In what can only be described as a growing war against telecom advertising in Canada, the Competition Bureau announced on September 14, 2012 that it began proceedings in Ontario Superior Court against Bell Canada (“Bell”), Rogers Communications (“Rogers”), TELUS Corporation (“TELUS”) and the Canadian Wireless Telecommunications Association (“CWTA”) for alleged misleading advertising in relation to “premium texting services” (see: Competition Bureau Sues Bell, Rogers and Telus for Misleading Consumers: Bureau Seeks Customer Refunds and $31 Million in Penalties).
The Bureau is seeking both the maximum civil penalties available under the Competition Act (the “Act”) against Bell, Rogers and TELUS, as well as full restitution for consumers (amendments to the Act in 2009 both significantly increased the monetary penalties for misleading advertising and introduced a new restitution penalty). The Bureau is seeking a $1 million AMP against the CWTA.
According to the Bureau’s allegations, Bell, Rogers and TELUS (together with the CWTA) facilitated the sale of 3rd party premium-rate digital content – for example, news, advice, alerts, trivia quotations, horoscopes and ringtones – without adequate disclosure of their fees and suggestions were made in advertising for these products that the services were free.
In making the announcement the Bureau said:
“’Our investigation revealed that consumers were under the false impression that certain texts and apps were free,’ said Melanie Aitken, Commissioner of Competition. ‘Unfortunately, in far too many cases, consumers only became aware of unexpected and unauthorized charges on their mobile phone bills.’ The premium-rate digital content in question can cost up to $10 per transaction, and up to $40 for a monthly subscription, rates over and above standard text messaging plans.”
The premium 3rd party content was marketed through free wireless apps and online, and have been the subject of previous consumer studies (see: Paying a Premium: Consumers and Mobile Premium Services, a Public Interest Advocacy Centre report) and critical commentary (see here). The 2011 PIAC report found, among other things, that consumer premium mobile service problems were under-detected and underreported, that the industry often dismisses complaints and no agency tracks or handles related complaints (leading to a recommendation for measures to improve consumer protection in relation to premium mobile services).
This is also the most recent case is the latest in a series of high profile advertising law challenges made by the Bureau against Bell (price claims and disclaimers; see here and here), Nivea (performance claims and the general impression test; see: Nivea), Yellow Page Marketing (misleading business claims and disclaimers; see: here, here and here) and the ongoing Rogers case (performance claims, the general impression test and disclaimers; see: here).
The Bureau’s Claim & General Impression Test
The thrust of the Bureau’s Statement of Claim is twofold: first, that the wireless companies made false or misleading representations to the public online and over their wireless networks the general impression of which was that consumers could receive premium text messaging and other services free (when they were in fact charged for the content); and second, that claims were made that consumers were safeguarded from receiving and having to pay unauthorized charges, when in fact the wireless companies collected and facilitated such charges keeping a portion.
In this regard, in Canada the general misleading advertising provisions of the Act can be violated where claims are either literally false or convey a false or misleading general impression.
Interestingly, the Bureau has also imported the recent (and lower) general impression test from the Supreme Court of Canada’s decision in Richard v. Time, alleging that the telecoms’ false or misleading representations were targeted at wireless users, including “credulous, inexperienced, and vulnerable” persons, such as children.
CWTA’s News Release and Control
In the CWTA’s news release, it indicates that it had in fact contacted the Bureau last year to investigate potential remedies for non-compliant advertising by companies utilizing Common Short Codes (and offer assistance in pursuing potential remedies), the Bureau chose instead to pursue litigation against the CWTA and the defendant telecos, that wireless carriers do not in fact create or control text messaging services (but rather only manage the billing for 3rd party creators and operators) and that the Bureau’s actions could disrupt Canadians’ access to text messaging services.
The control point made by the CWTA is an interesting, if not entirely settled point (i.e., in Canada, the degree to which a party, such as an ISP, must be linked to a false or misleading claim in order to be liable remains subject to debate).
In its Claim, the Bureau emphasizes the wireless companies’ involvement and control of the delivery of text messaging services, through third parties, alleging that the defendants are “far from being passive conduits” for the distribution of text messaging services, but rather provide third party providers with “privileged access” to their networks and the necessary infrastructure to deliver services (while collecting related revenues). According to the Bureau, the entire model for delivery of text messaging services through Short Codes and third parties has been established and is administered by the defendants, relying on their active participation.
In discussing the issue of liability for Internet representations in its Internet advertising guidelines, (Application of the Competition Act to Representations on the Internet, the Bureau takes the position that liability for misleading advertising claims made in the online environment should generally rest with the person who makes or permits the claim to be made, but that given the variety of “parties who may play a role”, it will pursue enforcement on a case-by-case basis.
The Bureau also takes the position in its guidelines, which are not however law (nor binding on the Bureau itself), that in determining who “causes” a representation to be made, it will assess which party (or parties) possess decision-making authority or control over content (and also the nature and degree of their control).
In sum, the Bureau’s position has been that while mere disseminators or conduits of information may not face liability, individuals or firms responsible for content (or with control over content) may face enforcement.
The Act also contains certain deeming provisions (although as the Bureau states in its guidelines these do not expressly refer to online or new media advertising) extending liability for misleading representations to the person “causing” the claim to be made, as well a “publisher’s defence” for persons who merely disseminate or distribute a false claim, where the requirements of that provision are met.
Key Trends Highlighted by the Case
Several of the key overall general trends this new case reflect include the increasing pressure from regulators to ensure that prices are fully disclosed and that the general impression of price and other material claims is not misleading (a theme in the ongoing Rogers case and several other recent cases involving disclaimers). The case also shows the Bureau’s growing focus on new and emerging technologies and mobile devices.
With respect to the latter point (increased focus on technology and mobile devices), while the key misleading advertising provisions of the Act are technologically neutral and apply regardless of medium (i.e., merely refer to “representations” made to the public), once Canada’s anti-spam legislation comes into force the Competition Bureau’s jurisdiction will be expanded to include some technology specific misleading advertising, such as false or misleading headers, web links and website content.
As for mobile devices specifically, while the Bureau has signaled concerns with adequate disclosure for mobile device related marketing (principally disclaimers) in some recent public remarks, it is unclear whether any new guidelines will be issued to address some of the challenges advertisers face with new technologies (or whether the Bureau plans further new technology related enforcement).
For the Bureau’s news release and backgrounder see: news release, backgrounder.
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