Misleading Advertising and the Combines
Investigation Act*
Ronald I. Cohen**
Advertisements contain the only truths
to be relied on in a newspaper.
Thomas JEFFERSON
To protect his clients from being persuaded by persons
whom they do not know to enter into contracts which
they do not understand to purchase goods which they
do not want with money which they have not got.
Lord GREENE, M.R., on the function of a lawyer.
I. Introduction
1. Advertising: Some Preliminary Remarks
In the free world, advertising is big business, and perhaps
nowhere is it bigger business than in North America.
From twelve and a half billion dollars in 1962, advertising has
now grown to an eighteen billion dollar industry 1 in the United
States.2 This growth would seem to be confirmed by the fact that,
in the United States, almost one hundred new advertising agencies
were formed in the first seven months of 1969.3
* This article is an updated and expanded version of a portion of the Interim
Report on False Advertising in Canada submitted by the writer to the Canadian
Consumer Council in September 1969. In its present form, the article will
in
appear as a chapter of the full Report to be submitted to the Council
September, 1970.
** Of the Bar of the Province of Quebec.
lThere is at least a question whether the advertising business can properly
be called an industry at all. It certainly cannot ba described as a monolithir
industry with one set of problems which can be solved by one simple formula:
Ira M. Millstein, The Federal Trade Commission and False Advertising, (1064),
64 Colum. L. Rev. 439, at p. 440. This is particularly true in the case of the
subject-matter of this article.
Advertising is basically “an effective means of selling” and, as such, is
employed at all levels of industry, whether that of manufacturing, distributing,
wholesaling or retailing, and the means of coping with misleading advertising
perpetrated at each of these levels may be different.
2 Newsweek, Aug. 18, 1069, p. 62.
3 Ibid.
No. 4]
MISLEADING ADVERTISING
Although advertising expenditure is necessarily smaller in Canada,
it has enjoyed a considerable surge here as well, increasing by
128% absolutely between 1954 and 1965 and growing relatively as
a percentage of the gross national product from 1.60% in 1954 to
1.75% in 1965.4 It has been suggested that the rate of growth of
advertising expenditures in Canada has been decreasing, rather than
increasing, over the last several years and that promotional techniques
other than advertising have been growing significantly more quickly
over that period of time.5
More relevant, though, than the “bigness” of advertising is
its importance to North American society, to the producer or seller,
on the one hand, and to the consumer, on the other. Its meaning-
fulness on this continent may be underlined most easily by mentioning
the role which it plays and the rising level of importance which
it has begun to attain in the Soviet Union, a nation whose political
philosophy would seem to deny the relevance of an industry which
is taken as the very symbol of capitalist free enterprise. It has been
presumed there that a good product needs no advertising, but this
presumption now appears untrue for reasons outlined in the follow-
ing statement:
Thanks to well-organized advertising, the consumer can more rapidly find
the goods needed by him, purchase them with a smaller expenditure of
time, and select the goods according to his taste …. This function of
advertising not only reflects the new relation to the consumer, care about
the population, and its needs, but it also has important economic significance.
It creates the precondition for a more economic and rational use of material
goods which are created by society, and permits a more satisfied customer. 6
Even the presumption that a good product needs no advertising
is dying:
.. the latter supposition has been clobbered so hard in recent years by
overwhelming homegrown evidence to the contrary that it
is really on its
last legs. 7
It will be the purpose of this article to examine certain controls
which have been placed on this vast “industry” by a review of the
relevant legislative provisions of the Combines Investigation Acts
4 The latest year for which Dominion Bureau of Statistics figures are available.
D.B.S., Advertising Expenditures in Canada, 1965, p. 6. See also O.J. Firestone,
The Economic Implications of Advertising, (Toronto, 1967), pp. 34-38.
5 See Firestone, op. cit., pp. 7, 8 and 37.
6 D. Kurnin, Iz Opyta Sovetskoi Torgobloi Reklamy, Sovetskaia Torgovlia,
Feb., 1958, pp. 46-47, quoted in Marshall I. Goldman, Product Differentiation
and Advertising: Some Lessons from Soviet Experience, in Speaking of Adver-
tising, (Toronto, 1963), pp. 352-353.
7David Levy, Soviets Hike Capitalist Advertising, Montreal Star, July 26,
1969, p. 17, col. 1.
8R.S.C. 1952, c. 314.
McGILL LAW JOURNAL
[Vol. 15
and all of the cases decided in accordance with these enactments. 8a
Before entering into the heart of the discussions, this article will
discuss advertising and some of the problems which it raises as well
as the history and purpose of sections 33C and 33D of the Act.
2. Advertising: Definition and Problems
What then is advertising? To define it is probably more difficult
than to describe its raison d’6tre.
Its purpose is generally, of course, to sell something.9 One sells
in different ways at different levels of commercial activity, but the
basic motivation remains the same. Manufacturers who wish to
“push” a product and, ultimately, to take advantage of economies
of scale must attract the largest possible number of buyers to
achieve this end. 10 Some producers must use advertising defensively,
namely, to combat the growing strength of the retailer – particularly
the large department or chain store operation –
and to go “over
his head” directly to the consumer who, after all the alternatives
have been presented, must make his choice. Nor is that a welcome
prospect, for the consumer is a fickle being who indulges his every
fancy, sates his every curiosity and changes brands (and even
substitutes products) with relative ease.
To combat this danger the producer must not only communicate with potential
buyers. He must also persuade them that his product has a kind of uniqueness
which makes it one product which should not be subject to substitution by
other joroducts. If advertising can successfully perform this function it then
becomes possible for the seller to extend his use of advertising to help
create barriers to potential competitors. Once consumers are thoroughly
persuaded that the advertiser’s product is uniquely necessary to maximum
levels of satisfaction of particular kinds of need, competitors will have
much more difficulty entering that market. These factors account for the
powerful persuasive feature of advertising for many products, long after
the product has attained wide circulation and is known to virtually everyone.1 1
Sa Many of these. not hitherto reported, axe reproduced in
the “Unreported
Judgments” section of this number of the McGill Law Journal, infra, beginning
at p. 65,1. The texts have been provided by the Combines Branch of the Depart-
ment of Consumer and Corporate Affairs.
It
is hoped that these judgments will be of some interest and utility to the
reader who will now be able to refer to nearly all of the section 33C cases in
various accessible publications. Only a few decisions which are, in the opinion
of the writer, less meaningful have been omitted.
0 Some might argue that certain institutional advertising is intended as a
“donation” to the publications in which it appears, but the quantity of such
advertising is marginal and need not, for our purposes, be considered.
10 Or as the Report of the Royal Commission on Consumer Problems and
Inflation, (1,968),
(the “Prairie Report”) aptly put the matter: “Thus, the
producer must dispose of large and growing volumes of product if his enterprise
is to remain profitable.” (p. 247)
“Ibid., p. 249.
No. 4]
MISLEADING ADVERTISING
Retailers face simillar, or at least analogous, problems. The larger
and more aggressive retailers who aim at continually growing profits
must always attempt to increase income relative -to overhead, some-
thing which may generally be accomplished by augmenting volume.
This is also true to a lesser extent of smaller retailers who must
struggle to at least retain a share of the market if they are to survive.
The nature of advertising at this level of industry is, of course,
different. Its purpose is not so much to laud the virtues of the
product as to sell it by promoting its availability at the advertiser’s
place of business, the service which will accompany the goods into
the hands of the buyer or the special price at which the item may
be purchased. Emphasis on one or another of these points will vary
according to the quality of the retail outlet and the income level
of the group at which the advertisement is aimed. Into the broad
category of retailer must fall as well the ‘ promoter” who has no
business other than fleecing the public and who will use whatever
product or gimmick which allows him to accomplish this end.
In addition to taking advantage of economies of scale, it is only
fair to point out that advertising serves -additional purposes from
the point of view of the seller. He aims as well “to advise a
potential buyer of goods and services for sale, their quality, their
usefulness, their effectiveness, their availability, their price, and
all the other elements of information which may affect the buyer’s
decision to purchase the items advertised.” 12
From the point of view of the consumer, the purpose of advertising
is to provide him with information relating to the qualitative and
quantitative characteristics of the product which is being advertised.
Professor Travers has observed:
Although there are available other sources of information –
studies like Consumer Reports and neighborhood scuttlebutt, for instance –
most Americans rely upon advertising for their information about the
goods and services available. 12a
professonal
The Prairie Royal Commission has suggested five main services
which advertising provides to the consumer: information, acquaint-
ance with the variety of existing products, acquaintance with new
products and changes, pre-shopping accumulation of knowledge to
save time and to better arm the consumer with facts necessary to
the purchase, and acquaintance with claims of producers.’ 3
12 Firestone, op. cit., p. 1.
12a Arthur H. Travers, J., Foreword to Symposium: Federal Trade Commission
Regulation of Deceptive Advertising, (1969), 17 Kans. L. Rev. 551, at p. 554.
