Honest Advertising in the Digital Age

Remarks by Josephine Palumbo, Deputy Commissioner, Deceptive Marketing Practices Directorate

Canadian Institute 26^th Annual Advertising and Marketing Law Conference

January 22, 2020

Toronto, ON

(As prepared for delivery)

Hello everyone. Thank you Jennifer, for that kind introduction, and thank you for having me here today to talk about advertising and marketing law from the Competition Bureau perspective.

Almost a year ago now, Matthew Boswell took over as Commissioner at the Competition Bureau, and since then we’ve been re-examining how the Bureau conducts its work, particularly in relation to the digital economy.

We are boosting our digital intelligence expertise and our tools and training to help us challenge anticompetitive conduct in today’s complex global economy.

Shortly after beginning his term, Commissioner Boswell addressed the Canadian Bar Association at their annual spring conference in Toronto, signalling to the competition law community that active enforcement in the digital economy would be an area of primary focus for the Bureau during his term.

As Deputy Commissioner, I reiterated his message at the fall Ontario Bar Association Conference.

We will, of course continue our efforts to help businesses comply with the law through outreach, but we will also use all of the tools in our toolbox, as resources permit, to address potentially problematic behaviour, including the increased use of temporary injunctions to stop such conduct, pending a full hearing.

It’s true that we may not always win cases, but it’s important to take them on regardless – so potential targets know that we are watching, and to bring clarity to the law.

Over the last year, this commitment has been evident in almost all of our work, but particularly in the area of fraudulent and deceptive marketing practices, and that’s what I’ll go over today.

I’ll share with you the Bureau’s enforcement priorities as they relate to advertising and marketing, I’ll talk a bit about the Bureau’s role in the area of consumer privacy and data use in the digital economy, and I’ll discuss our upcoming international collaboration opportunities.

But before I get to those points, I think it’s important to contextualize them within the digital economy.

Digital commerce is integral to today’s economy -- and it’s a key consideration in almost all of our work at the Bureau.

From April to September 2019, the Bureau launched 16 cases, and we continue to work on 37 active cases, all related to the digital economy.

Digital is changing the way Canadians work, live and interact with each other, bringing new opportunities to grow the economy, attract investment and create the jobs of the future.

But, this global sea change means we must re-evaluate how we look at marketing and advertising as the industry shifts to an increasingly digital focus, and we must work to build consumer trust in the digital economy.

This matters to the Competition Bureau because trust is the foundation of a thriving economy — it allows consumers to make choices with confidence and businesses to compete and innovate freely.

As Canada’s Competition Bureau, it’s our job to build that trust, and over the coming years, the Bureau will address many novel challenges to that trust.

Dishonest price claims, suspicious consumer reviews, and dishonest information about data privacy rank high on the list of concerns.

And, as Deputy Commissioner of the Bureau’s Deceptive Marketing Practices Directorate, these are the things that keep me up at night.

With the ever-expanding size and importance of the digital economy, it’s critical that the Bureau rise to this challenge.

And so, we are taking a clear and strong stance to not only confront anti-competitive issues in the digital economy, but to be a world leader in our efforts.

When conducting our investigations, we will consider options such as consent agreements to resolve cases in a way that reflects the public interest.

There are, of course, practical implications for advertisers here.

Businesses must consider the requirements of the Competition Act when advertising prices and making marketing claims, because failing to do so could mean breaching the law.

Let me share with you a couple of recent examples that demonstrate the Bureau’s focus on bringing more enforcement cases to court.

Recently, we took action against Flighthub for what appeared to be false claims on its websites. The Bureau felt these claims could result in hidden fees being charged to consumers for flight-related services like seat selection and flight cancellation.

While the Bureau continues its ongoing investigation into the marketing practices of FlightHub, we negotiated a temporary consent agreement that prohibits FlightHub from using false or misleading marketing practices on flighthub.com and justfly.com.

As part of this agreement, FlightHub will not mislead consumers into believing that the company will reserve a specific seat, or offer flexible cancellation and rebooking options, nor will it mislead consumers about the cost of flights.

Hudson’s Bay Company, or HBC, is a good example of our renewed focus on “hard” enforcement.

We took them to court over their advertising and pricing for sleep sets in Canada. It was the Bureau’s view that HBC offered their sleep sets at artificially high “regular prices,” and then advertised deep discounts off the inflated “regular price.”

