Protecting Your Brand in the Digital MarketplaceCompetition Law Compliance

Presentation by Sabrina Anzini, Loyalty One and Bill Hearn, Fogler Rubinoff LLP to

Canadian Marketing AssociationToronto, June 1, 2016

INTRODUCTION

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• What do we mean by protecting your brand in the digital marketplace? Legal and regulatory compliance

− Focus on Canada’s federal competition law» Deceptive advertising practices

− Mitigating risks of» Lawsuits from consumers or competitors» Enforcement actions by the regulator – i.e., the

federal Competition Bureau» Reputational damage arising from non-

compliance

Our Focus

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• Our presentation is informed largely by the mandate of the Competition Bureau under the deceptive advertising provisions of the Competition Act and the views of the Competition Bureau in its published guidance on the subject which include:• Enforcement Guidelines – Application of the Competition

Act to Representations on the Internet, October 2009• The Deceptive Marketing Practices Digest, June 2015

Our Focus

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• Competition Bureau’s Deceptive Marketing Practices Digest, June 2015 – three pertinent articles “Online Advertising in Canada” “Disclaimers Demystified” “Online Reviews”

Bureau’s View

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• Canadians have embraced the online world• Online advertising occupies an increasingly significant

percentage of Canadian advertising• Online advertising is ever more prevalent and sophisticated

Bureau’s View

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• From the Bureau’s perspective, innovation in this area must respect the rights of consumers not to be misled by advertisers

• This perspective is widely shared by many of the Bureau’s counterparts around the world including those in the US, UK and Australia

Bureau’s View

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• Online trends appear and mature quickly • Bureau’s main concern with these trends is how they impact

on the quality of consumer information• Bureau cites examples of behavioural advertising, geolocation

and mobile technology (and there are others – e.g., Big Data and the Internet of Things) to conclude that advertisers now have access to huge amounts of information about consumers

• This presents unprecedented marketing opportunities and compliance challenges

Bureau’s View

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• While marketing trends tend to come and go, the Bureau sees common problems when it comes to online marketing and the potential for consumer deception

• Even if these problems are not unique to online marketing, they require extra care given the complexities of the Internet as a medium and its role in the digital economy

Bureau’s View

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• Bureau identifies four examples of advertisements that often mislead consumers online

• Common element of each is that the advertiser has not adequately disclosed information necessary for consumers to make informed choices

• The “truth”, if revealed at all, is often buried in fine print disclaimers or obscured by placement in the context of the overall advertisement

Bureau’s View

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• The four problematical examples are: Where key terms are inadequately disclosed Where the true cost is hidden Where the online review does not disclose the connection

between the reviewer and the advertiser – “astroturfing” When what looks like unbiased information is actually

advertising - deceptive native advertising

Bureau’s View

OVERVIEW

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• Deceptive advertising under Competition Act General rules

− Sanctions− Scope of provisions− Sophistication of average consumer− Literal meaning and general impression− Disclaimers

Deceptive electronic messages (CASL amendment) Deceptive online reviews Deceptive native advertising

What We’ll Cover

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• Scenarios – “Deceptive Ad Law in Action”• Corporate compliance programs for competition law

• Why have them?• What should they look like?

• Wrap-Up• Takeaways• Checklists• Q&A

What We’ll Cover

TRUTH IN ADVERTISING -GENERAL RULES

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Civil− Administrative monetary penalties of up to $10

million (first occurrence) and up to $15 million (for each subsequent occurrence)

− Paid restitution to purchasers− Freeze assets

Criminal− Upon indictment, a fine without upper limit at the

discretion of the Court, imprisonment of up to 14 years, or both

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Sanctions

Deceptive Representations

• Can’t make representation to public that is deceptive in material respect and promotes a good/service/business interest

• All representations are caught• If representation could influence a person to purchase, it is

material• But following the CASL amendments to the Competition Act

… the representation need not be material if it is made in certain areas of an electronic message – i.e., the electronic message’s locator (e.g., URL and metadata), sender information or subject matter line

