1. “You Can’t Say That!” Product and Packaging Claims Presented to: Canadian Manufacturers & Exporter Small Manufacturing Summit February 17, 2011 Brian R. Fraser Partner and Co-Leader Advertising, Marketing and Regulatory Affairs National Practice Group Gowling Lafleur Henderson, LLP

2. 2 Table of Contents Table of Contents: 1.Introduction 2.Federal Competition Act 3.Consumer Packaging and Labelling Act 4.“Made in Canada” Claims 5.Quebec – Charter of the French Language

3. 3 Introduction – Where are the Rules are Found Advertising and marketing law is not governed primarily by one statute Governed by: Federal Statutes Provincial Statutes Industry Self-Regulation (e.g. Advertising Standards Canada) Codes, Guidelines and Policies (e.g. Canadian Marketing Association, Canadian Standards Association)

4. 4 Introduction – Who Are Some Of The Key Regulatory Players Federal Competition Bureau (www.competitionbureau.gc.ca)www.competitionbureau.gc.ca Health Canada (www.hc-sc.gc.ca)www.hc-sc.gc.ca Canadian Food Inspection Agency (www.inspection.gc.ca)www.inspection.gc.ca Privacy Commissioner (www.priv.gc.ca)www.priv.gc.ca Provincial Consumer Protection Offices Liquor Boards & Commissions Provincial Privacy Commissions (Alberta, Quebec and B.C)

5. 5 Competition Act The Federal Competition Act: Competition Act Regulates (among other things): Misleading Advertising Price Claims Contest Disclosure Telemarketing

6. 6 Competition Act Misleading Advertising: Essence: “Making a representation to the public that is false or misleading in a material respect” What is “material”?: Is it likely to influence the consumer’s purchasing decision? Application: Very broad – Applies to all products and services, and to claims made in any media, including traditional media, online and even oral representations Test: What is the general impression created by the representation (not just the literal meaning) Look at the advertising as a whole – what’s the consumer’s net take-away?

7. 7 Competition Act Misleading Advertising (continued ) : “Dual Track” Enforcement Process: Criminal (s.52) Beyond reasonable doubt Standard of “Intent”: “knowingly or recklessly” engage in prohibited conduct Penalties – jail or fines Civil (s.74.01) Balance of probabilities No guilty intent (mens rea) required Penalties: Cease and Desist Order Corrective Notices AMP’s (Fines)

8. 8 Competition Act Misleading Advertising (continued) : Most cases of misleading advertising will be handled via the civil process Bureau reserves the right to proceed via criminal prosecution where the accused acted knowingly or recklessly (had the requisite legal intent – known as “mens rea”) and will take into account a number of factors, including the degree of harm, whether vulnerable groups targeted and whether the accused is a repeat offender The Act also provides (s.36) a private right of civil action, but requires the criminal standard of “knowing or reckless” conduct

9. 9 Competition Act Criminal Penalties Until the 2009 Budget Amendment (March 12, 2009): If “summary conviction”, the maximum penalty was $200K fine and/or 1 year imprisonment If Crown proceeded by indictment, then directors and officers of advertiser faced prison sentences of up to 5 years and a fine in the discretion of the court

10. 10 Competition Act Civil Penalties Prior to March 12, 2009: If Competition Tribunal or courts found violation of s.74.01 of Competition Act, then advertiser could be subject to the following sanctions: A cease and desist order for up to 10 years A requirement that the advertiser publish a notice of the misleading claim and court’s order An administrative monetary payment (AMP) for individuals up to $50K (first order)/$100K (subsequent orders) and for corporations up to $100K (first order)/$200K (subsequent orders)

11. 11 Competition Act Penalties NOW: Criminal: Increase maximum prison term from 5 to 14 years Civil: Still have cease and desist orders and corrective notices Individuals – Increase AMP’s from $50K to $75K for first “offence” and from $100K to up to $1 Million Corporations – Increase AMP’s from $100K for first offence to $10 Million and from $200K to up to $15 Million for repeat offence Competition Tribunal empowered to: Require companies to pay restitution to victims Freeze assets if there is concern money may not be available for consumer redress

12. 12 Competition Act Performance Claims S.74.02 – governs claims regarding “performance, efficacy or length of life” of product Must be based on “adequate and proper test” Onus of proof lies on advertiser Test must have been conducted prior to claim being made

13. 13 Competition Act “Green” Claims Competition Bureau has issued guidance document (in conjunction with CSA): “Environmental Claims: A guide for industry and advertisers” One year “transition period” for enforcement ended June 25, 2009 – Now “in force”

14. 14 Competition Act “Green” Claims Highlights: “vague and non-specific” claims – e.g. “environmentally friendly”, “green”, etc. are discouraged Claims must be specific and verified Claims shall take into account the full life-cycle and net environmental impact of the product Comparative claims, in particular, need to be quantified Detailed instructions are provided for certain selected claims – e.g. “compostable”, “degradable”, “recyclable”, “reduced energy consumption”, etc. and use of Mobius loop and natural symbols (e.g. fish and trees)

15. 15 Consumer Packaging and Labelling Act Applies to All “Prepackaged Products” Require 3 Declarations: 1.Product Identity 2.Net Quantity 3.Manufacturer/Dealer Name and Address Declarations 1 and 2 Must be Bilingual Prohibits Misleading Labelling Other product-specific regimes (including for food, drugs, NHP’s, textiles, tobacco products, hazardous products, etc.) may also impact label requirements

16. 16 “Made in Canada” Claims “Product of Canada” The last substantial transformation of the good occurred in Canada; and 98% of the total direct costs of producing or manufacturing the goods have been incurred in Canada “Made in Canada” The last substantial transformation of the good occurred in Canada; At least 51% of the total direct costs of producing or manufacturing the goods have been incurred in Canada; and The “Made in Canada” representation is accompanied by an appropriate qualifying statement, such as “Made in Canada with imported parts”

17. 17 Quebec – Charter of the French Language Subject to some exceptions, basic rule: Every inscription on a product, on its container or on its wrapping, or on a document or object supplied with it, including the directions for use and the warranty certificates, must be drafted in French. The French inscription may be accompanied with a translation or translations, but no inscription in another language may be given greater prominence than that in French.

18. 18 Quebec – Charter of the French Language Some “manufacturer’s” exemptions: “The product is from outside Québec, is intended for incorporation into a finished product or for use in a manufacturing, processing or repair operation and is not offered in Québec for retail sale” “The product is from outside Québec and the inscription is engraved, baked or inlaid in the product itself, riveted or welded to it or embossed on it, in a permanent manner. However, inscriptions concerning safety must be written in French and appear on the product or accompany it in a permanent manner”

19. montréal  ottawa  toronto  hamilton  waterloo region  calgary  vancouver  moscow  london Thank You Brian R. Fraser Tel: (416) 862-4293 Email: Brian.Fraser@Gowlings.com