To Disclaim or Not and How? Very Big Questions. A Primer for Marketers

To Disclaim or Not and How?
Very Big Questions!*
* A Primer for Marketers

Bill Hearn, Davis LLP
Hubert Sibre, Davis LLP
Rafe Engle, R.S. Engle Professional Corporation
Janet Feasby, Advertising Standards Canada

June 12, 2012

Trends & Topics Seminar Series – June 12, 2012

Overview
• What’s a disclaimer? Why and how are they used in
advertising?
• When do disclaimers cause problems? What are the
costs?


Overview
• What are the rules for properly using disclaimers?
 under federal statutes (like the Competition Act)
 as enforced by federal regulators (like the Competition
Bureau)
 as interpreted by Canadian courts
 as administered by ASC


Overview
• What did the Supreme Court of Canada recently say
about disclaimers in Richard v. Time?
• Some conclusions and a discussion of disclaimers in
action


Disclaimers are commonplace but should
not be an afterthought

Truth Works!
• Tell the Truth: Honesty Is Your Most Powerful Marketing
Tool, Sue Unerman and Jonathan Baskin
• Extreme Trust: Honesty as a Competitive Advantage,
Don Pepper and Martha Rogers, Ph.D.


Disclaimers should be top of mind for
marketers
• In June 2011, Bell Canada voluntarily paid a $10 million AMP in a
consent agreement following an investigation and allegations by
the Competition Bureau that, despite the disclaimers in Bell’s ads,
the general impression created by these ads was deceptive
contrary to the false and misleading advertising provisions of the
Competition Act
• In October 2011, Canada’s Commissioner of Competition Melanie
Aitken warned in a speech to competition lawyers that: “Including
a fine‐print disclaimer is no licence to advertise prices that are not
available … We are investigating several industries where we are
concerned that Canadians have been taken advantage of, in this or
related ways. All I can say at this point is: stay tuned”


Disclaimers should be top for mind for
marketers
In February 2012, the Supreme Court of Canada in Jean‐Marc Richard v. Time
Inc. ignored disclaimers that were “inconspicuous” and “buried in a sea of
text” (lowering the bar for deceptive advertising and moving from a “buyer
beware” to a “seller beware” standard).  The highest court in the land
• expressly rejected the standards of
 the consumer with an average level of intelligence, skepticism and curiosity  and
 the careful and diligent consumer;  and
• applied the standards of
 the credulous and inexperienced consumer – i.e., someone who is not particularly
experienced at detecting falsehoods and subtleties found in commercial
representations,  and
 the ordinary hurried purchaser – i.e., not the person who never notices anything
but the person who takes no more than ordinary care to observe that which is
staring them in the face


Why thinking like a comedian might help with
legal compliance


Disclaimers – What, Why and How
• Dictionaries define a disclaimer as a renunciation or
denial – a statement that negates or limits in some way*
*Marketers should not use a disclaimer to negate the main message of an ad
• Marketers often make use of disclaimers in ads to
disclose important information that is required by law or
is necessary for the reader to better understand the ad
• This is commonly done by marking the headline with an
asterisk signaling to the reader that a footnote to the
headline is to be found elsewhere in the ad


Disclaimers – What, Why and How
• Disclaimers often serve a useful purpose and are usually
necessitated by the complexity of the offers being
advertised, by space restrictions in the ad medium being
used, and/or by financial constraints – e.g., there are
different compliance challenges for mobile marketing vs.
outdoor advertising
• In most cases, the text that is asterisked is the main
message and is in large easy‐to‐read print
• A disclaimer that properly adds information is not a
problem so long as the ad, taken as a whole, is not
materially deceptive


Disclaimers – Problems
• Problems arise when the asterisk refers to important
information which may negate or otherwise limit the
plain meaning of the main message
• Disclaimers that restrict rather than expand upon, or
contradict rather than clarify, the main message
usually raise legal concerns about deceptive
advertising