13 The Prairie Report, pp. 252-253.
McGILL LAW JOURNAL
[Vol. 15
By and large, though, one may draw the following useful dis-
tinction, namely, between the “informative” and “persuasive” aspects
of any advertisement.
The informative content brings to the attention of a potential buyer
the type of the commodity or service for gale, its quality, serviceability,
usefulness and price.
The persuasive content of an advertising message refers to that part
of the advertisement that attempts to translate latent wants on the part
of an individual into effective demand for a good or a service, encouraging
the prospective customer to purchase a specific product or service advertised.’ 4
For either the manufacturer or the retailer
to achieve his
purpose, he must promise something to the consumer and it is the
promise which,
if anything, is the product of the advertising
industry.15 Thus, the conflict between the seller and the buyer
becomes clear: the former must, within the bounds of truth, make
claims which will result in the maximum attraction of the buyer
to the product; while the latter wants as much relevant factual
information, without unnecessary or deceiving puffery, as possible.
It is evident that the promise may occur in either the informative
or the persuasive portions of any advertisement. It is far easier, of
course, to assess the veracity of a promise made in the former area,
and, morally speaking, it is no doubt true that the use of false or
misleading promises intended to be informative is more reprehensible
to the majority of people than the making of a promise which is
intended only to persuade.’ 6
In the United States, where advertising is regulated at the
federal level 17 under the Federal Trade Commission Act,’ 8 both
the informative and persuasive aspects of the content of any adver-
tisement may be questioned in virtue of section 5 which prohibits
“[u]nfair methods of competition in commerce and unfair or de-
ceptive acts or practices in commerce.”
In Canada, on the other hand, federal legislation until recently
dealt only with false information and then only insofar as it related
to misleading representations as to the ordinary price at which a
14 Firestone, -op. cit., pp. 2-3.
15 Millstein, loc. cit., p. 443.
16 This is not to say that both uses of the promise should not be controlled
but only that an untruthful statement as to the tar and nicotine content of a
cigarette, for example, will generally be more objectionable than an indication
that the smoking of that cigarette will raise one’s status in the eyes of the
opposite sex.
17 Most of the states have the old “Printer’s Ink Statute” which is largely
ineffective, but 29 of the states now have laws reaching most fraudulent
advertising practices and six of these have the “little F.T.C. Act” on the books.
1838 Stat. 717 (1014), 15 U.S.C. 41, 52 Stat. 11.1 (1 3B).
No. 4]
MISLEADING ADVERTISING
product is sold.’ 9 Even when the power of the federal government
to deal with misleading advertising was recently strengthened by
the passage of section 33D, 20 which is considerably broader in scope,
the Minister responsible for the administration of the section him-
self indicated 21 that the enforcement of the new provision would be
aimed at the following practices, all of which relate to the inform-
ative aspects of advertising:
1. A misleading statement of fact in an advertisement:
Example: “Below our cost” when the selling price is in fact higher
than the delivered price of the article to the retailer.
2. A statement of performance which is not supported by an adequate test:
Example: Rope advertised as “2,000 pound test” where no adequate
and proper test of the rope has been made.
3. Deceptive use of contests:
Example: “You are the lucky winner of our grand award” when
in fact the “award” was not exceptional in that many people received
the identical mailing piece.
4. “Free” offers that are not in fact free:
Example: Receipt of the “free” gift is contingent on the purchase
of another article or articles which could be purchased
through
conventional channels at lower prices.
5. “Bait-and-switch” operations where the item used as bait was not in
fact held for sale by the advertiser. This is the practice of advertising
an article at an exceptionally low price with the intention, not of selling
that article but of switching customers to other goods.
6. Contest purporting to award prizes where such prizes are not in fact
available:
Example: An advertiser announces planned distribution of $25,000
in prizes but in fact does not provide for the distribution of prizes.
7. The “stuffed flat”:
Example: An advertiser using the classified section purports to be
selling his household furniture whereas in fact he is selling goods
supplied from other sources.
8. “Clip-and-paste” solicitations:
Example: This is a direct mail device in which typically the customer
is invited to verify a listing in a directory but which when signed
and returned amounts to an order for which he may be invoiced.
9. Misrepresentation as to origin:
Example: A manufacturer encloses a foreign made article
display package marked “made in Canada”.
in a
10 Sec. W3C, the text of which is reproduced infra at p. 629.
20 Added by 17,18 Eliz. II, S.C. 19.68-69, sec. 116. It was proclaimed on July 31,
1969.
21 In his News Release of July 31, 11969.
McGILL LAW JOURNAL
[Vol. 15
II. The Law
1. The Combines Investigation Act
There are only two sections in the Combines Investigation Act
which deal with false advertising, namely, sections 33C and 33D,
the texts of which are as follows:
33C.
(1) Every one who, for the purpose of promoting the sale or use
of an article, makes any materially misleading representation to the public,
by any means whatever, concerning the price at which such or like articles
have been, are, or will be, ordinarily sold, is guilty of an offence punishable
on summary conviction.
(2) Subsection (1) does not apply to a person who publishes an
advertisement that he accepts in good faith for publication in the ordinary
course of his business.
33D.
(1) Every one who publishes or causes to be published an advertise-
ment containing a statement that purports to be a statement of fact but that
is untrue, deceptive or misleading or is intentionally so worded or arranged
is deceptive or misleading, is guilty of an indictable offence and is
that it
liable to imprisonment for five years, if the advertisement
is published
to promote, directly or indirectly, the sale or disposal of property
. (a)
or any interest therein, or
to promote a business or commercial interest.
(b)
(2) Every one who publishes or causes
to be published
in an
advertisement a statement or guarantee of the performance, efficacy or
length of life of anything that is not based upon an adequate and proper
test of that thing, the proof of which lies upon the accused,
if the
advertisement is published to promote, directly or indirectly, the sale or
disposal of that thing, guilty of an offence punishable on summary conviction.
(3) Subsections (1) and (2) do not apply to a person who publishes
an advertisement that he accepts in good faith for publication in the ordinary
course of his business.
is,
(4) For the purposes of subsection (2), a test that is made by the
National Research Council of Canada or by any other public department is an
adequate and proper test, but no reference shall be made in an advertisement
to indicate that a test has been made by the National Research Council or
other public department unless the advertisement has, before publication,
been approved and permission to publish it has been given in writing by
the President of the National Research Council or by the deputy head of
the public department, as the case may be.
(5) Nothing in subsection (4) shall be deemed to exclude, for the
purposes of this section, any other adequate or proper test.
Section 33C is itself a relatively new section, having only been
added to the combines legislation in Canada in 1960.2 The curious
thing about this provision in the Act is that it is the only offence
in the Combines Investigation Act (except, of course, for certain
22 8-9 Eliz. H, S.C. 1960, c. 45, sec. 13.
No. 4″]
MISLEADING ADVERTISING
of the new offences created by section 33D) which is punishable on
summary conviction and not by indictment. 23
The reason for the insertion of the provision has been stated
by Mr. David Henry, the Director of Investigation and Research,
in the following terms:
This provision was inserted after the combines branch had a number of
cases brought to its attention where a vendor, in order to make it appear
that the price at which he was offering an article was more favourable
than was actually the case, misrepresented the price at which the article
was ordinarily sold in the market generally. Besides being dishonest and
likely to mislead the buying public, this kind of tactics was regarded as
unfair as a basis of competition. 24
As he pointed out elsewhere, the section had also the purpose
“to inhibit a form of fraud on the public arising out of attempts
on the part of sellers to overstate the extent of the bargain to be
had if the purchaser will buy at the seller’s advertised price.” 2r
The intention of the section is clearly not to inhibit price competition
“but merely to protect the public from being misled as to the extent
of the bargain advertised when reliance is placed on the word of
the seller as to the ordinary price at which the goods are sold.” 2c
The judges deciding cases under section 33C have also from time
to time expressed their opinions as to the reason for the insertion
of this section in the Act. It has, for example, been held that the
section “is based on protecting a gullible and often stupid public
who rely in the good faith of merchandisers, a reliance often mis-
placed.” 27 Another magistrate has held that the purpose behind the
section is “to protect the unthinking little man, who hasn’t the
advantage or access to every manufacturer’s price lists and tends
to believe what he sees written in a newspaper. That man may
well be subject to more abuse by comments like this, and this
is the concern, I take it, which is behind the section.” 28 Mr. Justice
23 This, of course, does have a beneficial result. The proceedings must be
instituted within six months of the date of the commission of the offence (sec.
693 (2) Cr. C.) and the formality of submitting a Statement of Evidence to the
Restrictive Trade Practices Commission for a Report is thus necessarily averted.
Evidence in sec. 33C cases is referred directly to the Attorney-General of Canada
for action pursuant to sec. 15 of the Act.
