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Comparative Advertising Crosses the Line: Direct Energy Marketing Ltd. v. National Energy Corp., 2012 ONSC 4232

December 11, 2012

Authors: Jennifer McKenzie and Amrita V. Singh

In a recent comparative advertising case, the Ontario Superior Court (the Court) granted Direct Energy an injunction against National Energy on the basis that its brochures, which set out comparative price claims (among other things), violated section 7(a) of the Trade-marks Act and section 52 of the Competition Act.

National Energy printed approximately 38,000 brochures for its Toronto, London, and Kitchener sales offices, and distributed them door-to-door by sales teams.

The Court found the brochure, which reproduced the Direct Energy logo and trademark, to be misleading in that it contained inaccurate calculations of Direct Energy’s average rate increase, misstated rental rates, and implied that Direct Energy’s water heaters were less efficient by using the words “non-Energy Star.” On balance, the Court held the brochure was more focused on misleading consumers than fairly comparing the products and services of both companies.

The Court inferred that Direct Energy suffered damage. Between 2010 and 2011, Direct Energy lost over 60,000 water heater rental contracts. The distribution of the brochure also depreciated the goodwill attached to Direct Energy’s trademark. The Court directed a reference with respect to the quantification and computation of monetary damages sustained by the Direct Energy. No decision on damages has been released to date – stay tuned.

The Court enjoined National Energy from further distribution of the brochure, but did not order a newspaper retraction, holding that too much time had passed for the retraction to be of benefit to the public.

The decision is under appeal.

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Jennifer McKenzie Jennifer McKenzie
B.A. (Hons.), LL.B.
416.957.1628  email Jennifer McKenzie