Companies often advertise or label products with statements or pictures that are meant to indicate to the consumer that the products are made or produced in Canada. These claims can be useful marketing techniques given that Canadians may be more likely to buy local goods. Stated reasons for buying locally include supporting employment opportunities for Canadians, attempting to reduce the environmental damage from the transportation of goods, comfort with the labour laws of Canada, and of course patriotism.
The Competition Bureau clarified its approach to enforcing these "Product of Canada" and "Made in Canada" claims with the release of its revised Enforcement Guidelines Relating to "Product of Canada" and "Made in Canada" Claims ("Guidelines") effective July 1, 2010. The release of the Guidelines was intended to provide companies with information to ensure that they are complying with the false and misleading representation provisions found under the Competition Act, the Consumer Packaging and Labelling Act and the Textile Labelling Act ("Acts"), and to allow consumers to make informed purchasing decisions. The Guidelines apply only to non-food products.
Although the Acts do not require that the country of origin of a product be identified1, if a company chooses to make such a claim, the Bureau applies the Guidelines to determine whether a claim is false or misleading under the Acts.
The Bureau distinguishes between two types of country of origin claims – "Product of Canada" claims and "Made in Canada" claims. This is a deviation from the Bureau's former Guide, which referenced only "Made in Canada" claims. With respect to "Product of Canada" claims, the Bureau will not challenge the representation if the last substantial transformation of the goods occurred in Canada, and at least 90 per cent of the costs of producing or manufacturing the goods (includes costs for materials in producing the goods and labour costs, but does not typically include general overhead) have been incurred in Canada. A substantial transformation is said to occur when the goods are fundamentally changed in form, appearance or nature such that the goods are considered new and different after the change.
The requirements for a "Made in Canada" claim are less stringent than the requirements for a "Product of Canada" claim. As with the "Product of Canada" claim requirements, a proper "Made in Canada" claim also requires that the last substantial transformation of the goods occur in Canada. However, only 51 per cent of the costs of producing or manufacturing the goods are required to have been incurred in Canada. "Made in Canada" claims must also be accompanied by a specific qualifying statement such as "Made in Canada with imported parts."
When assessing whether a representation is false or misleading, the Bureau considers the general impression conveyed by the representation, including any pictorial representation, as well as its literal meaning. The Guidelines note that pictorial representations such as the Canadian flag or maple leaf may be as forceful as explicit claims, and will generally be interpreted by the Bureau as a "Made in Canada" claim. Therefore, these claims should meet the conditions for "Made in Canada" claims, including a qualifying statement.
With respect to enforcing false or misleading representations, the Guidelines note that the "Bureau has several instruments at its disposal to promote and achieve compliance with the Acts." Under the Competition Act for example, a corporation that makes a false or misleading representation contrary to the civil provision can be ordered to pay a penalty of $10,000,000, with a $15,000,000 penalty for breaches thereafter, in addition to restitution to purchasers. A person breaching the criminal false or misleading representation provision is liable for a maximum fine of $200,000 or imprisonment of one year.
While the Guidelines took effect on July 1, 2010, in May 2010 the Bureau, in order to ensure a fair transition, implemented a six-month grace period and confirmed that they would only consider enforcement in circumstances of bad faith. The six-month grace period has since expired and therefore, the Bureau is now assessing claims under the Guidelines as was intended.
While the Guidelines do not have the force of law, it is expected that the Bureau will assess whether a claim is false or misleading as interpreted in the Guidelines. Therefore, if businesses adhere to the Guidelines, it is unlikely that they will draw the attention of the Competition Bureau. In this respect, business are strongly encouraged to familiarize themselves with the Guidelines and ensure that any claims with respect to origin in Canada are accurate, particularly given the severity of the penalties for failure to comply with the Acts.
Heather E. Robertson, Toronto
1Other Acts such as the Textile Labelling and Advertising Regulations do require country of origin information under defined circumstances.
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