Advertising & Marketing LawPrepared by:
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Advertising and marketing law in Canada is governed by federal and provincial laws, as well as self-regulatory codes and policies, and encompasses a multitude of legal issues including consumer protection, intellectual property and privacy. This paper is a summary of some of the most important developments in Canadian advertising law in 2012.1. NEW ANTI-SPAM LEGISLATION
Canada's New Anti-Spam Legislation (CASL), is intended to address the sending of unsolicited “spam”, as well as other threats to electronic commerce, such as identity theft, phishing and spyware. Expected to come into force in 2013, CASL is intended to be technology neutral, and will apply to commercial electronic messages sent to “electronic addresses”, including e-mail accounts, instant messaging accounts and other “analogous technologies”.
Under CASL, it will be necessary to have either the express or implied consent of the message recipient, in order to send unsolicited commercial electronic messages. However, in most cases, CASL will create a requirement for express consent to send commercial electronic messages, substantially narrowing the ability to rely on implied consent to prescribed classes of existing business or non-business relationships. Further, such commercial electronic messages will be required to contain prescribed information that identifies the person who sent them, or caused them to be sent, as well as an unsubscribe mechanism complying with the statutory and regulatory requirements.
The substantive requirements for compliance with CASL are found in regulations published by the Canadian Radio-television and Telecommunications Commission (CRTC), and Industry Canada, the latter of which had only published its regulations in draft form at the time of writing.
Disclosing the Person who Sends the Message
The CRTC regulations outline the specific information that will be required in electronic messages and the requirements for requests for consent to send electronic messages. When CASL comes into force, the CRTC regulations will require commercial electronic messages to include the following information:
- The name of the person who sent the electronic message and, if different, the name of the person on whose behalf it was sent, as well as a statement identifying which person sent the electronic message and on whose behalf it was sent; and
- The mailing address of one of those persons, as well as either the telephone number, e-mail address or a web address of one of those persons.
Further, they prescribe that the unsubscribe mechanism required in such messages must be presented “clearly and prominently,” and capable of being readily performed. The unsubscribe mechanism must function through the same electronic means as the message (if practicable), and must specify an electronic address, or a link to a webpage, to which the request must be sent.
Where it is “not practicable” to include the above contact information and the unsubscribe mechanism in a commercial electronic message, the CRTC regulations include a key exception that will allow this information to be provided via a clearly and prominently labelled link to a website that contains them. This exception will likely be essential for messages subject to space constraints such as text messages, and potentially, for messages through social media platforms.
Requesting and Using Consent to Send Commercial Electronic Messages
The CRTC regulations provide that information required in a commercial electronic message must also be included in a request for consent to send such messages; however, it would also be necessary to identify the purposes for which consent is sought, and to state that consent may be withdrawn. The regulations state that a request for consent may be made orally or in writing. However, the onus on proving consent lies on the person claiming to have it. As such, if relying on an oral request for consent, it is important to have a means of evidencing it if challenged.
The Industry Canada regulations provide definitions of a “family relationship” and a “personal relationship,” thus determining the scope of a broad exception to CASL. Neither the consent nor the disclosure requirements will apply to electronic messages sent by or on behalf of someone with whom the recipient has a family relationship, defined as a blood relationship, marriage, common-law partnership, or adoptive relationship, and including persons connected by a blood relationship to such individuals. Similarly, the requirements for electronic messages will not apply to messages sent by or on behalf of someone with whom the recipient has a personal relationship established through at least one in-person meeting and a two-way communication within the previous two years. As proposed, the “personal relationship” exception would not extend to relationships established solely online, such as relationships on many social media platforms.
The Industry Canada regulations also specify the uses that may be made of consent obtained when the person on whose behalf it is sought is not known, as is frequently the case for third-party mailing lists. In such cases, the person who first obtained the consent may authorize the recipient of the list to use it. However, the ultimate user of the list must identify the person who obtained the consent in their electronic messages, and the unsubscribe mechanism must allow the recipient of the message to withdraw consent — not only from the person who sent the message, but also from the person who obtained the consent, as well as any other person they authorized to use it.
