Excerpts from several Industry Canada press releases involving fines between $50,000 and $95,000 and in one instance imprisonment for violation of Canada's Competition Act are below. Full text of these press releases are available on the Industry Canada Strategis site.
OTTAWA, November 23, 2004 - A Competition Bureau investigation into a Vancouver-based multi-level marketing firm has led to a $150,000 fine and guilty pleas on two counts under the deceptive marketing provisions of the Competition Act. The matter has been resolved with Global Online Systems Inc. (GOLS) voluntarily pleading guilty and signing a Prohibition Order filed today with the Federal Court of Canada.
On November 26, 2003, the Honourable Judge Patrick H. Curran JPC ruled at the conclusion of a preliminary hearing into these charges that there was not sufficient evidence to show that ACN was operating as a multilevel marketing plan as defined in the Competition Act and as such he discharged ACN on all charges.
Update: See above where The Halifax Provincial Court disagreed with the charges against ACN described in this press release!
OTTAWA, August 29, 2002 -- The Competition Bureau announced today that eight charges were laid in Halifax, N.S., against All Communications Network of Canada Co./ACN, Reseau De Toutes Communications Du Canada C.R.I., under the Competition Act's deceptive marketing practices provisions. The company, whose registered corporate office is in Halifax, operates a multi-level marketing plan which promotes and sells long-distance telecommunication services.
The Competition Bureau alleges that ACN Canada, as it is known, and its participants, through its web sites and at public meetings, recruited new participants by exaggerating income expectations without disclosing the income of a typical participant. Under the Competition Act, it is illegal to make reference to earnings in a multi-level marketing plan without disclosing a typical participant's income. In addition, operators of a multi-level marketing plan must ensure that any income representation made by a participant in the plan includes disclosure of a typical participant's income.
Furthermore, ACN Canada was charged with operating an illegal scheme of pyramid selling by offering recruitment bonuses to participants who paid for the right to recruit other participants.
Update: See above where The Halifax Provincial Court disagreed with the charges against ACN described in this press release!
OTTAWA, July 19, 2002 -- The Competition Bureau announced today that two directors of NSV Nutrinautes Inc., Richard Guertin and Richard Arsenault, have been charged under the Competition Act's deceptive marketing practices provisions. NSV Nutrinautes Inc., a Quebec company operating a multi-level marketing plan known as Cocooning Club, was charged in March 2002 with 11 counts under the Act.
The Competition Bureau alleges that Mr. Guertin and Mr. Arsenault were the directing minds of NSV Nutrinautes Inc., which through Cocooning Club and its participants, its Web sites and a TV informercial, recruited new participants by exaggerating income expectations without disclosing the income of a typical participant.
OTTAWA, May 18, 2001 -- Lifestyles Canada Ltd. was fined $95,000 after pleading guilty, in the Ontario Superior Court of Justice, to four criminal charges under the Competition Act's multi-level marketing plan provisions, the Competition Bureau announced today. A Prohibition Order was also imposed on the company restricting further anti-competitive conduct. Today's ruling comes as a result of the Competition Bureau's investigation of Lifestyles Canada's recruitment practices.
"Enticing new recruits through grossly exaggerated income expectations harms those who join such plans as well as competitors who play fair," said Raymond Pierce, Acting Deputy Commissioner of Competition, Fair Business Practices Branch. "This case again shows the need to warn that if something looks too good to be true, it probably is."
Under the Competition Act, it is illegal to make references to earnings in a multi-level marketing plan without disclosing the income of a typical participant. As part of its recruitment efforts in 1999-2000, Lifestyles Canada and its participants used Internet web sites, pre-recorded telephone messages, promotional material and meetings to highlight participants in their multi-level marketing plan earning hundreds of thousands or even millions of dollars, but failed to disclose that the income of a typical participant was between $399 and $2,000 per year.
Lifestyles Canada pleaded guilty to similar charges in 1994, when it became the first company prosecuted under the amended multi-level marketing provisions of the Competition Act. Lifestyles Canada sells botanical extract blends, vitamins, nutritional supplements, personal care products, household cleaning products and a diet program.
In addition to the fine and prohibition order against Lifestyles Canada, the Ontario Superior Court of Justice also imposed Prohibition Orders against two Ontario participants in the multi-level marketing plan -- Pat Ashby of London and Joseph Lau of Toronto. It is anticipated that similar Prohibition Orders will be imposed against two Alberta participants in the near future.
