This article was originally published in Blakes Bulletin on Communications Law, December 2005
Article by Sunny Handa & Maria Amore, ©2005 Blake, Cassels & Graydon LLP
Many businesses today rely on telemarketing as an important component of their marketing strategy. Today’s telemarketers include some of Canada’s biggest and most prestigious companies, ranging from telephone companies to newspapers. While telemarketing is growing so, too, are the requests to regulate the practice.
This article deals with the increasingly complex and difficult issue of telemarketing regulation under Canadian telecommunications law.
In a 2004 poll contained on Industry Canada’s Web site, 97% of Canadians polled said that they found unsolicited telemarketing calls to be annoying. Furthermore, according to this same survey, 79% of those polled supported the creation of a national do-not-call list, with 66% stating that they would likely add their name to such a list.
How such a list would operate and who would administer it are but a few of the questions that the Canadian Radiotelevision and Telecommunications Commission (the CRTC) must now face since legislation mandating the creation and maintenance of a national do-not-call list in Canada received royal assent on November 25th, 2005.
BACKGROUND
What is telemarketing and who regulates it? In Decision 2004-35, the CRTC defined “telemarketing” as follows: “the use of telecommunications facilities to make unsolicited calls for the purpose of solicitation, where solicitation is defined as the selling or promoting of a product or service, or the soliciting of money or money’s worth, whether directly or indirectly and whether on behalf of another party. This includes the solicitation of donations by or on behalf of charitable organizations.”
The CRTC’s jurisdiction in respect of unsolicited telecommunications flows from sections 7 and 41 of the Telecommunications Act (the Act). In light of the growing dissatisfaction expressed by consumers, the rules governing telemarketing in Canada have been gradually evolving.
Recent Developments Regarding Telemarketing Rules. The need for legislative amendments was identified by the CRTC as a result of a lengthy proceeding on telemarketing rules, which attracted an extraordinary degree of public participation. In its decision in this proceeding, the CRTC stated that there was “considerable merit” in the establishment of a national do-not-call list, but that amendments to current legislation would be required in order to give the CRTC additional powers, not only to administer the national list, but also to impose fines for non-compliance.
Following the release of Decision 2004-35, an application was submitted (in August 2004) to the CRTC by the Canadian Marketing Association (the CMA) requesting that the Decision be reviewed and varied. At the same time, the CMA requested an interim stay pending the CRTC’s final decision. The request for the stay was granted in Telecom Decision CRTC 2004-63 (Decision 2004-63) and applied to all requirements set out in Decision 2004-35 with one exception: the requirement that telecommunications service providers track and report complaint statistics, which became effective January 1, 2005.
Among the CMA’s chief concerns was the argument that the marketing community would have to incur significant additional costs as a result of implementing the new measures and that a number of not-for-profit organizations may, in fact, be forced out of business.
In addition, in August 2004, the CMA had, along with the Canadian Bankers Association (the CBA) and the Responsive Marketing Group, the Univision Marketing Group and Xentel DM Incorporated (collectively, the Companies), also petitioned the Governor-in-Council (the GIC, i.e., the Federal Cabinet) pursuant to subsection 12(1) of the Act, raising various concerns with Decision 2004-35.
On the recommendation of the Minister of Industry, the GIC declined to vary, rescind or refer back for reconsideration, Decision 2004-35. In issuing an order to uphold Decision 2004-35, the GIC considered the fact that on December 13, 2004, legislation was tabled, namely Bill C-37, that would amend the Act to provide the CRTC with the power to establish and administer a national do-not-call list. Less than a year later, on November 25, 2005, Bill C-37 received royal assent. The amendments, however, will only come into force on a date to be fixed by the GIC.