While the CRTC regulations have been finalized, the Industry Canada regulations are currently in draft form, and may be amended prior to coming into force.
The CRTC will be the regulatory agency responsible for enforcing CASL and pursuing monetary penalties. Violations will be punishable by a potential administrative monetary penalty of up to $1,000,000 in the case of an individual, and up to $10,000,000 in the case of a corporation. In addition to this, CASL creates a private right of action that will permit individuals to seek compensation for damages suffered as a result of a violation, and specified monetary penalties in respect of each violation. This private right of action will create a serious risk of class action lawsuits against entities that issue mass email marketing campaigns without obtaining adequate consent from the recipients.
Preparing To Comply with CASL
A coming into force date for CASL has yet to be announced; however, it is expected to be early in 2013. After it comes into force, CASL allows for a three-year transition period (from the date on which the Act comes into force) during which businesses may rely on implied consent to send electronic messages to persons with whom they have an existing business relationship or non-business relationship that already includes the sending of electronic messages. In such cases, the recipient is still permitted to withdraw their consent at any time. Existing business relationships will include persons who purchased a good or service within the two years immediately prior to the electronic message, or who inquired about a good or service within six months prior to the message.
Apart from this exception, when CASL comes into force, it will require many businesses to reconsider their existing consents for electronic marketing, and to ensure that future requests for consent and electronic messages are in compliance. Businesses involved in electronic marketing should consider the following practices in preparation for CASL:
- Review your existing consents to contact consumers. The onus of proving consent will be placed on the sender of the message. If you cannot establish express consent for the names on your list, there may be no choice but to purge the list or to seek additional express consent. It is currently uncertain whether existing express consent that is valid under the current privacy legislation will survive the coming into force of CASL.
- Review the manner in which you are seeking express consent to ensure you are prepared to comply with CASL after it comes into force. Retain an accurate list of the consents you receive, and scrub it to remove persons who have withdrawn their consent.
- Review your procedures for maintaining an accurate and current list of the consumers for whom you can establish implied consent through either an existing business relationship or an existing non-business relationship.
- Review the categories of electronic messages you distribute to identify those that fall within exceptions to the consent requirements. Such exceptions are available for messages that solely: complete, facilitate or confirm a commercial transaction, provide warranty or recall information, or provide a quote or estimate in response to a request.
- After CASL comes into force, ensure your electronic messages provide the prescribed information and contain a functional unsubscribe mechanism.
- Honour unsubscribe requests within 10 business days.
- Establish a CASL compliance policy to ensure that the classes of electronic messages you send are in compliance with CASL. A defence is available to persons who can establish they undertook due diligence to prevent violations.
- Implement policies to train any staff and third-party suppliers involved in the dissemination of electronic messages to comply with CASL and your compliance policy. Also, inform them of the consequences for failing to comply.
- In obtaining marketing lists from third-party providers, review the contracts to ensure they contain a representation and warranty backed by an indemnity that the list was assembled in compliance with CASL and that the provider will maintain the list in compliance with all CASL requirements including withdrawals of consent.
- If you outsource electronic marketing to a third party, review and update your services contract to ensure it requires compliance with CASL.
2. RICHARD V. TIME INC. — THE SUPREME COURT ISSUES RULING ON FALSE AND MISLEADING ADVERTISING
In February 2012, the Supreme Court of Canada issued a decision relating to misleading advertising, Richard v. Time Inc., 2012 SCC 8. While the case revolved around the interpretation of the Québec Consumer Protection Act (Act), it is likely to be of national significance, particularly as misleading advertising cases rarely reach the level of the Supreme Court.
In this case, the Supreme Court heard an appeal of a decision by the Québec Court of Appeal regarding an “Official Sweepstakes Notification” document that had been sent to the appellant, Richard, by Time Inc., along with a solicitation for a magazine subscription. The notification took the form of a letter addressed to the appellant, and signed by a fictional “Elizabeth Matthews, Director of Sweepstakes”. The document contained several prominent, bold face, and uppercase declarations that the recipient was the winner of a large cash prize, qualified with much less prominent conditional clauses indicating that this was only true if he held and returned the winning ticket:
If you have and return the Grand Prize winning entry in time and correctly answer a skill testing question, we will officially announce that
OUR SWEEPSTAKES RESULTS ARE NOW FINAL: MR JEAN MARC RICHARD HAS WON A CASH PRIZE OF $833,337.00!