24 Address to the 64th Annual General Meeting of the Proprietary Association
of Canada, Sept. 26, 1960, p. ia See also Mr. Henry’s Address to the Conference
on Combines Legislation, Canadian Manufacturers’ Association, Jan. 10, 1961, p. 4.
25Address to the New York State Bar Association, Anti-Trust Law Section,
Jan. 30, 1064, p. 33.
2 0 Address to the Executive Seminar, School of Business, University of Toronto,
June 18, 1962, p. 17.
27 Sherwood, J., in R. V. Colonial Furniture Company (Ottawa) Limited,
2
8 Enns, J., in R. v. Miller’s T.V. Ltd., (1,968), 56 C.P.R. 237, at pp. 241-242.
(1962), 15 McGill L.J. 651.
MoGILL LAW JOURNAL
[Vl. 15
Pothier of the Quebec Superior Court has given the following
specific example:
It seems obvious that the public, on learning that an article has been or
is being sold at the price of $54 and that it can be had for the sum of
to buy it. This
$27, will be interested by the bargain and encouraged
is precisely the situation which the legislator intended to present when
representation proves to be false. 29
Generally and simply, it has been stated that the section “is
designed to provide consumer protection by establishing as an offence
in relation to trade any misrepresentation as to the regular price
of an article.” 30 Solomon, Co. Ct. J., has observed that the section
was “passed to regulate merchandising in our free enterprise so-
ciety.” 31 Other judges have observed that, while the principal object
of the section is the protection of the consumer from the effect of
misleading price advertising, there is an ancillary object of pro-
moting fair competition between competing sellers within the frame-
work of an ethical standard of advertising. 32 The most socially
significant explanation for the presence of the section, however, is
that given by Matheson, Co. Ct. J., in R. v. Colgate-Palmolive Ltd.: 33
This legislation is the expression of a social purpose, namely the establish-
ment of more ethical trade practices calculated to afford greater protection
to the consuming public. It represents the will of the people of Canada
that the old maxim caveat emptor, let the purchaser beware, yield somewhat
to the more enlightened view caveat venditor –
As has been pointed out above, section 33D is an extremely
recent addition to the Act although its history is long. It is a whole-
sale transportation of section 306 of the Criminal Code.
let the seller beware.
The predecessor of section 306 as it first appeared in the Code
in 1917 “was initially directed against the fraudulent land sales
which accompanied the western real estate boom.” 3 Since then,
of course, this section has been amended many times to embody a
more sweeping prohibition of deceptive advertising practices. The
strange thing, however, is that the many amendments have not
29R. V. Trans-Canada Jewelry Importing Co. Ltd., unreported; rev’d on other
grounds, [1968] B.R. 1,79. The translation is that of the Department.
5OMatheson, J., in R. V. Colgate-Palmolive Limited, [1069] 1 O.R. 731, at
3 D.LR. 3d 707, at p. 709, 57 C.P.R. 221, at p. 223; rev’g (1968), 54
p. 73,
C.P.R. 100.
p. 22.
31R. v. Genser & Sons Limited, (:19,69), 15 McGill L.J. 676, at p. 670.
32R. V. Simpsons-Sears Limited, (1069), 58 C.P.R. 56, at p. 60. Cf. R. V.
Kellys on Seymour Limited, (1069), 60 C.P.R. 24.
33 [1069] 1 O.R. 72, at p. 733, 3 D.L.R. 3d 707, at p. 709, 57 C.P.R. 221, at
34 The Honourable Ron Basford, Minister of Consumer and Corporate Affairs,
Address to the Toronto Advertising and Sales Club, Sept. 24, 1968.
No. 4″]
MISLEADING ADVERTISING
achieved what one can only imagine their purpose to have been,
namely, to result in more prosecutions of offenders. There has only
been one reported case under the section, R. v. Thermo-Seal In-
sulation Ltd.3″ and that case was simply a charge laid in virtue of
section 406(3) (b) of the Code, the predecessor of section 306(4)
of the present Criminal Code. The explanation for the paucity of
prosecutions under this section would seem to be that the provinces
were responsible for its administration in virtue of section 92(14)
of the B.N.A. Act.36
Now, with the proclamation of the Criminal Code amendments,
section 306 has been placed in the hands of the federal government
for enforcement as section 33D of the Combines Investigation Act.
The intention of the government is clearly to go full speed ahead
in terms of activating this long dormant provision.37 Because there
has been no experience with the section judicially, Basford pointed
out that test cases will now be prepared with the utmost care, the
obvious object of the exercise being to test the limits of the legislation
as a law enforcement mechanism in the area of consumer protection.
The Minister was quick to point out that, in the event that the
wording of the section proves to be deficient, there will be no
hesitation in drafting amendments which will do the job.
It would, indeed, appear as though there will be some problems
involved in prosecutions under this section. In the first place, section
is an indictable offence punishable by five years in prison,
33D (1)
although, of course, fines may be imposed in lieu of imprisonmenta
There has been, as we shall see below, a certain reluctance on the
part of the courts to enforce section 33C as effectively as might
be possible because of its criminal nature and the offence therein
created is merely a summary conviction offence.
One wonders, therefore, just how far the courts will be prepared
to go in terms of punishment, particularly where, as in this case,
mens rea is not required. But this is perhaps the least of the problems
of section 33D (1). The words “a statement that purports to be a
statement of fact” raise certain questions. Who is to judge whether
a statement purports to be factual and what standards should be
applied? Should the viewpoint be objective or subjective? If sub-
35 (1951), 15 C.P.R. 42, 102 C.C.C. 68, 12 Fox Pat. C. 45 (Ont. Mag. et.).
36 Most provincial law enforcement agencies do not have commercial fraud
squads equipped to deal with this kind of problem. No doubt, this sort of offence
is, furthermore, not regarded as being wvorthy of the protection accorded to
“criminal” offences.
37 See the statement to this effect in the News Release of the Honourable
Ron Basford on July 31, 1969.
37a Sec. 622 Cr. C.
McGILL LAW JOURNAL
[Vol. 15
jective, from the point of view of the advertiser or the consumer?
And if from the point of view of the consumer, an ordinary reason-
able consumer, a sophisticated one or a slow-witted one, who, after
all, requires more protection than his more intelligent brother? Lest
these questions seem foolish to the reader, it may be pointed out
here that the standard of intelligence which the American Federal
Trade Commission employs in the exercise of its discretion is con-
siderably lower than average. 38
One might also wonder whether section 33D will be more re-
stricted in its application than section 33C since 33D refers in each
of its sub-sections to an advertisement while section 33C speaks
of a representation, which is unquestionably broader in meaning
than a published advertisement. Will the former term, for example,
include floor and window displays? Will the definition be as broad
as that suggested by section 15(a) -9 of the F.T.C. Act? These
questions will only be resolved by the litigation which will un-
doubtedly commence in the near future.40
2. The Jurisprudence under Section SSC
It is essential to the existence of an offence under section 33C
that there be a representation made: (a) to the public; (b) for
the purpose of promoting the sale or use of an article; (c) con-
cerning the price at which such or like articles have been, are,
or will be, ordinarily sold; and, of course, (d) that representation
must be materially misleading.
38 Millstein has observed that: “It may be said that the FTC has selected an
extremely low intelligence level, and that the Courts have not significantly dis-
turbed the Commission’s determinations ‘in this respect” (loo. cit., at p. 458).
See -also F.T.C. V. Standard Education Society, (1937), 302 U.S. .1i; Charles of
the Ritz Dist. Corp. v. F.T.C., (1 9 4 ), 143 F. 2d 676 (2d Cir.); and Heinz W.
Kirchner, (1063), 63 F.T.C. 1282, at p. 1290.
39 The section reads as follows:
The term “false advertisement” means an advertisement other than labelling
which is misleading in a material respect; and in determining whether any
advertisement is misleading, there shall be taken into account (among other
things) not only representations made or suggested by statement, word,
design, device, sound, or any combination thereof, but also the extent to
which the advertisement fails to reveal the facts material in the light of
such representations or material with respect to consequences which may
result from the use of the commodity to which the advertisement relates
under the conditions described in said advertisement, or under such conditions
as are customary or usual.
40 Prosecution has commenced but there have only been two cases concluded
to date in both of which “guilty” pleas were entered and there were, consequently,
no written notes.
