A group of Canadian consumers recently discovered that the value of gift cards can disappear very quickly.
Most provinces have rules to protect consumers who purchase gift cards, but if the retailer goes out of business, gift card holders are likely to be treated as unsecured creditors with few options.
This story from Cabin Radio describes how a number of Yellowknife, NWT consumers purchased cards for $100 or more at a customer appreciation event shortly before a retailer was set to go out of business. Customers were particularly disadvantaged because the Merle Norman brand chose not to backstop its franchisee’s gift cards, and because the Northwest Territories is one of the few Canadian jurisdictions without gift card legislation.
Consumers Council of Canada Executive Director Ken Whitehurst is quoted in the story. He noted that civil claims might be the only option for any recovery. He also noted that consumers with no other recourse could consider complaining to the Competition Bureau of Canada or to the Canadian Anti-Fraud Centre.
The Federal Government’s Financial Consumer Agency of Canada provides a link to the different provincial rules on gift cards, but as Ontario’s Consumer Protection site notes “If you have a gift card for a business that has closed, your options may be limited.”
Here are a number of guidelines for consumers to protect their gift card or gift certificates’ value:
1. Don’t rely on brand image when buying a gift card. Know who is issuing and standing behind it.
2. Read the terms and conditions to understand how the merchant may attempt to limit its liability to you.
3. Understand your rights and the laws in the province or jurisdiction you live in.
4. Don’t hesitate to report any problem collecting on a gift card to your provincial or territorial consumer protection department. Some say they can have non-binding influence with the merchant or franchisor.
5. Share the experience with the Consumers Council of Canada through https://www.consumerscouncil.com, so we can work on improving protections for consumers in the future.
6. If the value of a gift card is large, enter a claim for restitution in writing with the merchant and franchisor. In the event a bankruptcy ensues, unsecured creditors could receive partial compensation.
7. Some businesses will negotiate an exchange of products still in inventory in order to settle, if they haven’t already filed for bankruptcy. Consumers can propose creative solutions to get all or part of their value back.
8. Be suspicious of gift cards sold just days before a business closing and alert authorities. Fraudulent misrepresentation to raise cash by a business that expects to soon fail is not acceptable. A consumer who feels unsure about whether they have been defrauded, can discuss their experience with Canada's Anti-Fraud Centre.
9. Although consumer protection law may provide your rights, it may be up to you to enforce those rights through a court to collect against them.
10. If enough consumers are harmed and the right of claim is relatively clear, lawyers experienced in class action may be interested in making a case for you and other consumers as a class, without cost to the affected consumers. The Canadian Bar Association has an online “find a lawyer” service to help identify lawyers experienced in class action.
An effort by a a long list of powerful consumer electronics companies to prevent certification of a class action lawsuit against them for price fixing has been rejected by the Supreme Court of Canada.
Consumers Council of Canada, represented by Harrison-Pensa LLP, intervened in the case, because it dealt with a range of issues vital to the protection of Canadian consumers seeking redress in the case and in the future through class action lawsuits.
“Consumers Council of Canada applauds the decisive judgement of the court in this case,” said Council President Don Mercer. “The decision means that consumers and other claimants who are victims of price-fixing will not find the courtroom doors closed to them on technical and procedural grounds. Big companies who fix prices and hurt consumer markets will have to face the claims against them on their merits – just as it should be.”
The case, still before the courts, involves allegations of price fixing involving optical disc drives and related products against Toshiba Corporation, Toshiba Samsung Storage Technology Corp., Toshiba Samsung Storage Technology Corp. Korea, Toshiba of Canada Ltd., Toshiba America Information Systems, Inc., Samsung Electronics Co., Ltd., Samsung Electronics Canada Inc., Samsung Electronics America, Inc., Koninklijke Philips Electronics N.V., Lite‑On IT Corporation of Taiwan, Philips & Lite‑On Digital Solutions Corporation, Philips & Lite‑On Digital Solutions USA, Inc., Philips Electronics Ltd., Panasonic Corporation, Panasonic Corporation of North America, Panasonic Canada Inc., BENQ Corporation, BENQ America Corporation and BENQ Canada Corp.
In summary, the majority of the Supreme Court of Canada held that:
The class action could proceed (ie. certification was upheld).
Consumers who bought from other companies besides the defendants (called “umbrella purchasers”) could be part of the class.
The deadline to file a lawsuit (called a limitation period) could be extended if the conspiracy was not discoverable, or if it was concealed by the defendants.
Two avenues of legal redress, under the Competition Act and under the common law, did not exclude each other and could both be advanced.
In order to have a common issue related to proof of loss certified, the plaintiff needed only establish a methodology that was sufficiently credible or plausible to establish loss reached the requisite purchaser level (ie. the plaintiff did not, at the certification stage, need to show a methodology for proving that the conspiracy harmed every member of the class).
Slow pace of regulatory reform to protect investors and absence of investor representation at new securities regulator highlighted in Ontario Securities Commission's Investor Advisory Panel annual report.
Efforts to secure adoption by Ontario’s securities industry of a ‘best interests standard’ to protect investors – especially small retail ones – have fallen short but have resulted in some improvements in expected sales practices, concludes the just-released 2018 Annual Report of the Ontario Securities Commission’s Investor Advisory Panel.
