Why Corporations in Canada Should Not Rely on AI

Generative AI can save time. But Canadian corporations using AI to replace human judgment are taking on legal, privacy and brand risks that most boardrooms still underestimate.

From ad copy to customer chatbots to internal reports, AI is now inside almost every department. The problem is not the technology itself. The problem is what happens when companies treat it as a replacement for the people who are supposed to check, approve and stand behind the work. In Canada, the law has already started answering that question, and the answer is clear: the company is still responsible.

1. AI Can Sound Right and Be Completely Wrong

Generative AI can produce false information with total confidence. The U.S. National Institute of Standards and Technology (NIST) calls this confabulation and lists it as a core risk in its Generative AI Profile.

Inside a corporation, that can look like an invented statistic in a board deck, a wrong product claim in an ad or a customer reply that sounds convincing and is simply false. People make mistakes too. The difference is that AI can make thousands of them at speed.

2. Canada Already Has a Case: Air Canada’s Chatbot

This is not theoretical in Canada. In Moffatt v. Air Canada, 2024 BCCRT 149, the airline’s website chatbot told a grieving customer he could apply for a bereavement fare after booking. That was wrong under Air Canada’s own policy.

Air Canada argued the chatbot was effectively responsible for its own actions. British Columbia’s Civil Resolution Tribunal rejected that argument, found negligent misrepresentation and ordered the airline to pay $812.02 in damages, interest and fees. The tribunal said it should be obvious that a company is responsible for all the information on its website, whether it comes from a static page or a chatbot.

The dollar amount was small. The principle was not.

3. AI-Generated Advertising Still Falls Under the Competition Act

AI can write persuasive ads without knowing whether a single claim in them is true. In Canada, that is a legal problem for the company, not the software.

The Competition Act prohibits materially false or misleading representations to the public. Performance claims must be based on an adequate and proper test before they are made. Since the 2022 amendments, the maximum civil penalty for a corporation is the greater of $10 million for a first order ($15 million after that) or three times the benefit gained or, if that cannot be determined, 3% of annual worldwide gross revenues, according to Bennett Jones.

The 2024 amendments under Bill C-59 went further, adding stricter substantiation rules for environmental claims and opening the door to private lawsuits over deceptive marketing, as Torys explains. The Competition Bureau has also flagged AI directly: in its 2025 consultation report, more than a third of submissions raised concerns about AI being used for deceptive marketing, including fake reviews and deepfake endorsements, per Baker McKenzie.

Put simply: the company published it, the company benefited from it and the company answers for it.

4. Pasting Confidential Data Into AI Creates Privacy Risk

A marketing manager pastes a confidential launch plan into a chatbot. An HR employee enters details from a workplace dispute. A team uploads customer records to an external AI tool to “clean up” a spreadsheet. Each of these can move sensitive information into a system the company does not control.

In December 2023, the Office of the Privacy Commissioner of Canada and its provincial and territorial counterparts released Principles for Responsible, Trustworthy and Privacy-Protective Generative AI Technologies. They make it clear that organizations using generative AI still have obligations around legal authority and consent, appropriate purposes, openness, accountability, accuracy and safeguards under laws like PIPEDA.

“The AI tool said it was private” is not a privacy policy.

5. You May Not Fully Own What AI Creates

Companies are spending real money on AI-generated campaigns, characters, images and video. Whether they can legally own that work is still unsettled in Canada.

The Canadian Intellectual Property Office registered copyright in an image called Suryast, listing an AI painting app as a co-author. The Samuelson-Glushko Canadian Internet Policy and Public Interest Clinic (CIPPIC) has asked the Federal Court to correct or cancel that registration, arguing that copyright requires a human author. CIPPIC expects a hearing in the latter half of 2026.

Canadian brands selling into the U.S. face a clearer answer there: the U.S. Copyright Office has concluded that purely AI-generated material is not protected just because someone wrote the prompt. Meaningful human creative contribution matters.

