
According to the Competition Act, advertisements cannot be false or misleading, otherwise the business can be punished for making false claims.
What is false advertisement?
False advertising means that a product or service has been misrepresented to you. This can occur through misleading advertising, false or misleading labelling, and/or deceptive representations for the purpose of promoting a product or business interest. This includes false pricing.
Consumers have to be given the proper information about products or services, or the businesses advertising goods or services could find themselves in trouble.
What is the Competition Act?
The Competition Act is a federal statute that regulates how competition occurs in Canada between businesses. It also regulates how businesses may compete and forbids bad behaviour in advertising to the public.
The act further forbids:
- Making performance representations which are not based on adequate and proper tests;
- Misleading warranties and guarantees;
- False or misleading ordinary selling price representations;
- Untrue, misleading or unauthorized use of tests and testimonials,
- Bait and switch selling, double ticketing and the sale of a product above its advertised price; and
- The prohibition of promotional contest provisions for contests that do not disclose required information.
Another forbidden practice is misrepresenting the ordinary selling price of a product. There are two ways the ordinary selling price is validated:
- A substantial volume of the product was sold at that price or higher, within a reasonable amount of time;
- Or the product was offered for sale, in good faith, for a substantial period of time at that price or a higher price.
The act sets up two processes that deal with false advertising:
- Civil regime: misleading and false representations are strictly forbidden under this part of the regime. That includes things like not properly tested performance representations, misleading guarantees and warranties, unauthorized use of tests or testimonials and bait and switch selling.
- Criminal regime: misleading and false representations are strictly forbidden made knowingly or recklessly. That includes things like deceptive telemarketing, pyramid selling schemes, double ticketing, and misleading or false notices of winning a prize.
How is false advertisement punished?
Under the act, there can be punishments both under criminal and civil law.
Under criminal law, a business or a person could be looking at the following punishments:
- Summary convictions: a fine up to $200,000 and/or imprisonment for up to one year; or
- Indictable conviction: an imprisonment up to 14 years, and/or a fine at the discretion of the court.
At civil law, a competent court or the Competition Tribunal may
- Order a person to cease the activity, publish a notice and/or pay a monetary penalty
- On first occurrence, individuals may pay penalties up to $750,000 and corporations are liable for penalties up to $10 million
- For subsequent occurrences, the penalties rise to a maximum of $1 million for individuals and $15 million for corporations
To make a complaint, you can fill out the complaint form on the Competition Bureau website.
If you have been accused of false advertising, you should consult a lawyer.
Misleading Advertising and Labelling
False or Misleading Representations and Deceptive Marketing Practices