Existing Do-Not-Call Rules. Prior to bringing these amendments into force and effect, the CRTC plans to commence public consultations on the implementation phase of the national do-not-call registry. As such, it is helpful to note the existing telemarketing rules. These rules require telemarketers to maintain company-specific do-not-call lists. Customers who do not wish to receive calls from telemarketers must make separate requests to be removed from each telemarketer’s list. Telemarketers who do not comply with this requirement, i.e., who do not keep and respect such lists (or other regulations) may have their service suspended by their telecommunications service provider. Furthermore, the CRTC may issue an order that service to the infringing telemarketer be suspended in addition to an order prohibiting all telecommunications service providers from reconnecting that telemarketer for a period of time. The Act also provides for the possibility of criminal prosecution for the contravention of a CRTC order. A telemarketer may be held liable for a fine up to $10,000 for a first offence and a maximum of $25,000 for subsequent offences; for a corporation, the fines are even more severe: up to $100,000 for a first offence and up to $250,000 for a subsequent contravention. (It is important to note that, prior to Bill C-37 becoming law, the CRTC lacked the power to impose such fines itself.) Despite these possible sanctions, however, the CRTC has stated that telemarketers have not been sufficiently discouraged (at least partly due to costly and lengthy court procedures) and that better enforcement mechanisms are necessary to increase compliance with do-not-call rules.
With the new legislation, the eventual establishment of a national do-not-call list would not only save recipients of unwanted calls from reiterating the same do-not-call request to each telemarketer (since all telemarketers in Canada would have access to such a list), but it would also be the first step in creating a system that may be effectively monitored. Such a system now has statutory backing.
BILL C-37, AN ACT TO AMEND THE TELECOMMUNICATIONS ACT — ESTABLISHING A NATIONAL DO-NOT-CALL LIST IN CANADA
To address the CRTC’s lack of authority with respect to a national do-not-call list, the Government tabled Bill C-37 which received first reading in the House of Commons on December 13, 2004 and was later referred to the Standing Committee on Industry, Natural Resources, Science and Technology (the Industry Committee). The Industry Committee proposed amendments to two areas of the Bill. After the Bill completed its second reading in the Senate, it was referred to the Standing Senate Committee on Transport and Communications (the Senate Committee), which also proposed some minor amendments. On November 25, 2005, Bill C-37 received royal assent.
Bill C-37 effects major changes in telemarketing enforcement in two areas. The first is with respect to section 41 of the Telecommunications Act in order to create a legislative framework for a national do-not-call list. The amendments give the CRTC the authority to administer information systems for the establishment of the national list and allow the CRTC to delegate the operation of this service to third parties. The Industry Committee added an obligation for the CRTC to submit an annual report reviewing the operation of this list to the Minister of Industry.
The second major change to the Act amends the investigation and enforcement powers contained in section 72 of the Act. It is now a violation to contravene any prohibition in the abovementioned section 41 and the CRTC now has the power to impose sanctions. Such a violation would be subject to an “administrative monetary penalty” of up to $1,500 per infraction for individuals and up to $15,000 for corporations. This section also includes provisions for requesting reports from telemarketers, establishing possible defenses to alleged violations, and time limitations. A second amendment to the Bill proffered by the Industry Committee establishes that Parliament is responsible for reviewing the administration and operation of the provisions enacted by the Act. A Committee of the House of Commons or the Senate or both will be established or designated to review the administration and operation of the Bill three years after it comes into force.
What are the implications for the future? It is expected that the CRTC will soon commence public consultations with industry officials and consumers to determine how these changes to Canadian telecommunications law will be implemented. Important questions with regard to how exactly this system would operate remain to be addressed. It is instructive to note that the United States implemented a national do-not-call system in 2003, which has proven to be effective and quite popular with Americans; this system consists of approximately 100 million registrants, that is, over half of all households in the United States requested to be placed on the national do-not-call list. (The U.S. Federal Trade Commission, online at: http://www.ftc.gov/bcp/conline/pubs/alerts/dncalrt.htm.) It remains to be seen whether Canada’s model will be as successful.
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