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• Criminal provision requires “intent” (that the advertiser “knowingly or recklessly” engaged in deceptive advertising)

• The civil provision does not require intent• In either case, no need to show that: any person was actually deceived any member of the public to whom the representation was

made was within Canada the representation was made in a place to which the

public had access

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Criminal vs. Civil

The general impression conveyed by a representation, as well as its literal meaning, will be taken into account when determining whether or not the representation is deceptive in a material respect (Remember: “materiality” is not an element of a deceptive electronic message)

Basic Rule for Ad Interpretation

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The Average Consumer

Standard for Ad Interpretation

Appropriate level of sophistication to be attributed to average consumer when interpreting general impression of advertisement for deception has been in flux over past couple of years

Whether average consumer, for advertising interpretation purposes, can be taken to be a “reasonable” person or merely a “credulous” one

– Richard v. Time, SCC, 2012 – Commissioner of Competition v. Chatr, ONSC, 2013

• Reasonable person – the “average purchaser” … someone who possesses ordinary reason, intelligence and common sense but lacks any special expertise respecting the subject matter of the ad

• Credulous person – the “trusting and inexperienced purchaser” … someone who takes no more than ordinary care to observe that which is staring them in the face upon first entering into contact with the entire ad

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Standard for Ad Interpretation

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Richard v. Time• Supreme Court of Canada, 2012

► Held that the “general impression” test for deceptive advertising under Quebec’s Consumer Protection Act is as follows:

“… that of the first impression … the one a person has after an initial contact with the entire advertisement, and it relates to both the layout of the advertisement and the meaning of the words used.”

► Ignored the disclaimers that were “inconspicuous” and “buried in a sea of text” and, with respect to the average consumer for determining the general impression of an ad, expressly rejected the standards of:

• the consumer with an average level of intelligence, skepticism and curiosity, and

• the careful and diligent consumer

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• Supreme Court of Canada, 2012► Instead, applied the “credulous person” standard describing it as the standard of:

“… ordinary hurried purchasers, that is, consumers who take no more than ordinary care to observe that which is staring them in the face upon their first contact with an advertisement...”, and

“… the credulous and inexperienced consumer - i.e., not “a well-informed person” … but “someone who is not particularly experienced at detecting falsehoods and subtleties found in commercial representations”.

Richard v. Time

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Richard v. Time• Supreme Court of Canada, 2012► Elaborated on this standard stating:

“The words “credulous and inexperienced” therefore describe the average consumer for the purposes of the [Quebec Consumer Protection Act]. This description is consistent with the Legislature’s intention to protect vulnerable persons from the dangers of certain advertising techniques. The word “credulous” reflects the fact that the average consumer is prepared to trust merchants on the basis of the general impression conveyed to him or her by their advertisements. However, it does not suggest that the average consumer is incapable of understanding the literal meaning of the words used in an advertisement if the general layout of the advertisement does not render those words unintelligible.”

► Note that the ordinary meaning of “credulous” includes an element of “gullibility”. For instance, from the Canadian Oxford Dictionary:

• credulous: adjective 1. too ready to believe; gullible. 2. (of behaviour) showing such gullibility … [Latin credulous from credere believe]

• gullible: adjective: easily persuaded or deceived; credulous

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• Ontario Superior Court, 2013► Arguably, applied the “credulous person” standard for interpreting ads under the deceptive advertising provisions of the Competition Act

Commissioner of Competition vs. Chatr

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Disclaimers

• A disclaimer that expands on, or clarifies possible ambiguities in the main body of an advertisement is unlikely to mislead consumers … assuming that the general impression of the advertisement is not otherwise misleading Given space constraints and to avoid aesthetic clutter in

the main body of an ad, fine print can be perfectly legitimate if it adds useful information to a truthful ad

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Bureau’s First Basic Principle

