• Misleading Statements About Length of Time an Advertiser Has Been in Business
  • July 12, 2012 | Author: John McKeown
  • Law Firm: Cassels Brock & Blackwell LLP - Toronto Office
  • A recent decision of the High Court in the United Kingdom found that statements relating to the length of time an advertiser had been in business were misleading.

    The Facts

    The Advertising Standards Authority (“ASA”) received complaints about two advertisements from an individual who had been unsuccessful in litigation against the advertiser. In the United Kingdom, non-broadcast advertising is regulated by systems of self-regulation and statutory control. The ASA’s role is to apply and enforce the British Code of Advertising which has been developed by the advertising industry. The relevant provision of the Code provides that “no marketing communication should mislead or be likely to mislead by inaccuracy, ambiguity, exaggeration, omission or otherwise”.

    The first advertisement which appeared in Classic & Sports Car magazine contained the representation “The Showrooms-Since 1919” and “Coys founded 1919”. The representation was followed by an additional statement that said “Coys show-rooms have been synonymous with fine and elegant motor cars since the company first opened in 1919”.

    The second advertisement in the same magazine for an auction was headed “Coys Auction Spring Classics.” In the bottom right hand corner of the advertisement the words “Coys-founded 1919 London” appeared.

    The complainant challenged the assertion that the company had been founded in 1919 and said the advertisements were misleading because the current operating company, Coys of Kensington Sales Limited was incorporated in January of 2003 and did not begin carrying on business until 2004.

    The Proceeding Before the ASA

    The complaint was investigated by the ASA. In response, the advertiser’s solicitors stated that the representation was not false because the advertiser’s business was started in 1919 by WE Coy and that there was no substance to the complaint.

    After the investigation was completed the ASA concluded that the claim “since 1919” and “founded 1919” were likely to be read as providing reassurance to potential customers that Coys had a long trading history, denoting financial stability and inherited goodwill and expertise. The ASA noted that the material on the advertiser’s website suggested that Wilfred Coy started a petroleum distribution centre in 1919, the classic car business did not start until the 1940s and the car auction business did not start until the 1980s. They also noted that the history of the advertisers business included several liquidations and numerous name changes and that the 2003 liquidation left numerous auction creditors unpaid, resulting in director disqualification orders being made against two of the directors of the advertiser. Finally, it was noted that Coys had moved from Kensington to Richmond in 2006. As a result it was concluded that in the circumstances both representations were unsubstantiated and likely to mislead.

    The Application for Judicial Review

    The advertiser instituted an application for judicial review of the decision of the ASA. The advertiser asserted that no reasonable authority could reasonably conclude that the words “since 1919” and “founded 1919” could bear the meaning given to them by the ASA.

    The Court concluded that having regard to the ASA’s experience and expertise and the interpretation of advertisements (and even without it), it was plainly open to the ASA to conclude that in the context of classic car advertisements, the words "Since 1919" and "Founded 1919" were likely to mislead potential customers by suggesting that the advertiser had a long trading history, which itself suggested financial stability. As a result claim for judicial review was dismissed.

    The Canadian Position

    While there is a Canadian Code of Adverting Standards in substance similar to the British Code, compliance with the Competition Act is of more concern because of the availability of monetary penalties.

    Section 74.01 of the Act provides that a person engages in reviewable conduct who, for the purpose of promoting, directly or indirectly, the supply or use of a product or for the purpose of promoting, directly or indirectly, any business interest, by any means whatever makes a representation to the public that is false or misleading in a material respect. As there is no requirement to show an intentional element and the scope of potential remedies available is wider, the vast majority of misleading advertising cases will be dealt with under this section.

    The Act specifically requires that the general impression conveyed by any advertisement, as well as its literal meaning, be taken into account in determining if an advertisement is false or misleading in a material respect.

    Only the Commissioner of Competition may apply to the Tribunal, the Federal Court or a superior court of a province seeking a remedy relating to a reviewable matter. If the Tribunal or the court finds that a person has engaged in "reviewable conduct" as defined by the Act, they may order payment of an administrative monetary penalty, in any manner that the court specifies, in an amount not exceeding (i) in the case of an individual, $750,000 and, for each subsequent order, $1,000,000, or (ii) in the case of a corporation, $10,000,000 and, for each subsequent order, $15,000,000. Additional orders may be made relating to corrective advertising.

    Conclusion

    If a similar representation was made in Canada it would also likely be found to be misleading and potentially reviewable conduct under the Competition Act.