Legislative Updates

Content to follow:

 Federal Election Puts the Brakes on Bill C-51

By Meredith Ashton, Nicole Kutlesa

In our last issue of the Osler Advertising and Marketing Review, we reported on new consumer product safety legislation that formed an integral part of the federal Food and Consumer Safety Action Plan: Bills C-51 and C-52. Bill C-51 (An Act to amend the Food and Drugs Act and to make consequential amendments to other Acts), proposed progressive licensing, life-cycle monitoring and post-market testing for drug products. It received strong opposition from the natural health product industry. For instance, websites such as Truehope Nutritional Support Ltd.’s “Stopc51.com” sprang up and protest rallies were organized across the country. In response to overwhelming criticism, Health Minister Tony Clement set out to amend Bill C-51 in early June while the bill was still in second reading phase. The government proposed four substantial legislative amendments to be considered by the Standing Committee on Health.

The first major amendment would change the definition of “therapeutic product” to include “natural health product” so as to recognize natural health products (NHPs) as a category separate and apart from food and drugs. Secondly, the government proposed that the standards of evidence used to grant market authorization for a NHP under the Natural Health Products Regulations recognize traditional knowledge and history of use of the particular NHP.

The Conservatives also sought to clarify that the enforcement powers of inspectors should be exercised reasonably to determine compliance and prevent non-compliance. Additionally, seizure, detention and disposal of a product should be related to the risk of the product. Finally, the government proposed the creation of an Advisory Committee comprised of consumers, NHP industry representatives, health professionals, and patients. The Committee would assist the government in the interpretation and implementation of the Food and Drugs Act and associated Regulations.

Some Canadians were pleased with the proposals while others continued to demand termination of Bill C-51 in its entirety. As it turned out, the latter group’s demand was met when the Governor General, on the advice of the Prime Minister, dissolved Parliament on September 7, 2008 to issue writs of election. Bill C-51 died on the order table. It remains to be seen whether this contentious bill will be re-introduced when Parliament reconvenes.

We will continue to monitor natural health products regulation and will report on any developments in future issues of the Osler Advertising and Marketing Review.

 Gift Card Regulation in Canada Continues to Evolve

By Meredith Ashton, Nicole Kutlesa

Since the last issue of the Osler Advertising and Marketing Review, there have been significant developments in gift card regulation in Canada in the provinces of Ontario, Alberta, New Brunswick and British Columbia. To access our previous gift card legislation update, please click here.

Ontario

The Ontario gift card regulations (O. Reg.17/05) made under the Consumer Protection Act, 2002 were recently amended by O. Reg. 202/08.  The amendments address “open loop” gift cards which entitle consumers to redeem cards at multiple unaffiliated stores like shopping malls.  When the gift card regulations came into effect on October 1, 2007 open loop gift cards were exempt for a period of 270 days to give the government time to explore regulatory options.  As of September 1, 2008 a  supplier cannot issue an open loop gift card valued at less than the amount the consumer paid for it, less $1.50.  Furthermore, no fees are permitted unless they relate to card replacement, card customization or dormancy.  In some circumstances, a supplier may charge a maximum monthly dormancy fee.  Additional disclosure requirements apply with respect to dormancy fees for open loop gift cards.

Alberta

On November 1, 2008 Alberta’s new gift card regulation (Alta. Reg. 146/2008) made under the Fair Trading Act (the Act) will come into force. The regulation applies to valid “prepaid purchase cards,” including re-loadable cards, gift cards and gift certificates, purchased before, on or after November 1, 2008.

Unfair Practices and Required Disclosure
The regulation prohibits expiry dates on prepaid purchase cards; the sale of prepaid purchase cards with such dates constitutes an unfair practice under the Act. Additionally, it is an unfair practice when a supplier does not accept a gift card as partial payment on a purchase or when a supplier withholds any portion of a card’s unused remaining balance after use. The regulation also specifies that it is an unfair practice to charge any fees, including dormancy or inactivity charges, unless the fees relate to card replacement or customization. However, the regulation does allow a supplier to charge a one-time activation fee at the time of purchase under certain conditions. The regulation further creates specific disclosure requirements for prepaid purchase cards and requires that the supplier provide a receipt as proof of purchase when the card is issued.

Cancellation and Offences
The Act stipulates that when a supplier’s actions constitute an unfair practice, a consumer may cancel a transaction at no cost or penalty to the consumer, provided that notice is given to the supplier within one year of the unfair practice. The consumer is entitled to any remedy that is available at law, including damages. Furthermore, individuals who contravene the Act and regulation could be liable upon conviction to fines and/or imprisonment.