• A disclaimer that is used to restrict, contradict or somehow negate the message to which it relates likely confuses consumers and so is deceptive If the main body of the ad creates a deceptive general

impression in itself, the fine print disclaimer may not do much to alter that deception

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Bureau’s Second Basic Principle

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Apple’s Get a Mac - “Legal Copy” Ad

• Disclaimers Should be prominent, clear and close to main claim being

clarified Main claim in ad, apart from the disclaimer, should be

capable of standing alone Must be likely to be read and likely to alter the general

impression of the ad Print must be large enough to be clearly visible and

readable without resort to unusual means – don’t go below 7 point font

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Other Rules of Thumb

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Disclaimers-Below is 7 point fontSee The Pit.org - Standard Disclaimer

• Online advertising appears in many digital formats• Advertising created in any one format may appear across

interconnected platforms• Consumers, often on the go, encounter online advertising

throughout their day and assess this information on mobile devices (with space constraints)

• If the format only allows the advertising to unfold through a series of pages or steps, consumers may be misled if important information is relegated to a disclaimer – especially if the disclaimer appears after the consumer has somehow committed to the advertisement

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Disclaimers’ Digital Dilemma

• The same advertisement, viewed on one platform or mobile device, may present important information (including the disclaimer) in a way that is not obviously accessible to the consumer

• When online advertising is shared (as is often the case), there is a risk that fine print disclaimers get lost or left behind depending on the formatting or technical constraints of the secondary platforms or mobile devices

• These and other challenges associated with digital formats significantly limit the likelihood that fine print disclaimers will be effective in online advertising

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Disclaimers’ Digital Dilemma

• In March 2013, the US Federal Trade Commission published .com Disclosures – How to Make Effective Disclosures in Digital Advertising

• While not law in Canada and not binding on the Competition Bureau, this document contains practical guidance for Canadian advertisers illustrated by examples of advertising in the digital marketplace

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US FTC .com Disclosures

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Scrolling

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Pinching and Zooming

Ads Where Key Terms HiddenCommissioner’s Premium Text Messaging Case, May 27, 2016• In September 2012, following a five-month Bureau

investigation, the Commissioner began legal proceedings in the Ontario Superior Court of Justice against Bell, Rogers, Telus and the Canadian Wireless Telecommunications Association (CWTA) alleging deceptive advertising relating to premium text message and rich content services (such as trivia questions and ringtones) for mobile phones

• The Bureau’s investigation determined that the three telcomcompanies, in conjunction with the CWTA, facilitated the sale to their own customers of premium-rate digital content provided by third parties – in this way, the Bureau tackled the “point of diffusion” for the allegedly deceptive advertising

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Ads Where Key Terms HiddenCommissioner’s Premium Text Messaging Case, May 27, 2016• The Commissioner alleged that customers were led by third

party advertisers into believing this content was free, when it was not

• In fact, the premium-rate digital content could cost up to $10 per transaction and up to $40 for a monthly subscription –these costs were over and above standard text messaging plans

• Furthermore, the Commissioner alleged that the telecom companies led their customers to believe that measures were in place to prevent unauthorized charges on their mobile phone bills

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Ads Where Key Terms HiddenCommissioner’s Premium Text Messaging Case, May 27, 2016• In September 2012, the Commissioner was initially seeking

full customer refunds and administrative monetary penalties totalling $31 million – that is, $10 million each from Bell, Rogers and Telus and $1 million from the CWTA

• In March 2015, the Bureau announced that, in settlement, Rogers had agreed to pay up to $5.42 million in refunds to its customers in connection with premium charges that were allegedly “unauthorized” and “crammed” onto their mobile phone bills

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Ads Where Key Terms HiddenCommissioner’s Premium Text Messaging Case, May 27, 2016• Similarly, in December 2015, the Bureau announced that, in

settlement, Telus had agreed to pay up to $7.34 million in customer refunds and to donate $250,000 to consumer advocacy and research groups whose work advances the public interest in areas related to the digital economy

