business law week 11 lecture

next topic are is really three topics. Sale of goods, consumer protection, and competition law. Initially, you might think those three things do not have very much in common. But in fact, they do. They're sometimes grouped together under the heading commercial law because they are areas of law to do with commerce.

The foundation of the Canadian economy has always been the sale of goods. Now, recently the services sector has assumed a significant portion of our GDP and the financial services sector in particular, but the foundation of the Canadian economy has has always been the sale of goods. And that's the same for most economies. And in order to have a robust economy, the sale of goods must be encouraged and protected.

Originally, the law of sale of goods was what's known as caveat emptor or buyer beware. In other words, all the risk was on the buyer. Now what happens in commercial transactions when one party bears all the risk is that they get very reluctant to participate because they keep getting burned. They keep getting taken advantage of because sellers corporations tend to be much more powerful. And so if the buyers bear all the risk, then commerce grinds to a halt when they get too afraid to go out and spend their money.

Sale of goods law protects buyers and levels the playing field a little bit by changing caveat emptor into a relationship that is more balanced. This promotes commerce and therefore the economy. Note that the sale of goods involves contractual relationships. We are once again talking about contract law and once again we are talking about a special kind of contract where the government has seen fit to intervene in order to achieve some social policy goal. In this case promoting the economy.

Next we're going to talk about consumer protection. And you'll see that this bears some similarity to sale of goods. Consumers are generally thought of as being more vulnerable than businesses, more susceptible to exploitation. And once again, if consumers do not feel confident and secure in participating in the marketplace, then they won't and commerce will suffer. And so whether the goal is to be beneficent uh or whether it is to promote the economy, which I suggest is the much more likely of the two, the government has passed laws in Ontario. It's the Consumer Protection Act to protect consumers and to restrict the ability of people who deal with consumers to carry on business in ways that are considered to be unfair.

This is controversial because every time you put restrictions on business of this type, you make goods and services more expensive and therefore you make those suppliers less competitive. And so the balance is trying to promote commerce and the economy by protecting some of the participants while not making it so expensive that domestic producers and suppliers cannot compete.

And then finally we're going to talk about competition law. Unlike sale of goods law and consumer protection law, competition law is federal law. But again, you will see some similarities. What competition law tries to do is to prevent companies from acting in an anti-competitive manner. Why? Because in a capitalist system, it is generally acknowledged that competition is good. Competition is good for the economy. It promotes a robust economy and it is particularly good for consumers.

And so what we will find is that there are a variety of practices which are prohibited by the competition act. Some of them are criminal like bid rigging and price fixing and others are civil. They're simply prohibited but there are civil penalties not criminal penalties. And we will talk about the competition bureau which is given the mandate of reviewing and approving very large transactions which might have the effect of reducing competition.

Sale of Goods (1)

The Sale of Goods Act applies to every SALE of GOODS.

Hi, in this module we're going to be talking about the sale of goods, consumer protection, and competition law. Taken together, those are often referred to as commercial law. But in this video, we're going to talk about the sale of goods.

Sale of Goods (2)

The Sale of Goods Act applies to every SALE of GOODS.

As with any economy, the sale of goods is vital to the Canadian economy. The foundation of commerce in Canada has traditionally been the sale of goods. The law of the sale of goods is interested in the rights of buyers and sellers. After all, those are the parties to a sale of goods transaction. Later on, we will add lenders to the mix when we talk about the law of debtor and creditor.

Sale of Goods (3)

The Sale of Goods Act applies to every SALE of GOODS.

The statute that governs the sale of goods in Ontario is the Sale of Goods Act. Contracts that are governed by this act can range from the smallest transactions like buying a chocolate bar at a variety store to a multi-million dollar contract like the sale of an airplane. So the Sale of Goods Act has very broad application.

Sale of Goods (4)

The Sale of Goods Act applies to every SALE of GOODS.

If we go back a little bit to look at the history of sale of goods law, under the original common law, sales transactions favored sellers. The law was known as caveat emptor. You've probably heard of that. It means literally “buyer beware.” So all the risk was on the buyer. That wasn't fair. But probably more important for the courts and the legislatures, it had a chilling effect on trade and commerce. When one side of a transaction bears all the risk, then they're not enthusiastic participants. And after they get burned over and over, they withdraw and they no longer want to venture forth into the marketplace.

Sale of Goods (5)

The Sale of Goods Act applies to every SALE of GOODS.

If we go back a little bit to look at the history of sale of goods law, under the original common law, sales transactions favored sellers. The law was known as caveat emptor. You've probably heard of that. It means literally “buyer beware.” So all the risk was on the buyer. That wasn't fair. But probably more important for the courts and the legislatures, it had a chilling effect on trade and commerce. When one side of a transaction bears all the risk, then they're not enthusiastic participants. And after they get burned over and over, they withdraw and they no longer want to venture forth into the marketplace.

Sale of Goods (6)

The Sale of Goods Act applies to every SALE of GOODS.

So perhaps to increase fairness, but probably to promote trade and commerce, the common law developed rules to create protection for buyers. Quite often this was done by the courts implying terms into sale of goods contracts. By the end of the 19th century, the common law rules that had developed had become very complicated. There was a lot of overlap, there was a lot of inconsistency, and it was felt that there was a need to codify these common law principles.

Sale of Goods (7)

The Sale of Goods Act applies to every SALE of GOODS.

So in 1893 the English parliament enacted the Sale of Goods Act. This statute codified and replaced the previous common law rules applicable to the sale of goods. Every Canadian province has now enacted a Sale of Goods Act and they are almost word-for-word identical to that original 1893 English statute. In England, the original Sale of Goods Act was repealed and replaced with the 1979 version of the act, which has itself been amended at various times since then. But in Canada, there have been very few reforms to the Sale of Goods Act. And in Ontario, our Sale of Goods Act is almost identical to the original 1893 version.

