Appeal from the Order to Cease False Advertising of the Registrar under the Motor Vehicle Dealers Act, 2002, S.O. 2002, Chapter 30, Schedule B and Regulations as amended, dated June 6, 2019.
Between:
Tesla Motors Canada ULC o/a Tesla Motors
Appellant
and
Registrar, Motor Vehicle Dealers Act, 2002
Respondent
DECISION AND ORDER
ADJUDICATOR: D. Stephen Jovanovic
APPEARANCES:
For the Appellant: Kosta Kalogiros and Nicholas E. Fitz, counsel
For the Respondent: Michael Rusek, counsel
Anne Marshall, student-at-law
Dates and place of Hearing: Toronto, February 4-5 and March 16, 2020
REASONS FOR DECISION AND ORDER
OVERVIEW
1The appellant imports and sells Tesla electric vehicles in Ontario and elsewhere in Canada. It is licensed as a motor vehicle dealer with the Ontario Motor Vehicle Industry Council (OMVIC), which also registers the appellant’s sales staff. OMVIC administers the Motor Vehicle Dealers Act, 2002 (the MVDA) on behalf of the Ontario government and its stated purpose is to protect the public interest and advance the principle of ensuring a fair, safe and informed marketplace that supports a competitive economy. One way it seeks to fulfil that purpose is to regulate or oversee the advertising of motor vehicle dealers.
2The events giving rise to this appeal began with a letter from OMVIC to the appellant dated March 4, 2019 in which OMVIC wrote that it was recently “alerted” to the appellant’s webpage. This alert came from an unidentified motor vehicle dealer rather than a consumer, purchaser or potential purchaser of one of the appellant’s vehicles. The second paragraph of that letter reads as follows:
When advertising vehicles within Ontario, you must ensure that they adhere to OMVIC’s rules and regulations. As such, advertising a price that is based on “estimated savings” is misleading to customers. The price depicted must be the true all-in price the customer will be paying to attain the vehicle. If you are advertising any models in Ontario with a similar scheme, we would advise that they be changed immediately.
3Attached to that letter were printouts of pages 16-18 from the appellant’s website. The right side of the third attached page reads as follows:
Pricing Details
Model 3 Long Range Dual Motor All-Wheel Drive $67,900
Deep Blue Metallic Paint $2,000
19” Sport Wheels $2,000
All Black Premium Interior Included
Purchase Price $71,900
Est. 6-year gas savings -$6,700
Estimated Savings $6,700
Price after Est. Savings $65,200
All savings are experienced after purchase.
See how our savings are calculated
4At the bottom of that page was the following printing:
CASH $65,200 $71,900
After Savings Before Savings
5In a follow-up letter dated April 11, 2019, OMVIC wrote the following to the appellant:
Deducting the estimated gas savings from the advertised vehicle price is misleading and contrary to section 28 of the Act, as well as section 4 of the Code of Ethics (also enclosed, for your reference) These are not price savings. The price represents the total cost that the customer will be required to pay Tesla in order to obtain their vehicle.
6OMVIC maintained its position in subsequent correspondence and in what appears to be an internal memorandum of a meeting between representatives of the parties an OMVIC representative wrote the following:
I gave the analogy of a fuel efficient gas-powered vehicle: certainly the manufacturer is allowed to promote the gas efficiency, but they can’t deduct the est. fuel savings from the vehicle price.
7The appellant and OMVIC continued to negotiate changes to the appellant’s website and were able to resolve a number of concerns raised by OMVIC, but not the one dealing with the purchase price. On June 5, 2019, OMVIC emailed the appellant in response to proposed changes to the website and wrote the following:
This is not better. It’s much, much worse. At least previously you had both prices displayed simultaneously. You’re now making the user click on an additional tab to see the actual price of the car. I note it defaults to the lower price. We did discuss the possibility of a toggling feature, but that was with respect to advertising the fuel consumption savings. OMVIC has been very clear from inception that deducting unrealized operating cost savings from a point of sale price is misleading and non-compliant.
