Laws on false advertising: what you need to know

Wondering what are the prohibited acts under the law on false advertising in Canada and how to report such activities? Read this article to know more
Laws on false advertising: what you need to know

Are you a consumer interested in reporting a case of false advertising? Or are you a corporation engaged in the business of retailing, advertising, or marketing products? Either way, the different Canadian laws on false advertising is here to guide you.

What is the Canadian law on false advertising?

Businesses, advertisers, and retailers of goods and products must be knowledgeable on the different Canadian laws on false advertising, both at the federal and provincial levels.

These laws outline certain prohibitions, penalties, and other remedies available to any injured or misled consumers.

Federal laws

The main federal laws on false advertising in Canada are:

  • Competition Act
  • Canada’s Anti-Spam Legislation (CASL)

Competition Act

The main purpose of the Competition Act is to regulate the healthy competition among Canada’s businesses and industries by prohibiting monopolies and cartels. The Act also contains provisions on false and misleading advertising.

Advertising must be truthful and fair to level off the playing field in the marketing and advertising of products in the Canadian market.

The Act is mainly administered by the Competition Bureau. The Bureau also has relations with the Competition Tribunal, as established by the Competition Tribunal Act.

Offenses prescribed under the Competition Act may be a civil reviewable matter, a criminal offense, or even both.

Canada’s Anti-Spam Legislation (CASL)

Another law on false advertising is Canada’s Anti-Spam Legislation (CASL). The law regulates the use of emails and social media interactions for advertisements and marketing purposes.

Under the CASL, advertisers and marketers engaged in e-marketing are not allowed to flood consumers with unconsented spam messages. These spam messages may be in the form of texts, emails, or software updates and upgrades.

The CASL is jointly administered by the following authorities:

  • Office of the Privacy Commissioner of Canada (OPC)
  • Canadian Radio-television and Telecommunications Commission (CRTC)
  • Competition Bureau

Learn how to comply with the three basic requirements of Canadian anti-spam legislation to conduct business marketing and advertising without violating the law.

Provincial laws

At the provincial level, laws which directly or indirectly address false advertising through consumer protection laws and competition laws are also enacted.

For example, Ontario enacted its Consumer Protection Act, which has its similar counterpart in the different provinces.

In Québec, its Civil Code provisions will also apply in addition to its Consumer Protection Act.

What are examples of false advertising in Canada?

The following are examples under the Canadian law on false advertising:

False or Misleading Representations

False or misleading representation is generally a catch-all offense for false advertising of products in Canada. Generally, false or misleading representation is the direct or indirect promotion of a product’s supply or use through false or misleading information.

Under the Competition Act, this offence is both a civil reviewable matter (section 74.01 (1)) and a criminal offense (section 52 (1)).

Prohibitions under the Competition Act:

In addition to the provisions of the Competition Act on false or misleading representations, the Act also provides numerous examples of prohibited acts under the law on false advertising.

Offenses that are considered as anti-competition, while at the same time prohibited for its false and misleading nature, are the following (sections 52.1 to 55.1):

  • Deceptive telemarketing
  • Deceptive prize notices
  • Double ticketing
  • Illegal multi-level marketing
  • Scheme of pyramid selling

There are also prohibited acts under the provisions of deceptive marketing practices (sections 74.01 to 74.06):

  • Misleading warranties and guarantees
  • Unfounded performance claims
  • Unauthorized use of tests and testimonials
  • Confusing ordinary selling price
  • Bait and switch selling
  • Promotional contests with undisclosed information or undue delay of prize distribution

These two prohibitions are considered as both anti-competition and deceptive marketing practices:

  • Drip pricing (sections 52(1.3) and 74.01 (1.1))
  • False representations in electronic messages and web addresses/URLs (sections 52.01 and 74.011)

Watch this video to see how deceptive or illegal promotional contests are done:

Know more about these different prohibited practices under the Competition Act by hiring a lawyer in your province. Consumers and businesses located in Toronto, for example, can contact a Lexpert-Ranked advertising and marketing lawyer in Ontario.

Prohibitions under CASL

In relation to the other law on false advertising such as the Competition Act, the CASL provides certain prohibitions, such as:

  • unsolicited electronic messages (section 6 (1), CASL)
  • installation of computer programs to send electronic messages, e.g., software updates and upgrades (section 8 (1), CASL)

A common exception to these prohibitions is when the person receiving the message consented to it, whether explicit or implied.

What is the penalty for misleading advertising in Canada?

Penalties under the law on false advertising may be administrative, civil, or criminal in nature.

For false or misleading representations (section 74.01 (1)(a), Competition Act), the following penalties may be imposed by the court:

1. administrative monetary penalties:

  • for individuals: C$750,000 for first time violations and C$1 million for each subsequent violation; and three times the value of the benefit from the deceptive conduct if determinable
  • for corporations: C$10 million for first time violations and C$15 million for each subsequent violation; and three times the value of the benefit from the deceptive conduct if determinable or 3% of the corporation’s annual worldwide gross revenue if it cannot be determined

2. court order: to cease in the engaging of the complained conduct

As to the criminal liability for false or misleading representations (section 52, Competition Act), the following penalties are provided:

  • summary conviction: fine of up to C$200,000 and/or imprisonment of up to one year
  • conviction on indictment: fines at the court’s discretion and imprisonment of up to 14 years

Immunity Program

The Competition Bureau and the Public Prosecution Service of Canada offers an Immunity Program for persons or businesses who are willing to come forward and end any criminal activity prohibited by the Competition Act.

This is an extraordinary grant by the law on false advertising which provides immunity from prosecution, provided that the person or business is the first party to report such criminal activity.

However, this grant is only available for cartel offences and deceptive marketing offences of the Competition Act.

How do I report false advertising in Canada?

You may file a complaint to different regulatory bodies which has jurisdiction over specific cases:

  • false labelling or advertising of food products or food complaints: submit an online complaint to the Canadian Food Inspection Agency; residents of Québec should contact the Québec MAPAQ
  • misleading advertising of goods and products: submit an online complaint to the Competition Bureau
  • violations of the Canadian Code of Advertising Standards: file an online complaint with Ad Standards
  • spam texts or emails under the CASL: submit an online report to the CRTC

Competition Tribunal

When the matter is reviewable under the Competition Act, the Tribunal may investigate the complaint. It may issue a prohibition order forcing the liable person or entity to cease the conduct being complained.

Civil reviewable matters (sections 75 to 81) under the Competition Act are:

  • refusal to deal
  • price maintenance
  • exclusive dealing
  • abuse of dominance
  • delivered pricing

The Competition Act outlines two ways that the Tribunal can acquire jurisdiction over these civil reviewable matters (section 103.1):

  • upon application by the Commissioner of Competition, or
  • upon application by a third party, but only if certified by the Commissioner of Competition and with leave or consent of the Tribunal

To know more about how the Canadian law on false advertising might affect businesses and consumers alike, hire the best advertising and marketing lawyers in Canada as ranked by Lexpert.