Disclaimers – Costs
• Costs to business and brand include loss of consumer
trust and bad PR associated with deceptive advertising
• Federal regulators (such as the Competition Bureau)
may take enforcement action and impose substantial
fines and jail terms
• Provincial regulators (in specialized areas such as
OMVIC for Ontario motor vehicle dealers and MTCU for
Ontario private career colleges) may take enforcement
action and impose sanctions including fines and
revocation of marketers’ licenses/registrations


Disclaimers – Costs
• ASC may seek compliance in response to consumer
and/or competitor complaints
• Competitors (especially where comparative claims are
being made and deceptively disclaimed) may seek
injunctive relief and/or substantial damages in private
court actions
• Consumers (as individuals and, more troubling, as a
class) may seek substantial damages in private court
actions


Disclaimers – Rules for Proper Use
Federal Ad Laws of General Application under
Competition Act*
The basic rule prohibiting deceptive advertising is whether
the general impression created by the ad is false or
misleading in a material respect
* There are numerous federal ad laws that apply to specific
products (e.g., food, drugs and pesticides) that are enforced by
specialized regulators


Federal Ad Laws of General Application under
Competition Act
•This basic rule raises many questions, including
 What level of consumer sophistication may marketers
assume?
 What is the general impression created? Is it materially false
and misleading or not?
 What is the impression without the disclaimer? Will the
disclaimer actually be noticed? Is the “main message” so
strong that the disclaimer can’t alter it?
•You can’t use disclaimers like you would defined terms in a
contract


Some Guidance from the Competition Bureau
• Use of Disclaimers, Misleading Advertising Bulletin, 1986
• Asterisks, Disclaimers and Other Fine Print, Misleading
Advertising Bulletin, 1990
• Application of the Competition Act to Representations on
the Internet, Enforcement Guidelines, 2003 (updated 2009)
 Section on disclaimers with principles applicable to offline
ads too
• Remarks By Commissioner of Competition, CBA
Conference, 2011


Bureau’s 1986 Bulletin
• Disclaimers may properly clarify ambiguity or provide
qualification
• Main body of advertisement apart from the disclaimer
should be capable of standing alone
• It is unlikely that a disclaimer can change the general
impression of a misleading advertisement


• A practical well‐written summary
• Concludes with following observation:
“Advertisers considering using disclaimers and other fine print should ask
themselves the following questions: (1) Were there any footnotes in this
article? (2) Did you bother to read them? and (3) Do you remember what
they said?”

• Surprisingly, this article is not available on Bureau’s
website


• Covers print, television and radio advertising and addresses:
 Disclaimer content, placement and format
 Use and placement of symbols
 Size of fine print
• Not sufficient for disclaimer to be present – disclaimer must be
likely to be read and likely to alter the general impression
 On TV, need to keep disclaimer on screen long enough to read and
comprehend in one normal viewing
 When determining appropriate size of text for disclaimer, should
take context of ad and nature of target audience into account
 The 7‐point‐font rule in 6 point font:
“It is the [Bureau’s] position that disclaimers in print size smaller than 7 points will not save a representation from being misleading … At the same time, this should not be taken to mean that disclaimers in 7 point
or larger sizes will be sufficient to affect the general impression in every case. This determination depends on the circumstances of each case.”


