Advertising, loyalty programs and consumer credit: what’s new and what’s coming up

August 24, 2018

This publication was co-authored by Luc Thibaudeau, former partner of Lavery and now judge in the Civil Division of the Court of Québec, District of Longueuil.

Following the adoption of the Act mainly to modernize rules relating to consumer credit and to regulate debt settlement service contracts, high-cost credit contracts and loyalty programs¹in November 2017, major legislative and regulatory provisions affecting the rights and obligations of Québec merchants and consumers were assented to and published in the Gazette officielle du Québec on July 18, 2017.

Substantial changes and additions were made to the Regulation respecting the application of the Consumer Protection Act,² the Regulation respecting the application of the Act respecting the collection of certain debts,³ and the Regulation respecting travel agents.⁴ The progressive dates of coming into force of the provisions of Act 24 were enacted at the same time. The amendments to the Consumer Protection Act,⁵ its application regulation and the new provisions come into force on four different dates next year.

Overview of amendments substantially affecting the obligations of merchants

Commercial and advertising practices

The following provisions came into force on August 1st, 2018:

- Under the new s. 231.1 CPA, any picture of goods or services in an advertisement that also discloses their price or value must accurately depict the goods or services provided.

- The new s. 244.1 CPA prohibits merchants from falsely or misleadingly representing to consumers in an advertisement that credit may improve their financial situation.

- The new s. 251.1 CPA prohibits any person from withholding an amount of money on a credit card unless the person discloses, before the transaction, why and for how long it is to be withheld.

- The new s. 251.2 prohibits merchants from informing a personal information agent that a consumer has exercised a right to cancel or rescind a contract under a law supervised by the OPC or information unfavourable to the consumer concerning amounts that are no longer payable following the exercise of that right.

Under the new s. 223.1 CPA, merchants must present the information contained in an advertisement in a clear, legible and understandable manner. This provision comes into force on February 1st, 2019.

Clarification on loyalty programs

The many merchants offering loyalty programs under which consumers can obtain goods or services valued at over $50 may have to change their practices once the new provisions in ss. 79.6.1 et seq. of the Regulation come into force on August 1st, 2019:

- The new s. 79.6.4 provides that the conditions that allow consumers to receive exchange units, the terms applicable to the exchange, the terms applicable to the expiry, and the conversion factor used to convert exchange units, is information that loyalty program merchants must give to the consumer.

- The new s. 79.6.7 limits a merchant’s ability to increase the number of exchange units required to obtain goods and services, unless the increase is justified by a significant increase in the market value of the goods or services.

Under the new s. 187.8 CPA, since August 1st, 2018, exchange units obtained by a consumer remain valid and cannot expire at a given date or after a determined period. The effect of this new provision will be relaxed one year later by the new s. 79.6.4 of the Regulation.

High-cost credit

The provisions concerning high-cost credit come into force on August 1st, 2019:

- According to the new s. 61.0.3 of the Regulation, a credit contract is high cost when its credit rate is 22 percentage points higher than the Bank of Canada bank rate.

- The additions under the new s. 93 of the Regulation require that merchants offering high-cost credit hold a special permit. The new s. 18 of the Regulation provides, however, that banks, financial services cooperatives, trust and loan companies, mortgage lenders and insurance companies are exempt from the obligation to hold a permit.

- Under the new s. 73 of the CPA, a high-cost credit contract may now be cancelled within 10 days after the date on which each of the parties is in possession of a duplicate of the contract.

Tightening the rules on assessing the consumer’s repayment capacity

The following provisions will apply as of August 1st, 2019:

- Under the new ss. 103.2 et seq. CPA, and the new ss. 61.0.1 et seq. of the Regulation, the merchant must assess the consumer’s capacity to repay before granting credit, and the consumer’s capacity to repay will now be assessed according to the criteria set out, in particular the consumer’s gross income, the total of the monthly recurring disbursements related to housing, the total of the disbursements required under a credit contract or long-term lease of goods contract, the information contained in a credit report prepared at the time the capacity to repay is assessed and, where applicable, the credit history with that merchant.

