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Script 260 gives information only, not legal advice. If you have a legal problem or need legal advice, you should speak to a lawyer. For the name of a lawyer to consult, call Lawyer Referral at 604.687.3221 in the lower mainland or 1.800.663.1919 elsewhere in British Columbia.
This script discusses dishonest business practices, misleading advertising, deceptive telemarketing, scams, and business schemes to stay away from.
Consumers are protected against dishonest business practices
In addition to other federal and provincial laws, BC’s Business Practices and Consumer Protection Act (the Act) protects consumers against misleading advertising and dishonest sellers and dealers. It prohibits two unfair practices:
- deceptive acts and practices
- unconscionable acts and practices
The Act applies to transactions and sales between “consumers” and “suppliers”
A supplier is basically a business or someone who is in the business of promoting, advertising or conducting consumer transactions. So it covers the department store, but not your neighbour who has a garage sale once a year. A consumer is someone who buys, rents or leases something for their own personal, family, or household use. The Act applies to sales, transactions or advertisements involving goods, real estate, services or credit, but it doesn’t cover securities or insurance.
What are deceptive acts or practices?
These include any oral or written statements, visual or descriptive representations, or conduct by a seller that can deceive or mislead a consumer. For example, it’s deceptive for someone selling roofing products to say that your house needs a new roof when it doesn’t. And it’s deceptive for a car dealership to tell you that the vehicle you’re interested in was previously owned by a senior citizen when, in fact, it used to be a taxi.
What are unconscionable acts or practices?
Unconscionable acts are unscrupulous or dishonest sales practices often involving high-pressure sales tactics. Was a lot of undue pressure put on you to persuade you to enter into the consumer transaction? Were you taken advantage of because of your age or inability to understand the nature of the deal? Was the price much more than the price for similar products sold elsewhere?
What happens if a business commits a deceptive or unconscionable act?
If warranted, the Business Practices and Consumer Protection Authority can investigate your complaint (their contact information is at the end of this script). They have the authority to issue “compliance orders” compelling businesses to comply with the Act and possibly reimburse any monies lost by consumers. In extreme and rare cases involving numerous consumers who have lost significant amounts of money, the business’ bank account can be frozen and a lawsuit started against the business. In serious cases, the supplier could also be charged with an offence under the Act and fined.
You may have to sue the supplier to recover any loss you suffered
You can use Small Claims Court if your claim is for less than the court limit of $25,000. If you win, the court may give you a judgment for “punitive damages” to punish the supplier, in addition to ordering compensation for your financial loss. But before starting a court action, try to resolve the problem first. You can do this yourself, through a lawyer, or perhaps with the help of the Better Business Bureau.
The federal Competition Act also prohibits misleading price advertising
For example, “bait and switch” tactics are against the law. In general, if a business advertises a sale, it must stock sufficient items at the bargain price or give you a rain cheque, rather than use high-pressure sales tactics to get you to buy a different, more expensive item. Also, if there’s more than one price tag, the store must charge you the lowest price, unless the lower price has been crossed out or covered up.
What about deceptive telemarketing?
Some companies use deceptive practices when trying to sell you something over the phone. They’ll call saying that you’ve won a prize, and all you have to do is pay for the shipping and handling fees or give your credit card number for verification purposes. Or they offer to sell you something that sounds like a really good deal, but you end up with a cheap plastic watch instead of the expensive watch you expected. This is deceptive telemarketing. Deceptive telemarketing is prohibited by the Competition Act and is a criminal offence.
Telemarketers must follow rules
BC’s Telemarketer Licensing Regulation applies to telemarketers operating in BC who contact consumers to buy something over the phone and to third-party fundraisers. This regulation helps protect consumers by licensing and regulating telemarketers, and imposing penalties for violations of the regulation. For example, a licensed telemarketer may only contact you weekdays between 9:00 a.m. and 9:30 p.m. and weekends between 10:00 a.m. and 6:00 p.m., and they can’t communicate with you on a statutory holiday.
