Misleading Contest Rules and the Consumer Protection Act

On February 28, 2012, the Supreme Court of Canada rendered its decision on an appeal from the Court of Appeal of Quebec in the case of Richard v. Time Inc. 

In this case, Jean-Marc Richard sued Time Inc. and Time Consumer Marketing Inc. over their failure to provide him with a large cash prize which he believed that he had won. 

More significant is the fact that Time was held liable even though no false statement was actually made in the letter. The Court focused on the general impression created by the way the messages were conveyed, through the use of bold type and capital letters.

Richard had received a letter in the mail entitled “Official Sweepstakes Notification”.  The letter included boxes referring to Time Magazine and suggested that he had won a cash prize of US $833,337.  Some of the type in the letter contained exclamatory sentences in bold capital letters.  Other sentenced appeared in smaller print and contained the words “if you have and return the Grand Prize winning entry in time”.  The letter also suggested that there was a $100,000 bonus for which he would qualify if he returned his entry within five days.  The letter included a reply coupon and a return envelope.  The coupon contained an offer to subscribe to Time magazine.  The coupon set out the rules of the sweepstakes which indicated that a winning number had already been selected by computer and that the holder of that number would receive the prize only if the coupon was returned by a deadline date. 

Richard was convinced that he would receive the prize merely by immediately returning the reply coupon in the envelope.  He did so immediately (and also subscribed to Time magazine).  According to the Court, he began regularly receiving issues of the magazine a short time later “but the cheque he was expecting was a long time coming”.  In fact, and not surprisingly, it never arrived at all. 

He contacted Time and was told that he would not be receiving a cheque because his number was not the winning entry and the letter had merely constituted an invitation to participate in the contest. 

Richard sued in Quebec Superior Court for a declaration that he had won the prize and for an Order requiring Time to pay compensatory and punitive damages of an equivalent amount.  He was partially successful.  The judge ruled that he had suffered “moral injuries” worth $1,000 and awarded a further $100,000 in punitive damages by reason of Time’s violation of the misrepresentation sections of the Consumer Protection Act.  The Quebec Court of Appeal had a different view and set aside the entire award.  Richard appealed to the Supreme Court of Canada.

The Supreme Court of Canada was much more sympathetic to Richard than the Court of Appeal although not to the extent of the Quebec Superior Court. 

The Supreme Court of Canada pointed out that to decide on upon whether or not a representation constituted a business practice prohibited by the Consumer Protection Act, the Court had to consider the general impression given by the representation and the literal meaning of the words used in it.  In this case, the Court found that the average consumer would have been under the general impression that Richard held the winning entry and only had to return the reply to initiate the claim process.  The Court referred to the letter as having a “strange collection of affirmations and restrictions” which was not clear enough to dispel the general impression conveyed by its most prominent sentences.  The Court ruled that even if the letter did not contain any statements that were actually false, it was riddled with misleading representations within the meaning of the Act.  Richard subscribed to the magazine, and Time sent him some issues, which never would have happened had he not read the misleading documentation.  As a result, the letter was deemed by the Court to have had a fraudulent effect on his decision to subscribe to the magazine and Time Inc.’s conduct in participating in this process caused moral injuries to Richard.  The Court restored the $1,000 award for these injuries. 

More significantly, the Court agreed that punitive damages were in order.  It found that Time had intentionally violated the Act, and that its violation was capable of affecting a large number of consumers.  On the other hand, it felt that its impact on Richard was limited.  In the Court’s opinion, an award of $15,000 for punitive damages would be sufficient to induce Time to stop these prohibited practices. 

It is not clear from the case that any evidence was placed before the Court as to the amount of money Time actually brought in in magazine subscriptions as a result of this so-called sweepstakes.  I would have thought that a $15,000 award would be negligible next to the revenues which this campaign likely generated for Time.  To that extent, it would appear to me that the Supreme Court of Canada treated Time extremely generously.

More significant is the fact that Time was held liable even though no false statement was actually made in the letter.  The Court focused on the general impression created by the way the messages were conveyed, through the use of bold type and capital letters.  This general impression was false, and that was enough to establish liability.

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