As a result of the Bureau’s work on this case, HBC was required to pay a 4.5-million-dollar penalty and costs, and create a compliance program that will help them stay on the right side of the Act.

False and misleading claims harm competition and consumers, and as advertisers, you must consider the Competition Act when setting and advertising prices and when making claims about a product or service.

As more and more consumers make purchases online, hidden fees are increasingly an area of concern.

Since 2015, the Bureau has successfully resolved five cases involving hidden fees.

The Bureau took action against Ticketmaster for its pricing claims, in which it allegedly advertised an initial price for event tickets and then charged consumers additional fees later in the purchasing process.

When consumers tried to buy tickets at the advertised price, they often found that throughout the online purchasing process, several mandatory fees were added.

The Bureau concluded that these fees often increased the cost of tickets by over 20% and, in some cases, by over 65%.

In June of 2019, the Bureau reached a settlement with Ticketmaster, in which the company agreed to pay 4.5 million dollars in penalties and costs and establish a corporate compliance and monitoring program.

Consumers should be able to trust that the prices they see upfront are the ones they will ultimately pay.

The Bureau’s intervention in this case sends a clear message to the marketplace that these types of business practices will not be tolerated.

The Bureau also recently investigated what it concluded to be misleading claims by four of Canada’s largest rental car companies.

So far, the Bureau’s work in this space has led to almost 6 million dollars in penalties and the creation and use of formal programs to ensure future compliance with the law.

These cases are really important for us because they send a message to all digital advertisers that Canada’s competition watchdog is on guard for anyone who tries to use misleading pricing schemes and deceptive claims to attract consumers.

The Bureau is leveling the playing field between competitors in industries where we detect potentially anticompetitive conduct.

And we are certainly not limiting ourselves to cases involving hidden fees. We are also focused on influencer marketing.

Consumers need to know when influencer content is actually an advertisement.

An Ad Standards study revealed that a full 35 percent of Canadians aged 18-35 say they have made a purchase based on the recommendation of an Internet influencer and 41 percent said that they find the practice of influencer marketing to be acceptable.

So, it’s clear that Canadians are spending a lot of money based on the recommendations of Internet influencers, and the Bureau wants to make sure that consumers are not being misled.

We thoroughly reviewed influencer marketing practices, and subsequently sent letters to close to one hundred brands and marketing agencies in the health and beauty, fashion, technology and travel sectors advising them of their requirements under the law.

We reminded them that the Competition Act applies to influencer marketing just as it does to traditional advertising.

Influencers must clearly disclose their connection with the business, product or service they promote.

If an influencer receives payment in money, commissions, free products or services, or discounts, or if they have a personal or family connection to the company, they must disclose that information to consumers.

And advertisers need to know that if they are forbidden from making a certain claim about their product, an influencer is also forbidden.

Influencer marketing is not a way around the law.

We’ve provided new guidance to advertisers and influencers on our website to help them stay on the right side of the law.

Specifically, influencers should ensure that their disclosures are as visible as possible, and that they are clear and contextually appropriate, and their reviews and testimonials are based on actual experience.

This influence can have a significant impact on the buying habits of Canadian consumers, therefore, it’s a key area of focus for the Bureau.

If your company engages in influencer marketing, I encourage you to consult the Bureau’s recently updated Influencer Marketing webpage for further guidance.

And, this month, we launched a social media campaign to target influencers where they operate – in the social media sphere.

I urge you to follow our social media channels, and check out our hashtag #InfluencerAware campaign to educate influencers about the Competition Act.

Because, when relationships between businesses and influencers are clear, consumers are better able to make informed purchasing choices.

Related to influencer marketing, fake online reviews are another area of focus for the Bureau, as they can really sway consumers’ choices.

Studies show that positive reviews can make 91% of consumers more likely to use a business.

Authentic consumer reviews on digital platforms benefit both consumers and businesses, providing unbiased product information to help consumers make informed decisions, and rewarding businesses that provide a superior product or service. This helps to promote healthy competition in the workplace.

We have noticed an increase in organized efforts by companies to fraudulently boost their own ratings or lower the ratings of their competitors.

For example, companies may encourage their employees to post positive reviews on websites and review platforms, or provide their customers with incentives to leave positive reviews.

The Bureau is vigilant on this front, because Canadians need to know that they can trust online user reviews.

