GOAL
To have proposed amendments to the Competition Act disallowed, thereby protecting advertisers from an onerous and costly legislative regime that would have severely hampered their ability to engage in comparative advertising, and would have posed barriers to healthy competition.
THE ISSUE
In 2005, Bill C-19: An Act to Amend the Competition Act and to Make Consequential Amendments to Other Acts proposed a number of changes that would severely constrain advertisers from engaging in comparative advertising and consequently jeopardize Canada’s competitive environment.
The amendments called for:
- Harsh increases in maximum administrative penalties (AMPs) for deceptive marketing practices – from $100,000 to $10 million, and $15 million for a second ‘offence.’
- Restitution orders.
- A process of marketplace inquiry that would be redundant and detrimental to the existing self-regulatory consumer-complaints process overseen by Advertising Standards Canada.
ACTIONS
The ACA presented oral remarks to the House of Commons Standing Committee on Industry, Natural Resources, Science and Technology on March 9, 2005, then again on November 24, 2005. We urged the Committee to turn down the proposed amendments because they would be contrary to the intent of the Competition Act, likely unconstitutional, serve no useful purpose and likely injure the competitive marketplace. We stated that:
- The proposed increases in the maximum administrative monetary penalties (AMPs) for deceptive marketing practices were out of proportion with the nature of the offences they would address. These increased penalties would be similar in nature to those applied to criminal cases filed under the Competition Act yet deceptive marketing practices were largely non-criminal acts.
- Instances of deceptive marketing cases that would be deemed fraudulent and hence criminal were already subject to section 52 of the Act and need not be addressed further in the proposed additional amendments.
- Such severe penalties, if adopted, would inevitably place a ‘chill’ on advertising activity in Canada, with advertisers refraining from engaging in healthy comparative advertising that is essential for the promotion of competition.
- The proposal to provide government with the authority to conduct market inquiries was unnecessary because that authority would be redundant to the compulsory powers that the Commissioner and the Minister of Industry already have to conduct inquiries into marketplace behaviour.
- Additionally, the market-inquiry proposal had the potential to distract the Competition Bureau from its core purpose of investigating conduct deemed contrary to the Competition Act.
- In general terms, the proposals for amendments contained in Bill C-19 did not deal with substantive rules regarding advertising law but rather focused on the consequences or “penalties” for misleading advertising. Hence the focus was misplaced, given the intent of the Competition Act.
- Very high AMPs, coupled with the possibility of so-called “restitution orders,” ran the risk of undermining the effectiveness of the existing Advertising Standards Canada consumer-complaints process – a process that works well by allowing consumers to challenge ads and have them removed from the media very quickly and at no expense to the government or the consumer.
- Current AMPs, together with cease-and-desist orders and corrective notices, already provided good incentives for advertisers to comply with the law.
- Due to the severity of the proposed penalties, there were legal opinions that the amendments would be deemed unconstitutional.
- 1999 amendments to the Competition Act were important and beneficial but since that time the very few actions taken under the Act concerning misleading advertising – a handful of cases and fewer contested decisions – indicated there was no need for further amendments.
The ACA also stressed that advertising performs a critical role in supporting a vibrant and healthy economy, and our economy would not be as vibrant without the ability, via advertising, to communicate and establish strong brands and their differentiating benefits.
In addition to submitting the two written briefs and appearing before the House of Commons Standing Committee, we engaged in extensive discussions with industry associations and created an ad hoc ACA committee of member legal counsels to properly address the competitive barriers presented by the Bill.
OUTCOME
The ACA’s efforts ended successfully for a short time when the legislation died on the order paper after an election call. Unfortunately, about a year later in March 2009, without Committee investigation or opportunity for input, the Government arbitrarily attached a very similar bill to an Omnibus Budget Bill that included changes to the employment insurance benefits that were considered badly needed during the severe recession, and these Competition Act draconian changes were covertly passed into law.
For more information on this issue, contact Bob Reaume, Vice President, Policy & Research at (416) 964-0248 / 1-800-565-0109 / breaume@ACAweb.ca.
