Competition Bureau Orders Health Science Company Pay Penalties for False and Misleading Advertisements

Written on behalf of Campbells LLP
Posted on May 12, 2022
Nutritional Supplements

The Competition Bureau of Canada recently investigated NuvoCare Health Sciences Inc. (“NuvoCare”), a health sciences company manufacturing nutritional supplements. NuvoCare’s claims promoted the WeightOFF Max!, Forskolin+ and Forskolin Nx, among other products, and were made on labels and packaging, web platforms, social media, magazines, emails and at expos. Health Canada licences NuvoCare’s products to make certain claims but not to make weight-loss claims.

The investigation concluded that NuvoCare made marketing claims that gave the false or misleading impression that their products have been proven to cause weight loss. The Bureau found NuvoCare’s claims were not supported by adequate and proper testing. The Bureau resolved its concerns through a consent agreement reached with NuvoCare and founder Ryan Foley that will prevent both from making false, misleading, or unsupported marketing claims to consumers about products they market for weight loss.

As part of this settlement, NuvoCare and Ryan Foley agreed to:

  • pay $100,000 in total penalties
  • change or remove all weight-loss claims made about their products
  • establish and maintain a corporate compliance program to promote compliance with the law and prevent deceptive marketing issues in the future

The settlement registered with the Competition Tribunal has the force of a court order and will be binding for ten years.

The Competition Bureau of Canada

The Competition Bureau is an independent law enforcement agency that protects and promotes competition for Canadian consumers and businesses.

In February 2019, the Competition Bureau issued a warning calling on all retailers of natural health products in Canada to review their advertising and ensure that weight loss claims are not false, misleading or unsubstantiated.

Deceptive Marketing Practices

Under the Competition Act (the “Act”), it is against the law to advertise or market something in a way that is false or misleading. The Act applies to anyone inside or outside of Canada who is promoting the supply or use of a product, service or any business interest through:

  • printed or electronic advertisements
  • written or oral presentations
  • illustrations
  • audio-visual promotions

False or Misleading Representations

Pursuant to the Act, it is against the law to make materially false or misleading representations to promote a product, service or business interest. A representation is “material” if the general impression it conveys leads someone to take a particular course of action, like buying or using a product or service. A “representation” refers to any marketing material, including online and in-store advertisements, direct mail, social media messages, promotional emails, and endorsements, among other things.

Penalties and Remedies for Non-Compliance with the Competition Act

The consequences associated with engaging in deceptive marketing practices depend on which provisions of the Competition Act the conduct violates:

  • Under the criminal provisions of the Act, violators can be tried in criminal court. This requires proof of each element of the offence “beyond a reasonable doubt.”
  • Under the civil provisions, practices are brought before the Competition Tribunal, the Federal Court, or the superior court of a province or territory. To be found in violation requires that each element of the conduct be proven “on a balance of probabilities.”

For making false or misleading representations, a civil court may order the person: to stop engaging in such conduct, to publish a corrective notice, and/or pay an administrative monetary penalty. For individuals, the penalty can be up to $750,000 for a first-time violation and up to $1 million for subsequent incidents. For corporations, the penalty can be up to $10 million for a first-time violation and up to $15 million subsequently.

In situations where a person has made materially false or misleading representations about a product, a civil court may also make an order for restitution that requires the person to pay an amount not exceeding the total of the amounts paid to the person for the products in respect of which the conduct was engaged in, to be distributed among the persons to whom the products were sold and, in certain cases, may issue an interim injunction to freeze assets.

Where a company knowingly or recklessly makes false or misleading advertisements, it may be found guilty by a criminal court on a summary conviction with a fine of up to $200,000 and/or imprisonment for up to one year or conviction on indictment where fines are at the discretion of the court and imprisonment can be for up to 14 years.

Establishing a Compliance Program

The Competition Bureau has created a Bulletin (dated June 3, 2015, the “Bulletin”) to assist companies in creating an in-house compliance program by setting out basic principles and providing general guidance for the development of an in-house compliance program. The Bulletin encourages businesses to craft programs that reflect their specific circumstances. The Bulletin sets out the following questions that a business may ask itself in structuring such a program:

  • How familiar are the managers of the business with the requirements in the Acts, and how do they apply to the business?
  • Does the business operate in multiple countries?
  • Does the business have market power in the industry?
  • Does the business, and/or the sector within which it operates, have a history of contraventions?
  • Does the business make representations to the public to promote its products or business interests?
  • What is the size of the business?

While an in-house compliance program is not mandatory, it may be a mitigating factor considered by the Competition Bureau in conducting an investigation.

Oakville Lawyers Helping Clients with Corporate and Regulatory Matters

At Campbells LLP, our knowledgeable corporate lawyers regularly advise clients on administrative and regulatory matters and appear before administrative tribunals with positive results. We can help your company establish an effective in-house compliance program and review all marketing practices to ensure they are within the boundaries of the Act to maximize your message while minimizing any potential exposure. To speak with a lawyer about your corporate or regulatory needs, please contact us online or at 905-828-2247 to schedule a consultation.