The official rules of the sweepstakes stated that a winning number had been pre-selected and that the holder of the winning number would receive the prize only if they returned the entry form by the deadline.
The appellant claimed that he read the notification form thoroughly, and even went so far as to obtain a second opinion from the Vice President of his company, and was convinced that he had won a large prize. He returned the entry ticket, and at the same time subscribed to Time magazine. While his magazines arrived, the cash prize did not. After contacting Time and being informed that he did not hold the winning ticket, the appellant sought a declaration from the Québec Superior Court that he was in fact the winner, along with punitive and compensatory damages.
At trial, the Superior Court found that the notification form did not amount to a contract, and as such, refused to order the payment of the prize. However, the trial court found that the document was “designed to mislead the recipient”, and that any qualifying language was “buried in a sea of text”. As a result, the court awarded $100,000 in punitive damages, along with $1,000 for any “moral injuries” suffered by the appellant.
On appeal, the Québec Court of Appeal overturned the damages award, finding that there were no false or misleading representations in the document. While the exclamatory text may be designed to catch the attention, a careful reading of the document would dispel any impression that the reader was the winner of a prize. In reaching this finding, the Court of Appeal held that in assessing whether the general impression of an advertisement was false or misleading, one had to consider the “average consumer”, who had “an average level of intelligence, scepticism and curiosity”. Consumers had to be suspicious of advertisements that seemed too good to be true. In passing, the court noted that the appellant was a sophisticated businessman whom it suspected was well aware of his chances of winning from the very beginning.
The General Impression TestThe Supreme Court overturned the ruling of the Québec Court of Appeal, and issued an important ruling on the formulation of the “general impression” test for false or misleading advertising, and on the characteristics of the “average consumer”.
The Supreme Court affirmed that in considering whether advertising was false or misleading, one must consider not only the literal meaning of advertising copy but also the “general impression” created by the advertisement in the mind of an “average consumer”. The general impression test is applied by determining the “first impression” that an average consumer will have after contact with the entire advertisement. While the general impression does not result from a “rushed or partial” reading of the advertising copy, neither does it involve a minute dissection of the text. The Supreme Court stated that the courts must not approach advertisements as they would commercial contracts by reading them “several times, going over every detail to make sure they understand all its subtleties”. Instead a single reading of the entire advertisement, considering both the text itself as well as its layout and presentation, should be sufficient to assess the general impression created.
In assessing the “general impression” of an advertisement, the court must consider the viewpoint of an “average consumer”. The Supreme Court rejected the Court of Appeal's description of an average consumer as a person with an “average level of intelligence, scepticism and curiosity”, instead holding that the average consumer must be considered “credulous and inexperienced”, to give effect to the legislative intention to protect vulnerable people through the means of consumer protection legislation. The Supreme Court stated that the expression “average consumer” did not “refer to a reasonably prudent and diligent person, let alone a well-informed person”. Instead, the “average consumer” was prepared to trust the general impression of an advertisement, but was capable of understanding its literal meaning, provided that the general layout of the copy did not render it unintelligible.
In applying this test, the Supreme Court held that the “Official Sweepstakes Notification” was misleading as it conveyed the general impression that the appellant had won the prize. As a result, it awarded the appellant $1,000 in compensatory damages for moral injuries; however, it reduced the award of punitive damages to $15,000.
While the decision in Richard v. Time Inc. was founded on the prohibition on “false and misleading” advertising in the Québec Consumer Protection Act, similar prohibitions exist in the consumer protection legislation of most provinces, as well as at the federal level under the Competition Act. The Supreme Court's formulation of the “general impression” test and the “average consumer” in Richard v. Time Inc. is likely to be highly persuasive on future courts considering false or misleading advertising under this legislation as well.
3. CHANGES FOR FOOD MANUFACTURERS
New Allergen Labelling Requirements
On August 4, 2012, the new allergen labelling requirements came into force for prepackaged foods.
