May 20, 2020
By Jennifer McKenzie
The toll of the economic and health crisis is profound and everyone is looking for some optimism in the form of a treatment or cure for the COVID-19 virus. People are fearful and thus especially vulnerable, and many regulators have said that they will vigorously enforce against false or misleading claims relating to the COVID-19 virus.
For example, on May 6, 2020, the Competition Bureau issued a press release warning businesses against false or misleading claims that their products and services can treat, prevent or cure the COVID-19 virus.
The Bureau stated that it is actively monitoring the marketplace and has already issued compliance warnings to businesses, including a major national retailer in British Columbia, Alberta, Saskatchewan, Ontario, Québec and New Brunswick to stop potentially deceptive claims. These claims included that herbal remedies and vitamins can prevent COVID-19 infections and that certain air sterilization systems can kill or filter the virus.
The Competition Act prohibits the making of false or misleading claims to promote a product, service or business interest. It also prohibits the making of unsubstantiated product claims. Section 74.01 (1) states:
A person engages in a reviewable conduct, who, for the purpose of promoting, directly or indirectly, the supply or use of a product or for the purpose of promoting, directly or indirectly, the supply or use of a product or for the purpose of promoting, directly or indirectly, any business interest, by any means whatever,
(b) makes a representation to the public in the form of a statement, warranty or guarantee of the performance, efficacy or length of life of a product that is not based on an adequate and proper test thereof, the proof of which lies on the person making the misrepresentation [emphasis added]
The Competition Act does not define what constitutes an “adequate and proper” test. Rather, the determination of whether a test is “adequate and proper” is made on a case by case basis following the consideration of such factors as the scope and nature of the claim, and whether the relevant industry gives any guidance on the manner of testing a particular product. The Competition Act does make it clear, however, that the testing must be completed prior to the representation being made and the onus of proving the adequacy and propriety of the test rests with the advertiser.
Previously, the Competition Bureau has stated that, where tests have been done, performance claims that raise an issue under the Competition Act most commonly fall into two broad categories: those that are inappropriate in the context of the actual tests that were conducted; and those that are based on poorly designed test methodologies.
The wording of the claim must crafted to carefully align with the test data. Insight can be gained from historical and more recent cases where advertisers failed to substantiate claims because the testing was found to be inappropriate for the claim made. For example, in R. v. Bristol-Myers of Canada Limited, the court concluded that the claim, “Fleecy in the rinse softens right through the wash for three times more softness than any dryer product…” was not supported by an adequate and proper test. Bristol-Myers relied on panels of consumers who were asked to compare the softness of fabrics washed with varying amounts of fabric softener. Consumers reported that fabrics washed with the recommended amount of the FLEECY fabric softener were softer than fabrics treated with three times the recommended amount of the competing fabric softeners. The court acknowledged that although the qualitative consumer testing was the only means of measuring “softness”, it could not be used to support a quantitative claim. A more appropriate claim would have been limited to a qualitative statement that that fabric treated with FLEECY fabric softener "feels softer" than the other brands.
In another case, R. v. Remington Products (Canada) Inc., the court concluded that the testing by Remington Products (Canada) Inc. was inadequate to support the claim that its shaver “shaves closer than any other brand”. Remington had conducted testing against all major competitors, which constituted approximately 70% of the shaver market in Canada. Although the testing yielded statistically significant results concerning the closeness of the shave with the Remington shaver relative to the major competitor brands, it was inadequate in the context of the claim, which suggested that the Remington shaver shaved closer than any, and therefore all, other brands of shavers in Canada.
More recently, The Commissioner of Competition v Chatr Wireless Inc., the Competition Bureau brought an application against one of Canada’s largest telecommunication companies, Rogers Communications Inc, and its wholly owned subsidiary, Chatr Wireless Inc., in connection with claims that the discount wireless carrier Chatr had “fewer dropped calls than new wireless carriers”, and that new subscribers would have “no worries about dropped calls”. The Ontario Superior Court made a partial finding against Rogers and Chatr, concluding that, although the manner of pre-ad testing was appropriate for the claims made, Rogers and Chatr only tested against competitors in some major cities but not all before making the claims. Despite the fact that the “fewer dropped calls” claim was subsequently proven to be true, the court imposed an aggravated administrative penalty of $500,000, because the market was exposed to the risk that the untested performance claim was false in those cities where there was no pre-ad testing.
The Bureau’s press release followed an April 2, 2020 advisory from Jani Yates, the President of Ad Standards whose own Canadian Code of Advertising Standards mirrors Section 74.01(b) of the Competition Act. For example, Clause 1(e) of the Code states:
All advertising claims and representations must be supported by competent and reliable evidence, which the advertiser will disclose to Ad Standards upon its request. If the support on which an advertised claim or representation depends is test or survey data, such data must be reasonably competent and reliable, reflecting accepted principles of research design and execution that characterize the current state of the art. At the same time, however, such research should be economically and technically feasible, with regard to the various costs of doing business.
With respect to products such as drugs (hard surface disinfectants), natural health products (hand sanitizers depending on composition) and medical devices (COVID-19 test kits), the allowable claims are set by the market authorization granted by Health Canada. Health Canada has issued mechanisms to fast-track the approval of such healthcare products for importation and sale in Canada, such as an Interim Order Respecting the Importation and Sale of Medical Devices for Use in Relation to COVID-19. However, this does not mean there is a liberalization of allowable claims or the evidence supporting such claims.
Taking the press release, advisory and cases, there are a number of factors that determine whether testing is adequate and proper. For example:
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