Imposing Corrective Advertising Under The Competition Act
By: Cassels BrockProvided by World Services Group
Imposing Corrective Advertising Under The Competition ActPublished August 12, 2004 - Ontario, Canada
In our newsletter of August 2002 we discussed a decision of the Competition Tribunal relating to PVI International Inc. (“PVI”). Both PVI and the Commissioner of Competition appealed from this decision. The Federal Court of Appeal did not agree with the Tribunal concerning the imposition of an obligation to publish corrective advertising.
The PVI had made representations that its product, when installed in the gasoline-fuelled internal combustion engines, increased combustion efficiency from 68% to 90% and as a result increased fuel efficiency by an average of 22% and reduced emissions. PVI also said that the United States government had endorsed the accuracy of these statements.
The Competition Tribunal found that PVI had engaged in reviewable conduct contrary to the Competition Act, since the statements were false or misleading in a material respect and not based on adequate and proper tests.
The Tribunal made orders prohibiting PVI from repeating these representations and imposed an administrative monetary penalty. However, the Tribunal refused to require PVI to publish a corrective notice to bring the matter to the attention of affected consumers because the Tribunal said the complexity of the claims would make it difficult for consumers to grasp why the representations were false or misleading.
PVI’s appeal from the Tribunal’s decision was dismissed. However, the Commissioner’s cross appeal concerning failure to require PVI to issue a corrective notice was allowed. First, the court concluded that the Tribunal had erred in taking official notice of the U.S. regulatory practice to limit such notices to extreme cases, and failed to give the parties an opportunity to respond. Second, the court said that the Act contained no limitations with respect to complexity or required a detailed explanation of the nature of the misrepresentation.
However, given the passage of time between the making of the misrepresentation, the hearing of the appeal, and the Commissioner’s acknowledgement of the primary concern related to the precedential nature of the Tribunal’s ruling, the court declined to make any order requiring the Tribunal to reconsider this exercise of discretion.
PVI was not represented by counsel at the hearing of the appeal, which may have had an effect on the conclusions of the court relating to corrective notice. Canadian courts frequently make reference to the decisions of U.S. courts during the course of argument without taking any formal steps whatsoever. Further, the jurisdiction of the Tribunal to make such orders is quite open-ended.
It remains to be seen how the issue of corrective notices will be dealt with by the Tribunal in the future. From a brand owner’s point of view, the possibility that corrective advertising may be ordered is significant, since there can be substantial costs associated with placing the advertisements, as well as the potential for significant diminution of goodwill.
If you would like more detailed information regarding the subjects presented in above article, or on other marketing law issues, please contact:href="http://www.casselsbrock.com/profiledetail.asp?SID=39"John S. McKeown at firstname.lastname@example.org
This article is provided for information purposes only and does not constitute legal advice. ©John McKeown 2004
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