Advertising and Marketing News and Topics

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 Competition Bureau to Crack Down on False and Misleading Rebate Advertisements

By  Meredith Ashton,  Nicole J. Kutlesa

In response to concerns that businesses were profiting from expired, unredeemed gift cards, provincial governments across Canada recently enacted gift card legislation to prohibit expiry dates, among other things. A similar concern has recently arisen over consumer rebates. Offering rebates to consumers can be an effective marketing tool for businesses since consumers are more inclined to buy a product according to its perceived “after rebate” price. However, according to the Competition Bureau (Bureau), approximately only 1% of consumers actually redeem their rebates. These unclaimed rebates generate significant profit for manufacturers and retailers, and raise a concern that the fact that so few rebates are redeemed could lead to false and misleading rebate advertisements. To address this concern, the Bureau has established a special research group for false and misleading consumer rebate advertisements. A bulletin is expected to be released for public consultation by March 2009.

A rough draft of the bulletin was created in June 2008 and released to The Canadian Press under the Access to Information Act. In the draft bulletin, the Bureau stipulates that displaying the “after rebate” price in the largest font in advertising is misleading. Furthermore, the Bureau recommends that businesses clearly disclose how a consumer would receive the “after rebate “price and not be misled to think that this price is the “actual price” of the good or service. The Bureau’s draft bulletin also advises consumers to:

  • (1) ensure that all of the terms and conditions of the rebate offer can be met before deciding to purchase the product;
  • (2) request a duplicate original invoice when purchasing the product as an original receipt is usually required to be mailed in; and
  • (3) keep a copy of everything sent to the business in the event that the rebate payment is delayed or not paid.

Rebate Fulfillment

The Bureau has been investigating the use of rebates in Canada since early 2008 and has expressed concern in the past over rebate non-payment by third party fulfilment houses. Although it is not clear whether the forthcoming bulletin will address this issue specifically, the Bureau has previously warned that reliance by advertisers and manufacturers on their contracted fulfilment houses will not absolve them from blatant fulfilment defaults. In those circumstances, it will be the entity offering and promoting the rebate offer, not the fulfilment house, that will be on the hook for misleading rebate campaigns and non-fulfilment. Accordingly, advertisers and manufacturers must conduct their due diligence in choosing a fulfilment house and should ensure any risk of non-performance is adequately addressed in the services agreement.

At this time, the Bureau is not expected to prohibit rebate offers in Canada. It has stated that the prohibition in the Competition Act against false and misleading representations adequately addresses the issue and, accordingly, no legislative changes are anticipated.

 Domain Name Marketing Evolves With Custom Generic Top-Level Domains

By  Meredith Ashton

Every Internet address includes a suffix such as .com, .ca or .org. These suffixes are known as top-level domains. Currently, top-level domains are exclusively in Roman characters and are limited to 21 existing generic top-level domains (gTLDs) and approximately 250 country-code domains. In June 2008, the Internet Corporation for Assigned Names and Numbers (ICANN) adopted a community-developed policy which could result in an explosion of new gTLDs. The new policy will enable companies and groups to submit applications to create their own gTLD, using any word or phrase of 3 to 63 characters in length. Thus, companies can obtain gTLDs based on their own company name or trade-mark (e.g., brand name). The new policy will also allow applicants to apply for gTLDs in non-Roman characters such as Chinese, Arabic, and Cyrillic script. Applicants who successfully obtain a gTLD will be responsible for the administration of their gTLD, including potentially acting as a domain name registrar for any second level domains using the newly created gTLD.

Not only will this expansion of gTLDs widen the scope of the Internet and transform the familiar structure of the Internet address, but ICANN hopes that it will open up a substantial amount of space on the Internet and allow for more competition, choice and flexibility. Additionally, ICANN believes that the new policy could encourage innovation in new on-line technologies.

While this new policy has the potential to create vast opportunities and drastically alter how individuals, corporations and industry groups operate over the Internet, marketers and trade-mark owners should be aware of the implications new gTLDs will have on brand and trade-mark protection.

The Application Process

ICANN has prepared a Draft Applicant Guidebook (Guidebook) which provides a detailed overview of the application process. Generally, an applicant must submit a completed application and a U.S. $185,000 application fee. All completed applications are made public for objections and comments. Third parties may object to a proposal by filing the appropriate documentation and fees, and objections may be raised under any of the listed grounds. ICANN has proposed that the dispute resolution and adjudication process be administered by internationally recognized dispute resolution providers such as the International Chamber of Commerce and the International Centre for Dispute Resolution.

ICANN will evaluate the application to determine (among other things) whether the proposed gTLD already exists or whether it would lead to confusion. An applicant must demonstrate that it has the technical, organizational and financial capacity to administer the gTLD. If ICANN determines that more than one applicant has applied for the same gTLD, the Guidebook proposes a few different methods for resolving this problem, including performing a comparative analysis of the applications and/or auctioning the gTLD among the applicants.