8The issue of price savings could not be resolved, which led to the respondent issuing the Order to Cease False Advertising (the Order) on June 6, 2019, pursuant to s. 29 of the MVDA. Section 29 (1) reads as follows:
If the registrar believes on reasonable and probable grounds that a registrant is making a false, misleading or deceptive statement in any advertisement, circular, pamphlet or material by any means, the registrar may,
(a) order the cessation of the use of such material;
(b) order the registrant to retract the statement or publish a correction of equal prominence to the original publication; or
(c) order both a cessation described in clause (a) and a retraction or correction described in clause (b).
9The particulars in the Notice referenced the concerns raised by OMVIC in the March 4, 2019 letter to the appellant and specifically that the “Registrant was deducting unrealized fuel consumption savings as a point of sale discount. This is misleading as it results in an unattainable advertised vehicle purchase price”.
10The appellant made unilateral changes to its website after the Notice was issued but the respondent maintained that even with these changes the website advertising was “false, misleading or deceptive”.
11As will be reviewed in greater detail below, the changes made to the website included the following:
a) The “Include Potential Savings” toggle feature on the first page of the Order Configurator under the “Select Your Car” section was made to default to the purchase price with savings page, whereas the earlier version defaulted to an Affordability Calculation (rebate and potential future gas savings).
b) The ribbon was revised to show only the all-in purchase price, next to the total potential savings page (estimated fuel savings and government incentives) rather than the Affordability Calculation, which had previously been displayed alongside the all-in purchase price.
c) The final purchase page defaults to setting out the all-in purchase price (without deductions), listing the potential savings, whereas the prior version listed the Affordability Calculation alongside the purchase price.
12The parties agree that the essential facts are not in dispute. They also agree that I am to consider whether the appellant’s website in the form that existed at the time of the hearing rather than at the time the Notice was issued breaches s. 29 of the MVDA.
ISSUES
13The appellant submitted that there are three principal issues to be decided, together with a number of sub-issues. The principal issues, somewhat paraphrased, are as follows:
A) Whether the Notice ought to be vacated under s. 24 of the Charter as s. 29 of the MVDA is unconstitutional for unjustifiably infringing the appellant’s right to freedom of expression under s. 2(b) of the Charter.
B) Whether the Notice ought to be vacated because:
i) The respondent has not demonstrated that it had reasonable grounds to believe that the appellant’s website was false, misleading or deceptive.
ii) Is the appellant’s website false, misleading or deceptive?
C) Whether the Notice ought to be vacated because the respondent exercised his discretion under the MVDA improperly by:
i) Failing to honour its duty of procedural fairness.
ii) Prejudging the issue of whether the website is misleading while having regard to improper/irrelevant considerations.
Disposition
14For the reasons that follow, the Order to Cease False Advertising is vacated as there are not reasonable grounds to believe that the appellant’s website contains or constitutes a false, misleading or deceptive statement contrary to s. 28 of the MVDA.
ANALYSIS
The Evidence
15While the parties have indicated that there is no dispute as to the facts, a brief review of the evidence is necessary to understand their respective positions.
16Laura Halbert testified on behalf of the respondent, indicating that she was the Deputy Registrar of OMVIC since 2016, having been its Director of Compliance since 1997. She did not sign the Notice but was familiar with the process leading up to its issuance. She reviewed portions of the appellant’s website which provided information as to its Model 3 such as options and pricing of various configurations. According to Ms. Halbert, the inclusion of a reference to future potential savings, in particular a potential savings on the cost of gasoline over a six-year period of $6,700.00, created some “avoidable confusion”. That potential savings, together with the federal government incentive on the purchase of electric vehicles of $5,000, ($6,700.00 + $5,000.00 = $11,700) misrepresented the point of sale price as $44,290.00 rather than $55,900.00 (plus taxes).
17Ms. Halbert had no problem with the amount of the potential savings or how it was calculated and in fact stated that the calculation was quite helpful and a useful tool. However, she believed that it was unfair to the consumer as the $44,290.00 was not an achievable price and was, in effect, designed to get the consumer “hooked” based on this false number. She was not aware of any actual complaint from a consumer but thought that the manner in which the appellant listed the information created an uneven playing field and that others (dealers) were not making false statements.
18In cross-examination, Ms. Halbert testified that the primary objective of OMVIC was consumer protection along with preventing people from being taken advantage of and ensuring that consumers have enough information to make informed decisions when making a vehicle purchase.
