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Advertising Standards Canada Comes Out With An Updated Code And New Guidance On Testimonials And Endorsements (October 2016)

Earlier this month, Advertising Standards Canada ("ASC") revised its Canadian Code of Advertising Standards ("Code"). The amendments, which are already in effect, include new and updated definitions, new guidance on testimonials and endorsements as well as clarification on what is considered unacceptable depictions and portrayals.

ASC's Code, first published in 1963, has been revised throughout the years in order to address trends in advertising. It provides advertisers with criteria and guidelines to determine whether their advertisements are acceptable and it provides both a consumer and an advertising complaint procedure to tackle alleged violations of the Code.

New and updated definitions

The revised Code introduces new and updated definitions, including definitions of the terms "advertiser" and "entity." The term "advertiser" is defined as an "entity that has, or shares with one or more other entities, the final authority over the content of an advertisement" and the term "entity" is defined as including "one or more brands, persons, companies, organizations and other comparable entities." These new definitions attempt to facilitate the identification of persons and entities subject to the Code and accountable for advertisements.

In addition, the Code introduces the concept of teaser ads and provides that such ads do not need to identify the advertiser, as otherwise required under Clause 1 of the Code. The term "teaser advertisement" is defined in the Code as an "advertisement that generally reveals little about the product(s), service(s), event(s) or advertiser hinted at in the advertisement, the objective of which is to stimulate curiosity about and interest in the advertiser, product(s), service(s) or event(s)."

New guidance on testimonials and endorsements

Clause 7 of the Code provides that "[T]estimonials, endorsements and other representations of opinion or preference must reflect the genuine, reasonably current opinion of the individual(s), group or organization making such representations, must be based on adequate information about or experience with the identified product or service and must not otherwise be deceptive."

Although the above clause existed under the earlier version of the Code, new interpretation guidelines issued by ASC now tell advertisers what to disclose in order to ensure that the testimonials and endorsements featured in their ads comply with Clause 7. The new guidelines were introduced further to a concern over advertisers providing free products, gifts and/or compensation in exchange for positive reviews from online reviewers, bloggers and social media celebrities, among others. Pursuant to the new guidelines, consumers must be given more information regarding the nature and source of testimonials, endorsements and reviews. First, advertisers must disclose any "material connection" between the endorser or person making the representation and the entity that provides him or her with the product or service featured, except to the extent one would reasonably expect such connection, such as in the case of celebrity endorsements. Second, they must disclose the nature of the material connection clearly and prominently in close proximity to the representation about the product or service.

The term "material connection" is specifically defined as "any connection between an entity providing a product or service and an endorser, reviewer, influencer or person making a representation that may affect the weight or credibility of the representation, and includes: benefits and incentives, such as monetary or other compensation, free products with or without any conditions attached, discounts, gifts, contest and sweepstakes entries, and any employment relationship, but excludes nominal consideration for the legal right to identify publicly the person making the representation."

The new disclosure of "material connection" is very much in line with the disclosure requirement to which American advertisers are already subject. This is reflected by the fact that ASC specifically refers Canadian advertisers to the U.S. Federal Trade Commission's Guides concerning the use of endorsements and testimonials in advertising (available at www.ftc.gov/system/files/documents/plain-language/pdf-0205-endorsement-guides-faqs_0.pdf) for examples of appropriate disclosures of material connection.

Unacceptable depictions and portrayals

Under Clause 14 of the Code, advertisers are expressly prohibited from condoning any form of personal discrimination in their ads. The revised Code adds the following grounds for discrimination to those already listed in the earlier version of the Code: ethnic origin, disability, sexual orientation and gender identity; a sign that ASC is moving with the times and leaving little ambiguity as to what may or may not be considered acceptable.

We encourage all advertisers promoting their businesses, products and/or services in Canada to consult ASC's Code (available at https://adstandards.ca/code/) and its recent revisions, regardless of the media used by those advertisers and regardless of whether they are members of ASC.

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