Recent enforcement activities under the deceptive marketing sections of the Competition Act (the "Act") will be of interest to any business that advertises the prices of products or services in Canada, particularly on mobile and digital platforms. Indeed, deceptive pricing and digital/ mobile advertisements are an area of enforcement priority for Canada's Competition Bureau (the "Bureau"), as illustrated by a significant settlement reached in proceedings against wireless provider Rogers Communications ("Rogers") and the recent proceedings against rental car providers Avis and Budget.
ROGERS SETTLES PREMIUM TEXT PROCEEDINGS
On March 16, 2015, Rogers announced that it would provide an estimated $5.4 million in refunds and credits to customers who were charged for premium text messaging services that the Bureau claimed were the result of misleading advertising. The settlement was in response to a Statement of Claim that the Bureau filed in 2012 against Rogers, BCE Inc. and Telus Corp. and the Canadian Wireless Telecommunications Association, seeking $31 million in administrative monetary penalties ("AMPs"). The allegations related to so-called "premium" texting services that the wireless companies charged their mobile customers for when they signed up to receive products like jokes, ringtones, horoscopes and quizzes by text message. The Statement of Claim alleges that the companies misled customers by failing to disclose that they would be charged for these services and failing to stop providing the services even after customers requested to terminate. The Bureau claimed that Rogers, Bell and Telus have received over a million complaints from customers relating to these services.
According to the Bureau, the settlement represents the largest amount that a company has agreed to pay customers as part of a settlement under these provisions of the Act. While Rogers had initially suggested that third party service providers that provided the text services were responsible, the Bureau sought to hold the wireless companies responsible because they reaped financial benefit from the charges. The Bureau alleged that Rogers and the other companies received revenues in the hundreds of millions from these premium services, all the while permitting the misleading practices.
The Bureau alleged that the premium texting services violated the Act's prohibitions against false and misleading advertisement because they gave the impression that they were free and did not disclose to customers that they would be charged by their mobile companies for the text services. At the same time, the Bureau claimed that the wireless companies made false representations about their policies against unsolicited "spam" messages. It was alleged that the companies had policies that promised to protect customers against unwanted text messages and provided a procedure for customers to report spam, but the Bureau claimed that not only did the companies fail to honour their own policies, they were promoting the spam messages and profiting from them.
Although Canada's Anti-Spam Legislation ("CASL") was not in force at the time, these premium text services would also give rise to concerns under these new laws if the services were being offered today. Some of the text services may have been unknowingly accepted by customers; for example, they might have been combined with a game that the user downloaded. CASL requires a customer to give express consent before a computer program such as a mobile app can be installed on their device. Although the CRTC (the agency primarily responsible for enforcing CASL) has issued guidance to the effect that apps that are self-installed by the owners or authorized users of a device are not subject to this requirement, it was careful to carve out programs that are not reasonably expected by the user. If a user chose to download a gaming app, but unbeknownst to them the app contained a Joke a Day service like the one offered by the premium text services, that would likely be subject to CASL and be prohibited without express consent. If these premium text services were "hidden" in programs that customers downloaded, that would make them the kind of practice that CASL's computer program provisions were meant to curtail. That means that if the premium text services were offered today, they may be subject to further enforcement action by the CRTC and the potential for additional AMPs of up to $10 million per violation.
COMPETITION BUREAU SEEKS REMEDIES FOR INADEQUATE PRICE DISCLOSURES
On March 11, 2015, Canada's Commissioner of Competition (the "Commissioner") filed an application before the Competition Tribunal against rental car providers Avis and Budget, alleging that prices represented in the companies' promotional advertisements were deceptive and the companies required customers to pay additional non-optional fees ("NOFs") that were not disclosed in the advertisements. The application alleges that the advertisements created the general impression that consumers can rent the vehicles for less than what they actually could. The application seeks to impose AMPs of up to $10 million each against the companies, and obtain refunds for customers.1
Notably, the Commissioner alleged that the NOFs are charged at the companies' own discretion, and are unrelated to any fee, tax or other surcharge that is required to be levied by a government. This suggests that the Bureau's position is that additional costs other than taxes that are required by the government to be levied should be included in an advertised price.
The Commissioner alleged that the advertisements were deceptive for an additional reason, namely that the NOFs were identified to customers using terms that gave the impression that they were required to be levied by the government (e.g. the "Ontario environmental fee" and "Air Conditioning Excise Tax"). Accordingly, the claim is that the ads misled customers about the source of the additional fees.
The advertisements in question were made on multiple platforms, including the companies' mobile applications and websites, thereby triggering the provisions of the Act that were recently enacted as part of CASL. The application is the first to be brought under these new provisions. CASL created new prohibitions against false and misleading representations made in electronic messages, as well as in the "locator" (i.e. information used to identify the source of data, such as a URL), sender information and the subject matter of a message.
These effectively expand the existing prohibitions on deceptive advertising to include misrepresentations made in discrete parts of an email such as the sender's name or email address or links found in the email. The Bureau alleged that the emails sent by Avis and Budget contained misleading information in the subject line. While the Bureau probably did not need these new provisions to make the claims against Avis and Budget in this case, they highlight the additional enforcement options now at their disposal.
Footnote
1. The application estimates that the companies collected more than CAD $35 million in NOFs from customers who rented vehicles for use in Canada through their websites or mobile applications since the Act was amended to allow remedies to include customer refunds on March 12, 2009.
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