Disclaimers – This is 7 point font
This product is meant for educational purposes only. Any resemblance to real persons, living or dead is purely coincidental. Void where prohibited. Some assembly required. List each check
separately by bank number. Batteries not included. Contents may settle during shipment. Use only as directed. No other warranty expressed or implied. Do not use while operating a motor vehicle
or heavy equipment. Postage will be paid by addressee. Subject to CAB approval. This is not an offer to sell securities. Apply only to affected area. May be too intense for some viewers. Do not
stamp. Use other side for additional listings. For recreational use only. Do not disturb. All models over 18 years of age. If condition persists, consult your physician. No user‐serviceable parts inside.
Freshest if eaten before date on carton. Subject to change without notice. Times approximate. Simulated picture. No postage necessary if mailed in the United States. Breaking seal constitutes
acceptance of agreement. For off‐road use only. As seen on TV. One size fits all. Many suitcases look alike. Contains a substantial amount of non‐tobacco ingredients. Colors may, in time, fade. We
have sent the forms which seem right for you. Slippery when wet. For office use only. Not affiliated with the American Red Cross. Drop in any mailbox. Edited for television. Keep cool. process
promptly. Post office will not deliver without postage. List was current at time of printing. Return to sender, no forwarding order on file, unable to forward. Not responsible for direct, indirect,
incidental or consequential damages resulting from any defect, error or failure to perform. At participating locations only. Not the Beatles. Penalty for private use. See label for sequence. Substantial
penalty for early withdrawal. Do not write below this line. Falling rock. Lost ticket pays maximum rate. Your canceled check is your receipt. Add toner. Place stamp here. Avoid contact with skin.
Sanitized for your protection. Be sure each item is properly endorsed. Sign here without admitting guilt. Slightly higher west of the Mississippi. Employees and their families are not eligible.
Beware of dog. Contestants have been briefed on some questions before the show. Limited time offer, call now to ensure prompt delivery. You must be present to win. No passes accepted for this
engagement. No purchase necessary. Processed at location stamped in code at top of carton. Shading within a garment may occur. Use only in a well‐ventilated are. Keep away from fire or flames.
Replace with same type. Approved for veterans. Booths for two or more. Check here if tax deductible. Some equipment shown is optional. Price does not include taxes. No Canadian coins. Not
recommended for children. Prerecorded for this time zone. Reproduction strictly prohibited. No solicitors. No alcohol, dogs or horses. No anchovies unless otherwise specified. Restaurant package,
not for resale. List at least two alternate dates. First pull up, then pull down. Call toll free before digging. Driver does not carry cash. Some of the trademarks mentioned in this product appear for
identification purposes only. Record additional transactions on back of previous stub. Unix is a registeredtrademark of AT&T. Do not fold, spindle or mutilate. No transfers issued until the bus
comes to a complete stop. Package sold by weight, not volume. Your mileage may vary. This article does not reflect the thoughts or opinions of either myself, my company, my friends, or my cat.
Donʹt quote me on that. Donʹt quote me on anything. All rights reserved. You may distribute this article freely but you may not make a profit from it. Terms are subject to change without notice.
Illustrations are slightly enlarged to show detail. Any resemblance to actual persons, living or dead, is unintentional and purely coincidental. Do not remove this disclaimer under penalty of law.
Hand wash only, tumble dry on low heat. Do not bend, fold, mutilate, or spindle. No substitutions allowed. For a limited time only. This article is void where prohibited, taxed, or otherwise
restricted. Caveat emptor. Article is provided ʺas isʺ without any warranties. Reader assumes full responsibility. An equal opportunity article. No shoes, no shirt, no articles. quantities are limited
while supplies last. If any defects are discovered, do not attempt to read them yourself, but return to an authorized service center. Read at your own risk. Parental advisory ‐ explicit lyrics. Text may
contain explicit materials some readers may find objectionable, parental guidance is advised. Keep away from sunlight. Keep away from pets and small children. Limit one‐per‐family please. No
money down. No purchase necessary. You need not be present to win. Some assembly required. Batteries not included. Instructions are included. Action figures sold separately. No preservatives
added. Slippery when wet. Safety goggles may be required during use. Sealed for your protection, do not read if safety seal is broken. Call before you dig. Not liable for damages arising from use or
misuse. For external use only. If rash, irritation, redness, or swelling develops, discontinue reading. Read only with proper ventilation. Avoid extreme temperatures and store in a cool dry place.
Keep away from open flames. Avoid contact with eyes and skin and avoid inhaling fumes. Do not puncture, incinerate, or store above 120 degrees Fahrenheit. Do not place near a flammable or
magnetic source. Smoking this article could be hazardous to your health. The best safeguard, second only to abstinence, is the use of a condom. No salt, MSG, artificial color or flavoring added. If
ingested, do not induce vomiting, and if symptoms persist, consult a physician. Warning: Pregnant women, the elderly, and children should avoid prolonged exposure to Happy Fun Ball. Caution:
Happy FUn Ball may suddenly accelerate to dangerous speeds. Happy Fun Ball contains a liquid core, which if exposed due to rupture should not be touched, inhaled, or looked at. Do not use
Happy Fun Ball on concrete. Discontinute use of Happy Fun Ball if any of the following occurs: Itching, Vertigo, Dizziness, Tingling in extremities, Loss of balance or coordination, Slurred speech,
Temporary blindness, Profuse Sweating, or Heart palpitations. If Happy Fun Ball begins to


