A recent Supreme Court of Canada decision may give advertising and promotion execs pause the next time they come up with a witty or coy campaign.
“I think the Supreme Court’s intention is to protect the vulnerable consumer but my view is this decision sets the bar awfully low and raises a number of issues for sophisticated advertisers that choose to use sarcastic, ironic, or obvious exaggeration. Marketing departments may need to be reined in a little bit now” says Mark Hayes of Hayes eLaw LLP, adding it could serve as a trigger for other consumers to launch class actions.
“In this case, even though the amount awarded was relatively small, and it was one individual, you may see class action plaintiffs getting involved in cases like this now,” says Hayes.
The case goes back to August 1999 when Jean Marc Richard, a francophone living in Quebec, received a letter written in English only with the wording: “OUR SWEEPSTAKES RESULTS ARE NOW FINAL: MR JEAN MARC RICHARD HAS WON A CASH PRIZE OF $833,337!”
However, in fine print, the document made it clear that “If you have and return the Grand Prize winning entry in time and correctly answer a skill testing question, we will officially announce that…” Richard would win the grand prize.
After reading the document and consulting with others, Richard concluded he had won the grand prize and sent off his entry along with a subscription to Time Magazine. After waiting for his prize cheque, Richard contacted Time and was told the document was simply an offer to enter a sweepstakes, and he had not won the grand prize.
Time explained the documents were merely an invitation to participate in the sweepstake and that he could win only if he had received the “Grand Prize Winning Entry” (which was not the case) and had returned it in time. Richard brought an action in damages against Time alleging breach of contractual obligations and violations of the Consumer Protection Act. The trial judge said the general impression an average consumer would have from the document was that the recipient had won a large prize, which was not necessarily the case.
The trial judge determined Richard was entitled to damages for “moral injuries,” assessed at $1,000 and ordered punitive damages of $100,000, based in part on the desire to discourage misleading advertising and the fact Time had sent unilingual English advertisements to many francophone Quebec residents in violation of Quebec’s language law.
The Quebec Court of Appeal overturned the trial decision and dismissed Richard’s action. Critical in the Court of Appeal’s decision was its finding that the misleading nature of a consumer advertisement should be assessed on the basis of a consumer having “an average level of intelligence, skepticism, and curiosity.”
The Supreme Court overturned the appeal decision and restored the trial judgment, although it reduced the punitive damages award to $15,000.
It found that a commercial advertisement had to be assessed by first looking at the “general impression that the representation is likely to convey to a credulous and inexperienced consumer” and then determine whether that general impression is “true to reality.” If not, then the advertiser has engaged in a “prohibited practice” within the meaning of the Quebec statute. The court also found the advertiser does not have to be shown to have intended to mislead consumers and that there is an “absolute presumption of prejudice to the consumer” where there has been a breach of the act.
In its decision the court said: “A court asked to assess the veracity of a commercial representation must therefore engage, under s. 218 C.P.A., in a two-step analysis that involves — having regard, provided that the representation lends itself to such an analysis, to the literal meaning of the words used by the merchant — (1) describing the general impression that the representation is likely to convey to a credulous and inexperienced consumer; and (2) determining whether that general impression is true to reality. If the answer at the second step is no, the merchant has engaged in a prohibited practice.”
Hayes points out that all Canadian provinces have consumer protection legislation prohibiting misleading advertising. In addition, the federal Competition Act allows for quasi-criminal charges to be brought against a business for misleading advertising.
He says in light of Time, advertisers will need to be wary about using over-the-top advertising claims that could be believed to be factual by a “credulous and inexperienced consumer.”
As Cassels Brock & Blackwell LLP lawyers Imran Ahmad and Chris Hersh point out in an article about the ruling, its practical implications are:
“1) Consumers are viewed as unsophisticated and vulnerable — the general impression test is based on the likely reaction of a relatively unsophisticated consumer and a level of knowledge or diligence cannot be assumed;
“2) First impressions count — as in life, you only get one chance to make a general impression;
“3) Size and layout matter — disclaimers or conditions will be ineffective if they are not sufficiently prominent.”
And Hayes notes: “The Supreme Court has essentially said that in determining the average person we don’t look at the average man on a Clapham omnibus. I heard one person joke that perhaps we now should rather consider the person who missed the Clapham bus. This was intended to protect vulnerable consumers but my view is that it sets the bar awfully low.”