Sale of Goods (8)

The Sale of Goods Act applies to every SALE of GOODS.

Now, you might wonder why there have not been many changes to the Sale of Goods Act while other areas of law such as the Consumer Protection Act have been expanded dramatically over the years. Well, the answer is political priorities and legislative agendas. When was the last time you went to a political rally and you heard the crowd chanting “Sale of Goods! Sale of Goods!” Exactly. Never. Because voters are not terribly interested in reforming the Sale of Goods Act. It isn't a priority for politicians. Consumer protection, on the other hand, plays very well to voters and so the politicians make it a legislative priority.

Sale of Goods (9)

The Sale of Goods Act applies to every SALE of GOODS.

But we have to pay attention to the Sale of Goods Act even though it's archaic because it has such broad applications. The Sale of Goods Act works in addition to the underlying sales contract. It doesn't replace it. It adds to it and it provides specific rules governing the relationship between the buyer and the seller.

As I mentioned, the Sale of Goods Act applies to every contract for the sale of goods. That means we need to know what “goods” means and we need to know when we have a sale. 

Sale of Goods (1)

The Sale of Goods Act applies to every SALE of GOODS.

Not to services, intangibles, real property, gifts, leases, or licenses

Goods means tangible personal property. Remember we talked about property. We talked about real property and personal property. And under personal property, we talked about tangible personal property—stuff you can see and touch. Books, clothes, hats, keys, computers. That's tangible personal property.

So the Sale of Goods Act does not apply to intellectual property. It doesn't apply to services and it doesn't apply to real property. It's often difficult to distinguish between the sale of goods and the provision of services. There are a couple of cases that highlight this discrepancy.

Sale of Goods (2)

The Sale of Goods Act applies to every SALE of GOODS.

Not to services, intangibles, real property, gifts, leases, or licenses

In G and Whitespot, which is a case name you don't want to get backwards, Mr. G went into the Whitespot restaurant in Vancouver and ordered a meal. Unfortunately, his food was contaminated with botulism toxin. Not the good kind that makes your wrinkles go away—the bad kind that puts you in hospital. Mr. G got very ill and he sued the restaurant for breaching the implied terms of the Sale of Goods Act. The question for the court was whether serving a restaurant meal was a sale of goods or the provision of services.

Sale of Goods (3)

The Sale of Goods Act applies to every SALE of GOODS.

Not to services, intangibles, real property, gifts, leases, or licenses

The court held that the contract was for the sale of goods. Obviously, there were some services involved. They held Mr. G's chair for him. They hung up his coat. They cooked his food. They set the table. They cleaned up. They brought him water, utensils, and a napkin. But the primary purpose of the transaction was to provide him with a meal, and that, the court said, was a sale of goods.

Sale of Goods (4)

The Sale of Goods Act applies to every SALE of GOODS.

Not to services, intangibles, real property, gifts, leases, or licenses

On the other hand, in Borick and Hooper, Mrs. Borick wanted to buy a painting from an artist who had a reputation for painting a very specific style of painting—and that was a solid horizontal stripe on a plain background. This was the style the artist was known for. Ms. Borick had a very specific color in mind because she wanted it to match her furniture, and she had a specific size because she had a place where she wanted to hang it. And so she commissioned the artist to paint just such a picture for her, which he did and she paid him. But after a short time, the paint started to crack and peel and yellow in places.

So Ms. Borick sued for breach of contract for the breach of the implied conditions of the Sale of Goods Act. Once again, the question was whether this contract was for the sale of goods or for the provision of services.

Sale of Goods (5)

The Sale of Goods Act applies to every SALE of GOODS.

Not to services, intangibles, real property, gifts, leases, or licenses

In a result different from G and Whitespot, the court held that this was a contract primarily for the provision of services. Yes, there were some goods provided—canvas, paint, and wood for the frame—but the primary purpose of this contract was for the artist's skill and expertise. That's what she was buying. Had she gone into a gallery and bought a painting that was hanging on the wall, that would undoubtedly have been a contract for the sale of goods. But because she commissioned the artist to paint this specific painting for her, that was a contract for services and therefore the Sale of Goods Act did not apply.

The Sale of Goods Act also only applies to sales. It doesn't apply to gifts or leases or licenses. Goods have to be sold. That means that property must be transferred and it must be paid for. That means money must change hands.

Sale of Goods (6)

The Sale of Goods Act applies to every SALE of GOODS.

Not to services, intangibles, real property, gifts, leases, or licenses

This illustrates how out-of-date and obsolete the Sale of Goods Act is. This means that if you go to a car dealership and buy a car, the Sale of Goods Act will protect you because it is a sale of goods. But if you go to the same dealership and you lease the very same car—a transaction which is virtually identical today—the Sale of Goods Act will not apply because it is not a sale. That distinction ought to be done away with, but that would require an amendment to the Act.

Now, the Sale of Goods Act allows buyers and sellers to modify or exclude the implied terms and conditions of the Act, but as we will see, not in consumer transactions. So we have to determine whether we have a business transaction or a consumer transaction.

Sale of Goods (7)

The Sale of Goods Act applies to every SALE of GOODS.

Not to services, intangibles, real property, gifts, leases, or licenses

If we have a consumer transaction, then the Sale of Goods Act applies for sure. If we have a business transaction, then the Sale of Goods Act applies unless the parties agree to modify or exclude it.

You may be asking: so when do we have a consumer transaction? The test is whether the buyer intends to use the goods primarily for consumer purposes—household, domestic, or personal purposes—or business purposes. It doesn't matter how sophisticated the parties are. It doesn't matter what kind of goods it is. The test is what the goods will be used for.