No. 4]
MISLEADING ADVERTISING
The first issue to be discussed is the definition of the word
“public”. This is important, not so much to determine whether the
representation has been made publicly, but rather to define the
extent of the public to which the representation has been made
for the purpose of determining the true regular or ordinary selling
price of the article in question. With respect to the less important
meaning of the word “public” it might, however, be pointed out
that any representation made in an establishment which “is open
to the general public” would quialify as a representation made to
the public.41 It has also been hold that the fact that the representation
was made to an investigator who was not fooled or deceived thereby
would not be a bar to a successful prosecution.42
Until the recent case of R. v. Simpsons-Sears Ltd.,43 the secondary
sense of “public” had nowhere been defined by the cases, although
“the public was equated to the consumers or shoppers in the limited
geographical area where the accused store or business was operating,
comparable shopping prices in this limited area being presented
as evidence of the price at which each of the items in question were
ordinarily sold.” 44 In that case, Judge Beaulne was presented with
an unusual set of circumstances which required him to look very
carefully at the meaning of the word “public”. Certain refrigerators
were listed in the accused’s catalogue as a regular $149.95 value
on sale for $129.95. The Crown had the choice of proceeding against
the company in virtue of either the catalogue representation or the
representation made in one of the Ottawa stores. They chose to
proceed ‘against the accused on the basis of the misrepresentation
made in the catalogue, with the unhappy results detailed below.
While, generally, the importance of defining the “public” is
evident since, if -the public is generally equated to the consumers or
shoppers in the limited geographical area where the accused operates
his store or business and makes his representation, the evidence
in the case will relate to comparable shopping prices in this limited
area, the judge in this case carried the argument to its extreme.
Since the -accused ran 32 retail stores (of which two were in the
Ottawa area) and some 355 catalogue sales offices throughout Canada,
it was vital to determine the extent of the area in which the ordinary
price would be found.
The judge concluded that the advertisement in question was
directed at the catalogue operations consumer and not at the retail
41 R. V. Carnen Jewelry Mfg. Co. Inc., unreported.
42 R. v. Mountain Furniture Co. Ltd., (1966), 15 McGill L.J. 662, at p. 665.
43 (1669), 58 C.P.R. 56. The case is presently being appealed by the Crown.
-4Ibid., at p. 59. Emphasis original.
McGILL LAW JOURNAL
[Vol. 15
store consumer and, on this basis, it was, not surprisingly, extremely
difficult for the Crown to adduce evidence as to the price for which
the refrigerators in question had been or were ordinarily sold by
the accused’s main competitor. Simpsons-Sears was accordingly
acquitted. The
judge stated that “in the Court’s opinion one
must then define the consumer depending on the facts of each case
and on -the type of business involved in such case.” 4r The effect
of this decision is devastating on the Crown’s ability to prove its
case in such circumstances and wholly contrary, it may be assumed,
to the intention of the Act.45a
Whether the representation has been made to promote the sale
or use of an article is not a difficult point to prove. As Magistrate
Elmore made the point in the first judgment rendered under section
33C:
Now, can there be any doubt that the representations in this advertising
were made for the purpose of promoting sales ? I think not.45
Since the question has hardly arisen as a serious issue in the
cases, it would appear as though there almost exists a presumption
that any representation made is for the purpose of promoting the
sale or use of an article. And well might this be assumed for, if
the primary purpose of advertising is to sell the product advertised,
what further indication of this intention need be sought other than
the publishing of the advertisement itself, the making of the “pitch”
verbally to the potential customer, or the use of the promotional
material in whatever form it takes.
To promote the sale or use of an article, the representation
can -be made by any means whatsoever and prosecutions have been
successful in cases of floor or window displays, circulars, and pre-
ticketing, as well as newspaper advertisements. It should be noted,
though,- that section 33C refers only to articles and not to services,
a loophole which not only would free a service industry from
judicial pursuit, but might also render conviction of a part-service,
part-commodity operator more difficult. The obvious example is the
carpet field which is wide open to all sorts of fraudulent abuses
and schemes – many of which do not qualify for section 33C
and the ease with which a rug vendor who advertised
protection 47 –
45 Ibid., at p. 61.
45a See also the discussion on a similar point, infra, at p. 636.
40 R. v. Edgie Black’s Limited, (1962), 38 C.P.R. 140, at p. 141.
47 The passing-off of “seconds” as “firsts” and the sale of carpet by brand
name when that brand comes in several different weights (at extreme discrepan-
cies of price –
perhaps up to $2 per square yard on a weight difference of
4 or 5 ounces per square yard, a difference which, to the untrained eye, is
practically unnoticeable) are only two ways of “beating” the buyer. The stuffed
No. 4]
MISLEADING ADVERTISING
both the carpet and its installation for – a unit price might be
permitted to evade this provision is disconcerting.
From a technical point of view, it has been decided in the leading
case of R. V. Morse Jewellers (Sudbury) Ltd.48 that only one offence
was created by Parliament and not three separate offences and that
a charge which refers to the “have been, are, or will be, ordinarily
sold” phrase in one count is not void for duplicity:
From a careful perusal of s. 330(1)
it would appear that the gist
of the offence is making a materially misleading representation as to price
for the purpose set out in the section. The language is intended to include
any materially misleading representation as to price of the character men-
tioned. I am satisfied that Parliament did not intend to create separate
offences for misleading representations as to past, present and future prices.
The words “have been, are or will be ordinarily sold” are only used for the
purpose of giving a comprehensive description of the type of misleading
representation as to price which constitutes the offence. 49
Since the offence is criminal in nature, the Crown has the onus of
proving its case beyond a reasonable doubt.50 The wording of the
Act is such that the prosecution must adduce evidence that the
ordinary selling price, against which the “bargain” is apposed, is
not as stated in the advertisement. The cases have held that, although
the Crown need not establish a specific ordinary price to which
all firms in the area conformed,51 it must prove beyond a reasonable
doubt that the ordinary price is lower than represented in the area
in which the effect of the ad will be felt. Thus, where a catalogue
was circulated across the whole of Canada, the Crown was unable
to make its case by proving the ordinary price in the Ottawa area
alone.52 More surprising perhaps was the decision in R. v. F. W.
flat and bait-and-switch tactics are favorites of the less reputable carpet dealers
and more sophisticated methods, such as patching together first quality carpet
from a roll sold by the mill as “seconds” (and perhaps as much as 20% of all
roll carpet manufactured contains imperfections which qualify it as seconds)
because 10% or more of the roll is imperfect, result in enormous profits for the
vendor who will sell first quality carpet, all right, but with many more seams
than would ordinarily be necessary.
For some reason, the carpet industry is subject to many such abuses which
its more responsible representatives are seeking to curb on a self-policing basis.
48 [19631 2 O.R. 107 (Mag. Ct.); rev’d [1964] 1 O.R. 103, [1963] 3 C.G.C. 304,
41 C.R. 21, 42 C.P.R. 130 (High Ct.); aff’d [1964] 1 O.R. 466, [1964] 1 C.C.C.
293 (C.A.).
49 [1064] 1 O.R. 160, at pp. 109-10, [19.63] 3 C.C.C. 304, at p. 311, 41 C.R. 2.1,
at p. 28, 4,2 C.P.R. 130, at p. 139, per Fraser, J.
50 R. v. Allied Towers Merchants Limited (I),
(1965), 15 McGill L.J. 654,
at p. 655.
pp. 638-634.
51 R. v. Miller’s T.V. Ltd., (1968), 56 C.P.R. 237, at p. 240.
52R. V. Simpsons-Sears Ltd., (1969), 58 C.P.R. 56. See discussion supra, at
McGILL LAW JOURNAL
[Vol. 15
Woolworth Co. Ltd.53 where the accused placed an advertisement in
the Regina Leader-Post and the court was unsatisfied with proof
of the ordinary selling price in the Regina area alone.
There appeared to me that in the evidence there was a preoccupation with
the specific 20 sets and with the City of Regina, without particular attention
being given disposition of the T.V. model other than the residue. It is
incumbent in my view that the prosecution satisfy me that the model of
set was not available in the trade area of the Leader-Post advertisement,
not just the City of Regina. The confines of the trade area is problematical,
but it seems clear to me that it extends beyond the limits of this City.53a
The irony of this sort of ruling, of course, is that, the more
widespread the deception, the more difficult it is for the Crown
to obtain judgment. It would appear that these decisions go right
against the spirit, if not also the letter, of the Act.
Generally speaking, the Grown makes every effort to introduce
evidence relating to most of the sales of the product in the area
where the representation
is made. In the opinion of the writer,
the Crown should not be obliged to go this far to obtain a conviction,
for such a requirement has as its unhappy result the effect of
increasing the difficulty of the p-rosecution’s obtaining a conviction
where the goods are cheaper and their circulation is more widespread
or where the urban area is larger and more of the items are sold.
In this regard, the better point of view would be that, where the
accused itself has sold more of the product than any other dealer
or where the accused itself has even sold a substantial quantity
of the commodity, the record of the accused indicating the price
at which it has generally sold the product should be particularly
relevant, if not the most important factor, in determining the regular
price.54
Where, on the other hand, the product is only sold or is mainly sold
by one retailer in the area, the Crown may show, from evidence
gathered from the accused’s own files, that the retailer itself has
never sold the item at the higher price or that articles of similar
quality have not been sold by other retailers in the area at the
higher price. In this regard, expert testimony may in fact be neces-
sary to show that products are simillar in quality and, once this point
53 (.169), 58 C.P.R. 223.
