Canada: Superior Court Issues Partial Sealing Order In Commissioner's Case Against Chatr Wireless

In a recent ruling, Ontario's Superior Court of Justice explored the principles underlying the law respecting sealing orders and its application to reviewable matters under Part VII.1 of the Competition Act. On a motion by the Commissioner of Competition, the Court issued a partial confidentiality (or sealing) order with respect to certain information used by the Commissioner in her application against Rogers Communications Inc. and its wholly owned subsidiary, Chatr Wireless Inc., for alleged misleading advertising. Information about "dropped call" rates, which the Court characterized as being at the "very heart" of the Commissioner's application, was excluded from the sealing order after the Court determined that it was essential for that aspect of the proceedings to remain transparent.

Investigation into Misleading Advertising

The application to which the confidentiality order relates originated in November, 2010, when the Competition Bureau commenced legal proceedings against Rogers and Chatr. The Bureau's application came after complaints were made by competing discount wireless carriers, Wind Mobile and Mobilicity, alleging that Rogers' Chatr discount brand was misleading consumers into believing that its network was more reliable and had fewer "dropped calls" than those of other discount carriers.

In her application to the Court, the Commissioner alleged that Rogers and Chatr had engaged in misleading advertising under sections 74.01(1)(a) and (b) of the Competition Act. The Commissioner is seeking orders under section 74.1(1) of the Act:

  • directing Rogers to immediately cease its advertising campaign and refrain from engaging in similar campaigns;
  • requiring Rogers to pay an administrative monetary penalty (AMP) of $10 million dollars;
  • requiring Rogers to pay restitution to Chatr customers affected by the advertising (more specifically, $20 for each month that a customer was a Chatr customer during the currency of the alleged misleading advertising); and
  • Issuing a corrective notice informing the general public about the nature and provisions of the foregoing orders.

The Commissioner's application is set to be heard by the Superior Court on November 7, 2011.

The Motion for Confidentiality

As part of its investigation into the allegations against Rogers and Chatr, the Bureau collected information from recent discount wireless carrier entrants Public Mobile, Wind Mobile and Mobilicity. The information that was the subject of the Commissioner's confidentiality motion was divided into: (i) data on "dropped call" rates; (ii) information on call volumes, geographic locations of calls, subscriber data, financial information (including average revenue per user, or "ARPU"), marketing plans and strategy; and (iii) other information of a competitively or commercially sensitive and/or proprietary nature.

In her submissions to the Court, the Commissioner supplied an affidavit of the Assistant Deputy Commissioner that outlined the importance of maintaining confidentiality in the Bureau's investigations under the Competition Act. In her affidavit, Ms. Salvatore explained that the Bureau's ability to access information required in enforcement proceedings, and its duty not to release information that could frustrate the goals of the Competition Act,required it to maintain the confidentiality of confidential business records supplied to it for investigatory purposes.

In considering the motion, Marrocco J. discussed the Bureau's 2007 Information Bulletin on the Communication of Confidential Information under the Competition Act. He noted that, although the Bulletin clearly establishes the Bureau's commitment to protecting confidential information, it also recognizes that, due to the nature of the legislative scheme under which the Bureau operates, there is a risk that certain information may be required to be disclosed in the event that legal proceedings are initiated. Marrocco J. noted that this exception to the general rule against disclosure is expressly provided for in section 29(1) of the Competition Act and that "there is a risk of disclosure every time the Commissioner concludes an investigation and decides to commence proceedings."

In deciding whether to issue a sealing order, Marrocco J. applied the Supreme Court's decision in Sierra Club of Canada v. Canada (Minister of Finance), which set out the following two-part test for determining when a confidentiality order should be made:

(a) The order is necessary to prevent a serious risk to the proper administration of justice because reasonably alternative measures will not prevent the risk; and

(b) The salutary effects of the publication ban outweigh the deleterious effects on the rights and interests of the parties and the public, including the effects on the right to free expression, the right of the accused to a fair public trial and the efficacy of the administration of justice.

As applied to the Commissioner's application, Marrocco J. accepted that the information in respect of which the order was sought was treated by the parties, and by the industry generally, as confidential business information. He also accepted the Commissioner's submissions that "indiscriminate disclosure" of such information "will discourage telecommunications providers from voluntarily co-operating with the Competition Bureau," thereby satisfying the first part of the Sierra Club test. Marrocco J. rejected a further argument that disclosure of the information would cause injury to competition, since the information would be historical by the time the Commissioner's application was heard, however this further finding did not alter his conclusion that the first part of the Sierra Club test was met, i.e., based on the Commissioner's legitimate need to ensure her ability to protect information.

Applying the second part of the Sierra Club test to the Commissioner's application:

  • Marrocco J. denied the Commissioner's request for an order sealing information on "dropped calls," which information, as noted previously, he observed lies at the "very heart" of the proceeding. According to Marrocco J., such an order would have a deleterious effect on the public, since customers of Rogers and Chatr Wireless would be unable to determine for themselves whether Rogers had deliberately engaged in the reviewable conduct alleged by the Commissioner.
  • Marrocco J. found that the salutary effects of sealing information on call volumes, geographical locations of calls, subscriber data, financial information (including ARPU) and marketing and strategic plans outweighed the deleterious effects on the rights of Rogers and Chatr to free expression and a fair public trial.

Accordingly, Marrocco J. allowed the Commissioner's application to seal the marketing and strategic information of Wind Mobile, Mobilicity and Public Mobile, but he refused the order in respect of "dropped call" rates. Information about "dropped calls", therefore, will not be sealed and will form part of the public record of the proceeding. With respect to the Commissioner's request for an order respecting competitively or commercially sensitive confidential information and/or information of a proprietary nature, Marrocco J. refused "to make a sealing order in these general terms," albeit without prejudice to the Commissioner's right to "apply to seal a specific item of information not otherwise affected" by his order.

The Superior Court's decision provides a useful reminder that, notwithstanding the strong protections of confidentiality in section 29 of the Competition Act, provision of information to the Bureau, whether on a compulsory or voluntary basis, is not risk free, particularly if the subject matter of the Bureau's examination proceeds to litigation.

The Commissioner's application is scheduled to be heard by the Superior Court on November 7, 2011, and will be carefully watched. It has the potential to provide an important precedent for applications under the reviewable matters provisions in Part VII.1 of the Competition Act, especially given the Commissioner's decision to seek payment of a $10 million AMP (the maximum available under the Competition Act's civil misleading advertising provisions) and to seek the first order requiring payment of restitution to affected customers since the Competition Act was amended to allow for such orders in 2009.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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