By Julius Melnitzer | April 26, 2021
This article is the second in a two-part series
As the first article in our series demonstrated, regulatory enforcement of corporate laws tends to be at its highest in bad times – and the advent and aftermath of the pandemic are no exceptions. Here, we investigate whether Canadian business is ready to confront how the foundational changes to the way we do business impact competition law and compliance.
Put another way: has the speed-of-light transformation to a digital economy left corporate compliance systems in the dust? The answer, in many cases, is “yes”.
“There’s a lot of compliance systems that have not kept up,” says Kenneth Jull, counsel at Toronto’s Gardiner Roberts LLP.
On the other hand, COVID thrust many businesses into digital advertising for the first time or in unfamiliar ways.
“These companies may not be as savvy about the applicability of deceptive marketing rules, but they should be because this is a new advertising world,” Jull says.
Enforcement is definitely ramping up. Witness the recent federal budget’s $96 million funding increase to help the Competition Bureau pay for “new digital tools” and increased capacity. Doubtless, the funds will advance the Bureau’s intention, set out its Strategic Vision 2020-2024, to use proactive intelligence gathering to detect anti-competitive activity.
Huy Do, the Toronto-based co-leader of Fasken Martineau Dumoulin LLP’s antitrust, competition & marketing practice, believes the rapid pace of change is making it harder for audit and compliance systems designers to keep up.
“Even regulators, who must often cope with a mass of information, are facing challenges in their attempts to find smoking guns,” he says.
What many businesses fail to appreciate is that the issues are different, and often more complex, in the digital world.
“The tests for what’s misleading in a newspaper or on TV, for example, are different from what applies to computer screens or smartphones,” Jull says.
In the print and TV advertising world, advertisers ensure compliance by setting out the key elements of their assertions and ensuring that their fine print is not too small. Computers, however, invite an interactive process in which consumers may be unaware of the full price until they have scrolled through several screens. So-called “drip pricing”, in fact, led to a $4.5 million penalty for Ticketmaster in 2019.
“The question is: how much information does the vendor have to put on the first screen?” explains Jull, who was on the Competition Bureau team that prosecuted Ticketmaster. “We took the position that the first screen was misleading.”
More recently, in March, the FlightHub Group Inc., an online travel agency, and its directors incurred $5.8 million in penalties for charging hidden fees and misleading consumers about the costs and terms of various services.
But misleading advertising is not the only competition law arena where digital transformation has increased regulatory risk.
“Technology can make people lazy, and they may not think as carefully, for example, about what they’re discussing with competitors as they would be if they were meeting in person,” Jull says. “That’s why people get screwed on their emails.”
Emails foster a tendency to respond as quickly as possible. Giving in to it is not a great idea.
“It’s not a game show where you get points for hitting the button,” Jull says. “Stop to think whether you’d put that same message on your letterhead – because if you already pushed the send button, you just did.”
Then there’s the pressures that hard times bring.
“When business is tough, people can walk into minefields they’ve never encountered before,” says Janine MacNeil, an advertising and marketing partner in McMillan LLP’s Toronto office. “Their behaviour changes, they’re rushed, they cut corners and they make decisions quickly.”
The key, MacNeil believes, is for people to step back, think about things, and avoid doing or omitting something they didn’t intend.
“Otherwise, the regulatory and civil liability risks can be very high, especially in the consumer market,” she says.
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Julius Melnitzer is a Toronto-based legal affairs writer, ghostwriter, writing coach and media trainer. Readers can reach him at [email protected] or https://legalwriter.net/contact.