6. AI Can Make Every Brand Look the Same

When thousands of companies use the same few AI tools and the same prompting formulas, the output starts to blur together. Same polished tone. Same visual tricks. Technically impressive, emotionally interchangeable.

Advertising is supposed to make people remember your company. Human creativity is messy, personal and surprising, and that is often exactly what makes a campaign work.

7. Representation Needs People Who Know the Audience

AI systems learn from existing data, so they can repeat stereotypes and get cultural details wrong. In a country as diverse as Canada, that matters. An image that technically matches the prompt can still miss the community it is meant to reach.

The fix is not telling the model to “do better.” It is putting people with real cultural knowledge and the authority to say no into the review process. Ontario’s Information and Privacy Commissioner and Human Rights Commission reinforced this in January 2026 with joint principles for the responsible use of AI.

8. Canada Has No AI Act Yet. That Does Not Mean No Rules.

The federal Artificial Intelligence and Data Act (AIDA), part of Bill C-27, was never passed. Canada now has a Minister of Artificial Intelligence and Digital Innovation, Evan Solomon, but as of 2026 there is still no replacement federal framework, according to MLT Aikins.

That gap does not protect companies. Existing laws on advertising, privacy, human rights, employment and negligence already apply. Provinces are also moving: since January 1, 2026, Ontario employers with 25 or more employees must disclose in public job postings when AI is used to screen, assess or select applicants, as outlined here.

9. The Hidden Cost of “Saving Money”

AI is cheap to generate. It is not always cheap to verify.

• An error in an AI-written campaign still needs someone to catch it.
• A copyright dispute still needs lawyers.
• A data leak still needs privacy and security teams.
• Lost customer trust still needs marketing to rebuild it.

If employees spend hours fixing AI output, the company has not removed the human work. It has just moved it further down the line, where mistakes cost more.

10. Accountability Cannot Be Outsourced to a Machine

Customers, employees and regulators need to know who made a decision. “The algorithm generated it” is not an answer. Neither is “the chatbot wrote it.” The Air Canada decision showed that Canadian decision-makers are not interested in that excuse.

NIST’s AI Risk Management Framework calls for AI that is valid, reliable, safe, secure, accountable, transparent, explainable, privacy-enhanced and fair. None of that sounds like “generate it and hit publish.”

AI Should Be a Tool, Not the Person in the Room

None of this means Canadian businesses should abandon AI. Brainstorming, summarizing and organizing information are legitimate uses that can make skilled employees faster.

But helping a skilled employee is very different from removing that employee from the process. For advertising, public relations, customer communications, creative work and major internal decisions, corporations should think hard before making AI the default.

The question is not “Can AI do this?” The better question is “What do we lose if a human stops doing this?”

Sometimes the answer is very little. Other times, a company is trading accuracy, privacy, ownership, originality, cultural understanding, customer trust and accountability for a little saved time. That is not innovation. It is replacing something valuable with something cheaper.

Frequently Asked Questions

Is a Canadian company liable for what its AI chatbot says?
Yes, based on current case law. In Moffatt v. Air Canada (2024), B.C.’s Civil Resolution Tribunal held Air Canada responsible for inaccurate information its chatbot gave a customer.

Does Canada have an AI law?
Not a standalone federal one. AIDA was not passed. Existing laws, including the Competition Act, PIPEDA, provincial privacy and human rights laws, and Ontario’s AI job-posting disclosure rule, already apply to how businesses use AI.

Can AI-generated ads break Canadian advertising law?
Yes. The Competition Act applies to false or misleading representations no matter who, or what, wrote them. Performance claims must be backed by adequate and proper testing before they are made.

Can a company own copyright in AI-generated content in Canada?
It is unsettled. A Federal Court challenge to a copyright registration naming AI as co-author is expected to be heard in 2026. Documenting meaningful human creative input is the safest approach for now.

This article is for general information and is not legal advice. Businesses should consult a Canadian lawyer about their specific AI use.