The Competition Bureau is the Canadian Government agency responsible for stomping out deceptive marketing practices. The Federal Trade Commission serves the same function in the United States. The question is: Do online marketers in Canada have to follow U.S. FTC regulations?
The answer is, “Yes the FTC extends its jurisdiction to Canadians who do business with American residents.”
Example of Canadian Online Marketer Being Sued By the American FTC
In fact, a 2011 FTC complaint filed in Washington Stae accused several entities of unfair or deceptive business practices related to online advertising and sales. What was surprising was that “most of the defendants [were] located in Alberta.”
So its off to the US courts these Canadian online marketers went because their actions targeted US customers. And no, it’s highly unlikely they’ll be able to argue that the Federal Trade Commission does not have jurisdiction over them (in addition to the Competition Bureau).
In FTC v. Compagnie de Saint-Gobain-Pont-a-Mousson the court reasoned:
“Federal courts have long acknowledged that the investigatory and regulatory reach of domestic agencies may, and often must, extend across national boundaries.”
Consequences For Canadians Caught By The US FTC
So what consequences can a Canadian expect when faced with an FTC investigation?
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 in an effort to freeze 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. He was convicted of obstructing justice for 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.
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 US FTC can require the account holder to transfer it into the United States, where it will be frozen, and likely seized if the defendant loses.
And, even if the account holder doesn’t comply, most Canadian banks have counterparts in the United States and will comply themselves because they don’t want to get involved with an international entanglement.
FTC litigation should be avoided at all costs by not using unfair or deceptive marketing practices. 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 three things immediately:
- Contact an U.S. law firm skilled in international 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 the significance of the TRO.
- Don’t ignore the suit. Just because you are not geographically within 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.
Speak With A U.S. Attorney Who Has Helped Canadian Online Marketers Facing A U.S. FTC Investigation
Hopefully, you don’t ever face FTC litigation. But, if you do, consider the points raised in this article, and contact an attorney who has successfully helped Canadian businesses with U.S. FTC troubles.