- The new s. 103.3 CPA states that a merchant who fails to conduct the assessment under s. 103.2 may lose the right to claim the credit charges. Where applicable, such merchant may have to refund any credit charges already paid by the consumer.

- The new s. 61.0.5 of the Regulation provides that lenders who enter into high-cost credit contracts must provide consumers with a document summarizing the result of the assessment of their repayment capacity, their debt ratio, the methods for calculating the debt ratio, the elements used in the calculation of the consumer’s debt ratio and, where the debt ratio exceeds 45%, the document must include a compulsory warning.

- The new s. 103.5 CPA states that any consumer having entered into a high-cost credit contract with a debt ratio in excess of 45% is presumed to have contracted an obligation that is excessive, abusive or exorbitant.

- The new s. 103.1 CPA provides that any ground of defence raised by a consumer concerning a good financed is enforceable against the lender; in addition, in certain circumstances, the consumer can assert his or her rights against the merchant against the lender.

Information on consumer credit

The following provisions come into force on August 1st, 2019:

- For variable credit contracts, under the new wording of s. 126 CPA, merchants must give consumers specific information in every statement of account, in particular the consumer’s rights and obligations regarding billing errors.

- Under this section, credit card statements must indicate the estimated number of months or years required to repay the entire outstanding balance.

- The new s. 126.1 CPA provides that the minimum monthly credit card payment may not be less than 5% of the outstanding credit card balance. All new contracts entered into after August 1st, 2019 are subject to this provision. For existing contracts, the transition period is six years. Therefore, the minimum payment will gradually increase by half a percentage point per annum, from 2% to 5%.

- For the purposes of s. 127 of the CPA and s. 69.0.1 of the Regulation, statements of account sent electronically by credit card issuers must be available to cardholders for a period of two years.

In accordance with the new s. 21 of the Regulation, umbrella mortgages will be subject to a double consent. The act constituting the hypothec must identify the consumer credit contracts secured by such a hypothec. In addition, the contract must also explicitly stipulate that the credit contract is secured by a hypothec on the value of the consumer’s property. Merchants who enter into credit contracts must comply with the provisions on umbrella mortgages starting August 1st, 2019. Note that this provision does not apply to first-ranking immovable hypothecs.

Use of standard contracts

As of August 1st, 2019, money lending contracts, credit card application forms, variable credit contracts, variable credit contracts entered into for the use of a credit card, instalment sales contracts, contracts of lease with guaranteed residual value, and contracts involving credit other than an instalment sale contract must now contain certain specific information found in a box at the very beginning of the contract, and satisfy several requirements as to form.

Conclusion

Other obligations will gradually come into force over the coming year. This is particularly true for the rules applicable to travel agencies that came into force on August 1st, 2018, and others that will come into force on January 1st, 2019, and for provisions on the issuance of certificates for representatives of collection agents and stipulations that must be included in contracts entered into by debt settlement service merchants, applicable starting February 1st, 2019. Finally, merchants will have to comply with all the other provisions in Act 24 and its regulations commencing August 1st, 2019.

Merchants should pay special attention to the consumer law provisions that come into force over the coming year. The CPA contains penal provisions that impose considerable fines for those who contravene the Act or its regulations, ranging from $600 to $100,000.

Finally, please note that all contracts covered under the Consumer Protection Act must now be drafted on good quality white paper.

At least while paper still exists.... and with regards to that, there is unfortunately nothing in the new law. Let’s hope that the legislature will enact provisions in the near future that expressly permit merchants to enter into consumer contracts using electronic tablets.

SQ 2017, c. 24 (hereafter “Act 24”).
CQLR, c. P-40.1, r. 3 (hereafter the “Regulation”).
CQLR, c. R-2.2, r. 1
CQLR, c. A-10, r. 1
CQLR, c. P-40.1 (hereafter the “CPA”).