Sale of Goods (8)

The Sale of Goods Act applies to every SALE of GOODS.

Not to services, intangibles, real property, gifts, leases, or licenses

For example, if I go to Canadian Tire and I buy a coffee maker for my kitchen to make coffee in the morning, that would be a consumer transaction because I intend to use the goods primarily for household, domestic, or personal purposes. But if I go to the very same Canadian Tire and buy the very same coffee maker for my lunchroom at the office, then that would be a business transaction. And in that case, the Sale of Goods Act will apply, but we are free to modify or exclude it if we choose.

Sale of Goods (1)

The Sale of Goods Act:

• Implies terms into sales contracts (conditions and warranties)

• Helps determine when title passes from seller to buyer

• Provides remedies for breaches

So what does the Sale of Goods Act do? Well, the Act implies terms into sales contracts. It also helps determine when title in the goods passes from seller to buyer, and it provides remedies in the event of breach.

Let's talk about each one of these in turn.

We know what implied terms are because we talked about that when we talked about contracts. Implied terms are terms that will be interpreted as part of the contract because the court implies them into the contract. And we talked about a number of reasons why the court would imply a term into a contract. Here it's quite simple: the court will imply these terms into a sale of goods contract because the Sale of Goods Act says so.

Sale of Goods (2)

The Sale of Goods Act:

• Implies terms into sales contracts (conditions and warranties)

• Helps determine when title passes from seller to buyer

• Provides remedies for breaches

Some of the implied terms in the Act are implied conditions. Others are implied warranties.

Sale of Goods (1)

Implied conditions:

• Seller has right to sell

• Goods must match description

• Goods must match sample

• Merchantable quality

• Reasonably suitable for intended purpose

Conditions are fundamental—essential to the contract. A breach of a condition gives the innocent party the right to terminate the contract. A warranty is a more peripheral minor term. A breach of warranty only gives the innocent party the right to damages, not to terminate the contract.

Sale of Goods (2)

Implied conditions:

• Seller has right to sell

• Goods must match description

• Goods must match sample

• Merchantable quality

• Reasonably suitable for intended purpose

Some of these implied terms include:

• The seller has the right to sell the goods. You might think that's odd because the seller is the owner of the goods, right? Well, not necessarily—think of Amazon, where they sell many goods they do not own but have the right to sell.

• Goods must match their description. If you see a picture online, the item delivered must match that description.

• Goods must match a sample.

• Goods must be of merchantable quality—no defects.

• Goods must be reasonably suitable for their intended purpose.

Sale of Goods (3)

Implied conditions:

• Seller has right to sell

• Goods must match description

• Goods must match sample

• Merchantable quality

• Reasonably suitable for intended purpose

A series of surfboard examples illustrate these principles—whether a surfboard must float, whether it must function as a coffee table, and whether the seller was informed of the intended use.

There is overlap between merchantable quality and suitability for purpose. For example, a TV with a cracked screen fails both. A TV with a dent in the back may fail merchantable quality but still be suitable for its intended purpose.

Sale of Goods

Implied warranties:

• No encumbrances

• Delivery within a reasonable time

• Payment within a reasonable time

Implied warranties differ from conditions in their remedies. A breach of warranty does not allow termination—only damages.

Implied warranties include:

• Goods free of encumbrances.
  

• Delivery within a reasonable time.
  

• Payment within a reasonable time. (This last one benefits the seller—the only such implied term.)
  

Overall, these implied terms level the playing field between buyers and sellers by providing additional protections for buyers.

Sale of Goods

Risk follows title.

The SGA helps determine when title passes from seller to buyer.

The second function of the Sale of Goods Act is helping determine when title passes from seller to buyer. This matters because risk follows title. Whoever has title bears the risk of loss. So you want to know when title passes so you know when to insure or care for the goods.

The general rule: the intention of the parties governs. If you can determine when the parties intended title to pass, then that is when it passes. If intention cannot be determined, then the Act provides five rules to determine when title passes. You don’t need to memorize these—intention is the key.

Sale of Goods

Remedies:

• Repudiation (breach of condition)

• Damages (breach of warranty)

Lastly, the Act provides remedies—repudiation and damages. A breach of condition allows repudiation; a breach of warranty allows damages only. The innocent party can always treat a breach of condition as a breach of warranty if they choose (e.g., accept the goods and sue for damages), and sometimes they may be forced to if they accept the goods or make them irreparable.

That's the Sale of Goods Act. When we come back, we will talk about consumer protection laws.

Consumer Protection (1)

Consumer Protection Act:

• Allows consumer to sue in contract (regardless of privity)

• Makes SGA mandatory

• Applies to services (not just goods)

• Duty to warn of product hazards

• Prohibits false/misleading claims

Welcome back. So our next topic is consumer protection laws. Um in Ontario the act the legislation which provides for consumer protection is called the consumer protection act. Another very cleverly named statute. Every province has a consumer protection act. They're slightly different. Um, some of them are significantly different in in a few ways. U but they all have largely the same approach.

Consumer Protection (2)

Consumer Protection Act:

• Allows consumer to sue in contract (regardless of privity)

• Makes SGA mandatory

• Applies to services (not just goods)

• Duty to warn of product hazards

• Prohibits false/misleading claims

What the Consumer Protection Act does for the most part is once again it modifies the Freedom to Contract. It still allows people to design their contracts the way they choose, but it puts some limitations on that in order to protect consumers. Now, there is a debate as to whether consumers deserve more protection than others. You remember the definition of a consumer for the purposes of commercial law. It's a purpose-based test. If the purpose of the transaction is primarily domestic, household or personal, then you have a consumer transaction and the consumer gets the benefit of all the protections in the act. If the purpose of the transaction is primarily for business, then it is not a consumer transaction and the act does not apply.

