Canada: 7 Practical Lessons From CRTC's First CASL Enforcement Decision

Although CASL has been in force since July 1, 2014, the Canadian Radio-Television and Telecommunications Commission ("CRTC") has conducted its investigations and levied its penalties in a generally non-public manner. Until now, the CRTC's Compliance and Enforcement branch had publicly commented on only one Notice of Violation ("NoV") under CASL. We understand that an undisclosed number of other NoVs have been issued without public comment.

All other public CASL enforcement actions have taken the form of negotiated "undertakings" which are forms of settlements reached in confidential, closed door negotiations with the enforcement branch. This atmosphere of secrecy has made it difficult for organizations across Canada to understand the law and assess their risks.

This has now changed, at least to a degree. On October 26, the Commission issued its first written reasons in a decision under s. 25(1).

Background

The decision relates to a NoV apparently issued on January 30, 2015, to Blackstone Learning Corp. As reported in the decision, the NoV related to some 385,668 email messages advertising educational and training services sent between July 9 and September 18, 2014, primarily targeting government employees.

Blackstone received a Notice to Produce (NtP) on November 7, 2014. (See our previous post for background on NtPs.) Blackstone requested a review of the NtP on December 4, after the deadline for production had passed.  The Commission denied this request in a letter on January 22, 2015. The NoV was issued approximately a week later.

Although an NoV sets out an Administrative Monetary Penalty (or "AMP") for the alleged violation, these notices are not final determinations. The person named in the NoV has the right, under s. 24(1), to respond to the notice with representations to the Commission, within 30 days.  Blackstone made such submissions on Feb. 14.

In parallel with that, Blackstone also made an unsuccessful attempt to appeal the letter decision denying its request for review. Blackstone sought leave to appeal to the Supreme Court of Canada, which was the wrong forum.  The right of appeal under s. 27(1) of CASL is to the Federal Court of Appeal.

Pursuant to s. 25(1), the Commission must decide, on a balance of probabilities, whether the person committed the alleged violation and, if so, whether or not to impose the AMP set out in the NoV. The Commission has the power to vary the amount of the AMP, or to suspend it subject to conditions, or waive it altogether.

The Decision

The decision canvasses a number of issues and will be carefully parsed by practitioners. However, a few practical points jump out for immediate consideration.

  1. The decision was issued nearly 20 months after the NoV. This is quite a long time. However, CASL does not set any particular time frame for this process. It remains to be seen whether this is typical, or whether decisions will come more quickly in the future.
  2. The Commission reduced Blackstone's AMP from $640,000 assessed in the NoV to $50,000. This substantial gap (reducing the initially proposed AMP by 92%) suggests that (a) the Enforcement branch may need to re-calibrate its approach; and (b) it is worthwhile for anyone with a similar NoV to exercise their right to contest the AMP, as the Commission has demonstrated a willingness to consider mitigating factors in assessing the level of an AMP.
  3. The decision counts the number of "violations" based on the number of "campaigns", not the (much higher) number of individual messages sent. In this case, the NoV alleged 9 violations, for 385,688 emails. This approach theoretically lowers the potential upper level of liability under CASL, though with a $10M fining power, this may prove to be little solace for Canadian organizations.
  4. Even though the messages (which referred to and promoted training programs) did not discuss any specific commercial terms, the references to discounts and group rates were enough for the Commission to conclude the messages were "commercial electronic messages" subject to CASL.
  5. The Commission's analysis of the conspicuous publication exception seems to add a condition which does not expressly appear in the statute. According to the decision, in order for this exception to apply, the address must be "published in such a manner that it is reasonable to infer consent to receive the type of message sent, in the circumstances". The statute does not refer to the manner of publication, except that it must be conspicuous, and the only express limitation on the type of message is that it must be "relevant to the person's business, role, functions or duties in a business or official capacity". The Commission's analysis does little to clarify how this exception can be applied. However, it does effectively confirm that any business relying on this exception will have the burden to prove that the circumstances of publication fit within the wording of the Act. In the words of the decision:
    Paragraph 10(9)(b) of the Act does not provide persons sending commercial electronic messages with a broad licence to contact any electronic address they find online; rather, it provides for circumstances in which consent can be implied by such publication, to be evaluated on a case-by-case basis.
  6. The Commission also sets out a series of principles for the assessment of AMPs that will undoubtedly be influential in its future determinations. In particular:
    • the amount of the penalty must be enough to promote changes in behaviour, but driving a person out of business would not promote compliance – it would preclude future compliant behaviour;
    • the volume of complaints received will be relevant to assessing the nature and scope of the violation(s), but so is the time period over which the messages were sent – 60 unique complaints (for nearly 400,000 messages, or a complaint rate of approximately 0.016%) was considered to be a significant volume, but the fact that the violations were limited to a two month time-span indicated a lower penalty;
    • unaudited financial statements can be acceptable evidence of ability to pay, and an AMP that would represent "several years' worth" of revenues would be excessive; and
    • lack of cooperation during an investigation may result in a higher penalty, while evidence of efforts to comply (even if "not particularly robust") suggest a lower penalty will be appropriate.
  7. Blackstone was given until November 25, 2016 to pay the assessed AMP – which also happens to be the deadline for it to file an appeal of the decision to the Federal Court of Appeal (or an application for leave to appeal, if on a question of fact). Interest of 3% above the average bank rate, compounded monthly, will be applied after that date.

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