53a Ibid., at p. 225. The decision in R. v. R. & A. Cohen Limited, (1065), 15
McGill L.J. 659, where the Crown, basing its accusation on advertisements
appearing in the Ottawa Journal and the Ottawa Citizen, successfully obtained
a conviction by adducing proof of the ordinary price in the Ottawa area alone
would appear to make far more sense.
54R. v. Advance T.V. & Car Radio Centre Ltd., (10,69), 15 McGill L.J. 680,
at p. 682; R. v. Amalgamated Carpets & Furnishing Ltd., (1070), 15 McGill
L.J. 670; contra, R. v. Allied Towers Merchants Limited (I),
(1965), 15 McGill
L.J. 654.
No. 4]
MISLEADING ADVERTISING
is satisfactorily made, evidence may then be introduced to prove the
ordinary selling price of the similar articles.55 Where no other firm
in the region sells the brand and it can be shown that the accused
has not sold the goods at the higher price, a conviction may also
be obtained.56 In one of the more liberal judgments rendered under
section 33C, Magistrate Enns held that, where “the accused sold
more [T.V. sets] than any other dealer, the prices at which it sold
are particularly relevant. ’57 This statement must be appreciated in
context, however, and it would probably not be applicable where a
dealer, although selling at a ‘low price, referred to the true price
at which other dealers were in fact selling the same product. It might
be held to apply, though, where the accused itself sold 90% of the
model in question in the area.
There are other circumstances where many of the same con-
siderations apply, namely, where the product in question is only
manufactured or marketed by the accused. Two different kinds of
situations arise in the ‘circumstances. In the first, a department
store or chain of stores may sell products manufactured outside
under its own house name. The seller may then be tempted to cite as
the regular price either the price at which the same unit is sold by
other dealers carrying it un’der the label of the manufacturer or
the manufacturer’s list price itself.
The advertiser may, on the other hand, offer the item at the
suggested list price or even the ordinary selling price of other similar
articles. Any dealer would appear to be legally entitled to make a
comparison between the price ‘at which he is selling his house brand
and the regular selling price of either the same article or a similar
article but the court appears to have gone too far in the case of
R. v. F. W. Woolworth Co. Ltd. where the fact that the television
sets in question were -sold in the Regina area by the accused at a
price $200 lower than what they had suggested was the retail price
did not alter the decision. 58
55 R. v. Mountain Furniture Co. Ltd., 01966), 15 McGill L.J. 662, art p. 665.
56R. v. Trans-Canada Jewelry Importing Co. Ltd., (1,.67), unreported.
57R. v. Advance T.V. & Car Radio Centre Ltd., (1969.), 15 McGill ,L.J. 680,
at p. 652.
5s For some unexplained reason, the Crown has been singularly unsuccessful
in obtaining satisfactory results in its prosecutions before the Regina courts.
Aside from the F.W. Woolworth Co. Ltd. case, there are the following examples.
In the first prosecution against C.P. Kaufmann Ltd., the Court fined the
company $50 plus costs on a guilty plea but refused to grant a prohibition
order; in the second case against C.P. Kaufmann Ltd., a guilty plea was again
entered and -the Court sentenced the company to pay a fine of $100 and once
again refused to grant a prohibition order. In an appeal lodged against the
sentence, the Crown was unsuccessful in obtaining a higher fine. The appeal
McGILL LAW JOURNAL
[Vol. 15
In the second type of circumstance, the product in question is
manufactured and sold, whether directly or indirectly, by the manu-
facturer. As a part of the marketing technique, the producer will
often feature a “cents-off” label. The accused manufacturer is in a
position, when using this promotional gambit, not unlike the position
of the ordinary retailer except that the regular price of the product
will generally be established by the accused itself, not so much by
what it has stated the regular price to be but rather by its marketing
practices. It has been held, for example, that “a company cannot
itself set the regular price, and regard must be had to the actual
selling price of the merchandise in the community in which the
complaint arose.” 59 Thus, where 90% of the sales of the product
in question are made at the special price and only 10% of the sales
at the so-called regular price, it will be in order to convict.60 This
position has been recently upheld in the case of R. v. Andrew Jergens
Co. Ltd.,61 in which the label on the bottle was marked “special $1.19
–
regular $1.79 size”. The judge there remarked:
I am also satisfied that only a very small percentage of its regular shampoo
is marketed at $1.79 –
It has not yet been determined what percentage of the sales must
be at the “regular” price before it is possible to make a representation
as to that price. As indicated in R. v. Thomas Sales Agencies (1963)
Ltd.,63 it has been established that this figure must exceed 10%
but the cases have not gone so far as to lay down a general guideline.
One manufacturer visited by the writer suggested that two-thirds
of the sales should be at the so-called regular price but the courts
may be still more lenient than that. In this context, it might also
be noted that the use of a “cents-off” label for an extended period
of time may result in a conviction against the company since a new
and that only over a period of some months.6 2
against the sentence is reported at (1969), 60 C.P.R. 138. In the case of MacLeod
Stedman Ltd., the company also pleaded guilty on two counts and was fined $75 on
the first and $1 on the second. The Court did not grant a prohibition order and
an appeal against the sentence by the Crown was also dismissed. This appeal
is reported at (1069), 60 C.P.R. 185.
From the review of the sentences which is discussed infra at p. 649, it will
readily be seen that these fines are considerably lower than the average penalties
assessed by the courts across Canada. They can hardly serve as anything more
than a licence to perpetrate such offences with regularity as the Kaufmann
cases appear to attest.
59 R. v. Thomas Sales Agencies (1963) Ltd., judgment of Mag. Swabay, Ottawa,
July 19, 1,968, unreported; rev’d in part by [1969] 2 O.R. 587, 6 D.L.R. 3d 208,
58 C.P.R. 210, [1969] 4 C.C.C. 124.
60 Ibid.
61 (19.69), 15 McGill L.J 675.
62 Ibid.
63 [1969] 2 O.R. 587, 6 D.L.R. 3d 208, 58 C.P.R. 210, [1969] 4 C.C.C. 124.
No. 4]
MISLEADING ADVERTISING
selling price for the product will have been established over that
protracted period. Thus, in R. v. Produits Diamants Ltee., 64 the
court held that the use of the “cents-off” price over a period of
three years resulted in the establishment of the lower price as the
regular price.
There can be no doubt that the use of such a price over a period
of three years would result in the formulation of a new regular price.
Nor can there be any doubt that the sale of 90% of certain mer-
chandise at the so-called special price would have a similar -result. It
would appear that, in the future, when the courts are faced with
analogous circumstances in which the time and market history
factors are not so exaggerated they will have to examine the question
more closely. It is submitted by this writer that one must logically
look at the combination of these two factors, for the sale of as
much as 1007 of the merchandise at the low price over a short
period of time is totally justifiable while the sale of 50% of the
goods over an extended period of time may well not be permissible.
As indicated above, it is not necessary that the proof of the
Crown relate to the precise article with respect to which the represen-
tation is made. Thus, even where the particular mattresses in regard
to which the charge was made in R. v. Featherweight Mattress Ltd.,65
were only sold by one outlet in Peterborough, the Crown was
permitted to adduce proof of the regular selling price of mattresses
of similar quality sold in the local area even though these did
not necessarily have the same specifications. In the case of R. v.
Mountain Furniture Co. Ltd.,66 Magistrate Philp explained the point
at great length.
If the Crown must establish that such an article must be ordinarily sold
at a given price in the area where the representation with which we are
concerned is made, then any arrangement on the part of a retailer, of the
nature of a special franchise or sole sales agency in a given area, would
appear to render the legislation effective. I would find that the phrase
means, articles of similar quality. Minor differences in specifications, not
known or observed by the public, but only determinable by an experienced
person, after a mattress is opened, and its construction is observed in detail,
I would find, does not bar such articles as being similar.67
As the wording of the Act suggests, it is not sufficient that
there be a mere misrepresentation; the misrepresentation must be
material.68 Since there is no definition of this phrase “materially
misleading”, the words must be accorded their normally accepted
64 (1965), 15 McGill L.J. 658.
65 (1666), 15 McGill L.J. 667.
66 (1966), 15 McGill L.J. 662.
67 Ibid., at p. 665.
65SR. v. Kellys on Seymour Limited, (1969), 60 C.P.R. 24.
