The revised draft of the Industry Canada Regulations pertaining to Canada's new anti-spam/malware law (CASL) was published in the Canada Gazette on January 5, 2013 for a 30-day comment period.
The highly anticipated draft regulations represent the final legislative aspect of one of the world's most stringent anti-spam and anti-malware regimes and provide some clarity as to the use of some important terms in the CASL.
It also includes new exemptions in respect of subject matter not intended to fall within CASL's reach. The goal of CASL according to Industry Canada is to encourage the growth of electronic commerce by ensuring confidence and trust in the online marketplace by prohibiting damaging and deceptive spam, spyware, malicious code, botnets and other related network threats.
We expect that CASL and its regulations will come into force in late 2013 or early 2014.
Clarifying the meaning of "personal or family relationship"
Commercial electronic messages (CEMs) sent by an individual to someone with whom the sender has a 'personal or family relationship' are exempt from the anti-spam provisions of CASL.
Under Industry Canada's previous regulations, CASL's use of the term "personal relationship" was limited to relationships based on 'in person meetings' in respect of which there was a two-way communication within the previous two years.
Under the January 5 draft regulations, the definition of "personal relationship" has been considerably broadened as it covers not only in-person relationships, but also virtual relationships between individuals who have had direct, voluntary two-way communications; and, in respect of which, it would be reasonable to conclude that the relationship is personal taking into consideration all relevant factors. These factors include the sharing of interests, experiences, opinions and information evidenced in the communications, the frequency of communication, the length of time since the parties communicated and if the parties have met in person. The recipient can however request to no longer receive such CEMs.
'Family relationship' has been defined in the draft regulations to exempt CEMs between individuals with links back to common grandparents (i.e. messages between aunts, uncles, cousins, nieces, and nephews; consequently, second cousins are out). The definition of this expression appears to be in keeping with definitions included in the Income Tax Act.
Validity of Consent to Receive CEMs from an Unknown Third Party
Under CASL, a person (Requester) can, according to certain requirements, obtain consent from an individual to receive CEMs from both known and unknown third parties. In these cases, the Requester acts on behalf of such third parties. In the case that the consent was obtained on behalf of an unknown third party, the draft regulation requires that any CEMs sent to an individual must identify the Requester and provide an unsubscribe mechanism essentially that, in addition to meeting the requirements of CASL, allows the individual to withdraw their consent from the Requester and/or any other third party who is authorized to use the subject consent.
We can imagine, for example, a business that obtains consent from one of its clients to receive CEMs from some of the Requester's existing or eventual sponsors or affiliated businesses (who may not yet have any relationship with the Requester's clients). For the purpose of this example, eventual sponsors or affiliated businesses might be (see below under "What the Draft Regulations Do Not Do") considered as "unknown third parties" at the time of obtaining the consent.
Exempting Certain Business Practices
The revised regulations will completely exempt five business practices which were not intended to be targeted by CASL.
Business to Business Exemptions
There are two new exceptions falling within a new business to business exemption:
The first is an exemption for a CEM sent within a organization by an employee, representative, contractor or franchisee to another employee, representative, contractor or franchisee of that organization and that concerns the business affairs of that organization.
The second is an exemption for a CEM sent by an employee, representative, franchisee or contractor of an organization to another employee, representative, franchisee or contractor from another organization, in the extent that the organizations have a business relationship at the time the message was sent and the message is relevant to that person's business, role, functions or duties in a business or official capacity.
Messages sent in response to a request
The draft regulations provide an exemption for messages sent in response to requests, inquiries or complaints. This exemption fixes an unintended problem in s.6(5) of the Act which would have made it illegal to send consumers CEMs in response to a request for information without obtaining additional consent.
Messages sent to enforce a legal right
The draft regulations provide exemptions for messages sent due to a legal obligation (which may include, among other things, the sending of warranty or recall information, or the sending of electronic statements of account) or to enforce a legal right including a pending legal right. Examples include messages sent for debt collection, licensing, enforcing contractual obligations, enforcing court orders, and enforcement of foreign legal rights.