smoke, get away immediately. Seek shelter and cover head. Happy Fun Ball may stick to certain types of skin. When not in use, Happy Fun Ball should be returned to its special container and kept
under refrigeration. Failure to do so relieves the makers of Happy Fun Ball, Wacky Products Incorporated, and itʹs parent company, Global Chemical Unlimited, of any and all liability. Ingredients
of Happy Fun Ball include an unknown glowing substance which fell to Earth, presumably from outer space. Do not taunt Happy Fun Ball. May cause any of the aforementioned effects and/or
death. Articles are ribbed for your pleasure. Possible penalties for early withdrawal. Offer valid only at participating sites. Slightly higher west of the Rockies. Allow four to six weeks for delivery.
Must be 18 to read. Disclaimer does not cover misuse, accident, lightning, flood, tornado, tsunami, volcanic eruption, earthquake, hurricanes and other Acts of God, neglect, damage from improper
reading, incorrect line voltage, improper or unauthorized reading, broken antenna or marred cabinet, missing or altered serial numbers, electromagnetic radiation from nuclear blasts, sonic boom
vibrations, customer adjustments that are not covered in this list, and incidents owing to an airplane crash, ship sinking or taking on water, motor vehicle crashing, dropping the item, falling rocks,
leaky roof, broken glass, mud slides, forest fire, or projectile (which can include, but not be limited to, arrows, bullets, shot, BBʹs, shrapnel, lasers, napalm, torpedoes, or emissions of X‐rays, Alpha,
Beta and Gamma rays, knives, stones, etc.). Seek help immediately if you are actually reading this! This product is meant for educational purposes only. Any resemblance to real persons, living or
dead is purely coincidental. Void where prohibited. Some assembly required. List each check separately by bank number. Batteries not included. Contents may settle during shipment. Use only as
directed. No other warranty expressed or implied. Do not use while operating a motor vehicle or heavy equipment. Postage will be paid by addressee. Subject to CAB approval. This is not an offer
to sell securities. Apply only to affected area. May be too intense for some viewers. Do not stamp. Use other side for additional listings. For recreational use only. Do not disturb. All models over 18
years of age. If condition persists, consult your physician. No user‐serviceable parts inside. Freshest if eaten before date on carton. Subject to change without notice. Times approximate. Simulated
picture. No postage necessary if mailed in the United States. Breaking seal constitutes acceptance of agreement. For off‐road use only. As seen on TV. One size fits all. Many suitcases look alike.
Contains a substantial amount of non‐tobacco ingredients. Colors may, in time, fade. We have sent the forms which seem right for you. Slippery when wet. For office use only. Not affiliated with
the American Red Cross. Drop in any mailbox. Edited for television. Keep cool. process promptly. Post office will not deliver without postage. List was current at time of printing. Return to sender,
no forwarding order on file, unable to forward. Not responsible for direct, indirect, incidental or consequential damages resulting from any defect, error or failure to perform. At participating
locations only. Not the Beatles. Penalty for private use. See label for sequence. Substantial penalty for early withdrawal. Do not write below this line. Falling rock. Lost ticket pays maximum rate.
Your canceled check is your receipt. Add toner. Place stamp here. Avoid contact with skin. Sanitized for your protection. Be sure each item is properly endorsed. Sign here without admitting guilt.
Slightly higher west of the Mississippi. Employees and their families are not eligible. Beware of dog. Contestants have been briefed on some questions before the show. Limited time offer, call now
to ensure prompt delivery. You must be present to win. No passes accepted for this engagement. No purchase necessary. Processed at location stamped in code at top of carton. Shading within a
garment may occur. Use only in a well‐ventilated are. Keep away from fire or flames. Replace with same type. Approved for veterans. Booths for two or more. Check here if tax deductible. Some
equipment shown is optional. Price does not include taxes. No Canadian coins. Not recommended for children. Prerecorded for this time zone. Reproduction strictly prohibited. No solicitors. No
alcohol, dogs or horses. No anchovies unless otherwise specified. Restaurant package, not for resale. List at least two alternate dates. First pull up, then pull down. Call toll free before digging.
Driver does not carry cash. Some of the trademarks mentioned in this product appear for identification purposes only. Record additional transactions on back of previous stub. Unix is a
registeredtrademark of AT&T. Do not fold, spindle or mutilate. No transfers issued until the bus comes to a complete stop. Package sold by weight, not volume. Your mileage may vary. This article
does not reflect the thoughts or opinions of either myself, my company, my friends, or my cat. Donʹt quote me on that. Donʹt quote me on anything. All rights reserved. You may distribute this
article freely but you may not make a profit from it. Terms are subject to change without notice. Illustrations are slightly enlarged to show detail. Any resemblance to actual persons, living or dead,
is unintentional and purely coincidental. Do not remove this disclaimer under penalty of law. Hand wash only, tumble dry on low heat. Do not bend, fold, mutilate, or spindle. No substitutions
allowed. For a limited time only. This article is void where prohibited, taxed, or otherwise restricted. Caveat emptor. Article is provided ʺas isʺ without any warranties. Reader assumes full
responsibility. An equal opportunity article. No shoes, no shirt, no articles. quantities are limited while supplies last. If any defects are discovered, do not attempt to read them yourself, but return
to an authorized service center. Read at your own risk. Parental advisory ‐ explicit lyrics. Text may contain explicit materials some readers may find objectionable, parental guidance is advised.
Keep away from sunlight. Keep away from pets and small children. Limit one‐per‐family