McGILL LAW JOURNAL
[Vol. 15
meaning.0 9 In R. v. Patton’s Place Limited, 0 Magistrate Carson
stated:
I think the word “material” used here must bear its normal meaning and
that is, it is a representation which is calculated to, and in effect does, lead
a person to a certain course of conduct because he believes the information
put before him indicates that this would be advantageous to himself.T1
In the case of R. v. Kellys on Seymour Ltd.,72 Magistrate Hume
defined “material” in the following way:
The criteria [sic] of the word “material”, in my opinion therefore, is not
the value to the purchaser, but rather the degree to which the purchaser
is affected by these words and coming to a conclusion as to whether or not
he should make a purchase. And if these words, or this picture in this case, has
[sic] a material effect on the mind of the purchaser, then this is what
material means.73
Certain specific examples of materiafly misleading representations
can be given. In R. v. F. W. Woolworth Co. Ltd.,74 it was held that
the regular price must have been “a prevailing price consequently
less than” the price represented to be the ordinary price.75 Where
the price tag on a toy read “9958 Whol. $26.65 R. $39.95”, and
the evidence indicated that the sales made of such toys in the area
ranged from approximately $23 to approximately $28, the discrepancy
of $12 was held to be materially misleading. 7 A difference of $70 on
an item with a supposed regular price of $229.95 was held to be
materially misleading.77 This was also the case where a company
advertised that the regular price of a television set which it was
selling was $399 and the evidence indicated that such sets had
never sold for more than $319. 78 A difference of $40 on an alleged
ordinary price of $359 has also been held to be materially mis-
leading. 79 A discrepancy of $40 on an item for which the regular
price was said to be $669.50 was also sufficient8 0 as was a difference
69 R. v. Millers T.V. Ltd., (.1068), 56 C.P.R. 237, at p. 241, and R. v. Patton’s
Place Limited, (16.68), 57 C.P.R. 12, at p. 16.
70 (1968), 57 C.P.R. 12.
71 Ibid., at p. 16.
72 (19,69), 60 C.P.R. 24.
73 Ibid., at p. 26.
74 (1969), 58 C.P.R. 223.
75 Note that the difference between the ordinary selling price in the Regina
area and the price which had been represented as the ordinary selling price
was about $200. The accused was acquitted on the grounds that the proof
which had been made related only to the ordinary selling price in the Regina
area and not in the entire area in which the Regina Leader-Post was circulated.
76 R. v. Michael Benes, (19,69), 15 McGill L.J. 670.
77R. v. Patton’s Place Limited, (19 68), 57 C.P.R. 12.
78R. V. Genser & Sons Limited, (1969), 15 McGill L.J. 676.
79R. v. R. & A. Cohen Limited, (1965), 15 McGill L.J. 659.
so Ibid.
No. 4]
MISLEADING ADVERTISING
of $50 on a camera ordinarily selling, according to the advertisement,
for $154.81 In a more unusual set of facts, where a circular indicated
an ordinary price of $9.95 and it was satisfactorily indicated to
the court that the price on the circular should have read $8.95, the
fact that the item in question had normally sold in the area at price
between $3.44 and $6.88 led similarly to a conviction.8 2
Since the statute is a criminal one, it is inevitable that the issue
of mens rea would arise. In the first test of the necessity for its
existence, Magistrate Dnieper ruled that mens rea was necessary
to convict and, although he found all the other ingredients of the
offence present, he acquitted the accused solely by reason of the
absence of mens re, this despite his finding that the company was
“more than negligent” in its insertion of the untrue higher price in its
advertisement. 3 This decision was reversed by Jessup, J., in the
Ontario Supreme Court. 4 In that case, he laid down the rule, so
often referred to in the later cases, that mens rea is not a necessary
ingredient of the offence under section 33C.
it
There is nothing in the express language of s. 33C (1) disclosing any
intention that mens rea, in the sense that the materially misleading repre-
sentation made must be known to be such by the accused, is not an essential
ingredient of the offence. But in my opinion such an intention is derived
by necessary implication from s.-s. 2. If
is necessary to the offence
that the accused knows the representation he makes, is
in fact materially
misleading a publisher who accepted an advertisement in good faith for a
publication in the ordinary course of business would not require the special
defence provided by s.-s. 2. I, therefore, conclude that s. 330(1)
is an
offence of strict liability and that mens tea, in
the sense I have men-
tioned, is not an ingredient of the offence. I reach such conclusion for the
additional reason that in my opinion the class of acts legislated about in
s. 33C(i1) are not criminal in any real sense but are acts prohibited under
a penalty 8 5
This dictum has been followed admost universally sa and only
once has it been ignored as stated, whether purposely or accidentally.
81R. v. Allied Towers Merchants Limited (II), [1,9.65] 2 O.R. 628, [1966] 1
C.C.C. 220, 46 C.P.R. 239.
82 R. v. Allied Towers Merchants Limited (III), [1969] 2 O.R. ’34$, 69 D.L.R.
2d 300, 57 0.P.R. 52, [1969] 1 0.0.0. .179.
83 R. v. Allied Towers Merchants Limited (II), judgment of Magistrate Dnieper,
unreported.
84 [1965] 2 O.R. 628, [1,9661 1 0.C.0. 220, 46 C.P.R. 239.
85 Ibid., at p. 63 O.R., pp. 223- =
86 See, for example, R. v. Featherweight Mattress Ltd., (1966),
15 McGill
L.J., 667; R. v. Trans-Canada Jewelry Importing Co. Ltd., (196), unreported;
R. v. Miller’s T.V. Ltd., (.1068), 56 C.P.R. M7; R. v. Colgate-Palmolive Ltd.,
[,1069] 1 O.R. 701, 3 D.L.R. 3d 707, 57 C.P.R. M1; R. v. McGrath & Smith,
(1,967), 56 C.P.R. 160; R. v. Allied Towers Merchants Limited (III), [1068,] 2
O.R. 34M6, 69 D.L.R. 2<1 300, 57 C.P.R. 5,
0.0.0., pp. 242-243 C.P.R.
[,1069] I C.C..
1-79.
McGILL LAW JOURNAL
[Vol. 15
In R. v. Genser & Sons Limited, Gyles, J., restated the rule as
follows in his own terms:
I feel that mens rea is an element of the offence, but that it can b3 inferred
if there was, in fact, a misrepresentation, and then there of course is an
onus upon the accused to explain away this apparent inference.8 7
The strictness of the liability is illustrated by the fact that, even
where the advertisement is worded by a newspaper advertising
salesman, the accused, in whose name the ad after all appears, cannot
avoid responsibility for its contents. 88 This point of view was ex-
panded somewhat by Magistrate Enns in the recent case of R. V.
Advance T.V. & Car Radio Centre Ltd.8 9
At the same time, as I indicated in the course of the trial, I do believe that
it is necessary that there is proof that what appears or what is done in
the furtherance of a promotional technique such as an advertisement was
caused to be done or done by a direct act or deliberate act of the accused,
not some accidental or inadvertent thing. And so if there is evidence that
the accused corporation through its officers intended to cause the advertise-
ment that is complained of to be published, even if the advertisement in
itself is composed by others, I see no necessity of seeking further evidence
of intent other than the intent to publish the complained of advertisement.
In that sense I would concur with the defence that some element of mens rca
is necessary but no further than what I have indicated, in my view.
The publisher has, of course, the protection of sub-section 2 of
section 33C for ads which he accepts in good faith for publication
in the ordinary course of his business. Although there have been
no prosecutions of publishers, one wonders whether the words "in
good faith" could not be interpreted to mean "without negligence
and/or total disregard for the contents of the advertisements accepted
and in fact published." Clearly, those corporations publishing or
broadcasting false advertisements which are blatantly misleading or
which at least give rise to serious suspicion could be held not to
have published or broadcast "in good faith". A newspaper which
goes to the trouble of providing artistic and technical assistance in
laying out an ad or in preparing the actual text can surely be
expected to have the expertise to question seemingly fallacious
claims which are obvious enough to any ordinary consumer possessed
of moderate sophistication.
The fact that a company possesses a manual of advertising ac-
ceptability principles will not serve as a valid defence, even where
these are breached by an employee without the explicit sanction
87 (1968), 54 C.P.R. 160; rev'd [1969J 3 C.C.C. 87, 57 C.P.R. 17, 6 C.R. n.s.
140, 67 W.W.R. 19.
Ss R. V. R. & A. Cohen Limited, (1065), 15 McGill L.J. 659.
89 (1969), 15 McGill L.J. 680, at p. 691.
No. ,4]
MISLEADING ADVERTISING
of the firm itself. 90 It appears that the only defence, from the point
of view of intention, would be inadvertence. Magistrate Hume, in
R. v. Kellys on Seymour Ltd.,9 1 has given the following indication
of the meaning of inadvertence:
I would agree with one of the cases referred to that if the inadvertence
was something which occurred outside the control in the ordinary operation
of the company that this might be a defence unless negligence were in-
volved. 92
Thus, although Magistrate Hume was prepared to find as a fact
that there may have been an innocent misunderstanding or mis-
representation by the accused, and, even giving the accused the
benefit of the doubt that there was no intent to mislead, he felt
compelled to conclude that a conviction was warranted since mens
rea is not an essential ingredient to the charge.