And to help build consumer literacy and trust among Canadians, the Bureau regularly publishes Consumer Alerts. These alerts contain useful information for Canadian consumers to help them recognize, reject and report deceptive marketing practices, misleading advertising and scams.

But of course, protecting consumers from hidden fees, deceptive claims, and fake reviews are just a few of many marketing concerns associated with the digital economy. Another concern we’re hearing a lot about is data privacy.

As many of you know, advances in information technology are allowing firms to collect large amounts of data from many different kinds of sources.

Social media sites can collect data from users that includes information provided by users when they sign up, as well as information derived from the use of various online services.

The collection of data is an area where the principles of deceptive marketing are especially relevant.

While, historically, the Bureau has mostly reviewed practices where consumers were misled into purchasing a product or service, the era of Big Data means we will need to devote more attention to false claims that mislead consumers into giving away their personal data.

The issues of privacy and deceptive marketing practices intersect in the online marketplace.

The Bureau aims to ensure truth in advertising by addressing misleading claims about consumer privacy.

This is complementary with the mandate of the Office of the Privacy Commissioner, or the OPC, which is mandated to protect the privacy rights of Canadians.

For instance, when firms make false or misleading statements about the type of data they collect, why they collect it, and how they will use, maintain and erase it, we will take action.

The Bureau is ready to protect competition in the digital economy and put a stop to behaviours that harm consumers.

This is a very big job though, and we certainly can’t do it alone.

Because, cross border problems require cross border solutions.

On an enforcement level, the multinational nature of e-commerce lends itself to collaboration with our partners, both domestically and internationally.

Our close relationships with partners such as the International Consumer Protection and Enforcement Network, or ICPEN, and the Organisation for Co-operation and Economic Development, or OECD, will help the Bureau to fulfill its mandate and deliver on its strategic priorities.

Something that I am very proud of is the Competition Bureau’s recent appointment to the 2020-2021 ICPEN Presidency, highlighting our role as a leader in consumer protection across the globe.

I am pleased to note that I will have the honour of acting as the ICPEN President during the Bureau’s tenure.

ICPEN is comprised of consumer protection authorities from over 60 countries with the goal of protecting consumers’ economic interests around the world, sharing information about cross-border commercial activities that may affect consumer welfare, and encouraging global cooperation.

We are preparing an excellent program for our term as President of the network -- one that will address new and emerging issues in the digital economy.

As the 2020-2021 President, working hand-in-hand with global anti-trust agencies, the Bureau’s agenda will deal with issues aimed at protecting and empowering consumers in the digital economy worldwide.

Our proposed Programme of Work considers topics such as data and privacy, consumer protection issues and artificial intelligence, and consumer behaviour in the digital economy to better understand how consumers interact with digital interfaces and how they can be influenced online.

We will host a conference and a best-practices workshop, to examine the issues that matter most to consumers in our digital age in the fall of 2020 and in the spring of 2021.

The Bureau is also an active member of OECD’s Committee on Consumer Policy. The OECD Committee on Consumer Policy addresses a broad range of consumer issues and helps public authorities enhance the development of effective consumer policies.

Working with consumer groups, law enforcement, the business community and sector experts, the Committee conducts ongoing research and discussions to identify priorities, and to develop shared measures to promote consumer wellbeing.

International cooperation through the OECD helps us stay current with digital market trends as well as new and emerging issues that relate to deceptive online practices.

We also welcome opportunities for collaboration with the multinational member organizations that make up the Fraud Prevention Forum. Chaired by the Competition Bureau, the Fraud Prevention Forum is a group of about 100 private sector firms, consumer and volunteer groups, government agencies and law-enforcement organizations who are committed to fighting fraud.

And of course, we maintain productive domestic relationships as well, like the one we enjoy with Ad Standards Canada, whose mandate to promote trust and dialogue between Canadians and advertisers aligns well with the Bureau’s priorities in the advertising arena.

Our participation in such networks and committees helps foster a global culture of competition by encouraging dialogue at home and beyond our borders.

As the digital economy continues to advance and evolve, the Bureau is tackling the issues raised in the online marketplace and prioritizing cases that impact Canadian consumers.

It is also important for advertisers operating within this fast-paced economy to know and adhere to the rules of fair competition, as set out by the Competition Act.

Because strong, vigorous competition benefits Canadians.

It means better choices, better prices and fairer business practices, and it means a stronger economy where everyone can prosper and thrive.

Thank you.