By way of background, Rogers Communications and Chatr Wireless
(the "respondents") had actively marketed their Chatr
Wireless service as having "fewer dropped calls" than
that of other wireless telecommunication carriers. While the Court
found that the "fewer dropped calls" claims were
ultimately substantiated by "post-claim" testing, the
Court held that, at the time the claims were first published by the
respondents, they had not completed an "adequate and proper
test" of the claims, as required under section 74.01(1)(b) of
the federal Competition Act.
While Rogers Communications and Chatr Wireless asserted the
defence of due diligence, the Court was not satisfied that the
respondents had taken all reasonable steps to prevent the conduct
from occurring or that they "reasonably believed in a mistaken
set of facts that, if true, would have meant that they had
adequately and properly tested the claim". Among other
findings, Justice Marrocco concluded that the respondents made a
"deliberate decision" to make the claims based on results
inferred from technological facts that suggested the superiority of
their networks (such as higher cell site density, indoor
transmission systems, low-frequency spectrum and seamless handoffs)
rather than on proper testing. Justice Marrocco further noted that,
while the respondents had an ongoing drive test programme in place
(implemented in 2005, at a cost of $20 million), they choose not
use the programme, despite the fact they "knew it was
necessary to test performance claims before making them".
After considering a number of other factors, the Court was not
persuaded, on the evidence, that the respondents were duly
In assessing the quantum of the administrative monetary penalty
("AMP") to be imposed, the Court expressed that the
purpose of AMPs is not to punish or deter others from making
unsubstantiated performance claims and that a higher AMP may have
been warranted had the claims ultimately proved to be false or
misleading. Many of the factors to be considered under Section
74.1(5) in determining the amount of any AMP under the
Competition Act were in the Court's view mitigated by
the fact that the untested performance claims proved to be true and
substantiated. In fact, Justice Marrocco concluded that, since the
claims in issue were ultimately found to be substantiated, there
was no adverse effect on consumers, and any harm inflicted on the
competitors targeted by Chatr's advertising campaign was found
to be "appropriate". In the circumstances, the Court was
of the view that a $500,000 AMP was appropriate.
Finally, Justice Marrocco denied the Commissioner of
Competition's request for a prohibition order that the
respondents not engage in substantially similar reviewable conduct
for a period of 10 years. The reputational harm inevitably suffered
by the respondents was taken into account in denying the
prohibition order sought, as was the fact that a number of the new
wireless carriers had used the commencement and existence of the
application (in some cases in ways commented on unfavourably by the
Court) to try to obtain a competitive advantage. Justice Marrocco
further concluded that it would be reasonable to think that
"genuine Canadian corporations", such as the respondents,
would take care to avoid such risk of reputational harm in the
future and that the "prospect of future proceedings"
would therefore encourage competition.
The decision serves as an important reminder of the need for
advertisers to ensure that any claims as to the "performance,
efficacy or length of life" of a product or service must be
substantiated by an adequate and proper test before the claim
is made. "Post-claim" substantiation will not
be sufficient to meet the requirements of s. 74.01(1)(b).
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