The Competition Bureau filed a Notice of Application with the Competition Tribunal, alleging deceptive marketing practices by two of Canada's largest rental car companies, Aviscar and Budgetcar, and their related parent companies in March of 2015. In its application, the Bureau alleged that the rental car companies advertised prices for vehicle rentals at discounts which were unattainable due to additional "non-optional fees" imposed during the rental process. This case marks the first proceeding under the new provisions of the Competition Act that came into force as part of Canada's Anti-Spam Legislation (CASL) which prohibit the use of electronic messages to disseminate false or misleading representations. Specifically, the Bureau has alleged, in part, that the subject line of the companies' marketing emails and the content of the electronic messages sent by Avis and Budget were false or misleading in a material respect. The application of the new CASL amendments in such a high-profile case serves as a warning of the very real risks associated with sending false or misleading commercial emails and other electronic messages in Canada.
The CASL Competition Act amendments
In force since July 1, 2014, the CASL amendments to the Competition Act primarily updated the existing provisions of the Competition Act to be more technology neutral, for example, by amending existing provisions dealing with telemarketing to include "communicating orally by any means of telecommunication".
In addition to these "tech neutral amendments", the CASL also added new provisions to allow the Bureau to more effectively address false or misleading representations and deceptive marketing practices in the electronic marketplace, such as where a spammer disguises the identity of the sender of an electronic message to imply a personal relationship with the recipient of the electronic message so as to deceive them into opening the message.
Specifically, the CASL created a new civil (s. 74.011) and a new criminal (s. 52.01) provision in the Competition Act to specifically address false or misleading representations in relation to four components of an electronic message:
- sender information (data that identifies the sender or origin of the message);
- subject matter information (eg. subject line of an email);
- locators (eg. URL or metadata); and
Under the new criminal and civil provisions it is now an offence to:
- send, or cause to be sent, a false or misleading representation in the sender information or subject matter information of an electronic message;
- send, or cause to be sent, an electronic message that is false or misleading in a material respect; or
- make, or cause to be made, a false or misleading representation in a locator.
While the Competition Act has always prohibited making representations which are false and misleading in a material respect (and therefore, item (b), above, is merely an extension of that principle into the context of electronic messages), the new provisions with respect to representations made in the sender information, subject line or locator of an electronic message are entirely new offenses. Notably, and importantly, these new offenses also impose a new and very stringent standard upon the sender of electronic messages in that they do not allow the sender of an electronic message to rely on information found elsewhere in the message to qualify or set out conditions with respect to representations made in the sender information, subject matter information or locator of an electronic message. In short, a false or misleading representation made in the sender information, subject line or locator of an electronic message will result in liability to the sender regardless of whether the true meaning of the representation is qualified or explained elsewhere in the message. Moreover, liability under the new offenses does not depend on whether the representation made in the sender information, subject line or locator of an electronic message was misleading in a material respect (i.e. whether the representation actually affected or influenced the behaviour of the receiver of the electronic message) – if the representation is found to be false or misleading, then the new prohibitions apply.
The maximum penalties under the new criminal provision are, on conviction on indictment, a fine at the discretion of the court, to imprisonment for a term not exceeding 14 years, or to both; or, on summary conviction, to a fine not exceeding $200,000, to imprisonment for a term not exceeding one year, or to both. Upon conviction, an advertiser can also be exposed to civil liability under the statutory right of action for damages in Section 36 of the Competition Act.
Violations of the new civil provision can result in administrative penalties not exceeding, in the case of an individual, $750,000, and for each subsequent order, $1,000,000. In the case of a corporation, the penalty is not to exceed $10,000,000 and for each subsequent order, $15,000,000. Moreover, an advertiser who is found to have violated the new civil provision may also be exposed to civil liability under a new statutory cause of action created by CASL which will take effect on July 1, 2017.
While the new criminal and civil provisions created by CASL in the Competition Act were intended to protect Canadians from harmful and fraudulent spamming behaviour, the application of the new CASL amendments in the Avis and Budget application should cause legitimate business owners to take extra caution when implementing new email marketing campaigns in Canada. Breach of the new criminal and civil provisions can result in substantial penalties and enforcement actions. Therefore, advertisers should be diligent in ensuring the accuracy of any representations they make to potential customers in their own electronic advertising and marketing activities in Canada.
For further information, please contact a member of our firm's Marketing & Advertising group.
The preceding is intended as a timely update on Canadian intellectual property and technology law. The content is informational only and does not constitute legal or professional advice. To obtain such advice, please communicate with our offices directly.