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Brigitte Gauthier
Partner, Lawyer

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June 5, 2024

Almost two years after the issuance of the Single-use Plastics Prohibition Regulations, where do we stand and how are businesses affected?

On December 20, 2022, the federal government's Single-Use Plastics Prohibition Regulations1 (the “Regulations”) gradually came into force, with the effect, as the name suggests, of prohibiting (or restricting, in certain cases) the manufacture, import and sale of certain single-use plastics that pose a threat to the environment. In principle, it is now prohibited to manufacture, import and sell certain single-use plastic products made entirely or partially of plastic, such as foodservice ware, checkout bags and straws. On June 20, 2024, beverage ring carriers and flexible straws packaged with beverage containers have been added to this list.2 However, there are cases currently pending before the courts that have the potential to change the situation. Currently contested: the Regulations and the Order A contestation to the Regulations has been before the Federal Court since July 15, 2022, in an application for judicial review brought by Petro Plastics Corporation Ltd et al3 (the “Petro Plastics Case”). However, the parties to this case have asked for it to be suspended pending a final judgment in another case4 brought by the Responsible Plastics Use Coalition (the “Coalition Case”).5 In the Coalition case, the validity of the order by which plastic products were added to the list of toxic substances in Schedule 1 of the Canadian Environmental Protection Act (“CEPA”)6 is called into question. The Federal Court of Appeal will soon hear this case and render a judgment that will affect the Petro Plastics case. On November 16, 2023, in the Coalition Case, the Federal Court ruled in favour of the Coalition, retroactively quashing the Order Adding a Toxic Substance to Schedule 1 to the Canadian Environmental Protection Act (the “Order”) and declaring it invalid and unlawful as of April 23, 2021.7 Essentially, the Federal Court had two main reasons for concluding that the registration was illegal. Findings of the Federal Court Order found unreasonable The Federal Court concluded that the Order was unreasonable because the evidence that the federal government had in hand did not support the conclusion that all plastic manufactured articles were toxic within the meaning of CEPA. On the contrary, the evidence showed that certain plastic manufactured articles included in the scope of the Schedule 1 list were not toxic. According to the Federal Court, the government acted outside its authority by listing the broad category of plastic manufactured articles on Schedule 1 in an unqualified manner. Order found unconstitutional The Federal Court also concluded that the Order was unconstitutional because it did not fall within the federal government’s criminal law power. Only substances that are toxic in “the real sense” can be included on the list of toxic substances. They must be substances that are harmful, dangerous to the environment or human life, and truly have the potential to cause harm. In other words, according to the Federal Court, the power to regulate the broad and exhaustive category of “single-use plastics” lies with the provinces. The Attorney General of Canada appealed this decision with the Federal Court of Appeal on December 8, 2023. The Federal Court of Appeal granted a stay of the judgment rendered on November 16, 2023, until disposition of the appeal,8 such that the Order and the Regulations remain in force, at least for the time being. If the Federal Court of Appeal upholds the decision that the Federal Court rendered on November 16, 2023, this will affect the validity of the Regulations. Under section 90 of CEPA, a substance can only be added to Schedule 1 by order if the federal government determines that it is toxic within the meaning of CEPA, and, under section 93 of CEPA, the government only has the power to regulate such a substance after it has been added to the list. The plastic items in question Subject to the outcome of the court cases discussed above, here is the exhaustive list of items that the Regulations prohibit: Single-use plastic ring carriers designed to surround beverage containers in order to carry them together.9 Single-use plastic stir sticks designed to stir or mix beverages or to prevent a beverage from spilling from the lid of its container.10 Single-use plastic foodservice ware that (a) is formed in the shape of a clamshell container, lidded container, box, cup, plate or bowl, (b) is designed to serve or transport ready-to-eat food or beverages and (c) contains certain materials.11 Single-use plastic checkout bags designed to carry purchased goods from a business and : (a) whose plastic is not a fabric,12 or (b) whose plastic is a fabric that will break or tear, as the case may be, (i) if it is used to carry 10 kg over a distance of 53 m 100 times; (ii) if it is washed in accordance with the washing procedures specified for