New Brunswick

Bill 69, the Gift Cards Act (the Act), was introduced in the second session of the 56th Legislative Assembly on May 27, 2008 and quickly received Royal Assent on June 18, 2008. Upon the introduction of the bill, the opposition withdrew Bill 58, the Gift Card Expiry Act, which had received first reading on May 14, 2008. The Act is fairly consistent with gift card legislation introduced elsewhere in Canada. It applies to “gift cards,” including gift certificates, purchased on or after June 18, 2008 unless otherwise prescribed. To date, no regulations under Bill 69 have been proposed.

Prohibitions and Required Disclosure
Under the Act, expiry dates on gift cards are prohibited and void, except as provided in the regulations. Additionally, a supplier may not sell a card valued at less than the amount the consumer paid for it, nor may any fees be charged (unless prescribed). The Act provides for certain refund obligations where a prohibited fee has been charged. The Act also prescribes that certain disclosure requirements must be met when a gift card is issued. The supplier must also disclose how a consumer can obtain information about the card, such as any remaining balance.

Offences
Individuals in contravention of the Act will be subject to a fine.

British Columbia

Bill 17, the Public Safety and Solicitor General (Gift Card Certainty) Statutes Amendment Act, 2008 received Royal Assent on May 1, 2008.  However, the sections of the Bill which add Part 4.1-Prepaid Purchase Cards to the Business Practices and Consumer Protection Act have not yet been proclaimed in force. For more information on this statute, click here.

 Payday Loans Regulation Developments in Nova Scotia, Ontario and Manitoba

By James Blackburn, Kelly Moffatt

Nova Scotia

Private Members’ Bill 128, Consumer Protection Act (amended), which amends the Consumer Protection Act, was introduced on April 25, 2008.  The bill proposes the appointment of a consumer advocate to represent the interests of borrowers at a hearing about payday loans before the Utility and Review Board.  The fees and expenses of the consumer advocate would be paid by the Board.  The bill has yet to receive second reading.

Ontario

As was discussed in the May 2008 issue of the Osler Advertising and Marketing Review, Bill 48, An Act to regulate payday loans and to make consequential amendments to other Acts, received third reading on June 9, 2008 and came into force on June 18, 2008.

Manitoba

The Consumer Protection Amendment Act (Payday Loans), which enacted new legislation to amend The Consumer Protection Act regulating payday loans, came into force on May 5, 2008.  This legislation was discussed in the May 2008 issue of the Osler Advertising and Marketing Review.

 New Mandatory Reporting Requirements for Electrical Products

By Nicole Kutlesa, Mark Austin

As of July 1, 2008 manufacturers, wholesalers, importers and other dealers of electrical products became subject to mandatory reporting requirements provided under new product safety regulations (the Regulations) to Ontario’s Electricity Act, 1998 (the Act).  The Regulations, which apply to electrical products and devices governed by the Electrical Safety Code (the ESC), increase the enforcement capabilities of the Electrical Safety Authority (the ESA) – the administrative authority responsible for public electrical safety in Ontario and for enforcing the Act.  To aid in the interpretation and application of the new Regulations, the ESA has created a number of draft guidelines (the Guidelines) which are available on the ESA web site.

Accidents, Incidents and Defects

Section 8 of the Regulations requires manufacturers, wholesalers, importers, product distributors and retailers who become aware of a “serious electrical incident or accident or a defect in the design, construction or functioning of an electrical product or device that affects or is likely to affect the safety of any person or cause damage to property” to report the incident to the ESA “as soon as practicable” after becoming aware of it. Moreover, any certification body or field evaluation agency who has certified an electrical product for Ontario and who becomes aware of a serious electrical incident, accident or defect of an electrical product for which it has provided a report must also alert the ESA as soon as practicable.  

Under s.1 of the Regulations (which section was in force as of October 1, 2007), a “serious electrical incident or accident” is defined as an electrical incident or accident that:

  • (i) results in death or serious injury to a person;
  • (ii) has the potential to cause death or a risk of serious injury to a person; or
  • (iii) causes or has the potential to cause substantial property damage.

The Guidelines published by the ESA clarify what is meant by “accident,” “incident” and “defect.” Those terms are defined (respectively)  as “an event that results in death, injury or property damage;” “an event that could have resulted in death, injury or property damage;” and “a fault, flaw or irregularity that causes weakness, failure or inadequacy in form or function.”

Minimum thresholds for the reporting of serious electrical incidents, accidents or defects are further outlined in the Guidelines.  An accident must be reported if its actual impact resulted in death, serious injury (a permanent impairment of a body function or permanent damage to a body structure, chronic effect or any injury requiring hospitalization or professional medical treatment) or substantial property damage (meaning a loss attributed to flames or failure to contain an ignition source or hazardous material, or impact on a building and its contents ranging from partial to total loss).

