The CBC reported last week that a Montreal-based telemarketing company, which has been accused of defrauding thousands of small businesses in relation to an alleged invoice scheme for never ordered office supplies, is still making calls (see: Montreal Telemarketers in Fraud Case Still Making Calls).
According to the CBC:
“Express Transaction Services Inc. (ETS) and some affiliated companies face several charges under the federal Competition Act and Criminal Code, following an investigation and police raids at its Montreal facilities in 2007.
In fall 2011, the company was charged with fraud and violation under the federal Competition Act.
Several individuals linked to the companies also face charges of deceptive telemarketing and misleading representations under the Competition Act, and criminal fraud charges.
The Competition Bureau said ETS purposely sent out products to businesses even if they were never ordered. ETS then had its call centre make repeated phone calls to retrieve payment.
According to the bureau, the scheme made more than $170 million between 2001 and 2007. The federal Anti-Fraud Centre said thousands of victims were affected.
CBC News has learned that ETS continues to operate out of its Montreal offices, and small businesses across Canada are still receiving phone calls from the company.”
TELEMARKETING LAWS IN CANADA
COMPETITION ACT
The federal Competition Act makes it criminal offences to engage in deceptive telemarketing or to engage in telemarketing unless certain disclosure under the Competition Act is made.
“Telemarketing” is defined under section 52.1 as “the practice of using interactive telephone communications for the purpose of promoting, directly or indirectly, the supply or use of a product or for the purpose of promoting, directly or indirectly, any business interest”. (This definition is, however, to change once Canada’s new anti-spam legislation, Bill C-28, comes into force, which may occur in 2012 following the finalization of draft CRTC and Industry Canada Regulations.)
In its telemarketing enforcement guidelines (Telemarketing – Section 52.1 of the Competition Act), the Competition Bureau has taken the position that “interactive telephone communications” does not include fax, Internet or automated pre-recorded messages but are limited to live voice communications between two persons.
Under the Competition Act’s deceptive telemarketing provisions, it is a criminal offence to: (i) make materially false or misleading representations; (ii) operate a contest where the delivery of a prize is conditional on prior payment or certain disclosure is not made (regarding the number and value of prizes, area or areas to which they relate and odds of winning); (iii) offer free or below cost products, as consideration for supplying another product, unless disclosure is made of the fair market value of the first product (and any restrictions, terms or conditions relating to its supply); or (iv) offer products for sale grossly in excess of their fair market value where their delivery is conditional on prior payment by buyers.
The Competition Act also requires that certain disclosure be made by telemarketers both at the beginning of a call and sometime during a call.
For example, the Act requires that the following information be disclosed by telemarketers at the beginning of a call: (i) the person on whose behalf the call is being made; (ii) the nature of the product or business interest; and (iii) the purpose of the call.
Like the general misleading advertising provisions of the Competition Act (sections 52 and 74.01), the general impression is relevant to determining whether a claim made by a telemarketer is materially false or misleading. Unlike misleading advertising generally, however, if misleading claims are made in the context of telemarketing, the Competition Bureau does not have the discretion to proceed civilly, given that the only deceptive marketing provisions are criminal offences under section 52.1.
Competition Bureau Guidelines
The Competition Bureau has also issued a number of enforcement guidelines, pamphlets, reports and other guidance documents relating to deceptive telemarketing (see: Competition Act – Deceptive Telemarketing).
Fines & Penalties
Deceptive telemarketing is punishable, on indictment, by unlimited fines (i.e., in the discretion of the court), imprisonment for up to 14 years, or both (and on summary conviction, to fines of up to $200,000, imprisonment for up to one year, or both). There is also no “mens rea” (i.e., intent) required for deceptive telemarketing, in that the offences under section 52.1 are strict liability offences. As such, proof of the act, regardless of any guilty mind (or lack of), is sufficient to make out an offence. There is, however, a due diligence defense available under section 52.1.
The enforcement of the telemarketing provisions of the Competition Act has been an enforcement priority for the Competition Bureau in recent years, although for the most part aimed at companies and individuals engaged in true “scams” not legitimate marketers who may have committed technical violations of the Act. Having said that, a number of individuals have been charged, convicted and imprisoned in connection with the marketing of a broad range of products, including business directories, office supplies and credit cards.
CONSUMER PROTECTION LAWS & DO NOT CALL LIST
In addition to the federal Competition Act, telemarketing activities in Canada are also governed by consumer protection legislation (see: Telemarketing) and The national Do Not Call List, administered by the CRTC (see: Telemarketing).
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SERVICES AND CONTACT
I am a Toronto competition/antitrust lawyer and advertising/marketing lawyer who helps clients in Toronto, Canada and the US practically navigate Canada’s advertising and marketing laws and offers Canadian advertising/marketing law services in relation to print, online, new media, social media and e-mail marketing.
My Canadian advertising/marketing law services include advice in relation to: anti-spam legislation (CASL); Competition Bureau complaints; the general misleading advertising provisions of the federal Competition Act; Internet, new media and social media advertising and marketing; promotional contests (sweepstakes); and sales and promotions. I also provide advice relating to specific types of advertising issues, including performance claims, testimonials, disclaimers, drip pricing, astroturfing and native advertising.
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