It is submitted by the writer that a judgment of acquittal on
the grounds of a lack of intent under section 33C would be inap-
propriate except in circumstances where it could be shown by the
accused that there was an error committed by the person responsible
for publishing the ad, an error resulting from faulty composition
of the information as it was given to the publisher and not one
resulting from wording or layout suggested by the publisher to the
advertiser, since the advertiser must in all circumstances be presumed
to be more familiar than the publisher with the representations which
he is making relating to the products which he is offering for sale.
Even in the case where a mistake has been made by the publisher,
the vendor has the obligation, if the copy which he has submitted
is returned for his verification and approval, to ensure that the
representations made in the advertisement are correct. This must
also be true of promotional material qualifying as a "represen-
tation to the public" for the seller has even greater control of this
material before it is brought to the attention of the public.
It might be noted that the fact that the merchandise in question
constitutes good value is not any defence since the issue is that
the public were misled into believing that they were getting a much
better bargain than they were in fact getting.9 3 The court cannot
concern itself with the value of the merchandise; from its point of
90 R. V. Allied Towers Merchants Limited (III), [1968] 2 Q.R. 346, 69 D.L.R. 2d
300, 57 C.P.R. 52, [19691 1 C.C.C. 179.
91 (1969), 60 C.P.R. 24.
92 Ibid., at p. 27.
93 R. V. R. & A. Cohen Limited, (;1965), 15 McGill L.J. 659; R. V. Patton's Place
Limited, (1968), 57 C.P.R. 12; R. v. Kellys on Seymour Limited, (1969), 60
C.P.R. 24.
McGILL LAW JOURNAL
[Vol. 15
view, the only issue is the price.0 4 Even where the accused was
selling television sets at the best price the public could hope to find,
the judge was unwilling to take this factor into consideration since
the section does not refer to the necessity of any direct detriment
or loss to the public.9 5
"Regular price", as defined in the Eddie Black's case90 and by
Judge Sweet in the first Allied Towers case, 97 is "the price at which
it [an article] is ordinarily sold generally in the area in which the
representation [as to regular price] is made.""" "Value" has been
similarly defined in the Thomas Sales case :9
exchangeable value -
the price in the market.
I believe in the context herein that the word "value" must be given its
ordinary meaning -
Where a discount of over $200 was given "for cash", it was held
that the practice amounted to a promotional
technique and that
the real selling price in the ordinary sense of the term was the cash
which was actually paid. 100 The situation may be slightly complicated
where there are trade-ins but where these trade-ins themselves are
sold either alone or in a lot for a particularly cheap price, it has
been held that the true selling price is actually and simply the cash
which has been paid by the customer. Where, on the other hand,
it could be proven from the records of the accused that the difference
(between the price which he claimed was the ordinary or regular
price and the price in fact paid by the customer) could be accounted
for by a trade-in which he accepted and later sold for the difference
between the two prices, a verdict of acquittal should be entered.
When the words "list price" are used, it appears from the cases
that the position of the advertiser is less clear than when the words
"regular price" are employed. In the first Allied Towers case 101
Judge Sweet held that the former expression did not necessarily
imply that the price indicated was that for which the goods were
normally sold. He pointed out that where "there is no evidence of
dishonesty or bad faith on the part of the manufacturers in suggesting
the retail prices" the use of the words is not misleading. Furthermore,
he observed that "list price" is not an unfamiliar term to retail
94 R. v. Patton's Place Limited, (1068), 57 C.P.R. 12.
95 R. v. Advance T.V. & Car Radio Centre Ltd., (1i969), 15 McGill L.J. 680.
96 (1062), 38 C.P.R. 140.
97 (1065), 1t5 McGill L.J. 654.
98 Ibid., at p. 658.
99 [f1969] 2 O.R. 587, at p. 589, 6 D.L.R. 9d 208, -at p. 5210, 58 C.PR. 210, at
100 Ibid. Contra: R. V. Podersky's Limited, (1967), 58 C.P.R. 140.
101 (1965), i[5 McGill L.J. 654.
p. 21l,
[4069] 4 C.C.C. 1124, at pp. 125426.
No. 4]
MISLEADING ADVERTISING
buyers and that these people realize that retailers sometimes sell
below their price. He concluded:
To find that "list price" as used here is a material misrepresentation would,
I think, be tantamount to a finding that words which are factually true in
a well-recognized context are misleading in the manner in which they were
used. There may, indeed, be circumstances under which that would be so,
but I do not think that it has been established that that is so in this case.1 0 2
The validity of this view was seriously put in doubt by Magistrate
Dniper in the second Allied Towers case. He stated there that:
It may very well be that the manufacturer suggests a list and suggests
this price but witnesses for the Crown in the trade all indicated that this
was a fictitional [sic] price which they never received.1 03
He' related this point of view to section 33C(1) and continued:
The word "sold" in this section means, in my opinion, an actual sale made
and not "sold" in the trade sense that they are offered for sale at. The
word "sold" in this subsection I do not believe means a price written on an
article as an invitation to trade.' 0 4
This interpretation is certainly the one which gibes with the
legislative intent of the section, for any reference to -price, whether
to retail price, suggested retail price, list price, manufacturer's list
price, ordinary price, regular price, former price, and so on, implies
that the goods are or have been ordinarily sold at that price and
any such reference is misleading if untrue. In a subsequent case, the
words "Mfg. regular" were held to be interpreted by persons reading
the advertisement as meaning "manufacturer's list price". 1 5 It
is
not clear from this case whether such an interpretation would have
resulted in an acquittal since there was no manufacturer's list price
in existence according to the proof and, under the circumstances, the
words "Mfg. regular" were held to constitute a representation as to
the ordinary price.
Although there has not yet been a ease decided under section 33C
where the comparison was clearly made between the advertiser's
selling price and the manufacturer's list price, it is obvious that
the situation is likely to arise. It strikes the writer that the position
102 Ibid., at p. 656. This statement is acceptable only insofar as it includes the
words "in a wall-recognized context" for see. 3,3C offers no defence to the accused
on the grounds that the representation is factual. The criterion is the misleading
nature of the representation alone.
This is the moreso true in the case of sec. 3D which refers to "a statement
that purports ,to be a statement of fact" but that is either "untra l (presumably
factually), "deceptive on misleading" (presumably not on a factual, but rather
on an inferential, basis). See the text of the section, supra, at p. 628.
103 R. v. Allied Towers Merchants Limited (II), unmeported.
104 Ibid.
105 R. v. Patton's Place Limited (1068), 57 C.P.R. 1i2.
McGILL LAW JOURNAL
[Vol. 15
taken by Magistrate Williams in the third Allied Towers case 'l to
the effect that "there might have been some merit to this argument
had in fact the ad made reference to the manufacturer's list price"
is an untenable one. If list prices were used solely for the information
of the retailer, to give him some assistance in arriving at a price
which would be competitive and profitable, there would be no diffi-
culty. When, however, such price lists are brought to the attention of
the consumer as a comparison with the price at which the advertiser
is offering the product for sale, there can be no doubt but that
there exists an intention on the part of the seller to indicate to the
buyer that he is getting a bargain or beneficial price. Any other
view of the motivation behind this technique would be particularly
naive. When the higher price is not, in fact, that at which goods
have been regularly sold, then both the letter and the spirit of the
section have been violated and conviction is in order.
This is as well the position taken by the Federal Trade Com-
mission in the United States in both their decisions 107 and their
Guides Against Deceptive Pricing.0 8 The Guides read in pertinent
part as follows:
Many members of the purchasing public believe that a manufacturer's
list price, or suggested retail price, is the price at which an article
is
generally sold. Therefore, if a reduction from this price is advertised, many
people will believe that they are being offered a genuine bargain. To the
extent that list or suggested retail prices do not in fact correspond to prices
at which a substantial number of sales of the article
in question are
made, the advertisement of a reduction may mislead the consumer.
There would be little problem of deception in this area if all products
were invariably sold at the retail price set by the manufacturer. However,
the widespread failure to observe manufacturers' suggested or list prices,
and the advent of retail discounting on a wide scale, have seriously under-
mined the dependability of list prices as indicators of the exact prices at
which articles are in fact generally sold at retail. Changing competitive
conditions have created a more acute problem of deception than may have
existed previously. Today, only in the rare case are all sales of an article
at the manufacturer's suggested retail or list price.
But this does not mean that all list prices are fictitious and all offers
of reductions from list, therefore, deceptive. Typically, a list price is a price
at which articles are sold, if not everywhere, then at least in the principal
retail outlets which do not conduct their business on a discount basis. It
will not be deemed fictitious if it
is the price at which substantial (that is,
not isolated or insignificant) sales are made in the advertiser's trade area
(the area in which he does business). Conversely, if the list price is signifi-
106 [1968] 2 0.R. 346, 69 D.L.R. 2d 300, 57 C.P.R. 52,
[1.969] 1 C.C.C. 179.