a single domestic wash in the International Organization for Standardization standard ISO 6330, as amended from time to time.13 Single-use plastic cutlery that is formed in the shape of a fork, knife, spoon, spork or chopstick and that (a) contains polystyrene or polyethylene; or (b) changes its physical properties after being run through an electrically operated household dishwasher 100 times.14 Single-use plastic straws that either (a) contain polystyrene or polyethylene, or (b) change their physical properties after being run through an electrically operated household dishwasher 100 times. Exceptions Single-use flexible plastic straws Single-use flexible plastic straws, i.e., those with a corrugated section that allows the straw to bend and maintain its position at various angles,15 may be manufactured and imported.16 These flexible straws may also be sold in any of the following circumstances:17 The sale does not take place in a commercial, industrial, or institutional setting. This exception means that individuals can sell such flexible straws. The sale is between businesses in packages of at least 20 straws. The sale of a package of 20 or more straws is between a retail store and a customer if the customer requests straws and the package is not displayed in a manner that permits the customer to view the package without the help of a store employee.18 The sale of straws is between a retail store and a customer, if the straw is packaged together with a beverage container and the packaging was done at a location other than the retail store. The sale is between a care facility, such as a hospital or long-term care facility, and its patients or residents. Export of single-use plastic items All the manufactured single-use plastic items listed above may be manufactured, imported or sold for export until December 20, 2025.19 That said, any person who manufactures or imports such items for export will be required to keep a record of certain information and documents as appropriate for each type of plastic manufactured item.20 Records of the information and documents will have to be kept for at least five years in Canada.21 Conclusion: an opportunity to rethink the use of plastics In the short term, businesses will need to start thinking about how they will replace the plastic manufactured items they use. To help businesses select alternatives to single-use plastic items, the federal government has released its Guidance for selecting alternatives to the single-use plastics in the proposed Single-Use Plastics Prohibition Regulations.m22 According to this document, the aim should be to reduce plastics. Businesses may begin by considering whether a single-use plastic product should be replaced or no longer provided. Only products that perform essential functions should be replaced with non-plastic equivalents. Stir sticks and straws can be eliminated most of the time. Another way to reduce waste is to opt for reusable products and packaging. Businesses are invited to rethink their products and services to provide reusable options. Reusable container programs (i.e., offering customers the option of bringing their own reusable containers) are a reuse option that businesses may want to consider, in particular to reduce the amount of plastic foodservice ware. Only where reusable products are not feasible should businesses substitute a single-use plastic product with a recyclable single-use alternative. In such cases, businesses are encouraged to contact local recycling facilities to ensure that they can successfully recycle the products at their end of life. Ultimately, charging consumers for certain single-use alternatives (e.g., single-use wooden or moulded fibre cutlery) may also discourage their use. SOR/2022-138 Regulations, ss. 3 (2), s. 11 and ss. 13 (4) Petro Plastics Corporation Ltd et al v Canada (Attorney General), Court File No. T-1468-22. Order registered on April 23, 2021 and published in the Canada Gazette on May 12, 2021 Court File No. T-824-21 S.C. 1999, c. 33 Responsible Plastic Use Coalition v. Canada (Environment and Climate Change) 2023 FC 1511 2024 FCA 18 Regulations, s. 1 and 3 Regulations, s. 1 and 6 Regulations, s. 1 and 6 “Any material woven, knitted, crocheted, knotted, braided, felted, bonded, laminated or otherwise produced from, or in combination with, a textile fibre” as defined in section 2 of the Textile Labelling Act, RSC 1985, c. T-10 Regulations, s. 1 and 6 Regulations, s. 1 and 4 and ss. 5 (1) Regulations, s. 1 Ibid, s. 4 Regulations, ss. 5 (2)–(6) According to Guidance for selecting alternatives to the single-use plastics in the proposed Single-Use Plastics Prohibition Regulations, the goal is to ensure that people with disabilities who need flexible single-use plastic straws continue to have access to them at home and can carry them to restaurants and other premises. Regulations, ss. 2 (2), s. 10 and ss. 13 (5). Ibid., s. 8 Ibid, ss. 9 (1). https://www.canada.ca/en/environment-climate-change/services/managing-reducing-waste/consultations/proposed-single-use-plastics-prohibition-regulations-consultation-document.html