The panel reported, however, that “incorporating best interest principles into targeted reforms would be no substitute for adopting an overarching best interest rule.”
The 9-member panel, formed by the OSC to obtain expressions of the needs and concerns of Ontario investors, said it believes a ‘best interest standard’ is “necessary to provide foundational clarity and interpretive guidance to fill the gaps that inevitably will arise in situations not envisioned or anticipated by the targeted reforms’ specific provisions.”
However, the panel noted Canadian Securities Administrators, an umbrella organization of Canada’s provincial and territorial securities regulators, proposed provincial regulators adopt some principles identified with a ‘best interests standard’ to effect regulatory reform concerning the advisor-client relationship, including expectations around know-your-client and -product, suitability and conflict-of-interest-mitigation.
The panel wants the industry to stop considering conflicts of interest of financial advisors and their firms with those of their clients’ to be treated as normal and disclosure of conflicts to be considered a substitute for putting their clients’ interests first.
The report highlighted the Ontario government’s recent refusal to support CSA’s proposal to ban trailing commissions for transaction-oriented mutual fund dealers that offer no service or advice and to ban mutual funds from charging deferred sales charges.
“We remain confident that the CSA’s proposals constitute ‘smart’ regulations …,” the report said. “Rather than adding a regulatory burden, they create opportunities for new, more consumer-centric business models to evolve, compete and thrive.”
The report highlighted, as well, the panel’s recommendations concerning:
Financial advisor proficiency
Investment costs disclosure
The panel was critical of the lack of adequate investor protection and investor-focused governance features, including an Investor Office, in the design of the Cooperative Capital Markets Regulator, an initiative of the governments of British Columbia, New Brunswick, Ontario, Prince Edward Island, Saskatchewan, Yukon and Canada to create a common regulatory administrator for their capital markets. Other provinces have yet to join the CCMR.
“We remain dismayed by the continued lack of an Investor Office in the design as well as the absence of a mechanism for retail investor policy input in the form of an investor advisory body similar to ours,” said the panel. “This does not encourage optimism about the future of securities regulation in Canada and the potential for a national regulator appropriately focused on a mandate to protect investors and foster market integrity.”
The panel similarly highlighted the lack of investor representation in the governance of the Ombudsman for Banking Services and Investments, which provides third-party dispute resolution to investors in conflict with investment firms.
The IAP conducts its activities without direction or influence from the Commission. It reported meeting a dozen times in 2018, developing 9 submissions to the OSC and CSA. It reported consultations with 8 external organizations during the year. 10 branches of the OSC were consulted to discuss:
Best Interest Standard
Client Focused Reforms
CSA Staff Notice 81-330 Status Report on Consultation on Embedded Commissions and Next Steps
IIROC Oversight Report
MFDA Oversight Report
OSC Staff Notice 33-749 Compliance and Registrant Regulation – Annual Summary Report for Dealers, Advisers and Investment Fund Managers
Proposals on Non-GAAP and Other Financial Measures
Don Mercer, president of the Consumers Council of Canada, has been made a member of the Finance Canada Payments Consultative Committee – known as "Finpay" – for the next two years.
Finpay is a consultative committee made up of public- and private- sector stakeholders who meet regularly with officials of Canada's Department of Finance to discuss public policy related to payments. This membership includes representatives of the financial industry, merchant and consumer associations, payment service providers, government and acquirers.
Currently the committee is focused on payment issues such as the development of a new oversight framework for retail payments and the modernization of Canada's core clearing and settlement payment systems.
Consumers Council of Canada President Don Mercer has been named as a member of Treasury Board of Canada Secretariat's External Advisory Committee on Regulatory Competitiveness.
The committee, announced in the Government of Canada's Fall Economic Statement 2018 and Budget 2019, brings together business leaders, academics and consumer representatives from across Canada. The committee's role is to advise the government on regulatory competitiveness and innovation, while ensuring Canadians' health, security and safety and protecting the environment.
"With regulatory modernization, the devil is always in the details," said Joyce Murray, President of the Treasury Board and Minister of Digital Government, in announcing formation of the committee. "Tapping into the expertise of business, academia and consumer protection experts just makes sense. I look forward to ongoing recommendations of the External Advisory Committee on Regulatory Competitiveness to help Canadian businesses be more competitive and innovative."
In addition to serving as the Council's president, Mercer has been involved in a variety of roles with the Council since he retired after a long career in Ottawa, Toronto and Vancouver with Competition Bureau Canada, which administers the Competition Act, the Consumer Packaging and Labelling Act, the Textiles Labelling Act and the Precious Metals Marking Act. These laws, that promote market competition and fair trading practices by regulating anti-competitive conduct, setting product and quality standards, and prohibiting fraud and misrepresentation, are intended by Parliament to foster consumer protection and healthy competition and trust in the marketplace.
He is also an active member of the Payments Canada Stakeholder Advisory Council, an Advisory Council mandated by the federal law governing Payments Canada, the Financial Consumer Agency of Canada Consumer Protection Advisory Committee and has been recently appointed to Finance Canada's Payments Consultative Committee (FinPay).