How should you deal with telemarketers?
If you get an unsolicited phone call to buy something, don’t give out information about your bank or credit card, and don’t be afraid to hang up the phone. Note that telemarketers who phone you offering prizes or products for sale must tell you who they work for. To reduce the number of unsolicited calls, fax the Canadian Marketing Association at 416.441.4062 or visit their website at www.the-cma.org, and ask to have your name deleted from member phone and mailing lists. The Business Practices and Consumer Protection Authority may also be able to help if you have a problem.
What business schemes should you be wary of?
Many business schemes that promise you’ll get rich quick will only cause you to lose money or are illegal. Consider “multi-level marketing,” which involves selling a service or products through distributors who earn money by supplying the service or product to other participants in the venture, who in turn make their money by supplying the same or another service or product to other participants. Typically, consumer products such as cosmetics, jewelry or cleaning products are sold in customers’ homes. Promoters asking you to get involved are not allowed to make exaggerated claims. And any claims made about expected earnings must be fair and reasonable and include the average compensation earned by the typical distributor in that business, and the time and effort needed to reach specific levels of income.
A pyramid scheme is an illegal type of multi-level marketing
Typically, with pyramid schemes, the focus is on recruiting new distributors, not on selling the product. You’re promised that by buying a distributorship, you can make money by recruiting other people to be distributors. If those new distributors recruit other new distributors, everyone up the pyramid will get a share of the recruitment fee. But simple arithmetic tells us that after only a few recruitment levels, everyone in BC would be distributors, with no one left to be buyers!
What should you do if you’re a victim of an unlawful multi-level marketing scheme?
Contact the Competition Bureau. The toll-free phone number is 1.800.348.5358. A person convicted of promoting a pyramid scheme can be sentenced to a fine decided by the court, or up to five years in jail, or both.
What about franchises?
A “franchise” involves the “franchisor” granting the “franchisee” the right to use a particular system of carrying on business or the right to sell a certain product or service. In return, the franchisee typically pays a fee and ongoing royalties to the franchisor. Be cautious, however, of franchises that consist of selling a product through automatic vending machines or on display racks. You may be promised lucrative high-volume locations and told that all you have to do is keep the machines or racks stocked – and collect the money. But, in fact, the locations are often poor and the sales figures only a small fraction of those promised. After initially shelling out thousands of dollars, you may be stuck with some greatly overpriced vending machines and unsaleable products.
Also be cautious of work-at-home schemes and chain letters
Work-at-home schemes urge you to send away money to learn how you can make good money working from your home. But these schemes are misleading. And chain letters inviting you to send and receive money are illegal under the Criminal Code.
Be wary of other scams too
Watch out for scams involving the sale of office supplies, listings in directories and phoney invoices. In the office supply scam, for example, an employee of yours will get an unsolicited call implying that your business has agreed to accept shipment of paper and office supplies, when you haven’t in fact ordered them. When the supplies arrive, you discover that they cost way more than the going rate and/or are inferior.
Before investing money in any business opportunity, investigate the scheme carefully
A well-researched franchise may well be an effective way to carry on a business. But you must see a lawyer and have a properly prepared franchise agreement. A legitimate multi-level marketing venture could also prove profitable if you invest time, effort and money. But be aware that there are many scams out there.
Where can you get help or more information?
- Call the Business Practices and Consumer Protection Authority toll-free at 1.888.564.9963. Their website is www.bpcpa.ca.
- You can also contact the Better Business Bureau at 604.682.2711 for mainland BC (www.mainlandbc.bbb.org) or 250.386.6348 for Vancouver Island (www.vi.bbb.org).
- For inquiries relating to the Competition Act, call the Competition Bureau at 1.800.348.5358. Also check their website at www.cb-bc.gc.ca.
- For more information on telemarketers, refer to script 256 on “Shopping by Phone, Mail or the Internet.”
[updated June 2008]
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