Amendments to The Canadian Code of Advertising Standards, Including Guidelines Regarding Disclosures in Testimonials and Endorsements, Now In Effect

October 11, 2016 | Catherine Bate, Eugenia (Evie) Bouras | Toronto

Advertising Standards Canada (“ASC”) has made significant changes to The Canadian Code of Advertising Standards (“Code”). Effective as of October 3, 2016, amendments include new guidelines requiring disclosure of any material connection between an endorser and the supplier in online reviews, blogs or vlogs. The Code now also gives ASC the ability to advise the Competition Bureau or other regulator of an advertiser’s failure to comply with a decision of the ASC’s Standards Council (“Council”). The Code applies to virtually all advertising in Canada, regardless of media or membership in ASC, and so all advertisers need to be aware of these important updates to the Code.

The Code sets out the requirements for acceptable advertising under the advertising industry’s self-regulatory system. Consumers, competitors and special interest advocacy groups may raise complaints to ASC if they feel that a particular ad or claim violates the Code’s terms regarding accuracy and clarity, safety, acceptable depictions and portrayals, and more. ASC adjudicates such complaints under the Code, with the result being the removal of offending advertising from the Canadian market.

Notably, the amendments introduce an Interpretation Guideline to the clause of the Code governing testimonials. Under this Clause 7, testimonials, endorsements and other representations of opinion or preference must not be deceptive. The new Interpretation Guideline responds to the increasing rise of consumer reviews, native advertising/ advertorials, and brand influencers. The concern is that consumers need to know if someone has been compensated for writing about a product or service, to distinguish its perspective from other grass roots review or endorsements. Now, through the Interpretation Guideline, bloggers, vloggers and social media influencers are required to disclose any “material connection” between them and the supplier whose product or service they are showcasing. This new requirement will give the consumer more insight on the nature and source of the testimonial or endorsement.

The scope of material connection is also newly defined in the Code and includes: benefits, monetary compensation, free products, gifts, discounts and any employment relationship. The Interpretation Guideline excludes from this disclosure requirement situations where consumers would reasonably expect a material to exist, such as celebrity endorsements.  For examples of how to make adequate disclosure, ASC points to guidance developed by the U.S. regulator, and the Word of Mouth Marketing Association.

Furthermore, failure to comply with Council’s decision of non-compliance with the Code could now have greater implications for advertisers, and possibly trigger an investigation by the Competition Bureau (“Bureau”). The Code now provides that ASC may advise the Bureau or other regulatory authority of the advertiser’s failure to follow the consumer complaint procedure or to comply with Council’s decision, and that the advertisement or claim contravenes the Code.

The amended Code also features new definitions, most notably “advertiser” and “teaser advertisement”. “Advertiser” is defined in the Code as: “…an entity that has or shares final authority over the content of an advertisement…”. This definition now offers more clarity when determining the party responsible for an ad, such as the role for advertising between a supplier and a retailer. Teaser advertisements are defined as ads that reveal little about the product and whose objective is to stimulate the consumer’s interest in the product. Given the nature of the “teaser” ads, this definition allows advertisers to be exempt from the need to be identified without violating Clause 1 related to accuracy and clarity.  In addition, Clause 14 of the Code which governs acceptable depictions and portrayals also now specifically prohibits ads that condone discrimination based on national or ethnic origin, gender identity, or sexual orientation, in addition to other previous grounds including race, religion, sex or age.

All of these amendments are already in effect.


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