In Canada, both the federal and provincial levels of government share responsibility for governing consumer protection. At the federal level, the focus of consumer protection laws is on (1) the anti-competitive effects of mergers and other business practices, (2) product safety, packaging and labelling, and deceptive market practices, and (3) consumer transactions in sectors such as financial institutions and telecommunications. At the provincial level, consumer protection laws focus on other consumer transactions, except those that are governed by parallel regulatory regimes (as we discuss below). The focus of this article is to provide an overview of how consumer protection regimes function at the provincial level. For ease of reference, we consider Ontario’s Consumer Protection Act (the Act), but it is important to note that there can be material differences between provincial consumer protection laws. We recommend reaching out to counsel with experience navigating regulatory nuances if you are considering selling a product or service to consumers across jurisdictions.
Overview of consumer protection law in Ontario
The Act seeks to protect the “consumer,” who is defined as “an individual acting for personal, family or household purposes and does not include a person who is acting for business purposes.” Therefore, business-driven consumers of goods and services do not fall under the protection of the Act.
The Act regulates “consumer transactions,” which are defined as “any act or instance of conducting business or dealings with a consumer, including a consumer agreement.” “Consumer agreement” is also a defined term that encompasses any agreement between a supplier and a consumer in which (a) the supplier agrees to supply goods or services for payment; or (b) the supplier agrees to provide rewards points to the consumer, on the supplier’s behalf or on behalf of another supplier, when the consumer purchases goods or services or otherwise acts in a manner specified in the agreement.
More generally, consumer protection watchdogs seek to protect consumers from certain unfair or prohibited practices. Under the Act, for example, unfair practices include the following types of false, misleading or deceptive representations, amongst others:
- That goods or services have certain characteristics that they do not have;
- That goods or services are available for a reason that does not exist;
- That a service is needed or advisable if it is not;
- Exaggerating a material fact or failing to state a material fact if such fact deceives a consumer;
- Misrepresenting the purpose or intent of any solicitation of or any communication with a consumer.
The breadth of these unfair practices is important for an organization to appreciate as they provide the basic parameters of activities that organizations must avoid to comply with consumer protection law.
Consumer protection laws also set out requirements for specific consumer agreements. Although the categories and terminology related to these agreements can differ by province, in general, consumer protection laws apply to remote agreements, internet agreements, time share agreements, “direct” (itinerant sales) agreements, credit agreements, contracts for the supply of services at a distance (such as cell phone contracts), leases for the supply of goods and, in some cases, future performance agreements. The specific requirements for these agreements may consist of content and disclosure requirements, cancellation rights and a “cooling off” period, and cost of credit disclosure requirements for agreements dealing with consumer credit.
It is important for businesses to remember that they may be subject to the Act despite not having a place of business in Ontario or Canada. Section 2(1) states that the Act applies to all consumer transactions “if the consumer or the person engaging in the transaction with the consumer is located in Ontario when the transaction takes place.”
However, some consumer transactions are explicitly excluded from the purview of the Act where there is a parallel legal regime, as set out in section 2(2) of the Act. Examples include consumer transactions regulated under the Securities Act, prescribed professional services (insurance, mortgage brokering, or other business activities that deal with consumer credit) that are regulated under a different statute in Ontario, and consumer transactions for the purchase, sale or lease of real property.
Penalties for non-compliance and consumer remedies
Organizations that fail to comply with the Act can face a number of consequences that vary in severity, including:
- Fines and imprisonment: Under section 116 of the Act, an individual (which includes the Officers and Directors of a corporation) convicted of an offence under the Act is liable to a fine of up to $50,000 or up to two years imprisonment. A Corporation convicted of an offence under the Act is liable to a fine of up to $250,000.
- Class action lawsuits: Under section 8 of the Act, even if a consumer agreement or a related agreement includes a term that prevents or has the effect of preventing the consumer from commencing or becoming a member of a class proceeding, a consumer may still commence a proceeding on behalf of members of a class under the Class Proceedings Act, 1992 or may become a member of a class in such a proceeding in respect of a dispute arising out of a consumer agreement.
- Consumer agreement not binding: Under section 93 of the Act, a consumer agreement is only binding on the consumer if the agreement complies with the Act and its regulations.
- Consumer beware list: In Ontario, the Ministry of Government and Consumer Services maintains a searchable list of businesses that have not answered the Ministry after they’ve either been sent two notifications about a consumer complaint or been charged or convicted in relation to the Act or other acts of the Ministry.
Trends in consumer protection law
Generally, provincial regulators tend to air on the side of caution and look at more rather than fewer protections for consumers when they encounter activities that may be considered risky.
In recent years, we’ve witnessed the development of additional regulations that have sought to establish further protections for consumers, such as regulations around high-cost of credit and amendments pertaining to direct sales contracts and door-to-door selling activities. Moving forward, we can expect the development of more robust legislation intended to address risks in payday lending and other novel lending activities like buy-now-pay-later.
Ultimately, regulators have been tasked with maintaining technology-agnostic regimes in an increasingly technological world. We expect and hope that regulators will respond to this struggle by taking a strategic, risk-based approach to regulation.
A special thank you to articling student Ernest Tam who helped draft this article.