Canada: CASL Enforcement Decision - Sending Messages Without Consent

On October 26, 2016, the Canadian Radio-television and Tele-communications Commission issued a Compliance and Enforcement Decision finding that Blackstone Learning Corp. violated Canada's anti-spam legislation (commonly known as "CASL") by sending commercial electronic messages without consent and imposing a $50,000 penalty.

CASL

CASL creates a comprehensive regime of offences, enforcement mechanisms and potentially severe penalties (including personal liability for employers, corporate directors and officers) designed to prohibit unsolicited or misleading commercial electronic messages ("CEMs"), the unauthorized commercial installation and use of computer programs on another person's computer system and other forms of online fraud (such as identity theft and phishing).

For most organizations, the key parts of CASL are the rules for CEMs. Subject to limited exceptions, CASL creates an opt-in regime that prohibits the sending of a CEM unless the recipient has given consent (express or implied in limited circumstances) to receive the CEM and the CEM complies with prescribed formalities (including disclosure of contact information and an effective and promptly implemented unsubscribe mechanism) and is not misleading. An organization that sends a CEM has the onus of proving that the recipient gave express or implied consent to receive the CEM.

Violation of CASL's CEM rules can result in severe administrative monetary penalties (up to $1 million per violation for individuals and up to $10 million per violation for organizations), civil liability through a private right of action (commencing July 1, 2017) and vicarious liability on employers, directors and officers who are unable to establish that they exercised due diligence to prevent the CASL violations. CASL gives the Canadian Radio-television and Tele-communications Commission ("CRTC") regulatory and enforcement authority regarding CEMs and other matters.

The Compliance and Enforcement Decision

The Compliance and Enforcement Decision against Blackstone Learning Corp. ("Blackstone") related to nine email campaigns between 9 July and 18 September 2014, involving the sending of 385,668 promotional emails to employees at 25 Canadian federal and provincial government organizations. The email campaigns resulted in at least 60 complaints to CRTC's Spam Reporting Centre. CRTC commenced an investigation. Blackstone refused to cooperate with the investigator or comply with a CRTC order to produce financial statements to the investigator.

After the investigation, the investigator issued a notice of violation asserting reasonable grounds to believe that Blackstone had violated CASL by sending CEMs without consent, and imposing an administrative monetary penalty of $640,000. In accordance with the procedure set out in CASL, Blackstone challenged the notice of violation by making representations to CRTC. Blackstone argued that it had not violated CASL's CEM rules because it had implied consent to send the emails and that, in any event, the administrative monetary penalty was unreasonably high. CRTC rejected Blackstone's argument that it had implied consent to send the promotional emails, but agreed with Blackstone that the administrative monetary penalty was too high.

CASL Violation

Blackstone relied on CASL section 10(9)(b) — known as the "conspicuous publication rule" — to argue that it had implied consent to send the promotional emails because the email addresses to which they were sent were publicly available. CRTC rejected that argument.

CRTC explained that implied consent under the conspicuous publication rule requires more than the public availability of an electronic address. To constitute implied consent to receive CEMs to an electronic address, the electronic address must be "conspicuously published" by or on behalf of the person to whom the message is sent, the publication must not be accompanied by a statement that the person does not wish to receive unsolicited CEMs, and the CEM must be relevant to the person's business, role, functions, or duties in a business or official capacity. CRTC explained that the manner in which an electronic address is published must give rise to a reasonable inference of consent to receive the type of CEM sent.

CRTC held that Blackstone's general assertion that it had implied consent based on publicly available addresses was not sufficient to satisfy Blackstone's legal burden to prove consent. Blackstone did not provide any information regarding how and when it obtained the email addresses, whether the addresses were accompanied by a statement refusing unsolicited CEMs, and how Blackstone's promotional emails were relevant to the roles or functions of the intended recipients. For those reasons, CRTC held that Blackstone had violated CASL's CEM rules by sending promotional emails without consent.

Administrative Monetary Penalty

CASL states that the purpose of an administrative monetary penalty ("AMP") is to promote CASL compliance, and not to punish. CASL lists the factors to be considered when determining the amount of an AMP, including the purpose of the penalty, the nature and scope of the violation, ability to pay and any other relevant factor. CRTC commented on those factors.

