by Propaganda
in determining whether or not the representation is false or misleading in a material
respect.
The same provision would seem to open up the possibility of defence in the
event that statements are not meant or expected to be taken literally. What is not
clear is the extent to which the law would protect credulous persons who are duped
by exaggerated claims that reasonable persons would recognize as such. The FTC
specifically states its belief that to qualify as a deception in the legal meaning a rep-
resentation, omission, or practice “must be likely to mislead reasonable consumers
under the circumstances.”27 The omission of the qualifier “reasonable” in the Canadian
Competition Act suggests a possible extension of protection to the somewhat gul ible,
which is something the courts will have to resolve as new cases test the law.
The recent Supreme Court of Canada case of Richard v. Time 28 describes the
Quebec Consumer Protection Act as designed to protect the “average consumer”
where this includes the “credulous and inexperienced” person and not just the “rea-
sonably prudent and diligent person.” But in the Court’s view, this does not mean
that the former 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.” As one who received a similar solicitation from Time in the
1990s, I can say that the words in large bold font that proclaimed me, repeatedly, to
be a sweepstake winner seemed at first sight to be backed up by the smaller font text.
Careful language analysis revealed that I was only being given a chance to win, but a
first impression of the text had me somewhat fooled. I have used it regularly in classes
to indicate how layout, typography, and repetition can be used to deceive. It was artful
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deception, but it was wrong. I suspect the perpetrators may have justified the deception on the ground that it hooked people into subscribing to Time and would there-
fore be to their benefit. If so, it is another reason for being suspicious of the idea that
good ends justify bad means.
There is an important philosophical issue at stake: should the law be designed to
protect the mildly or even highly gul ible from exploitation and, if so, to what extent?
Or, should the law promote self-development by allowing people to suffer the conse-
quences of their sometimes foolish choices? Espousers of the Ayn Rand philosophy
of the virtue of selfishness would likely opt for the second philosophy, while the first
might be preferred by biblically influenced people in whom the answer to “Am I my
brother’s keeper?” resonates in the affirmative. The two goals need not be entirely
incompatible. One might, for example, seek to protect from exploitation those whose
judgment is impaired by virtue of some mental handicap while not coddling those
whose judgmental abilities suffer no such impairment. Those who fear a “nanny state,”
in which extensive legislation protects us from unsound decision-making but also
makes us less self-reliant, have good reason to be apprehensive. Bureaucracies, once
established, have a tendency to grow. On the other side, deregulation promoted by
(among others) neo-conservatives’ disdain for government intervention in the market
and consequent “inefficiencies” has revealed seemingly limitless greed in Wall Street
with disastrous effects on the US economy in 2008. As former Federal Reserve chair-
man, Alan Greenspan, famously remarked to a congressional committee on October
23, 2008, “I have found a flaw” in free market ideology.29 What seems likely is that the
two philosophies will be in a constant tug of war, with an equilibrium point changing
depending on the public mood at a given time and on the level of aggressiveness or
timidity as well as wisdom in the operation of the bureaucracy.
The penalties for violations of the Canadian Competition Act are quite substan-
tial, as the following makes clear:
s.52(5) Any person who contravenes subsection (1) is guilty of an offence and liable (a) on conviction on indictment, to a fine in the discretion of the court or to
imprisonment for a term not exceeding 14 years, or to both; or
(b) on summary conviction, to a fine not exceeding $200,000 or to imprison-
ment for a term not exceeding one year, or to both.
To contravene certain provisions of the act, misrepresentations must be “false or
misleading in a material respect,” as in the case of the following provision:
s.52(1)(d): Any materially misleading representation as to the price at which a prod-
uct is ordinarily sold is prohibited.
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A recent publication by the Competition Bureau spells out how the term “material” has been interpreted. In the words of its enforcement guidelines relating to rep-
resentations on the Internet, it states:
This phrase [false or misleading in a material respect] has been interpreted to mean
that the representation could lead a person to a course of conduct that, on the basis of
the representation, he or she believes to be advantageous. It is important to note that
omitting relevant information could also be viewed as material.30
Another test for materiality is whether the representation would, in context, influence
an ordinary citizen in “deciding whether or not he would purchase the product being
offered.”31
Like the Canadian Competition Act, the FTC Act makes use of the term “mate-
rial” in the expression “misleading in a material respect” in s.15. An FTC Policy
Statement on Deception explains that for a representation to mislead in a “material”
way “[t]he basic question is whether the act or practice is likely to affect the con-
sumer’s conduct or decision with regard to a product or service. If so, the practice is
material. . ”32 It later adds the qualification that the representation would be likely
to “mislead reasonable consumers under the circumstances.”