do not attempt to read them yourself, but return to an authorized service center. Read at your own risk. Parental advisory ‐ explicit lyrics. Text may contain explicit materials some readers may find
objectionable, parental guidance is advised. Keep away from sunlight. Keep away from pets and small children. Limit one‐per‐family please. No money down. No purchase necessary. You need
not be present to win. Some assembly required. Batteries not included. Instructions are included. Action figures sold separately. No preservatives added. Slippery when wet. Safety goggles may be
required during use. Sealed for your protection, do not read if safety seal is broken. Call before you dig. Not liable for damages arising from use or misuse. For external use only. If rash, irritation,
redness, or swelling develops, discontinue reading. Read only with proper ventilation. Avoid extreme temperatures and store in a cool dry place. Keep away from open flames. Avoid contact with
eyes and skin and avoid inhaling fumes. Do not puncture, incinerate, or store above 120 degrees Fahrenheit. Do not place near a flammable or magnetic source. Smoking this article could be
hazardous to your health. The best safeguard, second only to abstinence, is the use of a condom. No salt, MSG, artificial color or flavoring added. If ingested, do not induce vomiting, and if
symptoms persist, consult a physician. Warning: Pregnant women, the elderly, and children should avoid prolonged exposure to Happy Fun Ball. Caution: Happy FUn Ball may suddenly
accelerate to dangerous speeds. Happy Fun Ball contains a liquid core, which if exposed due to rupture should not be touched, inhaled, or looked at. Do not use Happy Fun Ball on concrete.
Discontinute use of Happy Fun Ball if any of the following occurs: Itching, Vertigo, Dizziness, Tingling in extremities, Loss of balance or coordination, Slurred speech, Temporary blindness, Profuse
Sweating, or Heart palpitations. If Happy Fun Ball begins to smoke, get away immediately. Seek shelter and cover head. Happy Fun Ball may stick to certain types of skin. When not in use, Happy
FunBall should be returned to its special container and kept under refrigeration. Failure to do so relieves the makers of Happy Fun Ball, Wacky Products Incorporated, and itʹs parent company,
Global Chemical Unlimited, of any and all liability. Ingredients of Happy Fun Ball include an unknown glowing substance which fell to Earth, presumably from outer space. Happy Fun Ball has
been shipped to our troops in Saudi Arabia and is also being dropped by our warplanes on Iraq. Do not taunt Happy Fun Ball. May cause any of the aforementioned effects and/or death. Articles
are ribbed for your pleasure. Possible penalties for early withdrawal. Offer valid only at participating sites. Slightly higher west of the Rockies. Allow four to six weeks for delivery. Must be 18 to
read. Disclaimer does not cover misuse, accident, lightning, flood, tornado, tsunami, volcanic eruption, earthquake, hurricanes and other Acts of God, neglect, damage from improper reading,
incorrect line voltage, improper or unauthorized reading, broken antenna or marred cabinet, missing oraltered serial numbers, electromagnetic radiation from nuclear blasts, sonic boom vibrations,
customer adjustments that are not covered in this list, and incidents owing to an airplane crash, ship sinking or taking on water, motor vehicle crashing, dropping the item, falling rocks, leaky roof,
broken glass, mud slides, forest fire, or projectile (which can include, but not be limited to, arrows, bullets, shot, BBʹs, shrapnel, lasers, napalm,torpedoes, or emissions of X‐rays, Alpha, Beta and
Gamma rays, knives, stones, etc.). Other restrictions may apply.
This supersedes all previous notices.


