Feb 2012 - Canadian Bar Association - Competition Law by Ava Chisling

Who's Afraid of a Big Bad AMP?

http://www.cba.org/CBA/PracticeLink/02-12-BC/01.aspx

Home

Career Builders

Law Firm Leaders

Solo & Small Firms

Join/Renew

Professional Development

Podcasts

National Magazine

Contact

Français

Search CBA PracticeLink In Dep

Who's Afraid of a Big Bad AMP?

<< Back

Big companies are most likely to get caught for misleading consumers. Little companies? Not so much By Ava Chisling — a media lawyer and longtime editor based in Montreal

Canada's Competition Bureau makes its stance on advertising very clear: if you mislead the public, the Bureau will find you and they w fine you. To make sure the public receives this message, in the past eight months, the Bureau has handed out two 10-million dollar administrative monetary penalties (AMPs) – the maximum amount allowed by law to first-time corporate offenders. The AMPs went to of Canada’s biggest players: Bell and Rogers (although Rogers is contesting the allegation) for various infractions of the Competition A Even if your business has little to do with compliance in advertising, the severity of these penalties is likely to get your attention – and is the whole point.

CBA PracticeLink is featured in each issue of National Magazine.

Subscribe to our Newsfeed What is RSS?

ShareThis

In her October 2011 speech at the CBA Annual Competition Law Conference, the Commissioner of Competition Melanie L. Aitken said, "I believe that through both our words and our actions to date, our message is being heard… We will hold to account companies that take advantage of Canadians." The question is, should all businesses pay careful attention to the Bureau's "comply or we will find you" message or does the warning only apply to the largest players? It is probably the latter because the only people who will likely be deterred by million dollar AMPs are those with millions of dollars – and those most likely to get caught. "It’s the classic criminal law deterrent," says John McKeown, a partner at Cassels Brock in Toronto and the author of Fox, Canadian Law of Copyright and Industrial Designs and Brand Management in Canadian Law. "They make an example of the big player. A slap on the wrist doesn't mean anything. It has to be significant." And a 10-million dollar fine fits the bill perfectly. McKeown says that the public is interested in high profile cases because of the size of the businesses the Bureau is catching. "The fact that both Bell and Rogers are in a market that is expanding – cellphone services – means that complaints about their advertising are likely coming from their competitors. And because they are big players, they are also more likely to get caught."

Asked to comment, Bell lawyer Fabien Fourmanoit provided the following statement:

"Unfortunately, I am unable to comment on the applicable law and the Bureau's approach specifically. However, I can tell you that Bell is one of the largest advertisers in Canada and in order to advertise our products and services, we have in place a multi-layered approval process. Bell goes through various rounds of approvals, including technical experts, marketing, communications, branding, and legal. What we have done, and continue to do, is ensure that everyone, from the technical folks to the marketing to communication departments, understands they are part of that greater compliance objective. That means giving all parties involved the right tools so they understand the law, and how it applies to the work they do."

McKeown's colleague at Cassels Brock, Chris Hersh, agrees. Hersh is a partner in the Competition, Antitrust and Foreign Investment Group. He has extensive experience in advising on and litigating in competition law. He says the Competition Bureau's focus on the hi AMP, high-profile misleading advertising cases leads to a two-tier system of enforcement. "Yes, competition law applies to everyone equally, but practically speaking, there are effectively two sets of rules – and this is the problem with the whole notion of enforcement. you are a big retailer like The Bay or a big company like Bell or Nivea, you have to abide by the rules. But if you own a little shop down street, you can do what you want because nobody cares. No one is going to bring a case against you as long as you are not engaging fraud."

The Bureau has neither the time, personnel or budget to catch and prosecute the vast majority of violators in this country. And in any c there would be little value in bringing every company with misleading claims of "Big Markdowns!" to court. "An ad is deemed 'misleadin it is misleading in a material way, which means it was relevant to a consumer's decision to go ahead with the purchase," says Hersh. "What is the societal value in bringing costly cases – and they are costly – to court or penalizing people for behavior that may or may n be misleading, where people may or may not be harmed?"

And therein lies the problem. "If you're a big business, you have to invest money and time in compliance," says Hersh. "But if you’re a business, you probably don’t even know that these kinds of cases exist so you don’t think about it. In some ways, this puts the big companies at a disadvantage because they have to market a certain way while their small competitors get to market a different way because they are just too small for the Bureau to bother with."

Who's Afraid of a Big Bad AMP?

http://www.cba.org/CBA/PracticeLink/02-12-BC/01.aspx

When it comes to compliance, McKeown doesn't care if a company is large or small or if they are likely to get caught or not. "If everyo knows and follows the rules, no consumers are misled and no competitor will have an undue advantage. When one abuses the rules, get an advantage and that’s why the rules are there." Not surprisingly, Greg Scott of the Competition Bureau agrees: "Deceptive mark deprives consumers of the ability to make informed purchasing decisions and denies rival businesses of the ability to compete on a lev playing field in the marketplace. This is particularly relevant in an economic environment where consumers are focusing on debt reduc and want to extract the maximum value from their purchases."

Scott says that "the Bureau takes misleading advertising and deceptive marketing very seriously and the enforcement of these provisi is a top priority. Canadians expect to receive truthful and accurate information about the products and services they purchase. The efficient operation of a market economy depends on the free flow of information about products and services offered for sale. Advertis is a principal way by which firms convey product information to the market."

Says Hersh, "If you allow people to use unfair advertising practices and get away with it, that affects competition in the marketplace. Y have people who are trying to advertise honestly and you have others who are advertising dishonestly. If you don’t prevent people from advertising dishonestly it has an impact on competition." McKeown says every company should have some kind of compliance strateg Big companies should have a compliance programme with designated people overseeing it, and smaller businesses should rely on common sense. "If you're a reputable businessman and you have something to say that you legitimately believe belongs in your ad, th won't be misleading. And if your claim can't be justified with tests, then you run the risk."

According to Hersh, enforcement agencies can be reactive rather than proactive, so when they receive complaints, they react. Since t general public is unlikely to complain about the advertising and pricing in their local store, and the local store is unlikely to complain ab the practices of its cross-town rival, complaints to the Bureau are more likely to be made by – and against – only Canada's biggest competitors. In theory, this allows the one million small businesses in this country and even more medium-size businesses to play by t own set of misleading advertising rules as they are simply unlikely to get caught.