Consumer Protection (3)

Consumer Protection Act:

• Allows consumer to sue in contract (regardless of privity)

• Makes SGA mandatory

• Applies to services (not just goods)

• Duty to warn of product hazards

• Prohibits false/misleading claims

As I say, there is something of a debate as to whether consumers warrant increased protection. The side that argues in favor of consumer protection says that consumers are weaker, more vulnerable than businesses. They're less sophisticated. They have less access to legal advice. They're likely to be less informed about the law and other matters. They can be taken advantage of more easily. Um, and so that's kind of the weaker, stronger party. uh angle there's also the the notion that I mentioned with respect to the sale of goods which is that if we want consumers to be enthusiastic participants in the commercial marketplace then we have to protect them to some degree in order to encourage them to participate because if we don't and they keep getting ripped off by unscrupulous businesses then they'll withdraw. they'll stick their money under the mattress and that will have a negative impact on trade and commerce.

Consumer Protection (4)

Consumer Protection Act:

• Allows consumer to sue in contract (regardless of privity)

• Makes SGA mandatory

• Applies to services (not just goods)

• Duty to warn of product hazards

• Prohibits false/misleading claims

those are the primary reasons why it's argued that consumers deserve more protection. What are the arguments on the other side? Well um one argument is that some consumers don't need it but yet we provide it to all of them. So, for example, you know, when I go to Canadian Tire to buy a coffee maker, I'm a consumer. If I buy it for my kitchen, I'm a consumer. I get all the protections of the Consumer Protection Act, not to mention the sale of goods act. But if a 24y old who's starting a business and has no real experience or legal knowledge, they go to Canadian Tire and buy the same coffee maker for their business. Well, they don't get any of those protections. Well, to be honest, they need those protections a lot more than I do, but I get them and the business person doesn't. Um, now maybe that doesn't argue convincingly that consumers are not deserving of more protection. Maybe it argues that we should tweak the definition of consumer.

Consumer Protection (5)

Consumer Protection Act:

• Allows consumer to sue in contract (regardless of privity)

• Makes SGA mandatory

• Applies to services (not just goods)

• Duty to warn of product hazards

• Prohibits false/misleading claims

another argument is that it increases transaction costs. Um, and that's an economic argument. So every time you put another hurdle in front of businesses, every time you add another requirement to the transactions that businesses engage in, you make those transactions more expensive. And what you're doing over the long haul is you're making Ontario businesses less competitive because if they have to comply with all these additional restrictions and regulations and other foreign suppliers do not, especially in an age of increasing global markets, that makes Ontario businesses less competitive and that hurts all of us.

Consumer Protection (6)

Consumer Protection Act:

• Allows consumer to sue in contract (regardless of privity)

• Makes SGA mandatory

• Applies to services (not just goods)

• Duty to warn of product hazards

• Prohibits false/misleading claims

And then finally, the other argument is um that it's kind of condescending. It's it's kind of patronizing, right, for the government to to deem that that I am needing of protection. You know what? I don't I don't necessarily want the government involved in tweaking the terms of contracts that I enter into. Um, you know, I'll give you an example. So, when I used to go to uh when I used to go to Rogers to get my cell phone, um, you know, a new cell phone, I would get one and and it would be free. Um, I just had to sign a three-year contract and the phone would be free. It was a good deal. And I did it year, you know, I did it over and over and over. I never paid for a phone.

Consumer Protection (7)

Consumer Protection Act:

• Allows consumer to sue in contract (regardless of privity)

• Makes SGA mandatory

• Applies to services (not just goods)

• Duty to warn of product hazards

• Prohibits false/misleading claims

And then a few years ago, I went to Rogers and I said, you know, I'd like a phone. They said, 'Well, it's going to be $400. I said, $400? Well, how come? Um, it's always free. And they said, well, because the government wanted to protect consumers, and so they forced us not to give out three-year contracts because they deemed that three-year contracts were taking advantage of consumers. And so now the the longest contract we can give you is a two-year contract. And this is still the law.

Consumer Protection (8)

Consumer Protection Act:

• Allows consumer to sue in contract (regardless of privity)

• Makes SGA mandatory

• Applies to services (not just goods)

• Duty to warn of product hazards

• Prohibits false/misleading claims

And when we advertise the cost of a new phone over two years, then you know we we can't get our money back as easily and therefore you got to pay 400 bucks for the phone. Um well, for me, you know, that's not a benefit for me. That just cost me 400 bucks. I'm happy to go and get a three-year contract. I've been doing that for years and years and years. But the government because they wanted to protect me has now made me pay $400 for a phone.

Consumer Protection (9)

Consumer Protection Act:

• Allows consumer to sue in contract (regardless of privity)

• Makes SGA mandatory

• Applies to services (not just goods)

• Duty to warn of product hazards

• Prohibits false/misleading claims

Um, so that's the arguments for and against. But the arguments for consumer protection have won. The the debate has been held. It has been won and lost and consumers are entitled to more protection. So now the goal is for the government to try and balance a sufficient degree of consumer protection with not having too negative uh an impact on trade and commerce realizing that there is a connection between the two.

Consumer Protection (10)

Consumer Protection Act:

• Allows consumer to sue in contract (regardless of privity)

• Makes SGA mandatory

• Applies to services (not just goods)

• Duty to warn of product hazards

• Prohibits false/misleading claims

So what does the consumer protection act do? what it does a lot, but let me highlight a few of the significant uh things that it does.

First of all, it it gives consumers the right to sue in contract instead of in tort. So, uh you'll recall when we talked about contract law, one of the one of the hurdles we we had um for if you remember Donahghue and Stevenson, one of the very first product liability negligence cases from the UK where Mrs. Donahghue was not able to sue the manufacturer in contract because she didn't have a contract with them. She didn't buy the the bottle of ginger beer from them. It was given to her by her friend. And so she was relegated to suing the manufacturer in negligence because she didn't have a contract.