Bureau’s Online Reps Enforcement Guidelines
(2003 & 2009)
• Relevant qualifying information must be presented in ads
clearly and conspicuously – consumer must receive clear
and accurate information to make an informed choice
• Disclaimers may expand upon and add information to the
main message
• A disclaimer can only qualify a representation; it cannot
cure or retract a false or misleading representation


(2003 & 2009)
• Generally the disclaimer should appear on the same
screen and close to the representation to which it relates
(but not always possible)
• Design of page should highlight the existence of
disclaimers (use of colour or contrast may assist)
• “See below for details” generally not explicit enough
(instead say “See below for restrictions on eligibility”)


(2003 & 2009)
• Attention‐grabbing tools should not distract a consumer’s
attention away from disclaimers
• Audio disclaimer may not be sufficient; if audio
disclaimers used, volume and cadence are important
• Visual disclaimers need to be displayed long enough to be
read and understood
• Consider making clicking through a disclaimer compulsory


(2003 & 2009)
• For “required disclosures” (such as contest rules and mini‐
rules) disclosures must be made in a way that they are
likely to be read
• What is considered adequately displayed will depend on
the format and design of the website
• Readers should not be required to take an “active step”
(such as sending an email or placing a phone call) – clicking
on a clearly labelled hyperlink is not considered by the
Bureau to be an active step


Commissioner Aitken’s CBA Speech, 2011
• “It’s very simple ‐ don’t mislead the public by hiding
charges or conditions in fine print.”
• “It’s pretty easy ‐ when a price is offered to consumers,
it better be accurate. Including a fine‐print disclaimer is
no license to advertise prices that are not available.”
• Is it really that simple and easy? Canadian courts have
struggled with disclaimers


Disclaimers – Rules for Proper Use What
Some Courts Have Said
R. v. Viceroy Construction Co. (1975) – “D” Ignored
• Catalogue for suburban houses
• Text and picture suggested two storey house
• Examination of specification sheet showed a one story
house
• Court held that “average person” would be fooled by
the ad


R. v. International Vacations Ltd. (1980) – “D” Upheld
• Advertisement published the full schedule of the carrier
• Disclaimer noted that individual flight availabilities had to
be checked
• Court held that disclaimer (warning of flights being sold
out) was effective
• The disclaimer was “an integral part of the
advertisement.”


