Additional Information about the Competition Act

1. The general scope of the false or misleading representations and deceptive marketing practices provisions of the Competition Act

In general, these provisions apply to anyone promoting, directly or indirectly, the supply or use of a product or service, or any business interest, by any means. This does not include advertisements or representations made solely for a political or charitable purpose.

All methods of making representations, including printed or broadcast advertisements, written or oral representations, audio-visual promotions and illustrations, are within the general scope of the Act. Some provisions, however, relate only to advertisements (for example, sections 74.04 and 74.05).

The Act refers to representations made "to the public." Under the law, it is not necessary to demonstrate that any member of the public to whom the representation was made was within Canada or that the representation was made in a place to which the public had access.

To contravene the Act, a representation must be "false or misleading in a material respect." This phrase has been interpreted to mean that the representation leads a person to a course of conduct that, on the basis of the representation, he or she believes to be advantageous. "Material" does not refer to the value of the product to the purchaser but, rather, the degree to which the purchaser is affected by the representation in deciding whether to purchase the product.

Finally, it should be noted that, although the Act contains some specific offences or reviewable matters, there are circumstances which do not necessarily fall within the scope of the specific provisions and are, therefore, pursued under the general provisions against false or misleading representations, section 52 and paragraph 74.01(1)(a). For example, the non-availability of an advertised product (a practice known as "bait and switch") is prohibited under subsection 74.04(2) where a "bargain price" is involved. If there is no representation (expressed or implied) of a bargain price, a case could nevertheless be pursued under section 52 or paragraph 74.01(1)(a).

2. The general impression test

Subsections 52(4), 52.1(4) and 74.03(5) require a court to take into account the general impression conveyed by a representation, in addition to its literal meaning. This test applies to the following provisions:

• subsection 52(1) — false or misleading representations;
• subsection 52.1(3) — deceptive telemarketing;
• paragraph 74.01(1)(a) — false or misleading representations;
• paragraph 74.01(1)(b) — performance representations not based on adequate and proper tests;
• paragraph 74.01(1)(c) — misleading warranties and guarantees;
• subsections 74.01(2) and 74.01(3) — false or misleading ordinary selling price representations; and
• Section 74.02 — untrue, misleading or unauthorized use of tests and testimonials.

General impression is also an element of subsection 53(1) which prohibits deceptive notices of winning a prize.

The application of the general impression test is particularly important where:

• The representation is partially true and partially false, or the representation is capable of two meanings, one of which is false;
• The representation is literally true but is, in fact, misleading since it fails to reveal certain essential information (Refer to Non-disclosure of material information);
• The representation is literally or technically true but creates a false impression, for example where the advertised results of a test of a product may not be significant to its use or efficacy but the representation makes it appear otherwise (Refer to Inappropriate claims under Performance Representations not Based on Adequate and Proper Tests);
• The representation is literally true insofar as the oral or written statements are concerned but the visual part of the representation may create a false impression, for example where it depicts a model which is different from the advertised product  (Refer to Use of illustrations).

Examples:

Two cases that resulted in convictions in the past provide useful illustrations of the application of the general impression test:

• A house represented as having a new furnace, where the word "new," although understood by the industry to mean a replacement and not the original furnace, was found by the court to give the impression to a purchaser that the furnace was in fact new.
• A catalogue contained the statement "you are entitled to 33 1/3 per cent discount off all items in this catalogue”, where the representation was literally true, but the word "discount" gave the impression of a bargain price which in fact was no bargain since the quoted, undiscounted prices were fictitious.