Consumer Protection (11)

Consumer Protection Act:

• Allows consumer to sue in contract (regardless of privity)

• Makes SGA mandatory

• Applies to services (not just goods)

• Duty to warn of product hazards

• Prohibits false/misleading claims

Well, the Consumer Protection Act says that you can sue a manufacturer in contract. So if you buy a car from a dealership, you can sue the manufacturer of the car in contract law, not just negligence. And because you're a consumer, you get the benefit of the sale of goods act with respect to the purchase of those goods. So that provides consumers with a significant degree of added protection. Um it it also um allows the uh consumer to ignore the rule of privity. Um even though they're not a party to the contract, they can sue on it.

Consumer Protection (12)

Consumer Protection Act:

• Allows consumer to sue in contract (regardless of privity)

• Makes SGA mandatory

• Applies to services (not just goods)

• Duty to warn of product hazards

• Prohibits false/misleading claims

The consumer protection act makes the sale of goods act mandatory for consumer contracts. We talked about that during uh our discussion of the sale of goods act. The sale of goods act actually doesn't mention the word consumer. There's no distinction between consumers and businesses in the sale of goods act. What the sale of goods act says is that the parties are free to modify or exclude provisions of the sale of goods act. It's the consumer protection act which says if it is a consumer transaction then the sale of goods act cannot be modified or excluded.

Consumer Protection (13)

Consumer Protection Act:

• Allows consumer to sue in contract (regardless of privity)

• Makes SGA mandatory

• Applies to services (not just goods)

• Duty to warn of product hazards

• Prohibits false/misleading claims

um there is um an application of the consumer protection act to services not just to goods. So those cases that we talked about G and Whitespot, Borick and Hooper that discussed the distinction between a contract for the sale of goods and a contract for the provision of services. Well, uh, if you're a consumer then and and the reason that those cases existed was because the the this section was not in the Consumer Protection Act when those cases were decided. But if you're a consumer, then um there is an implied term in every contract for the provision of services that the services will be rendered in a reasonable manner. So essentially you have the same type of protection um for buying goods that you have when you are procuring services.

Consumer Protection (14)

Consumer Protection Act:

• Allows consumer to sue in contract (regardless of privity)

• Makes SGA mandatory

• Applies to services (not just goods)

• Duty to warn of product hazards

• Prohibits false/misleading claims

Uh the consumer protection act makes it mandatory to warn of product hazards, prohibits false or exaggerated claims or misleading advertising. Remember when we talked about contract law? Um contract law doesn't say much about misleading advertising, does it? Right? Why? Because an advertisement is not generally an offer. It's an invitation to treat, right? And so if the misleading claims are not made in the offer, then it doesn't constitute breach of contract if they turn out not to be true. That's why the statute comes in and says you can't do that. That's an unfair business practice.

Consumer Protection (14.5)

Consumer Protection Act:

• Allows consumer to sue in contract (regardless of privity)

• Makes SGA mandatory

• Applies to services (not just goods)

• Duty to warn of product hazards

• Prohibits false/misleading claims

Um the uh consumer protection act also um prohibits unconscionable transactions mostly with respect to credit transactions and requires the disclosure of credit terms.

Consumer Protection (15)

Consumer Protection Act:

• Allows consumer to sue in contract (regardless of privity)

• Makes SGA mandatory

• Applies to services (not just goods)

• Duty to warn of product hazards

• Prohibits false/misleading claims

Now you know one thing I'll I'll say is that um there is I think a a debate as about whether these provisions which are all good in theory are really that good in practice. Um and what I mean by that is do they really work? Do they provide the kind of outcomes that that they are intended to provide? You know, and I'm not entirely sure they are. I mean, I think there are there are legitimate businesses that care about being in compliance with these requirements and they take effort to make sure they are. I think there are a lot of businesses that don't give a damn. And I'm not sure that many consumers even know this that these protections exist, nor would they be able or willing to pursue remedies if they did.

Consumer Protection (16)

Consumer Protection Act:

• Allows consumer to sue in contract (regardless of privity)

• Makes SGA mandatory

• Applies to services (not just goods)

• Duty to warn of product hazards

• Prohibits false/misleading claims

So I I'm not I'm not sure the extent to which these things work. and you know the the mandatory disclosure of credit terms. Well, there's an example uh you know of of whether the act is really producing the kind of outcomes that it intends to. So, you've all seen these commercials, right? the the ones with Matthew McConna and the and the Lincoln or whatever it is that he drives, you know, um and and they they give you whatever the advertisement is and then at the very and they and they talk about, you know, the prices and stuff on some of them at the very end the very end for like one and a half seconds they show a bunch of language on the bottom of the screen in tiny little letters, right?

Consumer Protection (17)

Consumer Protection Act:

• Allows consumer to sue in contract (regardless of privity)

• Makes SGA mandatory

• Applies to services (not just goods)

• Duty to warn of product hazards

• Prohibits false/misleading claims

So, you know, I have a PVR. So, I paused that once on one of these car commercials, and I counted over 600 words in that blurb. 600 words in tiny little print. And it's on the screen for one and a half seconds. I mean, I don't care who you are, you cannot possibly read it. So, why is it there? Well, because they're disclosing the credit terms as required by the Consumer Protection Act. So now they can tick off that box and say, "Oh, we're in compliance." Well, surely the requirement to disclose these credit terms was meant to be meaningful disclosure.