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December 8, 2023

Publicity contests no longer regulated by the Régie des alcools, des courses et des jeux

On June 2, 2021, the Québec government reduced the administrative burden relating to international publicity contests by excluding them from the jurisdiction of the Régie des alcools, des courses et des jeux (the “Régie”). It has now followed suit with all types of publicity contests launched on or after October 27, 20231. In concrete terms, this means that businesses launching publicity contests aimed at Quebec participants after this date no longer have to meet reporting obligations or pay prescribed fees to the Régie. Businesses in all sectors of activity use the well-known marketing strategy of publicity contests to attract new customers and build customer loyalty. Quebec has long been sidelined because of the Régie’s distinct requirements in this respect. For businesses wishing to increase their visibility through such contests, the province’s situation is now equivalent to that prevailing in the rest of Canada. That said, contests launched before October 27, 2023, remain subject to previous requirements—namely the payment of prescribed fees, the posting of a security where required and the filing of a report with the Régie within 60 days of the date on which the winner(s) is (are) declared—if they offer prizes the total value of which exceeds $2,000. We advise you to be careful, however. Despite the eased burden we have mentioned, publicity contests in Quebec must still comply with the requirements of the Criminal Code,2 the Competition Act,3 the Consumer Protection Act4 and the Charter of the French Language,5 as well as applicable privacy, labelling and advertising laws. Bill 17, An Act to amend various provisions for the main purpose of reducing regulatory and administrative burden, S.Q. 2023, chapter 24, sections 75 and following. RSC 1985, c. C-46. RSC 1985, c. C-34. CQLR, c. P-40.1. CQLR, c. C-11.

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November 27, 2023

The forgotten aspects of AI: reflections on the laws governing information technology