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Ads Where Key Terms HiddenCommissioner’s Premium Text Messaging Case, May 27, 2016• Likewise, on May 27, 2016, the Bureau announced that, in

settlement, Bell had agreed to pay up to $11.82 million in customer

rebates and to donate roughly $800,000 to public interest advocacy groups to support digital media research and awareness

the CWTA had agreed to develop a consumer awareness campaign and implement a corporate compliance program focusing on “billing on behalf of” practices

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Ads Where Key Terms HiddenCommissioner’s Premium Text Messaging Case, May 27, 2016• Rogers, Telus and Bell also each agreed to issue a public

notice to affected customers, implement an enhanced corporate compliance program, and develop a consumer awareness campaign to educate consumers about how charges can be incurred on wireless devices and how to avoid unwanted charges

• Bureau’s May 27th press release states that “the resolution of this matter brings total refunds to consumers to over $24 million while over $1 million in donations will go to leading consumer advocacy and research groups dedicated to supporting public interest in the digital economy.”

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Ads Where True Cost HiddenBell Settlement, June 2011• The Bureau alleged and following its investigation

determined that, since December 2007, Bell had charged higher prices than advertised for many of its services, including home phone, Internet, satellite TV and wireless

• The advertised prices were not available as additional mandatory fees, such as those related to Touch Tone, modem rental and digital television services were hidden from consumers in fine print disclaimers

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Ads Where True Cost HiddenBell Settlement, June 2011• For instance, Bell’s website advertised a bundle for home

phone, Internet and television services starting as low as $69.90 per month

• In fact, the lowest possible price for the bundle including mandatory fees was $80.27 (roughly 15% higher than advertised)

• Under a consent agreement, Bell agreed to: Modify all of its non-compliant advertisements within 60

days Pay an administrative monetary penalty of $10 million

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Ads Where True Cost HiddenAvis and Budget, Ongoing• In March 2015, the Commissioner of Competition filed an

application with the Competition Tribunal against Aviscar, Budgetcar and their parent Avis Budget Group Inc. alleging deceptive vehicle rental price advertising

• Commissioner is seeking total of $30 million in administrative monetary penalties and $35 million in refunds for consumers

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Ads Where True Cost HiddenAvis and Budget, Ongoing• Following the Bureau’s investigation, the Commissioner is

alleging that: Avis and Budget advertise prices for vehicle rentals that

are not attainable due to additional fees imposed during the rental process

These fees are characterized as taxes, surcharges and fees that governments and agencies require Avis and Budget to collect from consumers when, in fact, Avis and Budget impose these fees to recoup their costs of doing business

The additional fees can increase the cost of a rental by up to roughly 35%, depending on rental location and type of vehicle

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Ads Where True Cost HiddenAvis and Budget, Ongoing• The litigation is also the first proceeding under new

provisions for “deceptive electronic messages” under the Competition Act that came into force in July 1, 2014 as part of CASL That’s because the Commissioner alleges that Avis and

Budget used electronic messages to disseminate the alleged deceptive advertisements

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Is this a deceptive electronic message?

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Yes, here’s why…

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Deceptive Online ReviewsWhat is “astroturfing”• “Fake online grassroots support” – that is, reviews of

products/services posted online that appear to come from independent ordinary consumers experienced with the product/service but, in fact, are posted by people who have an undisclosed “material connection” with the product/service being advertised – e.g., they are an employee of the advertiser or a paid spokesperson and, again, this important fact is not disclosed in the post

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Deceptive Online ReviewsWhy does “astroturfing” concern the Competition Bureau?• To protect consumers from deception and to protect the

integrity of online commerce and competition amongst suppliers Impartial consumer reviews on digital platforms benefit

both consumers and businesses. If unbiased, reviews help consumers make informed decisions.