Of particular interest is the interpretation provided for the assessment of when defects must be reported under the Guidelines. The ESA’s interest in defects that “affect or are likely to affect the safety of any person or cause damage to any property,” is not limited to electrical defects.  The Guidelines state that a defect “may create hazards of an electrical, mechanical, chemical or other nature that are addressed in the safety requirements for electrical products” under the ESC. Therefore, if a defect of any nature is related to an electrical product governed by the ESC, the reporting requirements will apply.  The ESA will undertake to classify any report made to it and assist in determining the appropriate action to be taken.

Mandatory Reporting Requirements

The ESA has also released a document entitled “Final Draft Guideline for Mandatory Incident Reporting for Electrical Products” to assist in compliance with the Regulations (the Reporting Guidelines). In addition to manufacturers, wholesalers, importers, product distributors and retailers as listed in the Regulations, the Reporting Guidelines also require retailers who sell in or into Ontario via the Internet, mail order, auctions and flea markets, and those who sell second hand goods, to report to the ESA.  The reporting obligation of certification bodies and field evaluation agencies stands whether the serious incident occurred in Ontario or outside Ontario with a product that they have certified for Canada or a product that is similar to a product manufactured for sale in or into Ontario.  Distributors and retailers are required to notify manufacturers or importers of any concerns; should the manufacturer or importer fail to report to the ESA, the distributor or retailer must do so.

As previously indicated, a report must be made to the ESA “as soon as practicable” after a party becomes aware of the incident, accident or defect. The Reporting Guidelines indicate that the ESA interprets this to mean that “an initial report with the information that is available” must be made within 48 hours, followed by another report within 10 working days.  “Becoming aware” is considered to be when a company or one of its employees or officials receives the relevant information and includes “something a company exercising due care should know about the product.”

All information disclosed to the ESA during the reporting process will be subject to the ESA’s privacy policy. This policy states that the “ESA shall refuse to disclose records that constitute: […](ii) records containing commercial, proprietary, technical or financial information of ESA or any person or business that has supplied records to ESA in confidence, if disclosure would result in undue loss or gain, prejudice a competitive position or interfere with contractual or other negotiations.”

The mandatory reporting requirements are the latest in a series of expanded powers granted to the ESA under the new Regulations. Provisions empowering the ESA to order manufacturers, certification bodies and field evaluation agencies to give notice to the public or any person or class of persons of the risk or defect in an electrical product or the occurrence of a serious electrical incident have been in force since October 1, 2007.  If a party refuses or fails to comply with such an order, the ESA may issue the notice at the expense of the ordered party. Should the ESA (in its discretion) issue a notice, the manufacturer, certification body or field evaluation agency will be provided an opportunity to comment on the notice.

Corrective Action

The “Final Draft Guideline for Corrective Action and Public Notification for Electrical Producers” reinforces the authority of the ESA to order corrective actions where responsible parties fail to do so. As outlined in this guideline, primary producers (manufacturers, importers or national brands), distributors or retailers, and certification bodies or field evaluation agencies, have different responsibilities regarding corrective actions based on their differing levels of expertise.  It should be noted that retailers or distributors who import products into Ontario are considered importers and thus have the same responsibilities as primary producers.  Corrective actions can include: altering the product design; withdrawing products from the supply chain; changing warning labels; recalling products; and issuing public notices about the product. The guideline also provides a corrective action checklist.

The ESA has also been granted powers regarding the retention and preservation of electrical products under the Regulations. As of January 1, 2008 should an order under the Act be issued requiring that an electrical product or device be retained and preserved, additional requirements may be imposed including that: the product or device be retained in a specified secure place; an inventory be provided; an inspector have access to the product or device; or a label be affixed to the product or device indicating it is no longer approved for sale, that it presents a safety risk, or that it should no longer be used.

Approvals

As of October 1, 2007 only electrical products approved in accordance with the Regulations may be offered for sale, used, displayed or advertised in Ontario.  As of that same date, products and devices with deemed approvals under the Regulations include those certified by a certification body, in receipt of a report by a field agency confirming all applicable standards have been met, and those examined by the ESA directly.  Under section 6 of the Regulations, the ESA has the power to suspend or revoke the approval of an electrical product under certain circumstances, and may also revoke the recognition of a body as a certification body or field evaluation agency. Under the draft “Rules for the Suspension and Revocation of Product Approval and the Revocation of Recognition of a Certification Body or Field Evaluation Agency,” when a product is known or suspected to pose a serious hazard and an order has been made by the ESA to retain or turn over the product(s), suppliers must immediately cease offering the product for sale or use in Ontario.  If the parties fail to take the action requested by the ESA following the ESA’s investigation, approval of the product may be revoked.

Penalties

Penalties for refusing or neglecting to comply with the Regulations include personal fines of up to $50,000 or imprisonment for a term not longer than one year, or both, and a further fine of up to $5,000 for each day upon which such refusal or neglect is repeated or continued. Directors and officers may be liable for  fines of up to $50,000 or imprisonment for a term of not more than one year, or both. Corporations may be liable for fines on conviction of up to $1,000,000.