Consumer Protection (18)

Consumer Protection Act:

• Allows consumer to sue in contract (regardless of privity)

• Makes SGA mandatory

• Applies to services (not just goods)

• Duty to warn of product hazards

• Prohibits false/misleading claims

Surely it it has something to do with not just printing them on a screen, but communicating them to a recipient. But obviously these car companies have got legal advice that tells them that, you know, all you've got to do is is make it visible. It doesn't matter how big it is, doesn't matter how long it's up there for, you just got to make it visible. Um, and to me, what a waste of time. I mean, that's so cynical. That just defeats the purpose of the thing, right?

Consumer Protection (1)

Controlled business practices:

• Direct (door-to-door) sales

• Time shares • Fitness clubs

• Used cars

• Multi-level marketing

• Debt collection

there are a number of controlled business practices that are regulated by the Consumer Protection Act, uh, direct or door-to-door sales. And this is one area where the provinces differ quite significantly. Um, some provinces require licensing and registration and a and a deposit. Ontario doesn't do any of that. Um, Ontario just has a 10-day cooling off period for uh goods or services that are sold doortodoor. Uh, time shares, fitness clubs, used cars, car repairs, uh, multi-level marketing, debt collection. These are all controlled business practices.

Consumer Protection (2)

Controlled business practices:

• Direct (door-to-door) sales

• Time shares

• Fitness clubs

• Used cars

• Multi-level marketing

• Debt collection

So if you go to the consumer protection act, you'll see that there's sort of a chapter on each one of these types of businesses and and they are controlled in the sense that they may require licenses or uh performance bonds to be posted. They may require uh certain education, certain courses to be taken. They may require registration.

Consumer Protection (3)

Controlled business practices:

• Direct (door-to-door) sales

• Time shares

• Fitness clubs

• Used cars

• Multi-level marketing

• Debt collection

so why are these businesses um singled out? Well, they're singled out because these are the businesses that politicians get a lot of complaints about and and so they provide certain minimum requirements in the consumer protection act as a result. So you know what happens is people call their politicians, they call their MPPPS and they say you know I got ripped off, I got taken advantage of. there ought to be a law. Well, if enough politicians get enough phone calls when they meet in their caucus, you know, one of them says, "Boy, I'm getting a lot of calls about these these fitness club memberships, you know, these automatic renewals."

Consumer Protection (4)

Controlled business practices:

• Direct (door-to-door) sales

• Time shares

• Fitness clubs

• Used cars

• Multi-level marketing

• Debt collection

Like, people are people are upset about it. And then other politicians say, "Yeah, you know, I'm getting a lot of those calls, too." Finally, someone says, you know, I think we could make some political hay if we were to introduce legislation to, you know, prohibit some of the some of the more aggressive or unfair business tactics that that these guys are doing.

Consumer Protection (5)

Controlled business practices:

• Direct (door-to-door) sales

• Time shares

• Fitness clubs

• Used cars

• Multi-level marketing

• Debt collection

And that's how it becomes law. Um, it's a vote getter, right? That's that's what politicians do. They respond to the the interests of their constituents. That's why if you want the law changed, you've got to go out and do something about it. In a democracy, you have a direct path to affect change.

Consumer Protection (6)

Controlled business practices:

• Direct (door-to-door) sales

• Time shares

• Fitness clubs

• Used cars

• Multi-level marketing

• Debt collection

now you might say, "Okay, well then why aren't there more uh businesses on there?" Like, why aren't lawyers and doctors and chiropractors and accountants and real estate agents and insurance brokers and financial adviserss on there? Um, don't they get a lot of complaints about those guys? Yes. In fact, those businesses are much more controlled. So much so that each one of those has their own statute. So there is a public accounting act, there is a solicitor's act, there is a health care professions act, there is an architect's act, etc., etc.

Consumer Protection (7)

Controlled business practices:

• Direct (door-to-door) sales

• Time shares

• Fitness clubs

• Used cars

• Multi-level marketing

• Debt collection

So yes um this is sort of the um uh regulation um in in miniature you know this these are businesses that don't require their own statute but do require some um regulation.

There are other laws which you can read about in your textbook. Um, some of them are federal. The the food uh and and labeling laws um that protect primarily consumers um by ensuring that labels disclose pertinent information that claims made are not false and misleading with respect to to healthcare and things.

Consumer Protection (8)

Controlled business practices:

• Direct (door-to-door) sales

• Time shares

• Fitness clubs

• Used cars

• Multi-level marketing

• Debt collection

Once again, I'm going to say that I think it's a little bit arguable the extent to which some of these laws are effective. Um, you know, I'll give you a couple of examples. Um, when you go and buy milk, what kind of milk do you buy? Well, if you're like me, you buy 1%, right? Why why do you buy 1%? Because because 2% is too high in fat and skim milk is disgusting. So 1% that's what it is, right?

Consumer Protection (9)

Controlled business practices:

• Direct (door-to-door) sales

• Time shares

• Fitness clubs

• Used cars

• Multi-level marketing

• Debt collection

Um, now 1% what? 1% what? Well, 1% milk fat, right? Like it's 1% MF. If you look on the on the box, 1% milk fat. Now, you must you might think, well, that that's great. It's only 1% fat. Boy, that's that's health food. That's fantastic, right?

Consumer Protection (10)

Controlled business practices:

• Direct (door-to-door) sales

• Time shares

• Fitness clubs

• Used cars

• Multi-level marketing

• Debt collection

Not so fast. How is it measured? 1% of what? Well, it turns out that milk fat in dairy products is measured by volume. By volume, by how much room in the container it takes up. Huh? Do we measure other foods that way? No, we don't. We don't measure any other foods that way. Just dairy foods. All other foods are measured by weight. Grams. That's what you're used to seeing, right?