Authentic experiences of ordinary consumers are highly valued to other consumers and to businesses

This is threatened by an undisclosed material connection between the reviewer and the advertiser

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Deceptive Online ReviewsHow’s “astroturfing” being addressed by the Bureau’s counterparts elsewhere? • US Federal Trade Commission (FTC) Published guidelines on the use of endorsements and

testimonials in 2009 and updated its FAQ guidance on the subject in May 2015

In 2011, the FTC took enforcement action against Legacy Learning Systems. Company paid $250K to settle FTC charges that it deceptively advertised its products through online affiliate marketers who falsely posed as ordinary consumers or independent reviewers

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Deceptive Online ReviewsHow’s “astroturfing” being addressed by the Bureau’s counterparts elsewhere? • Australian Competition & Consumer Commission (ACCC) In 2013, the ACCC published practical and informative

guidelines in its Online reviews – a guide for business and review platforms

• United Kingdom’s Competition & Markets Authority (UK CMA) In March 2016, the UK CMA published Online Reviews:

letting your customers see the true picture setting out guidelines for acceptable online reviews and confirming it had taken enforcement action against an online marketing company Total SEO & Marketing

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Deceptive Online ReviewsWhat has the Bureau done to address its concerns?• In July 2014, the Bureau published the article “Don’t Buy into

Fake Online Endorsements” encouraging consumers to be wary of phony online endorsements

• In June 2015, the Bureau published the article “Online Reviews” expressing its concern over an increase in “astroturfing” – especially by so-called “reputation enhancement firms” who pay third parties to post fake online reviews

• In October 2015, the Bureau announced its settlement with Bell Canada

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Deceptive Online ReviewsBell Canada Settlement October 2015• Online reviews for Bell apps written by Bell employees

without disclosing their material connection to Bell Specifically, in November 2014, certain Bell employees

were encouraged to post positive reviews and ratings of the free MyBell Mobile app and Virgin My Account app on the iTunes App Store and the Google Play Store, without disclosing that they work for Bell

The apps allowed Bell customers to manage their mobility accounts directly from their mobile devices

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Deceptive Online ReviewsBell Canada Settlement October 2015• Bell’s senior management acted quickly to have the reviews

and ratings removed as soon as they became aware of the matter

• Still, the Bureau concluded that these reviews and ratings created the general impression that they were made by independent and impartial consumers and temporarily affected the overall star rating for the apps

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Deceptive Online ReviewsBell Canada Settlement October 2015• Following inquiry by the Competition Bureau, Bell agreed to:

− pay an administrative monetary penalty (AMP) of $1.25 million

− enhance and maintain its corporate compliance program, with a specific focus on prohibiting the rating, ranking or reviewing of apps in app stores by its employees or contractors

− sponsor and host a workshop to promote, discuss and enhance Canadians’ trust in the digital economy, including the integrity of online reviews

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Deceptive Online ReviewsBell Canada Settlement October 2015• Quotes - John Pecman, Commissioner of Competition “I am pleased that Bell Canada demonstrated leadership to fully

resolve the Competition Bureau’s concerns in this matter. Bell’s senior management acted quickly to remove the reviews of the apps that had been posted by its employees and has taken steps to prevent it from happening again. I commend the shared compliance approach taken by Bell to resolve this matter, which will benefit both consumers and the digital marketplace.” – Ottawa, October 14, 2015

The settlement was “an excellent example of the concept of ‘shared compliance’ at work” - Toronto, May 19, 2016

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Deceptive Online Reviews Advertiser must disclose material connection with

endorser, if such a connection exists – e.g., employment, paid blogger etc.

As summarized in Advertising Standards Canada (ASC)’s Canadian Code of Advertising Standards(the ASC Code) , testimonials must

– reflect genuine current opinions of endorser– be based on adequate information or experience– not be deceptive– disclose any material connection between endorser

and manufacturer of product

Is this astroturfing?

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Yes, here’s why…

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What about this?