The Guidebook was submitted for review and public comment until January 7, 2009; ICANN received over 300 comments from participants in 24 countries. Comments related broadly to brand and trade-mark protection, financial considerations and other general comments. A detailed review of the comments was released on February 18, 2009. Once the Guidebook is finalized, the application process will be opened to the public.

Marketing Opportunities

The ability to create new gTLDs will present unique marketing opportunities. For example, franchisors will be able to obtain gTLDs for their company name or trade-marks and then can create and issue individualized domain names for their franchisees. In addition, the ability to obtain domain names using non-Roman characters will allow companies to tailor their marketing strategies to appeal to local consumers in jurisdictions that do not use Roman characters (i.e., China, Russia and Japan).

Implications for Trade-Mark Protection

While the expansion of gTLDs will create extensive opportunities, it may also increase the burden on rights holders trying to protect their trade-marks. This increased burden may not be the result of new challenges per se (many trade-mark owners already register their trade-marks as multiple domain names in the existing gTLDs and country code domains) but, rather, the product of having to allocate exponentially more resources to protect one’s trade-mark rights (i.e., 500 instead of 21 gTLDs).

Under the proposed application process, trade-marks will not be automatically reserved for their trade-mark owner. Rights holders will have to consider how best to protect their property rights –namely, whether to (i) apply for new gTLDs representing their trade-marks and/or (ii) obtain domain names representing their trade-marks in any new gTLDs that are created. The high cost of securing and maintaining new gTLDs, as well as securing and maintaining domains names within each gTLD, makes this approach quite daunting. Alternatively or conjunctively, individuals, companies and organizations will also need to consider whether to monitor for (and then object to) new applications that may infringe upon their legal rights. However rights holders respond, it is clear that, after the application process opens, the cost of protecting one’s intellectual property rights will be dramatically more expensive and time-consuming.

Instances of cybersquatting, confusion and fraud may also significantly increase due to the introduction of new gTLDs. Though the cost of doing so is prohibitive, legitimate concerns exist that opportunists may attempt to acquire desirable domain names with a view to re-selling them for profit. Furthermore, concerns exist that consumers may be increasingly confused by the plethora of newly created domain names, thus making it more difficult to identify genuine websites from fraudulent ones.

In the months leading up to the opening of the application process, intellectual property rights holders will want to consider how to best protect their rights, and also how to take advantage of the new business opportunities afforded by new gTLDs.

 Competition Bureau Updates Bulletin on Corporate Compliance Programs

By  James Blackburn,  Meredith Ashton

On October 24, 2008 the Competition Bureau published its updated Bulletin on Corporate Compliance Programs (Bulletin). The Bulletin, which was created in 1997 and revised in 2006, is designed to provide guidance to corporations in implementing credible and effective compliance programs that comply with the Competition Act, the Consumer Packaging and Labelling Act, the Textile Labelling Act and the Precious Metals Marking Act (Acts).

The revised Bulletin still recommends five basic requirements for a corporate compliance program:

  • (1) obtain senior management involvement and support;
  • (2) establish and distribute corporate compliance policies and procedures;
  • (3) continuously train and educate staff on compliance issues, including their duties to comply with the law and internal policies and procedures;
  • (4) implement monitoring, auditing and reporting mechanisms; and
  • (5) provide incentives for compliance and ensure consistent disciplinary procedures to deter and demonstrate the business’ commitment to the compliance program.

The Bulletin now provides more detailed guidance on how a business can incorporate these essential components into a program. The Bulletin has also added tools that a business can use for illustrative purposes in creating a legitimate corporate compliance program. These tools include a Corporate Compliance framework, a template Certification Letter and a Due Diligence Checklist.

Although a court or the Competition Tribunal can order the implementation of a corporate compliance program in certain situations, it is not mandatory for Canadian businesses to establish such a program. Nevertheless, businesses may now be giving corporate compliance programs a second look; the revised Bulletin identifies how the existence of a credible and effective program can influence the Competition Bureau’s enforcement-related decisions. The Bulletin notes that where a business allegedly commits an offence under any of the Acts which provide for an examination of the business’ due diligence, the presence of a credible and effective program may be evidence of the exercise of appropriate due diligence by the business and could act as a mitigating factor.

Additionally, the existence of a legitimate corporate compliance program may be considered by the Competition Bureau in determining whether to charge a business under the criminal or civil provisions of the Competition Act for false or misleading representations or deceptive marketing practices. Furthermore, the Commissioner of Competition may take into account the presence of a compliance program in deciding whether to use an alternative case resolution approach to resolve a breach of any of the Acts.