The enhanced allergen labelling requirements require prepackaged food products containing the priority allergens: tree nuts, peanuts, sesame seeds, wheat or triticale, eggs, milk, soybeans, crustaceans, shellfish, fish, or mustard seed; gluten; or sulphites in excess of 10 parts per million, to bear a “contains” statement that specifically identifies the source of the allergen or gluten, or the common name “sulfites” or “sulfiting agents” as applicable.
Manufacturers and importers should verify that their product labels are now compliant with the new allergen labelling requirements.
Senate Bill S-11, the Safe Foods for Canadians Act
On June 7, 2012, the federal government introduced the Safe Food for Canadians Act (Act). The Act is intended to replace and consolidate the requirements of the Canada Agricultural Products Act, the Meat Inspection Act, the Fish Inspection Act, and the food provisions of the Consumer Packaging and Labelling Act, creating a more consistent inspection and enforcement regime across various food products. If adopted, it would apply to all persons and establishments that manufacture, prepare, store, package or label foods and/or beverages. The Government has touted several advantages of the proposed legislation, including increased traceability in the food supply, official certification for exported foods, and improved food safety stemming from licensing requirements for food importers, and new prohibitions against tampering with a food product, or knowingly or recklessly communicating false or misleading information with intent to cause a reasonable apprehension that a food has been tampered with so as to render it injurious to human health.
New Registration and License Requirements
If adopted, the Act will create a mandatory licensing and registration regime for all persons who convey prescribed foods from one province to another or who import or export food products.
The full scope of the licensing regime, as well as the conditions and requirements for licensing, will be established by new regulations that have not been published at the time of writing. However, the Act as written would prohibit conducting “prescribed activities” without a licence or registration. This provision could expand the scope of the licensing regime to include activities such as the manufacturing, packaging, or labelling of imported foods or foods for export.
The proposed Act would also create a more consistent food inspection regime by repealing the Canada Agricultural Products Act, the Meat Inspection Act, the Fish Inspection Act, and providing for a consolidated food inspection system. Overall, the powers of inspectors would be generally the same as those under the current system, including the power to enter places and conveyances to conduct examinations for the purpose of verifying compliance and preventing noncompliance with the Act. However, the proposed legislation does include several novel powers for food inspectors, including an express statutory authority to pass through private property to access a place for inspection; and to activate computers, and examine or copy data. Inspectors will be authorized to order the cessation of activities regulated under the Act, and may order the seizure of anything they believe was used in a contravention of the Act.
Traceability and Export Certificates
While the federal government has stated that strengthened food traceability and increased export opportunities through product certifications are a goal of the legislation, these elements are not fleshed out in the legislation itself. Instead, the Act provides that the minister may issue export certificates, and may make regulations regarding the issuance of such certificates. With respect to food traceability, the Minister of Agriculture and Agri-Food may issue regulations requiring persons to establish systems to identify food commodities, and determine their place of departure, destination, and location while in transit.
The ultimate impact of these proposed requirements on the industry are difficult to assess in the absence of the regulations. However, companies operating in the food industry in Canada should expect to be subject to new licensing requirements when moving food products interprovincially within Canada and when exporting them.
The proposed Act will increase the potential penalties for offences significantly. For example, the maximum fine for most offences under the act would be $250,000 for a first offence, and $500,000 for subsequent offences, with the prosecutor having the discretion to proceed by way of indictment and seek a fine of up to $5 million, and/or imprisonment for up to two years in more serious cases. In the case of more serious offences, including offences related to tampering with food products, or knowingly or recklessly causing a risk of injury to human health, prosecutors could seek a fine to be set at the discretion of the court, and/or imprisonment for up to five years.
4. FEDERAL PRIVACY COMMISSIONER ISSUES GUIDELINES FOR ONLINE BEHAVIOURAL ADVERTISING
In June 2012, the Office of the Privacy Commissioner of Canada (OPC) announced a new policy position on online behavioural advertising, which it describes as “tracking consumers' online activities over time in order to deliver advertisements targeted to their inferred interests”. The Guideline confirms that online behavioural advertising may be a reasonable purpose for which one may collect and use personal information, provided that it is carried out in compliance with the Personal Information Protection and Electronic Documents Act (PIPEDA), and consumers are not required to consent to it as a condition of service.