In follow up…

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Native Advertising

• As described in the Canadian Marketing Association’s Native Advertising Mini-Guide Online native advertising is any form of advertising that

fits naturally onto a digital page, blending into both look and feel

It provides advertisers with the opportunity to speak naturally with their target audience

Unlike other forms of advertising that may be somewhat disruptive, native advertising gives consumers information or leads them to a place on the Internet

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Native Advertising

• The Interactive Advertising Bureau (IAB) has identified 6 types of native ads In-feed units – online advertorials – e.g., BuzzFeed Paid search units – presented organically in search engine results –

e.g., Google Recommendation widgets – delivers ad via a “widget” integrated

into the main well of a page – e.g., Outbrain Promoted listings – found on sites that do not have traditional

editorial content – e.g., Amazon In-ad native element units – are placed outside the editorial well –

e.g., OneSpot Custom native advertisements – platform specific – e.g., Spotify

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Integration of Native Advertising Into Website Content

Social

Native Advertising is Everywhere

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Native Advertising Is Everywhere

Deceptive Native Advertising

• Main regulatory concern is when advertising is disguised as objective editorial content that misleads and influences consumers to purchase a product based upon what appears to be an unbiased third party review (when it’s not)

• In its June 2015 article “Online Advertising in Canada”, the Bureau expresses concerns about “online information that is actually advertising” – i.e., deceptive native advertising

• The online world offers consumers gateways to new sources of information where they can educate themselves about products and services by referring to articles and studies

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Deceptive Native Advertising

• This “intensely pro-consumer development” can be completely undermined by advertisers who design online ads to look like something other than promotional material e.g., ads disguised to look like unbiased news articles or

independent sources of information• Advertisements that deceptively pose as arms-length

information can be seriously misleading and erode confidence in the digital marketplace

• May see Bureau enforcement action in this area – will likely rely on deceptive electronic messages provisions of the Competition Act

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Deceptive Native Advertising

• ASC Code provides that no advertisement shall be presented in a format that conceals its commercial intent

• Best practice is to separate editorial content from advertising messages in a manner transparent to the reader

• If there is a “material connection” between the advertiser and the reviewer, this must be disclosed

• See also the Word of Mouth Marketing Association (WOMMA)’s white paper Don’t Be Naïve About Native –How Marketers Should Approach Disclosure in Native Advertising, November 2014

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Is this Deceptive Native Advertising?

No, here’s why…

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SCENARIOS

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Scenario 1Company Y is a consumer electronics retailer that planned a back-to-school promotional event that would run from mid-August to the end of the month. The promotion offered 40% off all printers with the purchase of a qualifying laptop.

Company Y’s marketing department decided to promote the event via the company’s website, sponsored blog posts and targeted emails. To promote the back-to-school event on its website, Company Y created a new page. Near the top of the page were the words “Back-to-School Sale: 40% off all printers!” and immediately underneath was similarly-sized text stating, “With the minimum $1000 purchase of a laptop”. Beside the text were images showing a laptop and a printer. Company Y also prepared promotional emails. The subject line stated “Back-to School Sale: 40% off all printers!” The body of the email encouraged consumers to come down to the store while supplies lasted and featured images of various printers.

To increase awareness of their products and services via social channels, Company Y sponsored several “influencers” with a predominately high social following to positively review these products and mention the deals. On one influencer’s blog, the post is identified as “sponsored content”, while another’s identifies the specific post as “opinion only”.

In an effort to further drive attention to this campaign, Company Y has asked all of its retail employees to “share” a link to the sale on their personal Facebook pages to further increase awareness.

What do you think of Company Y’s proposed plan?