3o7 See, for example, the article by Carleton A. Harkrader, Fictitious Pricing
and the FTC: A New Look at an Old Dodge, (1962), 37 St. John's L. Rev.
1, at pp. 1S-10.
10816 C.F.R., Part 233. These Guides were promulgated on January 8, 1964.
No. 4]
MISLEADING ADVERTISING
cantly in excess of the highest price at which substantial sales in the trade
area are made, there is a clear and serious danger of the consumer being
misled by an advertised reduction from this price.
It is submitted, therefore, that this is the proper view to take of
representations which include reference to "manufacturer's list price"
and even of those which attempt in some way to disclaim elsewhere
in the advertisement any necessary connection between the manu-
facturer's list price and the highest price at which the advertiser
has sold the product in question. 0 9 The inclusion of such a disclaimer
is almost, in itself, an admission that the statements elsewhere are
misleading and, where they are, one doubts the ability of an accused
to avoid conviction by disclaiming their apparent nature and intent.
Commissioner Elman has "sympathized" with the attorney drawing
up a clause, in the following way:
One may well sympathize with its draftsman, who had a herculean if not
impossible assignment set before him, comparable to drafting a brief arguing
that "black" does not necessarily mean "black" and can also mean "white".
The draftsman's problem, of course, arose from the fact that the Com-
mission had already made abundantly clear its view that the term "manu-
facturer's list price" may popularly be understood as meaning the generally
prevailing price for the product in the area, and can truthfully be used as a
basis for price comparison only when it is in fact that price. It was thus
essential, for the draftsman's purposes, that the disclaimer should specifically
disavow any such implication.309a
Similar, or at least analogous, comments would be relevant in
the case of the words "save over... ". In one of the earlier cses
decided under section 33C, the court held that the words "save over
$100" coupled with the inclusion of the advertiser's price did not
necessarily disclose an offence under section 33C notwithstanding
the fact that the highest price at which such items had previously
been sold was $269, somewhat less than the $296 which was suggested
by the ad. These words were held by the judge to be capable of more
than one interpretation, although he did not proffer any alternatives,
and the judge concluded that, since the words were by no means
unequivocal, the accused had to be acquitted on the grounds that
the section, being of a quasi-criminal nature, was to be strictly
interpreted. 110 In a more recent case, the use of the same words was
interpreted differently. In R. V. Patton's Place Limited,"' Magistrate
Carson declared:
And, I think if this advertisement had not in heavy print not said "Save
$100" the ease might be interpreted differently. But, that phrase "Save $100 !"
109 Giant Food, Inc., (l962), 61 F.T.C. 326, at pp. 348-351.
109a Ibid., at p. 349.
liOR. v. Becker, (1063), 15 McGill L.J. 654.
I" (1068), 57 C.P.R. 1-2.
McGILL LAW JOURNAL
[Vol. 15
I am Teading the whole advemtisement together -
"Mfg. Regular - $229.95" and the heavy print $189.95 clearly indicates to
the purchaser or reader of the ad that in other places he would have to
pay $229.95 but by dealing with Patton's Place Ltd. he could save himself
$100. And, $100 in relation to $229 is a very material difference. I think
that
with that in mind -
this must be interpreted as a material difference. As Mr. Patton himself
said -that unless some considerable advantage can shown to the person price-
wise, he is liable not to come into the store.' 12
Even the words "compare at" or "special" when used without
explicit reference to price have been held to implicitly refer to an
ordinary selling price and, in the result, to be misleading. In the
second Allied Towers case, 113 Magistrate Dnieper observed, when
considering the meaning of the words "compare at":
Next we must consider what does "compare at". Does it mean "Mr.
Consumer, look at this item, see our price and compare our price with the
price of our competitors. That is, compare our camera at the price of our
competitors."
Or does it mean "Mr. Consumer, look here, here is an item..." -
in
this instance a camera - "... which we are selling for $59. Compare this
camera with the cameras which are sold by our competitors for the price
of $154.00."
It is not reasonable to assume that the advertisement was placed to
have the consumer compare the relative merits of the goods. There is only
one reasonable construction to be placed on the advertising and that is
that the "compare at" price was put in to indicate to the customer that
he was geting such and such a bargain. Any other construction would be
naive in the extreme. 114
At another level, it has been held that the phrase "compare at"
should be interpreted as meaning "compare this price with the price
such an article ordinarily or usually sells for" and not as meaning
compare this price with the manufacturer's list price or the manu-
facturer's suggested retail price or various other terms.1 14
The word "special" has been interpreted in the Colgate-Palmolive
Limited case: 1r
A reasonable shopper upon reading the words and numbers "Special $1.49"
upon the diagonal red band might very well conclude that he was being offered
Economy Size Halo Shampoo at a price below which it is ordinarily sold.' 10
112 Ibid., at pp. 16-11.
"13 (1964), unreported.
114 Ibid.
114a R. v. Miller's T.V. Ltd., (1968), 56 C.P.R. 237.
"15 [19.69] 1 O.R. 731, 3 D.L.R. 3d 707, 57 C.P.R. 221.
116 Ibid., at p. 734 O.R., p. 710 D.L.R., p. 225 C.P.R.
No. 4]
MISLEADING ADVERTISING
It is perhaps worthy of note that, of 82 cases concluded to date, 117
there have been 72 convictions or pleas of guilty, 8 acquittals 1 8 and
2 cases where charges were withdrawn due to inability to locate
the accused. Of the 82 cases, 70 were against retailers, 4 against
distributors and 8 against manufacturers. All 8 acquittals were
entered in favour of retailers. Of the charges laid, the greatest
number, 11, were with respect to camera equipment. Watches were
involved in 5, television sets in 10, radios and phonograph equipment
in 7, records in 3 and carpets in 5. Prohibition orders have only been
obtained in 37 of the cases and fines have generally been extremely
low, averaging $281.44 per case. 118a This is extremely low when one
considers that there is a potential fine of $500 per count or $1,500
per count in the case of corporations, according to the position taken
by the Combines Branch. When one considers the profits which may
accrue, as a result of the deceptions, to the deceivers, one may well
look upon the fines in most cases -as a license for doing business.
The factors to be considered are those applicable to criminal law
generally. Thus the fact that an accused had not before been convicted
would weigh in his favour as would the size of the business oper-
ation.119 It must not be forgotten, however, that, while the small enter-
prise need not be fined excessively, a larger corporation must be
subjected to a higher penalty if the punishment is to have any
affect at all. In this vein, Judge Marin, in the Andrew Jergens
case,120 although fully convinced that this first offence would not
be repeated, insisted that, from the aspect of deterrence, he had an
obligation to inflict a more significant penalty for its deterrent value
not only against the accused but also as it would apply to other
companies in the field of cosmetics. Although he did suggest that the
issue of retribution was a doubtful principle as far as criminal
law was concerned, he maintained that it was a very valid one when
applied to offences under the Combines Investigation Act.
Where there has been a previous offence and a prohibition order
issued, there is every indication that courts will deal harshly with a
violation of the order. In the only such case on record to date, R. v.
121 the judge imposed a fine
Allied Towers Merchants Limited (IV),
of $1,500 on the company. He pointed out that the fine was lenient
117 As of July 31, 1970.
"1
i1sa The average would be considerably lower on a "por count" basis but the
8 One of which memains under appeal by -the Crown.
minimal extent of the fines on a "per case" basis is sufficiently surprising.
119R. v. Miller's T.V. Ltd., (,1968), 56 C.P.R. 237.
120 (1969), 15 McGill L.J. 675.
121 June 24, 19.69, Provincial Court (Criminal Division), Metropolitan Toronto,
Judge Dnieper, unreported.
McGILL LAW JOURNAL
[Vol. 15
since the company had given every indication that it intended to
stop this sort of practice. He said: "Were it not for this obvious
desire of the company to comply, the penalty would be infinitely
higher." As he also pointed out, the offence is neither a summary
conviction offence nor an indictable offence, but rather a peculiar
follows that the six month
offence created by Parliament. It
prescriptive provision does not apply and that there is neither
a maximum nor minimum penalty provided in the Act. Furthermore,
the accused may be convicted both of a section 33C offence and,
as in this case, of a violation of the prohibition order 122 since the
act in question breaches two laws.
III. Conclusion
Whatever be the cause or motivation, it may now be observed
that section 33C is finally being implemented in accordance with
the fondest hopes of those legislators responsible for its very existence.
Of the 72 judgments rendered since 1960, 53 date from February
1968. Eighty-eight percent of these have resulted in convictions and
a not insignificant body of case law has developed in the result.
Although not all the judgments have been broad-minded nor all the
penalties powerful deterrents, there obviously exists a strong tendency
towards acceptance of the consumer revolution. It is to be hoped that
this direction continues and expands from the narrow confines of
section 33C into the broader judicial attitudes which will be required
for the proper administration of section 33D.
122 Combines Investigation Act, see. D1 (3).