While lawmakers in Canada1 and elsewhere2 are endeavouring to regulate the development and use of technologies based on artificial intelligence (AI), it is important to bear in mind that these technologies are also classified within the broader family of information technology (IT). In 2001, Quebec adopted a legal framework aimed at regulating IT. All too often forgotten, this legislation applies directly to the use of certain AI-based technologies. The very broad notion of “technology-based documents” The technology-based documents referred to in this legislation include any type of information that is “delimited, structured and intelligible”.3 The Act lists a few examples of technology-based documents contemplated by applicable laws, including online forms, reports, photos and diagrams—even electrocardiograms! It is therefore understandable that this notion easily applies to user interface forms used on various technological platforms.4 Moreover, technology-based documents are not limited to personal information. They may also pertain to company or organization-related information stored on technological platforms. For instance, Quebec’s Superior Court recently cited the Act in recognizing the probative value of medical imaging practice guidelines and technical standards accessible on a website.5 A less recent decision also recognized that the contents of electronic agendas were admissible as evidence.6 Due to their bulky algorithms, various AI technologies are available as software as a service (SaaS) or as platform as a service (PaaS). In most cases, the information entered by user companies is transmitted on supplier-controlled servers, where it is processed by AI algorithms. This is often the case for advanced client relationship management (CRM) systems and electronic file analysis. It is also the case for a whole host of applications involving voice recognition, document translation and decision-making assistance for users’ employees. In the context of AI, technology-based documents in all likelihood encompass all documents that are transmitted, hosted and processed on remote servers. Reciprocal obligations The Act sets out specific obligations when information is placed in the custody of service providers, in particular IT platform providers. Section 26 of the Act reads as follows: 26. Anyone who places a technology-based document in the custody of a service provider is required to inform the service provider beforehand as to the privacy protection required by the document according to the confidentiality of the information it contains, and as to the persons who are authorized to access the document. During the period the document is in the custody of the service provider, the service provider is required to see to it that the agreed technological means are in place to ensure its security and maintain its integrity and, if applicable, protect its confidentiality and prevent accessing by unauthorized persons. Similarly, the service provider must ensure compliance with any other obligation provided for by law as regards the retention of the document. (Our emphasis) This section of the Act, therefore, requires the company wishing to use a technological platform and the supplier of the platform to enter into a dialogue. On the one hand, the company using the technological platform must inform the supplier of the required privacy protection for the information stored on the platform. On the other hand, the supplier is required to put in place “technological means” with a view to ensuring security, integrity and confidentiality, in line with the required privacy protection requested by the user. The Act does not specify what technological means must be put in place. However, they must be reasonable, in line with the sensitivity of the technology-based documents involved, as seen from the perspective of someone with expertise in the field. Would a supplier offering a technological platform with outmoded modules or known security flaws be in compliance with its obligations under the Act? This question must be addressed by considering the information transmitted by the user of the platform concerning the required privacy protection for technology-based documents. The supplier, however, must not conceal the security risks of its IT platform from the user since this would violate the parties’ disclosure and good faith requirements. Are any individuals involved? These obligations must also be viewed in light of Quebec’s Charter of Human Rights and Freedoms, which also applies to private companies. Companies that process information on behalf of third parties must do so in accordance with the principles set out in the Charter whenever individuals are involved. For example, if a CRM platform supplier offers features that can be used to classify clients or to help companies respond to requests, the information processing must be free from bias based on race, colour, sex, gender identity or expression, pregnancy, sexual orientation, civil status, age except as provided by law, religion, political convictions, language, ethnic or national origin, social condition, a handicap or the use of any means to palliate a handicap.7 Under no circumstances should an AI algorithm suggest that a merchant should not enter into a contract with any individual on any such discriminatory basis.8 In addition, anyone who gathers personal information by technological means making it possible to profile certain individuals must notify them beforehand.9 To recap, although the emerging world of AI is a far cry from the Wild West decried by some observers, AI must be used in accordance with existing legal frameworks. No doubt additional laws specifically pertaining to AI will be enacted in the future. If you have any questions on how these laws apply to your AI systems, please feel free to contact our professionals. Bill C-27, Digital Charter Implementation Act, 2022. In particular, the U.S. Executive Order on the Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence, October 30, 2023. Act to establish a legal framework for information technology, CQLR c C-1.1, sec. 3. Ibid, sec. 71. Tessier v. Charland, 2023 QCCS 3355. Lefebvre Frères ltée v. Giraldeau, 2009 QCCS 404. Charter of Human Rights and Freedoms, sec. 10. Ibid, sec. 12. Act respecting the protection of personal information in the private sector, CQLR c P-39.1, sec. 8.1.

