How Canadian is the Made in Canada claim of premium coat maker Moose Knuckles?

Not Canadian enough, the Competition Bureau says.

In the first case of its kind, the bureau on Wednesday said Montreal-based coat maker Moose International Inc. (known as Moose Knuckles) uses "false or misleading" Made in Canada claims and should stop doing it.

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The bureau is seeking a $4-million penalty from the company and "restitution for consumers." According to bureau guidelines for Made in Canada, at least 51 per cent of the "direct" costs of producing or manufacturing goods must be incurred in Canada, and the bureau said most of the company's parkas are made in Asia.

Moose Knuckles "vigorously rejects the allegations" made by the bureau, president Ayal Twik said in an e-mail. "Moose Knuckles core products are made in Canada and always have been."

The case underlines the importance that companies place on Canadiana and wrapping themselves in the Canadian flag as a way to gain a customer following and charge a premium price.

Rival Canada Goose led the way in the upscale coat category in flagging its product as Made in Canada and worthy of its high prices. Now Moose Knuckles' claim is being put to the test.

"In this industry, branding, brand value and brand reputation is very important," Chris Hersh, a partner at law firm Cassels Brock & Blackwell LLP who specializes in competition law, said in an interview.

Moose Knuckles identifies itself as a Canadian company with a Canadian product, he said. "To the extent that this case challenges their Canadian-ness, that could potentially have a negative impact on their brand reputation and the willingness of some consumers to pay a premium, based on a Made In Canada claim."

Susan McGibbon, president of consultancy the Retail Lab, said it's risky for a company to try to take advantage of Canada's global reputation for being dependable and trustworthy if the company can't fully back up its claim. "Being uniquely Canadian and Made in Canada mean something on the global stage" with both economic and emotional value tied to it, she said.

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Still, other Canadian companies such as Tim Hortons benefit from focusing on their domestic roots without claiming their products are Made In Canada, said Andrew Resnick of Novo Consulting. Clothier Roots, for example, waves the Canadian flag even though many of its goods are produced overseas, Mr. Resnick said. He noted that while Tim Hortons plays heavily on its Canadian heritage, its controlling shareholder is now a Brazilian private equity firm.

The bureau, in filing an application with the Competition Tribunal, alleged that the Moose Knuckles parkas, which cost from $595 to more than $1,000, are mostly manufactured in Vietnam and elsewhere in Asia. The bureau accused the company of only doing the finishing touches to the jackets, such as adding the trim, zippers and snaps, in Canada.

"Consumers are willing to pay a premium for Made in Canada products and manufacturers know this," said Matthew Boswell, senior deputy commissioner of competition at the bureau. "The bureau has taken action in order to ensure that consumers – and retailers – have the correct information to allow them to make informed purchases."

Moose Knuckles countered that government officials are "using costly litigation against a small and proud Canadian company to test their vague guidelines." It said in a statement that it had on several occasions "pro-actively" contacted the bureau for clarification on its guidelines to ensure compliance. The company said it meets all requirements "to proudly and legally bring its Made in Canada products to the world."

It said it has more than 400 Canadians employed in three domestic garment factories as well as in other production for its core coat collection. "Like virtually every other garment made in Canada, textiles and components from abroad are used in the Canadian manufacture of Moose Knuckles parkas," it said.

In a category dominated by Canada Goose, Moose Knuckles sells jackets with hood trims made from blue and silver fox fur from Finland, gaining a following among well-heeled consumers in North America, Europe and Asia. Its name conjures a Canadian strain of good humour but has a double entendre, with the word also connoting the bifurcation of an area of the male anatomy.

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The Competition Bureau says the "Made In Canada" claim must be accompanied by a qualifying statement when appropriate, such as "made in Canada with imported parts" or "made in Canada with domestic and imported parts." This could include more specific information such as "made in Canada with 60 per cent Canadian content and 40 per cent imported content," the bureau rules says.

As well, the "last substantial transformation of the good" has to occur in Canada, it says.