“Disclaimers, the less conspicuous, fine print elements of advertisements, are often used to add information or clarifications that are not integrated into the design of the main body. Sometimes these disclaimers add details or expand on what is being offered. At other times, when the main message is designed in such a way that it could mislead consumers, advertisers might try to rely on fine print disclaimers to restrict or even contradict the more prominent message. It is this last type of usage that often gets advertisers into trouble.”
(Competition Bureau,
The Deceptive Marketing Practices Digest)
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Advertisers commonly use disclaimers to add additional information to or clarify an advertising claim. In general, a disclaimer may be used to add more information to a headline claim, clarify a claim or disclose important (i.e., material) conditions or limitations related to an offer.
While disclaimers can be a very useful and legitimate tool for advertising, they can also in some cases violate the general civil or criminal misleading advertising provisions of the federal Competition Act or other Canadian advertising and marketing legislation (e.g., provincial consumer protection legislation or federal consumer packaging and labelling legislation).
Two potential ways that a disclaimer can raise misleading advertising law issues in Canada include where the disclaimer itself includes false or misleading claims or, alternatively, where it fails to cure the overall general impression of a headline claim that is misleading.
As such, when using disclaimers it is important to ensure that none of the information in the disclaimer is literally false or misleading and also that the overall general impression of the advertisement is not misleading.
In addition to the general misleading advertising sections, the Competition Act also contains many specific provisions that either prohibit or set out specific requirements for particular types of advertising practices (for more information, see Canadian Advertising Law).
A number of these sections require specific types of disclosures, which should be reviewed before launching a promotion. These include sections 52.1 (deceptive telemarketing), 53 (deceptive prize notices), 55 (multi-level marketing plans) and 74.06 (promotional contests), among others.
Some of the Competition Bureau’s (Bureau) guidance for using disclaimers has included the following: (i) ensuring that the literal meaning and the general impression of advertising are not false or misleading; (ii) that a disclaimer can, in general, expand or clarify a claim that is made in the main body of an advertisement (assuming that the overall general impression of an advertisement is not otherwise misleading); (iii) that a disclaimer can only qualify a claim but cannot cure or retract an otherwise false or misleading claim; (iv) advertising, including disclaimers, should fully and clearly disclose all material information to consumers; (v) a disclaimer should be in close proximity to the headline claim that it qualifies; and (vi) disclaimers should be clear and understandable for consumers (e.g., not use industry jargon).
The Bureau has commenced many enforcement proceedings in relation to disclaimers and other advertising disclosure issues, including false or misleading price claims (e.g., drip-pricing cases), influencer marketing (e.g., endorsements and testimonials that failed to disclose a material connection with a brand) and contests and other types of promotions that failed to adequately disclose the material terms and conditions of the promotion.
Importantly, even if all material terms of an offer are included in full terms and conditions, advertising may still violate the Competition Act or other marketing legislation where material terms (e.g., price, performance or important conditions and limitations) are not clearly disclosed upfront to consumers.
This was been a key issue in, for example, online “drip-pricing” related cases brought by the Bureau (e.g., online car rental and ticket sales companies that failed to adequately disclose their prices upfront before the check-out process). New specific provisions regarding drip-pricing were added under the general misleading advertising sections of the Competition Act (i.e., sections 52 and 74.01) on June 23, 2022, which now specifically prohibit drip-pricing claims and also give the Competition Bureau and private plaintiffs increased scope to challenge deceptive upfront pricing practices.
Potential Penalties
Some of the potential penalties for violating the civil deceptive marketing practices provisions under Part VII.1 of of the Competition Act include Competition Tribunal or court orders to stop the conduct, publish a corrective notice, pay restitution to consumers and administrative monetary penalties (AMPs).
Following 2022 amendments to the Competition Act, the maximum AMPs for civil deceptive marketing increased: (i) for individuals, up to the greater of $750,000 ($1 million for each subsequent order) and three times the value of the benefit derived from the deceptive conduct if that amount can be reasonably determined; and (ii) for corporations, up to the greater of $10 million ($15 million for each subsequent order), three times the value of the benefit derived from the deceptive conduct or, if the latter amount cannot be reasonably determined, 3% of the corporation’s annual worldwide gross revenues.
The potential penalties for violating the general criminal misleading advertising section of the Competition Act (section 52) include, on indictment, a fine in the discretion of the court and/or imprisonment for up to 14 years and, on summary conviction, a fine of up to $200,000 and/or imprisonment for up to one year.
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SERVICES AND CONTACT
We are a Toronto based Canadian competition and advertising law firm that helps clients in Toronto, Canada and the United States practically navigate Canada’s advertising and marketing laws and offers Canadian advertising/marketing law services in relation to print, online, new media, social media and e-mail marketing.
Our Canadian advertising/marketing law services include advice in relation to anti-spam legislation (CASL), Competition Bureau complaints, the general misleading advertising provisions of the federal Competition Act, Internet, new media and social media advertising and marketing, promotional contests (sweepstakes) and sales and promotions. We also provide advice relating to specific types of advertising issues, including performance claims, testimonials, disclaimers, drip pricing, astroturfing and native advertising.
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