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October 19, 2023

Smart product liability: issues and challenges

Introduction In 2023, where do we stand in terms of liability where smart products are concerned? The rules governing product liability set out in the Civil Code of Québec were introduced early in the 20th century in response to the industrial revolution and the growing number of workplace accidents attributable to tool failures.1 Needless to say, the legislator at the time could not have anticipated that, a century later, the tools to which this legislation applied would be equipped with self-learning capabilities enabling them to perform specific tasks autonomously. These “smart products,” whether they are intangible or integrated into tangible products, are subject to the requirements of general law, at least for the time being. For the purposes of our analysis, the term “smart products” refers to products that have: Self-learning capabilities, meaning that they can perform specific tasks without being under a human being’s immediate control. Interconnectivity capabilities, meaning that they can collect and analyze data from their surroundings. Autonomy capabilities, meaning that they can adapt their behaviour to perform an assigned task more efficiently (optional criterion).2 These capabilities are specific to what is commonly referred to as artificial intelligence (hereinafter referred to as “AI”). Applying general law rules of liability to smart products Although Canada prides itself on being a “world leader in the field of artificial intelligence,”3 it has yet to enact its first AI law. The regulation of smart products in Quebec is still in its infancy. To this day, apart from the regulatory framework that applies to autonomous vehicles, there is no legislation in force that provides for distinct civil liability rules governing disputes relating to the marketing and use of smart products. There are two factors that have a major impact on the liability that applies to smart products, namely transparency and apportionment of liability, and both should be considered in developing a regulatory framework for AI.4 But where does human accountability come in? Lack of transparency in AI and product liability When an autonomous product performs a task, it is not always possible for either the consumer or the manufacturer to know how the algorithm processed the information behind that task. This is what researchers refer to as “lack of transparency” or the “black box” problem associated with AI.5 The legislative framework governing product liability is set out in the Civil Code of Québec6 and the Consumer Protection Act.7 The provisions therein require distributors, professional sellers and manufacturers to guarantee that the products sold are free from latent defects. Under the rules governing product liability, the burden of proof is reversed, as manufacturers are presumed to have knowledge of any defects.8 Manufacturers have two means to absolve themselves from liability:9 A manufacturer may claim that a given defect is the result of superior force or a fault on the part of the consumer or a third party; or A manufacturer may argue that, at the time that the product was brought to market, the existence of the defect could not have been known given the state of scientific knowledge. This last means is specifically aimed at the risks inherent to technological innovation.10 That being said, although certain risks only become apparent after a product is brought to market, manufacturers have an ongoing duty to inform, and how this is applied depends on the evolution of knowledge about the risks associated with the product.11 As such, the lack of transparency in AI can make it difficult to assign liability. Challenges in apportioning liability and human accountability There are cases where the “smart” component is integrated into a product by one of the manufacturer’s subcontractors.In Venmar Ventilation,12 the Court of Appeal ruled that the manufacturer of an air exchanger could not be exempted from liability even though the defect in its product was directly related to a defect in the motor manufactured by a subcontractor. In this context, it would be reasonable to expect that products’ smart component would be likely to result many similar calls in warranty, resulting in highly complex litigation cases, which could further complicate the apportionment of liability. Moreover, while determining the identity of the person who has physical custody of a smart product seems obvious, determining the identity of the person who exercises actual control over it can be much more difficult, as custody and control do not necessarily belong to the same “person.” There are two types of custodians of smart products: The person who has the power of control, direction and supervision over a product at the time of its use (frontend custody); The person who holds these powers over the algorithm that gives the product its autonomy (backend custody)13. Either one of these custodians could be held liable should it contribute to the harm through its own fault. As such, apportioning liability between the human user and the custodians of the