Purolator v. UPS (1995) – “D” Upheld
• Disclaimers were right in the main text of ad – i.e., “Usually at
rates up to 40% less than other couriers charge”
• Court held that “A disclaimer does not automatically nullify a
misleading impression created by an ad. Its effect will depend
on several factors, including the degree to which a
representation misleads the public without the disclaimer, the
prominence which it is given in the context of the entire
advertisement, the degree of sophistication that the public to
whom the advertisement is directed exhibits, and the
likelihood that the audience would recognize the disclaimer.”


Maritime Travel Inc. v. Go Travel Direct.com Inc. (2009)
– “D” Ignored
• Claim was “Go Travel Direct offers vacations for less by
eliminating the travel agent and passing the savings on to you”
• Small print disclaimer that the price comparison was to one
destination on one date
• Disclaimer not sufficient to overcome the general impression
that prices were generally lower
• Contrast with 1980 International Vacations case


Disclaimers – Rules for Proper Use:
Bureau’s Enforcement Position
Commissioner of Competition v. Bell ‐ Consent Agreement (2011)
•Advertised prices were not actually available to anyone due to extra fees
•The Commissioner concluded that:
 consumers would be required to review disclaimers on the Respondents’
website or elsewhere to identify the additional fees for which consumers
were liable
 the disclaimers were in any event insufficient to alter the general
impression of the representations
•Consent Agreement required that Bell “make no price representation that
uses a disclaimer that contradicts the general impression of the
representation to which it relates”
•Bell paid AMP of $10 Million



THE NEW LEADING CASE

Richard v. Time, Supreme Court of Canada (2012)


Richard v. Time: How far can advertisers go


January 2011
Jean‐Marc Richard v. Time Inc.

• Hearing before Supreme Court in January 2011
Claim for US $833,337

• Claim for US $833,337


Jean-Marc Richard v. Time Inc.
• Introductory facts
 Richard receives « Sweepstakes Notification » in 1999
 The Sweepstakes says:
– « Our sweepstakes results are now final: Mr. Jean Marc Richard
has won a cash prize of $833,337.00!
– We are now authorized to pay $833,337.00 in cash to Mr. Jean
Marc Richard!
– A bank cheque for $833,337.00 is on its way to xxxx st!
– You will forfeit the entire $833,337.00 if you fail to respond to this
notice! »
• The justification from Time:
 « If you have and return the Grand Prize winning entry»


Judgment of Carole Cohen, j.c.s.

• No contract between Time and Richard to pay the
amount promised, but:
• Many infractions to the Consumer Protection Act –
Title II – illegal commercial practices
• $100,000 of punitive damages and $1,000 of
compensatory damages (moral damages)


Judgment of the Quebec Court of Appeal

• Reverses first instance judgment
• Confirms that the Consumer Protection Act applies to
the relationship between Time and Richard, whether
a contract exists or not
• Modifies definition of average consumer


Judgment of the Court of Appeal

Other subjects discussed
• Punitive damages under sec. 272 of the Act
• Obligations imposed by the Act
• Average consumer in relation with the criteria to
determine illegal practices
• Quantum
• Compensatory damages
• Legal costs


• To justify the reversal of the first instance decision, the
Quebec Court of Appeal states the following (translated)
« The average consumer is not more naive that the average
person. I imagine him to be of average intelligence, of average
scepticism and of average curiosity. »
• In addition, the Court of Appeal states: « He knows, I believe,
that advertisement is, somewhat by definition, boastful. »



Consequently, the criteria of the average consumer, as
compared to the traditional definition of an
inexperienced and credulous consumer, was
substantially modified by the Court of Appeal


Leave to appeal to the Supreme Court
of Canada

• The impact of the Court of Appeal judgment on the
definition of the average consumer
• Leave to appeal allowed


Hearing before the Supreme Court of
Canada

Two main subjects
• The average consumer as applied to advertising
• Quantum of punitive damages


Judgment of the Supreme Court of
Canada - February 2012

• Reversal of the judgment of the Quebec Court of Appeal
• History of consumer protection
• Review on prohibited practices
 General impression
 Abstract analysis