If goods for sale have two or more different marked prices, s.54 of the Canadian
Competition Act requires that the customer be charged the lowest price among the
different tickets on the item, and if a lower price is advertised in in-store displays and
advertisements, that price is the one that must be charged. The penalty for violating
this provision could be a fine not exceeding $10,000, or imprisonment not exceeding
a year, or both.
Other provisions of the act, such as those dealing with multi-level marketing and
pyramid marketing schemes, are less relevant to our present concern with misleading
advertising. In the former case, they impose a requirement to provide certain kinds of
information to the consumer to enable him or her to make better choices. Pyramid
selling is forbidden outright under s.55.1(2) along with advertising of such.
Standards of veracity have been quite stringent over the years. Dominion Stores,
carrying on business under the generic name Best for Less, displayed in-store signs that
compared its price to a “wh
y pay up to” price, followed by a list of savings. Dominion
was convicted and fined when it was established that items were available from com-
petitors at lower prices than the “why pay up to” prices. When Simpsons Ltd. con-
ducted a one-day “mini casino” promotion in October 1985, it was charged and found
guilty under s.52 and s.59 for not disclosing adequately the chances open to “players.”
Advertisements said, “You could save 10%, 15%, 20% or 25% on practically everything
in the store.” It did not disclose that 90 per cent of the cards contained the 10 per cent
symbol under all four tabs while the remaining cards contained all four percentage
symbols.33
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What used to be s.57—now covered under s.74.04(2)—is recognizable as pro-
scribing what are more commonly known as “bait and switch” operations. The deal
involves advertising a popular item at ridiculously low prices to bring people into the
store. When they arrive, the advertised item is out of stock, but a substitute is offered
that is not a bargain.
Telemarketing is given special attention in s.52.1. In addition to the requirement
that the messages not be misleading, s.52.1(2)(a) requires a telemarketer to disclose in
“a fair and reasonable manner at the beginning of each telephone communication”
the identity of the person on whose behalf the call is made and “the nature of the
product or business interest being promoted and the purposes of the communica-
tion.” Telemarketing across the border poses special problems regarding enforcement,
and a Canada-US Working Group was set up in 1997 to deal with them. Among
the strategies the group recommended was education and prevention by trying to
impress on the public that telemarketing fraud is “a serious form of economic crime.”
Publicizing convictions is of course one way to do this, and some interesting examples
can be found in the group’s 2009–10 Annual Report. For example, the company and
operatives of Toronto-based DataCom Marketing Inc. were convicted of using the
“assumed sale” technique, whereby they misled companies into believing they had
already ordered a business directory: “The telemarketers failed to disclose which com-
pany they represented, the price of the product, the terms and conditions to return it,
the purpose of the call and the nature of the product, contrary to the requirements of
the telemarketing provisions of the Act.”34
The Canada-US Working Group was pleased with the working of consumer hot-
lines set up for purposes of educating the public about telemarketing fraud. Another
success was the “reverse boiler-room” projects, which involve seizing “sucker lists” from
offenders and contacting them to alert them to current telemarketing frauds.35
Information from other sources suggests that there is a highly gul ible segment of
the population. A message from the Sûreté du Québec (Quebec provincial police) in
2008 advised the public about fraudulent chimney sweepers, noting that quite a few
who are bilked by them do not even have a chimney!36
The pervasiveness of the Internet, to be discussed more generally in the next chap-
ter, has caused concern about the ability to enforce provisions of the Competition Act.
In Industry Canada’s April-June 1996 issue of the Misleading Advertising Bulletin, some of the implications of the Internet for marketing were discussed by Rachel Larabie-LeSieur, Deputy-Director of Investigation and Research (Marketing Practices). The
Internet’s interactivity provides for instant transactions following advertising of a
product. This is a great convenience, but it also tends to facilitate fraud. “Ease of entry
and low initial cost means that the Internet is fertile ground for scam artists,” she said.