The Guideline states that while certain individual pieces of information collected in the course of behavioural advertising may not themselves constitute “personal information”, where this information is aggregated in a manner that could identify an individual, it constitutes personal information and is subject to PIPEDA. Wherever personal information is collected, the knowledge and consent of the individual is required.
Depending on the sensitivity of the personal information collected, express opt-in consent may be required. However, the Guideline specifically states that opt-out consent may be acceptable where:
- the personal information involved is not particularly sensitive;
- the individual is provided with an easily used opt-out option that is immediate and persistent; and
- the collection is limited to that necessary to meet the purpose disclosed, and the advertiser destroys the information or renders it non-identifiable as soon as possible after the purpose is achieved.
The Guideline indicates that where it is not reasonably possible for an individual to opt out of a particular technological collection of information, or where doing so renders a service unusable, then the information gathered by that technology should not be used for behavioural advertising. Likewise, as it is difficult to establish meaningful consent for children, they should not be targeted by behavioural advertising, and user tracking should not be implemented on websites targeted to children.
5. CANADIAN TRANSPORTATION AGENCY PUBLISHES NEW PRICE ADVERTISING REQUIREMENTS FOR AIRFARES
The Canadian Transportation Agency (CTA) has published draft regulations that will require all persons who advertise a price for air services to advertise a total price, inclusive of any fees, charges and taxes. If adopted as drafted, the proposed regulations will apply to all persons who advertise a price for air services, within or originating in Canada, including air carriers and travel agents, and will apply in all forms of media, including print and online advertising.
Under the proposed regulations, all advertisements for air services that include a price would be required to include:
- The total price of the services in Canadian dollars, including all taxes, fees, and other charges that must be paid to obtain the service, including any amounts charged by the air carrier, as well as any third party charges, such as taxes or amounts charged by public or airport authorities;
- A minimum description of the services, including the origin and destination, whether the trip is one way or a round trip, and any limitations regarding booking or travel periods;
- A breakdown of any taxes, fees, or charges to be provided to a third party, under the heading “Taxes, Fees and Charges”;
- Each optional, incidental service offered for a fee and the amount of that fee; and
- Any published tax, fee, or charge that is not collected by the advertiser, but is instead paid at the point of origin or departure.
The draft regulations include an acknowledgement of the space constraints in certain media by permitting the breakdown of the third party taxes, fees, and charges, as well as the costs for optional services, to be disclosed in another location that is “readily accessible”, such as a website or via a toll free number, provided that location is mentioned in the advertisement. This exception would not apply to advertisements that are “interactive”.
There is a proposed exception for travel packages that include air services and other travel services such as accommodation or ground transportation, and the regulations do not apply to air cargo services or air services that are only offered business to business. The regulations would not apply to persons who simply supply the medium of the advertising, such as a newspaper publisher, or a television station. Further, it should be noted that the regulations do not apply to price advertising for other travel services, such as hotels or cruises, though Ontario and Québec have legislation governing price advertising for all travel services by travel agents.
If the regulations come into force as drafted, they will be enforced by administrative monetary penalties of up to $5,000 for an individual offender, and up to $25,000 in the case of a corporate offender. The new requirements are expected to come into force in early 2013.
6. NEW COPYRIGHT LEGISLATION FORTHCOMING
On June 29, 2012, the Copyright Modernization Act (CMA) received Royal Assent. The CMA is intended to address numerous issues arising from the development of digital and Internet technology since the Copyright Act was last substantially revised in 1997. While the CMA is not yet in force, and no coming into force date has been announced, the Act has a large scope and its full impact on Canadian copyright law will take time, and likely judicial decisions, to determine.
New Rights for Creators and Users
When it comes into force, the CMA will create new rights for both creators and users of copyrighted materials.