Judgment of the Supreme Court of Canada
On the subject of the average consumer:
• Advertising and consumer law must protect more that
simply the average – a credulous and inexperienced
consumer
• Average consumer is not particularly experienced at
detecting falsehoods and subtleties
• The document from Time was purposefully drafted to be
misleading
• Proof of contract between Richard and Time was necessary
(here it existed because Richard subscribed to Time
magazines)


Judgment of the Supreme Court of Canada
On the subject of punitive damages:
• Consumer Protection Act allows for punitive damages (Section
272 of the Act)
 Contract is needed (Sections 1e, 2 and 272 of the Act)
 Independence of the recourse in damages
• Criteria as established continues to apply
• Quantum must be dissuasive, but proof of capability of
impugned person must be made
• No need to consider the Charter of the French Language for
quantum
• Costs awarded in favour of Richard because of the importance
of the questions raised before the Court


Canadian Code of Advertising Standards
• Cornerstone of advertising self‐regulation
• Sets criteria for truthful and acceptable advertising
• Consumers’ complaints − Consumer Complaint
Procedure
• Disputes between advertisers − Advertising Dispute
Procedure


Clause 1: Accuracy and Clarity
• Ads must not make inaccurate or misleading claims
about a product/service
• General impression conveyed by an ad is important
in assessing truthfulness of a message
• Ads must not omit relevant information
• Details of an offer must be clearly stated
• All claims must be supportable


Canadian Code of Advertising Standards
• Consumers critically scrutinizing advertising.
• 2011 – misleading was top complaint issue.
• Rise in number of complaints re illegible supers in
automobile, telecommunications and financial
services commercials


Standards Council Decision
Internet Ad: Telecommunications Service Provider
“Unlimited” service advertised at a specified monthly price
Complaint:
Ad did not disclose important limitations on the service
Decision:
• “Unlimited” meant no limitations or restrictions, but in reality the
service was limited. Limitations were not found on the main page,
but elsewhere on the advertiser’s website. Limitations should have
been disclosed on the main page
• Ad found to contain an inaccurate claim and omitted relevant
information
Infraction: Clauses 1(a) and (b)


Standards Council Decision
Cosmetic Advertisements – 7 separate cases
Advertisements implied that the models’ very long eyelashes resulted
from using the advertised products
Complaints:
Depicted results could not have been achieved unless false lashes or
lash inserts were used in addition to the product
Decision:
The use of false eyelashes/inserts in mascara commercials is important
information that must be, but wasn’t, clearly communicated so that
viewers did not understand the basis for the depiction and claim
Infractions: Clauses 1(a) and (d)


Some Conclusions
• Marketers must take seriously the use of disclaimers;
given the consequences, they can’t be an afterthought

• Marketers must carefully think through the nature,
content, placement, format, size and prominence of
disclaimers


Some Conclusions

• Competition Bureau has been consistent in articulating
the principle that the disclaimer cannot contradict the
main message

• Canadian courts may not have been as consistent, but
now have rules from SCC decision in Richard v. Time

• One challenge is that it is always easy to discern what’s
a contradiction


Some Rules of Thumb

Disclaimers in ads should
• enlighten, not confuse consumers
• expand upon main message or clarify ambiguity
• not contradict or negate the main message
• be consistently placed and marked with symbols
throughout the ad
• be placed close to the main message to which it relates


A Discussion of Some Disclaimers
in Action - Likes & Dislikes


Disclaimers in Action


Q&A


Why thinking like a comedian might help with
legal compliance

• SNL’s “Happy Fun Ball” Spoof TV Commercial

Saturday Night Live ‐ Happy Fun Ball ‐ Video ‐ NBC.com

Happy Fun Ball (old SNL spoof commercial) ‐ YouTube

• What works and what doesn’t


Contact us

Bill Hearn Rafe Engle
Davis LLP R.S. Engle Professional Corporation
bhearn@davis.ca counsel@rsengle.ca

Hubert Sibre Janet Feasby
Davis LLP Advertising Standards Canada
hsibre@davis.ca janet.feasby@adstandards.com

To Disclaim or Not and How? Very Big Questions. A Primer for Marketers

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