May 20, 2011
The Federal Trade Commission and Canadian Businesses
Most Canadian business owners have never heard of the Competition Bureau, the federal Canadian agency which is responsible for stopping deceptive marketing practices in Canada. More, however, have heard of its American equivalent, the Federal Trade Commission, and with good reason.
The FTC is certainly in the news more often, publicized cracking down on fake herbal remedies and shady spyware. And, though most Canadians don’t realize it, the FTC extends its jurisdiction to Canadians who do business with American residents.
Recently, the FTC filed a complaint in a federal district court in Seattle. The complaint accuses a number of individuals and businesses of unfair or deceptive trade practices related to online advertising and sales. What’s surprising about the complaint is that, according to the FTC, “Most of the defendants are located in Alberta.”
These Canadian companies now face a lengthy legal battle in a foreign land, and it if their actions targeted US customers, it is highly unlikely that they will be able to argue that the Federal Trade Commission does not have jurisdiction over them (in addition to the Competition Bureau). Indeed, the US Court of Appeals for the District of Columbia, in FTC v. Compagnie de Saint-Gobain-Pont-a-Mousson, stated, “Federal courts have long acknowledged that the investigatory and regulatory reach of domestic agencies may, and often must, extend across national boundaries.”
So what kinds of consequences can a Canadian face if an FTC case is brought against them?
For starters, any injunctions or orders brought in US courts apply to foreign lands. That means that if a Temporary Restraining Order or Permanent Injunction is brought during a trial to order a freeze of a Canadian business owner’s assets and to enjoin him from moving or deleting any of his records, violating that order can bring serious consequences.
The famous “honest services” fraud case of the Canadian businessman Conrad Black comes to mind, in which he was convicted of obstruction of justice for disobeying a Chicago court’s orders by removing records from his Toronto office. He has since had all but one of his fraud convictions overturned on appeal, but because he disobeyed the court order, he remains convicted of obstruction of justice as well.
The significance of this is that a Canadian cannot so much as mortgage their house under a general asset freeze order to pay for a lawyer. Doing so can result in contempt, obstruction of justice, and other charges brought by the Court.
Additionally, the FTC has the power to order the “repatriation” and garnishing of assets. In other words, even if money is in a Canadian bank account, the FTC can require the accountholder to transfer it into the United States, where it will be frozen, and likely seized if they are found liable for what the FTC accuses them of.
And, even if the accountholder doesn’t comply, most Canadian banks have counterparts in the United States and will comply themselves because they don’t want to be involved in any illegal activities themselves.
FTC litigation should be avoided at all costs, by refraining from engaging in any form of unfair or deceptive marketing practice. Trickery in marketing isn’t only a terrible way of getting return customers, but it’s likely to invoke the wrath of federal agencies.
However, if you do find yourself faced with an FTC suit in a country outside of the United States, you should do a few things:
-Immediately contact an American lawyer skilled in FTC litigation. These cases are complex and being a self-represented litigant is a sure way to lose everything.
-Don’t transfer any of your assets or destroy any of your records. The Temporary Restraining Order that gets served with almost every FTC case likely prohibits doing these things, and you’ll get into hot water if you think you can trick them. You can’t spend a penny of the money that you have if there’s a general asset freeze order, and you need to get a lawyer immediately to tell you what the significance of the TRO is.
-Don’t ignore the suit. Just because you are not geographically within the jurisdiction of the United States, does not mean that you are not legally in the jurisdiction of the United States. A Quebec man ignored a California lawsuit brought by Facebook against him for spamming, and a billion dollar default judgment against him by the California court was subsequently upheld by a Quebec court. The FTC can be even worse, in that it can criminally prosecute you.
Hopefully, you don’t ever face FTC litigation. But, if you do, consider the points raise in this article, and contact an experienced marketing lawyer.
This is a guest post by:
Aaron M. Kelly, Esq.
The Kelly Law Firm, L.L.C.
13430 N. Scottsdale Road, Suite 106
Scottsdale, Arizona 85254
Licensed in Arizona and Michigan