OTTAWA, February 23, 1999 -- Konrad von Finckenstein, Director of Investigation and Research for the Competition Bureau, announced today that Charles Barrie Press was found guilty of seven charges under the Competition Act on February 12, 1999. Mr. Press was fined $50,000 yesterday on four of these charges in Alberta's Court of Queen's Bench in Calgary and the Crown entered a conditional stay of proceedings on the remaining three charges.
This fine is significant because it is the first fine imposed against an individual for an offence under the multilevel marketing provision of the Competition Act.
Mr. Press was a co-founder of The Integrity Group (Canada) Inc., a multi-level marketing firm that sold telephone services, a satellite dish, training programs and food products. In November and December 1995, recruitment meetings were held in Quebec, Ontario and Manitoba. The court found that while representations relating to compensation were made to prospective participants at these multi-level marketing meetings, there was no disclosure of actual compensation received, or likely to be received, by typical participants, contrary to section 55(2) of the Act. Under this section, if representations relating to compensation are made to prospective participants of a multi-level marketing plan, there must be fair, reasonable and timely disclosure of compensation earned by typical participants in the plan. The plan was also promoted on the Internet, where there was no disclosure of actual compensation received, or likely to be received, by typical participants.
The court determined that Mr. Press was the controlling and directing mind of the company, and as such, was guilty of the offences.
"We hope this case will send a clear message to participants and operators of multi-level marketing companies who make such claims and fail to disclose the amount of income actually received by typical participants in such plans", Mr. von Finckenstein said. "Such claims often mislead prospective participants into believing it is a quick and easy way to earn large amounts of money."
The Integrity Group (Canada) Inc. was found guilty in December, 1997 of eleven charges under section 55 of the Act and was fined a total of $150,000. Another co-founder, Ms. Debra Hurd, pleaded guilty to one charge under the Act last month.
OTTAWA, March 20, 1998 -- The Competition Bureau announced today that VH$ Network Inc. pleaded guilty to two offences contrary to the multi-level marketing provisions of the Competition Act and was fined a total of $70,000. A prohibition order was imposed against the company and its shareholders, including Groupmark Canada Limited. The order forbids income claims without disclosure of compensation earned by the majority of participants in the multi-level marketing plan.
VH$ Network, a Mississauga-based multi-level marketing company, sold various products that were advertised in video cassette catalogues. Charges relate to representations made at recruitment meetings, in training manuals, in fax-on-demand service, and in a pre-recorded telephone message. Income claims were made without disclosure of the compensation earned by the majority of participants.
"People are often misled to believe that they can earn significant amounts of money in multi-level marketing plans," said Konrad von Finckenstein, Director of Investigation and Research. "To comply with the Competition Act, any income claims made in connection with these plans must be accompanied by disclosure of the amount typically earned in the plans."
On February 13, 1998, GeoForce Inc. pleaded guilty to two similar offences under the Act. This Edmonton-based multi-level marketing company sold herbal supplements through a network of distributors.
Multi-level marketing is a method of selling products through various levels of distributors. These distributors receive commissions on their own sales as well as the sales of those they recruit. Under the Act, operators of multi-level marketing plans making income claims to potential distributors must disclose the amount of money typically earned by existing distributors in the network.
OTTAWA, February 12, 1998 -- The Competition Bureau announced today that GeoForce Inc. of Edmonton, Alberta pleaded guilty to two offences contrary to the multi-level marketing provisions of the Competition Act. The company, which promoted the sale of herbal supplements through a multi-level marketing distribution system, was fined a total of $50,000.
A prohibition order was also imposed against GeoForce, Granite Sphere Advertising Ltd. and the principal shareholders of both companies, Mr. Kevin Boyle and Mr. Brian Boyle.
"Exaggerated income claims often mislead people into believing that they can easily earn large amounts of money," said Konrad von Finckenstein, Director of Investigation and Research. "This case sends a clear message to multi-level marketing companies that if they make income claims without disclosing the amount typically earned in their plans, they are violating the Competition Act."
The charges against GeoForce related to representations made in company literature, at recruitment meetings and through personal meetings; potential earnings were mentioned but there was no disclosure of compensation earned by typical participants.
Multi-level marketing is a method of distributing products through various levels of participants. Plan participants receive commissions on their own sales and sales of others they recruit. Operators of these plans who make income claims must disclose the amount of money typically earned by participants.