“Victims will be precluded from the safeguards that time and distance have tradi-
tionally afforded.” Illegitimate marketers could present misleading representations as
online entertainment, especially where children are concerned. Larabie-LeSieur did
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not see this kind of fraud to be different in content or subject matter from what has already been experienced in other media;37 however, the Internet tends to be resistant
to regulation, nationally and internationally. How do you enforce national laws in
a borderless medium? What steps can be taken, for instance, when a buyer resides
in Canada, the seller is located in Colombia, the good is shipped from Japan, and
the financial transaction is cleared through a bank in Switzerland? Where does the
offence occur? Which country’s laws and standards should prevail? How will conflicts
between different legal regimes be resolved?
Among the solutions Larabie-LeSieur contemplated were increased use of com-
puter technologies to combat illegal activities with a focus on the intermediaries, the
service providers. But “under which circumstances, if at al , should online service pro-
viders be held liable for advertisers’ deceptive practices?” One of the attractions of
the Internet is that communications are not subject to the usual filters and controls
of the established mass media, as with telephone communications. There are many
who would like to keep things this way and to handle problems of misleading adver-
tising (or hate propaganda, or libel, etc.) by self-policing. Here the service providers
already have taken the initiative in some cases. Larabie-LeSieur acknowledged that the
Internet “may indeed be suitable to some form of self-policing since consumers can
and do provide quick feedback service to advertisers and service providers,” but she
thought that under the influx of millions of new users in the years to come “it seems
unrealistic to rely overly on the culture of the Internet to ensure effective deterrence
against fraudulent practices.” Her proposed solution was to seek efficient co-operation
among enforcement agencies on a global scale.38 Legitimate businesses have an obvious
stake in combatting fraud on the Internet, since people who have been victimized in
scams will have less to spend on legitimate business. In any case, enforcement of the
Competition Act relies to some extent on complaints from the public.39
Interesting explorations of other possibilities were undertaken in the 1970s, prior
to the computer age, by a study team headed by Michael J. Trebilcock, a law and eco-
nomics professor at the University of Toronto; its arguments are still relevant. The
team’s “Study on Consumer Misleading and Unfair Trade Practices” set out to decide
whether there was a case to be made for imposing restrictions based on persuasive, as
distinct from simply informative, content.40 In other words, should there be restric-
tions beyond what is simply false or misleading? In particular, should there be a dis-
closure requirement to force advertisers to tell truths they would rather not state?
Beyond literal inaccuracies, such as falsely advertising a reduction in price, it is not
possible in many cases to assess an image appeal in terms of truth and falsity. The study
notes, “[T]he principal attacks against image
advertising are directed against its ten-
dency to distract consumers from other, arguably more important, issues concerning the
product at hand and against those claims which exploit the susceptibilities of the audi-
ence to which they are directed.”41 The problem is measured by the effects produced in
the mind of the consumer, not the abstract characteristics of the claim itself. Insufficient
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information can as readily mislead a person to make unwanted purchases as false information. So, at first sight, it seems as though a broader “information ethic” could gain a
foothold and provide a basis for legislation.
However, the study questions whether the aim of advertising is to inform; it more
often is meant to persuade, and detailed technical information may interfere with this.
Advertising is a form of advocacy, so one does not expect it to give the whole picture.
Here the study expresses reluctance to pursue a more global truth requirement: “To
condemn resort to persuasion and polemics in advertising, while tolerating similar
tactics in the classroom, in the pulpit and on the hustings, smacks of discrimination....
It seems there is a point beyond which positive legal requirements cannot go.”42
The study advocates a restricted role for government advertising controls, enforc-
ing truth only on matters of factual claims and not on esoteric general impressions
received by the potential consumer.
Advertising Standards Canada/Les normes canadiennes de la publicité
The current body known as Advertising Standards Canada (ASC) in English and Les
normes canadiennes de la publicité in French existed for many years as the Canadian
Advertising Foundation (CAF). The latter in turn was preceded by the Canadian
Advertising Advisory Board (CAAB), founded in 1957 and “dedicated to the improve-
ment of the industry’s image through the harnessing of the powers of advertising in the
public interest.”43 The CAAB first became involved in self-regulation in 1963, sponsoring
the first Canadian Code of Advertising Standards. At the time of the name change from
CAF to ASC in May 1997, the President and CEO, Linda Nagel, commented that the