Discussion

• 1) Website: prominent display of true nature of deal. No major change to size. • 2) Promotional Email:

A) could create impression that ALL printers eligible for 40% discount, when discount was conditional on purchasing a laptop. “Mistake” versus “misleading”

B) compliance with CASL • 3) Blog Posts: native advertising –clear to consumers, non- promotional versus paid content. US

FTC Enforcement Policy (December 2015), opinion versus sponsored content, genuine belief• 4) Employee Request: voluntary, no specification of neutral consumers. • 5) Enforcement: compliance strategies, due diligence as mitigating factors

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Scenario 2Company A is an over-the-counter drug company looking to successfully launch their newly developed “facelift in a pill” product. In order to “hit the ground running” for sales of this new item, Company A has decided to undertake a multi-pronged digital advertising strategy.

To begin, Company A plans on purchasing several digital sidebar advertisements on various sites including the phrase “Clinically Proven to Take 10 Years Off of Your Face”. Company A has not undertaken any clinical studies, however they believe strongly that they can substantiate this claim if challenged, based on extensive customer feedback.

Company A believes that “word of mouth” referrals are better advertisements than anything that they could pay for. In seeking to increase their presence in this regard, Company A has retained the services of a third-party digital marketing firm. As part of their agreement, the firm will post positive reviews of the product on several popular beauty product discussion sites. These reviews will include unsubstantiated testimonials as well as images of the product and “before/after” shots provided by Company A.

Company A ask for your advice on Competition Act compliance – what do you recommend?

Analysis

• 1) Digital Advertisement Slogan: deceptive electronic statement, studies to substantiate claim?

• 2) Third Party Presence: firm versus company involvement in each element.

• 3) Third Party Reviews: the lines between third parties and the company itself? Posting deceptive content online

• 4) Other regulatory issues must be considered – e.g., compliance with the advertising of OTC drugs under the federal Food and Drugs Act (but that’s another seminar!)

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Scenario 3Corporation B owns and runs a number of frozen yogurt franchises. Business has been slow lately, so the company has made a concerted effort to increase its digital presence. This rollout strategy includes a new advertising slogan “Frozen Yogurt, More Important to Your Life than Oxygen” to be used on a series of pop-up ads online, alongside images of the product and brand logo. As part of this campaign, Corporation B will be sponsoring a variety of social media posts by celebrities with the individual proclaiming the brand as their favourite, all marked with “#AD”.

When evaluating their digital presence, Corporation B noticed that they have suffered from a series of negative Google Reviews lately. To get their stores back to an acceptable level, the Corporation has ordered all of their employees to enter a “5-Star” Google Review for any of the franchise’s locations. As this is an additional burden for their employees, Corporation B is running an internal program offering a paid half-day off to any employee who completes more than 3 reviews.

What is your assessment of Company B’s plan?

Analysis

• 1) New Slogan: representation and literal meaning (objective standard) and substantiation. • 2) Celebrity Participation: opinion with assumption that payment has exchanged hands,

disclosure between marketer and advertiser, best practices of FTC• 3) Google Reviews: voluntary versus mandatory, independent and impartial versus employees• 4) Freedom of Speech: justified limits, customers needs to be able to believe performance

claims.• 5) Role of Incentives: how is this different?

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CORPORATE COMPLIANCE PROGRAM

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Purpose of Compliance Program

• To outline to businesses how to comply with the Competition Act

• To detect any early-stage issues that arise within your business so that action may be taken

• To “keep tabs” on other businesses (competitors) and possible anti-competitive actions

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Benefits of Compliance Program• Legal basis for businesses of duty to act lawfully. Reduce exposure to criminal and/or civil liability for

company and executives Reduce litigation costs

• Reputation and risk Brand in marketplace – negative publicity Recruiting new clients Recruiting new employees Building existing workforce

• Improve conditions in marketplace and others will follow suit (good actors)

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Benefits of Compliance Program

• Costs of compliance program = less overall than possible penalties under the Competition Act. Cost of business disruption during a Bureau investigation

• Mitigation Existing compliance programs are considered with any

investigation and/or court proceeding− How to proceed− Magnitude of remedy

Early notification of internal violations policies and/or programs

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Design ConsiderationsSeven Considerations from the Competition Bureau (source: Corporate Compliance Program Bulletin, June 3, 2015 http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03927.html)

1) Buy-In and Support from the Top2) Assessment of Compliance Risks within your Business3) Policies and Procedures4) Training 5) Monitoring, Verification and Reporting 6) Discipline and Incentives7) Evaluation and Improvement

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#1- Buy In and Support from the Top • Foster culture of compliance from

management • Compliance officer/compliance • Support from Board of Directors

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#2- Assessment of Compliance Risks within your Business• Identify areas of risk • Identify employees operating in those

areas of risk• Can changes be made to change risk

profile identified?