Consumer Protection (11)

Controlled business practices:

• Direct (door-to-door) sales

• Time shares

• Fitness clubs

• Used cars

• Multi-level marketing

• Debt collection

Huh? So why is milk fat in dairy products measured by volume? Well, the answer is because it's dense. Therefore, it makes the numbers lower. Now, you might say, "But isn't that misleading?" Absolutely it is. They're measuring it differently than all the other foods on the shelf. The reason is because the dairy lobby is extremely powerful politically and the dairy lobby has convinced the federal government that they should be allowed to label their food in a false or misleading way because if they were to be truthful in labeling their food, then they would sell less of it because people would look at it and say, "Oh my goodness, 35% fat by weight or whatever. whatever it is or calories from fat.

Consumer Protection (12)

Controlled business practices:

• Direct (door-to-door) sales

• Time shares

• Fitness clubs

• Used cars

• Multi-level marketing

• Debt collection

So, um you know that to me that's a problem and and there are other examples of this. If you look at food that is, you know, claimed to be made with real fruit. Like you'll see this on kids snacks like fruit by the foot, right? You know, I go to the grocery store, I think, well, I'm going to buy my kids healthy snacks. I see fruit by the foot. It says made with real fruit. It's got pictures of bananas and watermelons and strawberries on the box. So, I look on the ingredients.

Consumer Protection (13)

Controlled business practices:

• Direct (door-to-door) sales

• Time shares

• Fitness clubs

• Used cars

• Multi-level marketing

• Debt collection

Well, what's the real fruit? It's high fructose concentrated pear syrup. Huh? Yeah, that's real fruit. High fructose concentrated pear syrup. No, it's just pure sugar. The only reason they don't use high fructose corn syrup is so that they can say made with real fruit. Well, no offense, but high fructose pear syrup had as about as much connection to a real pear as I have to Matthew McConna.

Consumer Protection (14)

Controlled business practices:

• Direct (door-to-door) sales

• Time shares

• Fitness clubs

• Used cars

• Multi-level marketing

• Debt collection

I look further down the label on the same product and you know what I see? Hydrogenated oils. trans fats. This is a kids snack. They're making bogus health claims. Pictures of fruits on the on the box that aren't in it because they're just pictures. They're not ingredients. So, they don't have to be accurate. Made with real fruit, which is just a bogus false claim. And what that's what isn't in it. What is in it? Trans fats. a proven carcinogen and they are trying to dupe me to deceive me into buying this crap for my kids because I will think it's a healthy snack when what it really is literally is poison.

Competition Law (1)

Competition Act:

• Restricts mergers and acquisitions

• Prohibits anti-competitive practices

• Prohibits false/misleading claims

• Provides for reviewable and illegal practices

The last topic in this module is competition law. Unlike sale of goods legislation and consumer protection legislation, the competition act is federal legislation. Um, and the competition act has as its primary goal reducing um behavior that is anti-competitive. Now why would we want to do that? Well, because generally speaking, it is felt that more competition is better for especially consumers who have the benefit of companies competing to supply them and also generally for the economy. It's felt that when people have to work really hard to compete that we get better products, better services, better value. We're more competitive and that's why we encourage competition and through the competition act, we restrict or prohibit behavior which is anti-competitive.

Competition Law (2)

Competition Act:

• Restricts mergers and acquisitions

• Prohibits anti-competitive practices

• Prohibits false/misleading claims

• Provides for reviewable and illegal practices

You'll notice that in the United States, the same types of laws are called antirust laws. And that comes from a time uh way back when uh when the Rockefellers used trusts to monopolize uh the oil industry and uh and so their anti-competition laws are called antitrust laws. Here in Canada, we call them competition laws. Um, so what does the Competition Act, the Federal Competition Act do? Well, first of all, it restricts mergers and acquisitions that would lead to reduced competition. So, for example, in the United States, Sirius Satellite Radio and XM satellite radio are the same company.

Competition Law (3)

Competition Act:

• Restricts mergers and acquisitions

• Prohibits anti-competitive practices

• Prohibits false/misleading claims

• Provides for reviewable and illegal practices

 Here in Canada, it's very unlikely that the competition tribunal would allow that merger to take place because there are only two satellite radio providers in the country. So clearly allowing them to merge would lead to greatly reduced competition. Um this part of the act has a very high threshold. We're only talking about I don't know I can't remember what the current limit is but but it's it's like over hund00 million for the for the size of transaction involved. All right. So we're only talking about really really big companies.

Competition Law (4)

Competition Act:

• Restricts mergers and acquisitions

• Prohibits anti-competitive practices

• Prohibits false/misleading claims

• Provides for reviewable and illegal practices

The Competition Act um prohibits various anti-competitive practices, conspiracy, bid rigging, abuse of dominant position, discriminatory, and predatory pricing. Um I have a list here of some and you'll see that there's a bigger discussion in your book. Um notice that some of these practices are what's called reviewable and some of them are just straight out illegal. So practices that are straight out illegal like bid rigging and price fixing, you can't do those. We call them quasi criminal because the consequences for engaging in these kind of activities uh can be criminal consequences, jail and fines. Um and you so you can't fix prices or rig bids under any conditions. Um other practices like abuse of dominant position or um uh predatory pricing, those are what's called reviewable. What that means is that they're not illegal automatically.

Competition Law (5)

Competition Act:

• Restricts mergers and acquisitions

• Prohibits anti-competitive practices

• Prohibits false/misleading claims

• Provides for reviewable and illegal practices

Instead, they're illegal if they would have the effect of unduly lessening competition. So, you can do them if they don't lessen competition. For example, predatory pricing, I just gave an example. So, predatory pricing is selling stuff for lower than your cost. Okay? So, it cost you 10 bucks to make it, you sell it for eight. That's predatory pricing. Now, if you're doing that, it's reviewable. The tribunal is going to look at why you're doing it. If you are doing it to put a competitor out of business by selling below your cost to engage in a price war and put them out of business, that's anti-competitive. That's illegal. But if you're doing it to liquidate last year's inventory so that you can make room on your shelves for this year's stock, that's fine. That's not illegal. Okay? See the difference?