19The appellant called as an expert witness Cara Clairman, the President and CEO of Plug’n Drive (PND) an advocacy organization promoting electric vehicles. PND works with nine manufacturers of electric vehicles in addition to the appellant. It strives to educate potential buyers of electric vehicles what their cost to drive them would be as compared to the cost of gasoline powered cars. Based on an average driving distance of 20,000 kms per year, she calculated that the appellant’s Model 3 would incur a charge for electricity of $467.00 while a mid-sized gasoline vehicle would require $2,480.00 worth of gasoline. The Tesla owner would therefore have a fuel savings of approximately $2,013.00 per year.
20In her report of November 8, 2019, she provided an opinion as to the appellant’s advertising of fuel savings writing the following:
In summary, Tesla’s advertising is extremely reasonable and accurate. If anything, Tesla underestimates the actual savings. In my view, this information is not only appropriate to provide, but is critically important information for the consumer to understand the full cost of EV ownership.
In addition to the fuel savings being valid, if not conservative, presenting those fuel savings and showing how those savings, and incentives, factor into the total cost of ownership over a period of time is information that electric vehicle consumers seek. As such, presenting an estimated cost after savings is not misleading provided that the purchase price is shown clearly and any savings are itemized clearly for consumers, and that the assumptions behind estimates can be seen and tested. Based on my review, Tesla does all of the above and it is my view that the website is not, therefore, misleading consumers inn any way. Quite the opposite – it is providing consumers with vital information to inform their purchase decision.
21The appellant also called as a witness Marie Schellenberg, its Market Manager for Canada East, which covers Ontario and Quebec, since 2019. Ms. Schellenberg had previously worked as the manager of the appellant’s Yorkdale outlet, overseeing a 20 person sales staff.
22Ms. Schellenberg testified that Tesla vehicles may be ordered online or by visiting one of the appellant’s retail outlets. She estimated that 10% or fewer vehicles are purchased online and that the majority of purchasers rely on the appellant’s sales staff for vehicle information. According to her, potential customers who visit the stores are very inquisitive, had previously visited the website and did some research about Tesla or electric vehicles. She was not aware of any complaint from a consumer about the pricing information on the appellant’s website and in particular was not aware of any consumer thinking that the purchase price of the basic Model was $44,290.00, i.e., the “after potential future savings” number. She explained that consumers are allowed to cancel their orders for vehicles up to the day of delivery and that she was not aware of anyone cancelling an order because they thought the purchase price was this number.
23Ms. Schellenberg reviewed the website pages, found in Ex. 2 at tab 11 and the appellant’s typical motor vehicle purchase agreement, found at tab 12, which does not contain any reference to the potential cost savings.
24The printout from the website as found at tab 11 is 8 pages in length. More detailed printouts were provided after the hearing and after a telephone discussion with counsel for the parties. This was done at my request as there was some confusion at the hearing as to pages that were being shown on a screen during the evidence of Ms. Schellenberg and those pages found at tab 11. Counsel for the respondent objected to the introduction of these additional pages, not because of their content, but the order in which they were being presented which he submitted was misleading. Counsel indicated that he had no objection to my viewing the actual website. However, I have not found it necessary to do so and base my decision on the documents filed at the hearing.
25The following is a description of what I find to be the relevant information from the website pages found at tab 11 with the pages numbered as in Ex. 2:
Page 745:
A purchase price of $55,990 is shown for the standard range plus model, $65.990 for long range and $75,000 for performance. A note below these prices reads “All prices are shown without potential incentives or gas savings of $11,700: Learn More. A ribbon at the bottom of the page indicates in a slightly larger font $55,990 purchase price $11,700 potential savings over 6 years Show Details.
Page 746:
Include potential savings*. The above numbers change to $44,290*, $59,290* and $69,290*. A note after these numbers reads *Costs above include potential incentives and gas savings at $11,700. Learn More. The information on the ribbon remains the same.
Page 747:
The purchase price is shown as $55,990 with a Federal incentive of -$5,000 for a Drive away price of $50,990, excluding taxes & fees: Incentives deducted after taxes. There is then reference to Est. 6-year gas savings of -$6,700, Potential Future Savings of -$6,700, a Potential savings over 6 years of $11,700 and After potential savings of $44,290, ending with Savings calculated over a 6-year period. There is no ribbon on this page.