Messages sent by a foreign business to a foreign recipient, but accessed while roaming in Canada
The draft regulations provide an exemption for CEMs sent by a foreign business to a foreign recipient that is accessed while roaming in Canada, provided that the sender could not reasonably know that the message would be received in Canada.
Third Party Referrals
The draft regulations create a new exemption that applies to a single CEM sent as a result of a referral from someone with a family, personal, business or non-business relationship both with the sender and with the recipient. The sender must disclose the ordinary or full name of the referree with the underlying relationships in the single exempt message, and the implication here is that the single exempt message can be used to solicit consent of the recipient for subsequent messages.
Exemptions for Telecommunication Service Providers
The draft regulations permit telecommunications service providers (TSPs) to allow the installation of computer programs without consent (i) in order to prevent illegal activities or activities that present risks to the security of the TSP's network; and/or (ii) for the purpose of updating or upgrading the TSPs network.
Defining Terminology in the Context of Non-Business Relationships
CASL indicates that an "existing non-business relationship" includes membership, in a club, association or voluntary organization as defined by the Regulations. According to the draft regulations, a definition of "membership" is the status of having been accepted as a member in accordance with membership requirements.
For the purposes of CASL, a "club", "association" or "voluntary organisation" is a non-profit organization that operates exclusively for social welfare, civic improvement, pleasure or recreation, or for any other purpose than profit, so long as no part of the income of such organization was payable to, or otherwise available for the personal benefit of any proprietor, member or shareholder (except for an organization the primary purpose of which is the promotion of amateur athletics in Canada).
What the Draft Regulations Do Not Do
The original Industry Canada regulations were published for comments in July 2011. Fifty-seven stakeholders, comprised of both organizations and individuals, filed comments and concerns highlighting significant problems with CASL that would adversely affect everyone from consumers and other individuals to not for profit organizations and businesses of all sizes. While the draft regulations address some of the comments received by Industry Canada, the following items represent some of the significant issues that remain:
1) Consents under the Personal Information Protection and Electronic Documents Act (PIPEDA) are not valid for the purposes of CASL. Industry Canada suggests in its explanatory notes accompanying the draft regulations, that "CASL is intended to create a higher threshold for the collection and use of consent for the particular activities" it regulates.
This means that, in some cases, even if some businesses are compliant with PIPEDA when seeking consent to collect or use the electronic addresses of individuals, these businesses may no longer be able to send CEMs to these individuals if they do not, in addition, comply with CASL. It has to be mentioned that, in light of these extra requirements, CASL provides a transitional period for the first three years starting when CASL will come into force. During these three years, consent under CASL will be implied in the situations where businesses already have an existing business relationship when the CASL comes into force. However, during that period, such implied consent can be withdrawn by the individual.
2) In particular instances manufacturers and the consumers of their products may not have a direct relationship pursuant to which CEMs may be sent under CASL. CASL does not clarify the rights of manufacturers in this regard other than to suggest that offering an exemption to address this potential problem "would be too broad" and that manufacturers with legal obligations would be able to avail themselves of other exemptions to send messages that regard such obligations.
3) The draft regulations do nothing to address concerns expressed by many stakeholders that Canadian businesses that target foreign clients (for example, clients located in the US) will be subject to a much higher standard under CASL than US businesses who target the same businesses under US CAN-SPAM Act (thereby putting Canadian businesses at a disadvantage).
4) The draft regulations do not address the significant concerns expressed by many stakeholders that the application of form and content requirements to SMS messages and other social-media messages are impracticable.
5) The draft regulations do nothing to address concerns expressed by many stakeholders to the effect that the drafting of section 5 in respect of "unknown third parties" is both complex and unclear, since, among other things, it is unclear how it is possible to obtain "express consent on behalf of a person whose identity [is] unknown."
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