Competition Law (6)

Competition Act:

• Restricts mergers and acquisitions

• Prohibits anti-competitive practices

• Prohibits false/misleading claims

• Provides for reviewable and illegal practices

The Competition Act prohibits false and misleading claims or advertising. Uh, interestingly, you'll remember this is the same thing that the um Consumer Protection Act prohibits, right? So, what's the difference? Well, remember that the Consumer Protection Act only benefits consumers. The Competition Act applies much more broadly, not just to consumers. So any false or misleading claims that are made um in a business context will be prohibited under the competition act. Also the consumer protection act does not allow for civil claims. So under the consumer protection act you have rights between buyers and sellers and complaints made to the ministry. But under the Competition Act, I could sue a company for doing something that was anti-competitive even if it didn't directly affect me.

Competition Law (1)

Anti-competitive practices:

• Price fixing

• Bid rigging

• Abuse of dominant position

• Predatory pricing

• Refusal to supply, tied selling

• Fake “sale” prices

We've talked about reviewable and illegal practices. So, these are some of the anti-competitive practices. Price fixing is when people agree on prices to charge. That's anti-competitive. All four of the big chocolate companies were uh Mars, Hershey, uh Cadbury, and can't remember. Uh they were all uh they one of them pleaded guilty to price fixing. The other three were found to have engaged in it. Loblaws was uh was found to have engaged in price fixing. Bid rigging is when you have a tender process and the uh biders uh collude to rig the process. Abuse of dominant position is when you are the dominant player in the industry and you use that position to unduly lessen composition. Competition predatory pricing we talked about. Uh refusal to supply and tied selling. So so those are related. Refusal to supply is when um you um refuse to supply someone with a product if they sell a competitor's product.

Competition Law (2)

Anti-competitive practices:

• Price fixing

• Bid rigging

• Abuse of dominant position

• Predatory pricing

• Refusal to supply, tied selling

• Fake “sale” prices

So if you sell iPhones, we won't let you sell Samsung's. Um tied selling is similar where you say if you sell our S10 model then you also have to sell all of our cases and all of our chargers. that's reviewable practice. Um, fake sale prices. Uh, that's a common one, uh, where companies will advertise stuff as being 50% off. You can't advertise something as being 50% off unless you can demonstrate that your regular price is double what you're selling it at. And there are there are sort of formula that are in the act regarding how much time you have to have sold it at the other price etc. Um and uh the competition act also restricts contests and prizes.

Competition Law (3)

Anti-competitive practices:

• Price fixing

• Bid rigging

• Abuse of dominant position

• Predatory pricing

• Refusal to supply, tied selling

• Fake “sale” prices

So um when you see um contests like roll up the rim and McDonald's monopoly and things those those promotional contests are uh governed by the competition act. So when you see you know no purchase necessary and you might wonder well why why do they let people play the game if they you know without making a purchase because they have to because you can't require people to make a purchase as a condition. Now, they're clever about it. So, if you want to play without making a purchase, they're going to make it very difficult and and inconvenient for you. They're going to make you mail in something with a, you know, a handdrawn card and a provide a self-address stamped envelope. It's cheaper just to buy the the double double.

Competition Law (4)

Anti-competitive practices:

• Price fixing

• Bid rigging

• Abuse of dominant position

• Predatory pricing

• Refusal to supply, tied selling

• Fake “sale” prices

Um, but you can enter with no purchase necessary. They have to disclose the rules on request including you know when draws take place, how many winning tickets there are, what the odds of winning are, what the value of the prizes are, what the geographical distribution of the winning tickets are, things like that, right? So you you can see all those if you if you're interested um in a in the rules of a promotional contest, they they must be made available to you. Uh, so you can go check those out and most of them are mandatory and that's why they do it. They don't do it because they're, you know, benevolent. They do it because the competition act tells them they have to.

Competition Law (5)

Anti-competitive practices:

• Price fixing

• Bid rigging

• Abuse of dominant position

• Predatory pricing

• Refusal to supply, tied selling

• Fake “sale” prices

Um, the competition tribunal, I think for a long time was ineffective. That was a patronage position. If you if you wanted uh a really good uh highpaying government job with uh, you know, a solid 24-hour work week and a driver. Um the competition tribunal was a good place. Um you know was sort of a it was a you know party fundraisers and former politicians. It was a place for them to hang out and have long lunches. I'm going to say that for the last 15 years or so things have changed. Uh the competition tribunal's been really good. You can go to their website, you can see the kind of stuff they do. They've taken on some big players. They took on the the uh the uh multiple listing service, uh the Toronto Real Estate Board. They've taken on some big retailers. Um and uh I think they're I think they're really working hard these days. They tend to settle more cases than they prosecute, but that's the same as all of the regulatory bodies because trying to get criminal convictions against these big companies, it's incredibly difficult and expensive.

Competition Law (6)

Anti-competitive practices:

• Price fixing

• Bid rigging

• Abuse of dominant position

• Predatory pricing

• Refusal to supply, tied selling

• Fake “sale” prices

 And rather than devote all of their resources to trying to get one big win, they'd rather spread themselves a little thinner and and go after a bunch of players and and see if they can get them to pay some voluntary fines and maybe participate in in efforts to educate and and rehabilitate others. So, you know, maybe it would be nice if they would be able to take more of them to task for for behavior that is essentially illegal, but generally they they will settle most of these cases um for civil penalties and and no finding of guilt, no uh admission of wrongdoing, which kind of allows the companies to, you know, save face and and walk away. Uh but still, they pay a price.