Page 748:
This page is titled Gasoline Savings and shows how the estimated gas savings of $6,700 over 6 years is calculated. The dollar numbers for the three models are the same as first shown on page 746 and there is no ribbon on this page.
Page 749:
This page shows the $5,000 Federal Incentive with the same dollar numbers fore the three models as shown on pages 746 and 748. There is no ribbon on this page.
Page 750:
The title on this page is Your Model 3 showing a Purchase Price of $55,990, a potential savings of $11,700, calculated over a 6-year period: Learn More and the reference to the amount Due Today of $3,200. The ribbon returns on this page with the same information on the previous ribbons.
Page 751:
This page is similar to page 750 with slightly more dollar figures. The purchase price is shown as 55,900 followed by the Federal incentive of -$5,000, then a Drive away price of $50,990. This is followed by the Est. 6-year gas savings of -$6,700, another reference to Potential Future Savings of -$6,700, then a reference to After potential savings of $44,290. Finally, the Purchase Price is shown as $55,900 with another reference and again the same ribbon appears across the bottom of the page.
Pages 752-3:
These pages appear to deal with the gasoline savings with dollar figures similar to those on previous pages and no ribbon.
Page 754:
The final page allows for a credit card payment in the amount due to complete the order, $3,200. It includes the following dollar amounts: Purchase Price $55,990, Federal incentive, -$5,000, Drive away price $50990, est. 6-year gas savings -$6,700, Potential Future savings -$6,700, after potential savings $44,290, Purchase Price $55,990 and again, Potential savings $11,700 calculated over a 6 year period. Learn More. The usual ribbon then appears with a button to allow the placement of the order. A copy of the right side of this page is attached as Schedule “A”, hopefully to add some clarity to the above descriptions.
Findings
26The parties agree that the onus is on the respondent to satisfy the Tribunal that there were reasonable grounds to believe that the website (or individual pages) contains false, misleading or deceptive statements. “Reasonable grounds to believe” is a lower standard of proof than “balance of probabilities”: see Ontario (Alcohol and Gaming Commission of Ontario) v. 751809 Ontario Inc. (Famous Flesh Gordon’s), 2013 ONCA 157.The respondent’s Registrar by signing the Order has indicated that he has concluded that he has reasonable grounds to believe that this is the case. The respondent’s one witness, Ms. Halbert, testified why she believes this to be the case. Ms. Clairman, the appellant’s expert witness, wrote in her report that “presenting an estimated cost after savings is not misleading provided that the purchase price is shown clearly and any savings are itemized clearly for consumers.”
27There has been no evidence of any consumer confusion over “future potential savings” or confusion over what is the actual purchase price of the various iterations of the Tesla Model 3. Ms. Schellenberg testified that consumer complaints escalate to her and that she had never received a consumer complaint about the pricing numbers. The information conveyed on the website about the potential savings and in particular how the dollar amount of the potential savings is calculated is conceded by the respondent to be accurate.
28The ultimate position of the respondent is succinctly summarized in the letter from its counsel to the Tribunal dated March 30, 2020, part of which reads as follows:
The Tribunal will recall that the central issue in this proceeding is that Tesla Motors’ website includes a feature by which a consumer can ‘toggle’ between “Purchase Price” and “Include Potential Savings” subpages.
The Registrar’s position is that the manner in which “Potential Savings” is displayed is likely to mislead a consumer into believing that he or she can purchase the vehicle for a price which, is in fact, not offered by Tesla Motors to the public.
Specifically, in the example of a Model 3 vehicle, the “Potential Savings” price is based on hypothetical, potential future reductions in operating costs over six years in comparison to a gas-powered vehicle and is therefore misleading.
The contents of Tesla Motors’ “Brief of Screenshots” are arranged in a specific way to try to minimize this concern. The “Potential Savings” subpage with the misleading price information is included at Tab 7, behind a series of other pages, implying that the information depicted in the “Potential Savings” section is not an important factor for typical consumers, and secondary to choices about interior and exterior schemes. It also implies a consumer will only interact with this information in the later stages of the purchasing process.
This is not a reasonable interpretation of how a consumer actually interacts with the webpage. It is more likely that a consumer coming to the “Include Potential Savings” toggle will click on it immediately to see how much money he or she might be able to save, rather than waiting until almost the end of the purchasing process to do so. This is precisely why the “Include Potential Savings” pricing appears so prominently throughout Tesla Motors’ website; in order to influence a consumer’s choice to purchase one of its vehicles.
