Canada: Canada’s Anti-Spam Legislation: Casting A Wide Net

Last Updated: December 30 2011
Article by Martin P.J. Kratz and Preet K. Bell

The new Canadian anti-spam legislation (unofficially, the Anti-Spam Act) is one of the most comprehensive and onerous anti-spam statutes to date, imposing significant requirements not seen in other jurisdictions. Businesses using e-mail in Canada should carefully consider the impact of this legislation on their operations.

The Anti-Spam Act will affect all Canadian businesses that engage in any e-mail marketing practices and may reach those businesses that use e-mail in business. The Act was passed in December 2010, but is not yet in force and all of the accompanying regulations to the statute have not yet been finalized. However, it is expected to be in force in early 2012.

Given its onerous requirements, businesses should not delay in turning their minds to its impact. The following discussion should assist in identifying whether a business may be caught by the Anti-Spam Act, what it could mean for such a business, and preliminary steps that should be taken to ensure compliance.

Does it Apply to You?

The Anti-Spam Act was designed to address "mailing list" houses but has been drafted so broadly that it could encompass all businesses that send electronic communications. The main application of the Act is to "electronic messages" sent in the course of "commercial activity". An electronic message is broadly defined as a message sent over any means of telecommunication, which includes text, sound, voice or image messages. Therefore, it could capture postings on social media sites, such as Facebook or Twitter.

Commercial activity is defined as a transaction, act or conduct of a commercial character, whether or not it is with the expectation of profit. Therefore, the Act is not limited to businesses in the pursuit of profit.

The Anti-Spam Act also applies to software developers and businesses that create computer programs, such as apps and updates.

It is important to note that the Anti-Spam Act may have an extra-territorial effect. It applies where a computer system located in Canada is used to send or access the electronic message, and certain provisions can even apply if a computer system in Canada is used merely to route the message. Therefore, it could impact activities undertaken outside of Canada.

What Does it Prohibit?

The Anti-Spam Act's main prohibition is sending commercial electronic messages without express or implied consent from the recipient.

Many businesses will now be required to obtain express consent before sending any electronic communications and businesses will have to modify all such communications to include, among other things, a clear unsubscribe mechanism. There are generally three categories that an electronic message can fall into: (1) an exception where no consent is required; (2) a situation where consent can be implied; or (3) a situation where express consent is required.

There are certain exceptions in the Anti-Spam Act, and more are likely to be prescribed in the regulations. Exceptions include where there is a personal or family relationship, or where you are only providing certain requested information. Implied consent most commonly applies where there is an existing business relationship (which is generally measured by a two-year period before the message is sent), or an existing non-business relationship (for example, a charity contacting a donor). Consent can also be implied where, for example, the recipient has disclosed their electronic address to you and the message is relevant to their business or duties.

If a business does not fall within an exception where no consent is required or a case of implied consent then the business must amend its practices to obtain express consent from the recipient: the recipient must expressly opt-in to receive communications. The onus will be on the business sending the electronic communication to prove that express consent was obtained.

In addition, almost all commercial electronic messages must contain certain prescribed information. This includes contact information for the sender, and a clear unsubscribe mechanism.

The Act also prohibits the installation of computer programs without express consent, which is intended to capture spyware and malware. There are exceptions to this, which include certain updates to existing programs.

The Anti-Spam Act also provides for corresponding amendments to other legislation, including the Competition Act and the Personal Information Protection and Electronic Documents Act. For example, the Competition Act will be amended so that commercial electronic messages are subject to its deceptive marketing provisions.

What Are the Penalties?

A business considering the impact of the Anti-Spam Act will note that the legislation provides quite severe penalties. The maximum penalty for an individual is $1 million, and for a corporation, the maximum penalty is $10 million. These amounts appear to be per violation, which means the penalties could add up quickly if there is non-compliance.

In addition, a business should note that directors and officers can also be held liable if they directed or assented to the violation, and an employer can be liable for violations committed by an employee. However, a due diligence defense is available.

Even if a violation of the Anti-Spam Act does not ultimately give rise to a penalty, the investigation and enforcement provisions of the legislation could still negatively impact a business. For example, the Act provides authority for, among other things, production notices and warrants. The Anti-Spam Act will mainly be enforced by the Canadian Radio-television Telecommunications Commission (CRTC), Competition Bureau, and Privacy Commissioner of Canada.

Of note, the Anti-Spam Act also creates a private cause of action for individuals. Therefore, if a violation of the Anti-Spam Act is found, individual litigants could potentially use it to spearhead their own civil action.

Where Are the Regulations?

Draft regulations have been published and Industry Canada and the CRTC issued a call for comment in respect of proposed regulations. Many industry associations and businesses have submitted comments and recommendations often noting that elements of the legislative framework are too broad, and seeking additional exemptions, such as that verbal or electronic consents should be sufficient instead of the "in writing" requirement in the draft regulations. As well, the form requirement for commercial electronic messages requires a website address and so would appear to exclude use of such messages by businesses that are not yet online. Other comments have noted that the anti-spam form requirements do not fit for short code messaging that already requires consent.

A business that may be affected by the Anti-Spam Act should monitor the development of the regulations.

What To Do Now

A business that considers that the Anti-Spam Act may be applicable to its operations should consider the provisions of the law in detail. There are transitional provisions in the Act which could provide more time for certain businesses to become compliant. However, given the significant impact of this legislation, businesses should without delay consider the following in order to ensure compliance with the Act:

  • Be mindful of its potential extra-territorial effect. If any computer system in Canada is used to send, access or route the electronic message, the Anti-Spam Act could potentially apply.
  • Clearly establish which of your communications, if any, can fall within the exceptions to consent and which fall under implied consent. For those that do not, evaluate the adequacy of existing consent and consider whether there may be a need to enhance or address obtaining fresh express consent.
  • Develop a database of contacts that have consented to receive electronic communications, and implement a system to document those contacts that have provided consent on an ongoing basis (as the onus is on the business to prove consent was obtained).
  • Ensure all required commercial electronic messages contain the prescribed content, including a clear unsubscribe mechanism.
  • Document all procedures and policies implemented in order to ensure compliance with the Anti-Spam Act, as they may support a due diligence defence down the road.
  • U.S. compliant (CAN-SPAM, which has been in effect in the U.S. since 2003) does not mean Canadian compliant. The U.S. statute operates on an opt-out approach to consent, whereas the Canadian legislation operates on an opt-in approach. Therefore, businesses that are U.S. compliant should not assume they are in compliance with the Anti-Spam Act.
  • Monitor the development of the regulations and adapt to their requirements.

On its face, the Anti-Spam Act has a broad impact and imposes important requirements on businesses, and supports these requirements with fairly comprehensive enforcement and penalty provisions. Businesses should review all current e-mail marketing practices to comply with the new legislation. A few preventative measures could go a long way.

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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Martin P.J. Kratz
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