AI algorithm could be difficult. In the case of a chatbot, for example, determining whether the human user or the AI algorithm is responsible for defamatory or discriminatory comments may prove complex. C-27: canadian bill on artificial intelligence Canada’s first AI bill (“Bill C-27”) was introduced in the House of Commons on June 16, 2022.14 At the time of publication, the Standing Committee on Industry and Technology was still reviewing Bill C-27. Part 3 of Bill C-27 enacts the Artificial Intelligence and Data Act. If adopted in its current form, the Act would apply to “high-impact AI systems” (“Systems”) used in the course of international and interprovincial trade.15 Although the government has not yet clearly defined the characteristics that distinguish high-impact AI from other forms of AI, for now, the Canadian government refers in particular to “Systems that can influence human behaviour at scale” and “Systems critical to health and safety.”16 We have reason to believe that this type of AI is what poses a high risk to users’ fundamental rights. In particular, Bill C-27 would make it possible to prohibit the conduct of a person who “makes available” a System that is likely to cause “serious harm” or “substantial damage.”17 Although the Bill does not specifically address civil liability, the broad principles it sets out reflect the best practices that apply to such technology. These best practices can provide manufacturers of AI technology with insight into how a prudent and diligent manufacturer would behave in similar circumstances. The Bill’s six main principles are set out in the list below.18 Transparency: Providing the public with information about mitigation measures, the intended use of the Systems and the “content that it is intended to generate”. Oversight: Providing Systems over which human oversight can be exercised. Fairness and equity: Bringing to market Systems that can limit the potential for discriminatory outcomes. Safety: Proactively assessing Systems to prevent “reasonably foreseeable” harm. Accountability: Putting governance measures in place to ensure compliance with legal obligations applicable to Systems. Robustness: Ensuring that Systems operate as intended. To this, we add the principle of risk mitigation, considering the legal obligation to “mitigate” the risks associated with the use of Systems.19 Conclusion Each year, the Tortoise Global AI Index ranks countries according to their breakthroughs in AI.20 This year, Canada ranked fifth, ahead of many European Union countries. That being said, current legislation clearly does not yet reflect the increasing prominence of this sector in our country. Although Bill C-27 does provide guidelines for best practices in developing smart products, it will be interesting to see how they will be applied when civil liability issues arise. Jean-Louis Baudouin, Patrice Deslauriers and Benoît Moore, La responsabilité civile, Volume 1: Principes généraux, 9th edition, 2020, 1-931. Tara Qian Sun, Rony Medaglia, “Mapping the challenges of Artificial Intelligence in the public sector: Evidence from public healthcare”, Government Information Quarterly, 2019, 36(2), pp. 368–383, online EUROPEAN PARLIAMENT, Civil Law Rules on Robotics, European Parliament resolution of 16 February 2017 with recommendations to the Commission on Civil Law Rules on Robotics (2015/2103(INL)), available online at TA (europa.eu). GOVERNMENT OF CANADA, The Artificial Intelligence and Data Act (AIDA) – Companion document, online. EUROPEAN COMMISSION, White Paper on Artificial Intelligence: a European approach to excellence and trust, COM. (2020), p. 3. Madalina Busuioc, “Accountable Artificial Intelligence: Holding Algorithms to Account”, Public Administration Review2020, online. Civil Code of Québec (CQLR, c. C-1991, art. 1726 et seq. Consumer Protection Act, CQLR c. P-40.1, s. 38. General Motors Products of Canada v. Kravitz, 1979 CanLII 22 (SCC), p. 801. See also: Brousseau c. Laboratoires Abbott limitée, 2019 QCCA 801, para. 89. Civil Code of Québec (CQLR, c. CCQ-1991, art. 1473; ABB Inc. v. Domtar Inc., 2007 SCC 50, para. 72. Brousseau, para. 100. Brousseau, para. 102. Desjardins Assurances générales inc. c. Venmar Ventilation inc., 2016 QCCA 1911, para. 19 et seq. Céline Mangematin, Droit de la responsabilité civile et l’intelligence artificielle, https://books.openedition.org/putc/15487?lang=fr#ftn24; See also Hélène Christodoulou, La responsabilité civile extracontractuelle à l’épreuve de l’intelligence artificielle, p. 4. Bill C-27, An Act to enact the Consumer Privacy Protection Act, the Personal Information and Data Protection Tribunal Act and the Artificial Intelligence and Data Act and to make consequential and related amendments to other Acts, Minister of Innovation, Science and Industry. Bill C-27, summary and s. 5(1). The Artificial Intelligence and Data Act (AIDA) – Companion document, Government of Canada, online. The Artificial Intelligence and Data Act (AIDA) – Companion document canada.ca. Bill C-27, s. 39(a). AIDA, Companion document Bill C-27, s. 8. TORTOISE MEDIA, The Global AI Index 2023, available at tortoisemedia.com.

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