  • Purpose: CRTC explained that the purpose of an AMP may include both specific and general deterrence of CASL violations, but cautioned that the objective and effect of an AMP must always be to promote CASL compliance rather than to punish. CRTC also explained that a significant AMP may be necessary to deter non-compliance. CRTC noted that while CASL authorizes significantly higher maximum AMPs than other regulatory regimes (e.g. the Unsolicited Telecommunications Rules), that did not mean that larger AMPs were inherently more appropriate for CASL violations. CRTC concluded that the purpose of an AMP suggested a lower penalty than the one set out in the notice of violation.
  • Nature/Scope of Violation: CRTC explained that while the number of CRMs sent by Blackstone was significant and the CEMs were disruptive, the two-month duration of the violations was relatively short and suggested a lower penalty than the one set out in the notice of violation.
  • Ability to Pay: CRTC explained that Blackstone's ability to pay an AMP could be assessed based on various metrics and information regarding revenue-generating capabilities (e.g. unaudited income statements). CRTC concluded that Blackstone's limited ability to pay suggested a lower penalty than the one set out in the notice of violation.
  • Other — Lack of Cooperation: CRTC explained that Blackstone's failure to cooperate with the investigation and refusal to produce financial statements was a relevant factor that suggested the need for a penalty to ensure compliance with CASL.
  • Other — Self-Correction: CRTC explained that there were indicators that Blackstone had intended to comply with CASL and would self-correct and comply with CASL's CEM rules in the future, which suggested a lower penalty than the one set out in the notice of violation.

CRTC explained that CASL's CEM rules are similar to the Unsolicited Telecommunications Rules regarding automatic dialing-announcing devices (which require express consent), and noted that significantly lower penalties than the one set out in the notice of violation have proven sufficient to encourage compliance with the Unsolicited Telecommunications Rules.

CRTC concluded that, in light of all relevant factors, the investigator's recommended $640,000 AMP should be reduced to $50,000, which CRTC considered appropriate in the circumstances and reasonable and necessary to promote Blackstone's compliance with CASL.

Comment

Conspicuous Publication Rule

CRTC's decision reinforces that implied consent based on the conspicuous publication rule requires more than simple public availability of an email address. In particular, an organization that relies on the conspicuous publication rule has the burden of proving that all requirements of the rule — conspicuous publication of the email address by or on behalf of the recipient, no statement refusing CEMs and CEM content relevant to the recipient's business, role, functions or duties — are satisfied for each CEM. Organizations will have to carefully consider the kinds of records (e.g. screen shots of relevant web pages) they should create and maintain so that they are able to prove all elements required by the conspicuous publication rule for each CEM.

It is important to note that there are uncertainties regarding the scope and application of the conspicuous publication rule. For example, how long does the implied consent last, is implied consent withdrawn if the publication of the email address is terminated, and what makes a CEM "relevant" to the intended recipient's business, role, functions or duties? There may also be risks arising from changed circumstances (e.g. a statement refusing unsolicited CEMs added after the email address is collected or changes to a recipient's business, role, functions or duties).

AMPs

CRTC's decision provides helpful insight into CRTC's approach to assessing AMPs for sending CEMs without consent. It is important to bear in mind that CRTC's decision to reduce the investigator's recommended $640,000 AMP was based on the specific circumstances of Blackstone's case, and different circumstances (e.g. a longer violation period or a greater ability to pay) might have resulted in a significantly larger AMP. CRTC's previous enforcement actions have resulted in the following financial penalties:

  • Compu-Finder: $1.1 million for sending CEMs without consent and with an ineffective unsubscribe mechanism.
  • PlentyofFish Media: $48,000 for sending CEMs with an unsubscribe mechanism that was not clearly and prominently set out and could not be readily performed.
  • Rogers Media: $200,000 for sending CEMs with an unsubscribe mechanism that did not function properly or could not be readily performed or with required content that was not valid for the required minimum 60 days, and for failing to implement some unsubscribe requests within 10 business days.
  • Porter Airlines: $150,000 for sending CEMs without proof of consent and sending CEMs that did not contain required information or have a required unsubscribe mechanism.

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