Dishonest Business Practices and Schemes (Script 260)

From Clicklaw Wikibooks

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. It prohibits two unfair practices:

  1. deceptive acts and practices
  2. 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.

Deceptive acts and 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 a car you’re interested in was previously owned by a senior citizen when, in fact, it used to be a taxi.

Unconscionable acts and 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?

If a business commits a deceptive or unconscionable act

Consumer Protection BC can investigate your complaint. They can issue “compliance orders” forcing suppliers to comply with the Act and possibly reimburse any money that consumers lost. In extreme and rare cases involving many consumers who have lost a lot of money, Consumer Protection BC could freeze the supplier’s bank account and sue it. In serious cases, the supplier could also be charged with an offence under the Act and fined.

Suing the supplier

You can use Small Claims Court if your claim is for less than the 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 suing, try to resolve the problem. 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

One example is “bait and switch” tactics. They 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 check, 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.

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 contact you only on 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 statutory holidays.

Dealing 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. Telemarketers who phone you offering prizes or products for sale must tell you who they work for. To reduce the number of unsolicited calls, contact the National Do Not Call List registry. Consumer Protection BC may also be able to help if you have a problem.

Canada’s new anti-spam law starts July 1, 2014

Starting July 1, 2014, Canada has a new anti-spam law to protect people and businesses from spam (junk email and text messages) and online threats (spyware, malware, phishing scams, etc.) originating in Canada. It’s called the Electronic Commerce Protection Act. Unfortunately, the law cannot control businesses and people outside Canada, and they produce huge amounts of spam and online threats. Some sections of the law take effect later: January 15, 2015 for the sections on installing computer programs and July 1, 2017 for the sections on suing for losses.

Consent is required—a key section of the new law requires senders of commercial emails and text messages to have the consent of the person they’re sending the message to. The law also prohibits installation of computer programs and collection of electronic addresses without consent, as well as false and misleading representations.

Consent requirement is phased in—the law has two types of consent: express and implied. There is implied consent for 36 months after the law starts—if there is already a relationship between the sender and recipient of a commercial message. But the recipient can cancel this implied consent any time. During these 36 months, senders of commercial messages can ask recipients for express consent so they can continue sending commercial messages to those recipients after the 36 months.

Senders must identify themselves and let recipients unsubscribe—in addition to getting consent from recipients, senders of commercial messages must identify themselves and include an unsubscribe option in the message so recipients can stop receiving messages.

Three federal government agencies will enforce the law: the CRTC, the Competition Bureau, and the Office of the Privacy Commissioner.

Details on the new law are available on the Canadian government’s anti-spam website.

Business schemes to 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”. It involves selling a service or products through distributors who earn money by supplying the service or product to other participants in the venture. They, 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 shows that after only a few recruitment levels, everyone in BC would be distributors, with no one left to be buyers!

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 or up to 5 years in jail, or both.

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 paying thousands of dollars, you may be stuck with some greatly overpriced vending machines and unsellable products.

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.

Other scams

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 ordered them. When the supplies arrive, you discover that they cost way more than the going rate and are inferior.

Before investing money in any business, investigate carefully

A well-researched franchise may be an effective 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 there are many scams out there.

Where can you get help or more information?


[updated May 2016]





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