For users, the CMA will expand the existing exception of fair dealing to include situations when copyright material is used for the purpose of parody, satire or for education purposes. Additionally, it would be permissible to use an existing publicly available work to create a new work, provided this is done solely for non-commercial purposes, the source of the original work is credited, and the creation of the new work does not have a substantial adverse effect on the original work.
In addition to the new fair dealing exemption, the CMA will provide a number of rights and exemptions to educational institutions and educators. Exemptions permitting educational institutions to reproduce, display or perform works in the classroom would be rendered more technologically neutral by removing links to specific technologies. Further, a number of proposed amendments would facilitate the use of new digital technologies in the classroom. These changes will encourage the delivery of both lessons and course materials over the Internet, and will permit the use of materials obtained from the Internet for educational purposes, provided the material was posted by the copyright owner without the expectation of compensation and is not protected by technological protection measures.
The CMA will also provide legal sanction to several practices that have become widespread with the advent of digital technology (or for that matter video cassette recorders). First, if the law is adopted, it will permit the reproduction of a work for private purposes where the initial copy of the work is a lawful copy, not merely rented or borrowed, provided the individual making the copy does not circumvent a technological protection measure to create it. This right would permit an individual to make backup copies of materials they have purchased legally, but would not permit them to distribute those copies. This provision will permit individuals to copy the work onto any medium or device they own, (for example, would permit copying a compact disc onto a computer or digital music player).
Additionally, the CMA includes a provision that will permit “time shifting” in the case of recordings made for the purpose of viewing or listening to a program at a later time, provided the recording is kept no longer than is reasonably necessary, and the individual received the program legally. This provision will not apply to “on-demand” programs.
As for creators, performers would benefit from expanded exclusive rights in their performances when embodied in sound recordings. This expansion would include a broader right of reproduction, making it available through digital distribution and the right to sell tangible copies of such sound recordings. Further, the CMA would give performers moral rights in their performances, similar to those enjoyed by other creators.
Additional changes will eliminate the differential treatment of photographs under copyright law as compared to other works, by providing that the copyright in a photograph would be first owned by the author or the author's employer, as is the case for other works. A person who commissions a photograph would be permitted to make a personal or non-commercial use of it, unless they enter a contract that provides otherwise.
New Penalties and Enforcement Mechanisms
The CMA will prohibit the circumvention of the technological protection measures used by rights-holders to secure and control their digital content. It will also prohibit providing circumvention services to others, or dealing in technology designed to circumvent protection measures. Interestingly, these prohibitions appear to apply even when a user circumvents a technological protection measure for an otherwise permitted use of a work, such as fair dealing for the purpose of review or criticism.
The CMA will also make it an infringement of copyright for anyone to provide a service over the Internet or another digital network if they know or should know that the service is designed primarily to enable acts of copyright infringement. Whether infringement is established under this provision will be based on factors including how the service is promoted, the provider's knowledge of past infringements relating to the service, whether the service has significant uses other than copyright infringement, and whether the service would be economically viable if it were not used to enable acts of infringement.
While CMA strengthens the ability of copyright owners to protect their works, it also includes provisions that will result in non-commercial infringers of copyright facing considerably less exposure to statutory damages. The CMA reduces the range of possible statutory damages to awards of between $100 and $5,000 per infringer, which will cover all past infringements. The court would also be permitted to consider factors such as the hardship of the award to a non-commercial infringer and whether the infringement impacted the plaintiff. Infringement for commercial purposes will remain subject to potential statutory damage awards of between $500 and $20,000.
Finally, the CMA will limit the liability of Internet Service Providers (ISPs) and operators of Internet search engines for copyright infringement carried out by their subscribers, as they act as mere conduits for material over the Internet. The CMA would permit copyright owners to send a notice of claimed infringement to an ISP in a prescribed form. On receiving such a notice, the ISP would be obligated to forward it without delay to the alleged infringer identified in the notice, and to retain records that would help determine the identity of the alleged infringer for a period of six months to one year.
The last year has been full of changes and challenges for advertisers and their lawyers in Canada. While most basic principles governing advertising law are similar in Canada and the US, there are many important differences; and Québec, with its Civil Code and French language rules, adds layers that must be considered when embarking on a North American advertising campaign.