29Turning to the issues in this appeal, in view of my findings that the statements on the website cannot reasonably be construed as being false, misleading or deceptive I see no need to deal with the first issue, the appellant’s s. 24 Charter argument. Likewise, I see no need to make any findings on the third issue, whether the respondent’s Registrar failed to honour a duty of procedural fairness or prejudged whether the website was misleading while having regard to improper/irrelevant considerations.
30I agree with the parties that the information on the website and even how it appears on the website must be viewed on an objective basis to determine if it is false, misleading or deceptive. To do so, the website information must be considered from the perspective of the “average consumer”.
31Both parties rely on the Supreme Court of Canada’s decision in Richard v. Time Inc., 2012 SCC 8. In Richard, the consumer was led to believe that he had won a significant cash prize as the mailing he received stated in bold print “OUR SWEEPSTAKES RESULTS ARE NOW FINAL: MR JEAN MARC RICHARD HAS WON A CASH PRIZE OF $833,337.00!” The Court had to consider whether the mailing violated the Quebec Consumer Protection Act and its protections against false or misleading representations. In doing so it wrote the following:
The words “credulous and inexperienced” therefore describe the average consumer for the purposes of the C.P.A. This description of the average consumer is consistent with the legislature’s intention to protect vulnerable persons from the dangers of certain advertising techniques. The word “credulous” reflects the fact that the average consumer is prepared to trust merchants on the basis of the general impression conveyed to him or her by their advertisements. However, it does not suggest that the average consumer is incapable of understanding the literal wording meaning of the words used in an advertisement if the general layout of the advertisement does not render those words unintelligible.
32In Canada (Commissioner of Competition) v. Chatr Wireless Inc., 2013 ONSC 5315, the court reviewed Richard to consider whether the same consumer perspective should be applied to a matter under the Competition Act, R.S.C. 1985, c. C-34. The representation in Chatr was that if a cell phone customer switched its carrier to Chatr he or she would experience fewer dropped calls and would have “no worries about dropped calls.” The court was somewhat more specific about the proper consumer perspective which it found to be that of a “credulous and technically inexperienced consumer of wireless calls.” Accordingly, the consumer perspective in this manner should be the “credulous and inexperienced consumer” of motor vehicles.
33From that perspective, I cannot conclude that there are reasonable grounds to believe that the website is false, misleading or deceptive. The “reasonable grounds to believe” standard “requires only an objective basis for belief.”
34Section 29 (2) of the MVDA provides that “section 9 applies with necessary modifications to an order under this section…” Section 9 (5) reads as follows:
If a hearing is requested, the Tribunal shall hold the hearing and may by order direct the registrar to carry out registrar’s proposal or substitute its opinion for that of the registrar and the Tribunal may attach conditions to its order or to a registration.
35A credulous consumer is one who takes at face value or accepts what he or she reads in an advertisement, which in this case is the appellant’s website. An inexperienced consumer at its extreme would mean a first-time car buyer. Even using these definitions, I cannot conclude that the information about potential or future gas savings, which has been acknowledged by the respondent to be correct, even conservative, would lead a credulous and inexperienced consumer to believe that the potential or future savings were discounts off the point-of-sale price. The actual purchase price and the drive away price are repeatedly displayed on a number of pages throughout the site. Part of the respondent’s submissions as to what page the consumer would toggle to while viewing the site and be misled as to the actual purchase price are pure conjecture. There is no basis in the evidence for the respondent’s conjecture as to what is the “more likely” way the average consumer would view the pages on the site.
36In my view, the repeated use of the words “savings”, “future” and “potential” and the constant references to “purchase price” are easily understood and do not create a misleading impression of what the point-of-sale, or actual, price is for the appellant’s vehicles. The average consumer would not be misled.
37In my view the respondent has not satisfied the onus of establishing that there are reasonable grounds for believing the appellant’s website, or the individual pages, contained false, misleading or deceptive statements.
ORDER
38The Order To Cease False Advertising issued by the respondent on June 6, 2019 is vacated.
LICENCE APPEAL TRIBUNAL
____________________________________
D. Stephen Jovanovic
Associate Chair
Released: January 28, 2021