"Material" amendments to the Canadian Code of Advertising Standards

4 minute read
13 October 2016

On Oct. 3, 2016, Advertising Standards Canada (ASC) provided notice of important amendments to the Canadian Code of Advertising Standards ("Code"), which are effective immediately.

There are a number of significant changes, including the following:

  • There are now definitions for the terms "advertiser", "entity", "material connection", and "teaser advertisement".
  • Advertisements that include any type of discrimination based on ethnic origin, gender identity, sexual orientation or disability are now expressly prohibited.
  • The Competition Bureau (and/or other regulatory authorities) may now be notified of an "advertiser's" failure to comply with the Consumer Complaints Procedure (including a decision of the Standards Council).
  • The following messages are now excluded from the purview of the Code: A message from an "entity" that has no "material connection" to the "entity" that makes, distributes, markets or advertises the product or service featured in the message. For example, a member of the public can post a positive online review of a product without having to worry about complying with the Code, provided no such "material connection" exists.
  • There is a new Interpretation Guideline to Clause 7 (Testimonials, Endorsement, Reviews), which provides that any "material connection" between the endorser and the "entity" providing the endorsed product/service must be clearly and prominently disclosed in close proximity to the endorsement. However, no such disclosure is required when the "material connection" is one that consumers would reasonably expect to exist (e.g. certain endorsements by celebrities).

This last change is part of a broader push in the industry to help advertisers avoid what might otherwise constitute misleading representations. As we noted in an earlier article entitled First issue(s) of the Deceptive Marketing Practices Digest, the Competition Bureau has recently advised of this disclosure requirement in the context of "astroturfing." Further, in the U.S., the FTC has published comprehensive guides relating to the use of endorsements and testimonials. The primary rationale for the requirement is to provide members of the public with important information that could affect their evaluation of the importance of these endorsements. On this point, the Code defines a "material connection" as:

Any connection between an entity providing a product or service and an endorser, reviewer, influencer or person making representation that may affect the weight or credibility of the representation, and includes: benefits and incentives, such as monetary or other compensation, free products with or without any conditions attached, discounts, gifts, contest and sweepstakes entries, and any employment relationship, but excludes nominal consideration for the legal right to identify publicly the person making the representation."

Finally, it is important to note that this matter is far from academic - both regulatory bodies have recently undertaken enforcement activities to ensure advertisers comply with their "material connection" disclosure requirements. Accordingly, we hope that you will keep abreast of, and take the necessary measures to comply with, this rapidly developing area of advertising law.

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