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#3- Policies and Procedures

• Reflect operations of the business• Internal controls should reflect risk profile

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#4- Training

• Design• Delivery• Importance of delivery Mandatory training

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#5- Monitoring, Verification and Reporting• Ongoing verification to detect high-risk

conduct, with intent to identify prior to occurrence

• Confidential internal reporting system Stand-alone or linked to other policies

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#6- Discipline and Incentives

• Consistent action • Documentation• Follow ups

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#7- Evaluation

• Continued assessment• Review and refresh

WRAP UP

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Some Takeaways

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• Advertising law can often be reduced to simple “rules of thumb” - e.g., tell the truth

• But in highly competitive and innovative markets where technology changes rapidly there are important details and nuances – e.g., how far can the truth be stretched

• Regulators are actively enforcing advertising laws • Costs of non-compliance are significant – big penalties

(possibly jail time), class action damages for restitution, reputational harm (name and shame)

• By comparison, costs of compliance are generally not significant – that is, corporate compliance programs and due diligence are prudent and cost-effective

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Due Diligence ChecklistCompetition Act

Has there been a problem? Report it to legal and compliance groups Make sure employees know how to report problems and to whom Consider potential compliance issues when drafting training and

other documentation Policies and procedures, compliance programs and employee

acknowledgement Make sure accountabilities are known: management accountability,

business accountability for employees. Suspected breaches reported to the Competition Bureau (company,

competitors, suppliers) If in doubt, consider asking for a written opinion from the

Commissioner before engaging

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Due Diligence ChecklistFalse or Misleading Representations and Deceptive Marketing Practices Understand Canada’s Anti-Spam Legislation for electronic messages Ensure public statements to promote product/business don’t create false or misleading

general impressions Avoid fine-print disclaimers and, if used, overall impression created should not be false or

misleading Understand provisions related to false or misleading representations and deceptive

marketing apply in Canada or abroad and apply to public and private place Review overall general impression of a representation to ensure it is not misleading. Is the lowest price that appears on a product what is being charged? Are reasonable quantities of the product advertised at sale price in fact available? Is the term “regular price” used? If so, has the product been offered in good faith for sale at

that price for a substantial period of time, or a substantial volume of the product has been sold at that price within a reasonable period of time?

Are illustrations used the same as the product being sold? Performance claims need to be based on adequate and proper testing conducted prior to the

claim, even if business believes accuracy of the claim. Is product being sold at the advertised price? When in doubt, ask for legal advice.

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Some Other Helpful Resources• CMA Code of Ethics & Standards of Practice• CMA Guide: Digital Marketing• CMA Guide: Canada’s Anti-Spam Law (CASL)• WOMMA Guide to Best Practices for Transparency and

Disclosure in Digital, Social & Mobile Marketing

ADVERTISEMENT• See also Bill Hearn’s “Canada” chapter in international

comparative legal guide to Advertising & Marketing, 2016 published in May by UK-based Law Business Research If you would like a pdf copy, please email bhearn@foglers.com

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“If I hear the word ‘digital’ one more time, I’m going to stick a fork in my head.”Bruce Philip, Brand Strategy Consultant and Columnist,

There Is No Such Thing as “Digital Marketing”, Canadian Business Magazine, June 2016

This presentation contains general information only and does not constitute legal advice. Qualified legal counsel should be consulted to assess the application of laws to specific facts.

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Thank You