Canada: Bell Canada Agrees To $10 Million Penalty

On June 28, 2011, Bell Canada settled a complaint brought by the Commissioner of Competition with respect to misleading advertising under the Competition Act. A consent agreement was filed with the Competition Tribunal under which Bell Canada is obligated to make certain changes to its advertising and pay an administrative monetary penalty of $10 million, which is the maximum available under the civil misleading advertising provisions of the Competition Act.

The consent agreement does not provide extensive detail of the advertising in question. According to the Competition Bureau's press release, the allegations were that many of Bell's services (wireless, home phone, internet, satellite TV) were not available at the prices advertised because of additional, mandatory fees. These fees were such things as touch tone fees (home phone), modem rental fees (Internet), and others. The details of these extra fees were set out in the advertisements in small print disclaimers. The Commissioner's view was that if such fees are "hidden" in the small print the disclosure of them there may be ineffective. The Commissioner's position is that if such disclaimers contradict the main message of the advertisements they will be ineffective as disclaimers. Bell Canada was of the view that these disclosures were truthful, adequate and in compliance with the law, but it chose to settle the case and pay $10 million.

The Commissioner seems to have alleged that complex pricing details can mislead consumers, where pricing is disclosed in the "headline," but additional mandatory charges apply. This will be so even where these additional charges are fully disclosed in "mice type" disclaimers. While the consent agreement does not call into question the failure to disclose mandatory government charges (such as taxes), in situations where a vendor of goods or services has chosen to split the cost into various components, a fulsome disclosure - beyond the small print - of all mandatory aspects of the pricing will be required in order to meet the threshold that is set by this case.

Of course, a consent agreement embodies the terms of a settlement. It is difficult to predict whether a court would have agreed with the Commissioner's allegations in all respects. As well, the evaluation of the meaning of advertisements is carried out using the long-established "general impression" test, which applies to particular advertisements. By its nature this test makes it difficult to draw bright lines between acceptable and unacceptable advertising behaviour in the abstract.

The Commissioner's pursuit of a $10 million administrative monetary penalty may be the clearest message to take from this matter. Any retailer who has complexity in its advertised pricing will need to take account of this case.

Under the current provisions of the Competition Act, in addition to administrative monetary penalties of up to $10 million, the Commissioner has the authority to ask the court to order "restitution." It is not clear how a court would determine when restitution is appropriate, or in what amount. Large retailers faced with the prospect of paying even a small amount of restitution per customer may decide that they face greater risk from a restitution order than they do from the administrative monetary penalty. Bell Canada resolved the matter without payment of restitution.

In addition to the $10 million penalty, Bell Canada agreed to pay $100,000 costs of the Commissioner's case. Also, a key aspect of the consent agreement is that Bell Canada must report to the Commissioner (within 30 days of a request) with respect to its compliance with the agreement (which requires Bell Canada to not make any new price representation that uses a disclaimer that contradicts the general impression of the representation to which it relates). The term of the agreement is ten years.

Misleading price advertising cases have not been a significant aspect of the Competition Bureau's enforcement activities in recent years. This case, with its significant administrative monetary penalty, should attract the attention of advertisers. It may signal an end to the Bureau's absence from active enforcement of such matters, especially with respect to "full price disclosure." Businesses whose product offerings lend themselves to price dis-aggregation may well wish to review their advertising approach in light of this action by the Competition Bureau.

The foregoing provides only an overview. Readers are cautioned against making any decisions based on this material alone. Rather, a qualified lawyer should be consulted.

© Copyright 2011 McMillan LLP

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James B. Musgrove
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