Canada's new anti-spam and online fraud act (commonly known as "CASL") creates a comprehensive regime of offences, enforcement mechanisms, and potentially severe penalties (including personal liability for corporate directors and officers) designed to prohibit unsolicited or misleading commercial electronic messages ("CEMs") and deter other forms of online fraud (such as identity theft, phishing and spyware).
For most organizations, the key parts of CASL are the rules for CEMs, which apply to almost every electronic message (including email and instant messages) relating to a commercial activity. Subject to limited exceptions, CASL 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 and is not misleading. The rules can be enforced by regulators and through private lawsuits. Contravention of the rules for CEMs can result in severe administrative penalties (up to $1 million per violation for individuals and up to $10 million per violation for organizations) and civil liability.
This bulletin focuses on the parts of CASL relating to CEMs, and provides guidance for organizations that wish to be ready to comply with CASL when it comes into force.
THE BASIC PROHIBITION
CASL prohibits the sending of a CEM unless: (1) the person to whom the CEM is sent has consented to receiving it; and (2) the CEM complies with prescribed formalities. The prohibition is not limited to mass unsolicited commercial email (commonly known as "spam"), but also applies to a CEM that is sent directly to a single recipient.
CASL uses broad, open-ended definitions, so that it applies to messages sent by any means of telecommunication (including text, sound, voice, or image) to an address for an email account, instant messaging account, telephone account, or any similar account. There are limited exceptions for interactive two-way voice communications, faxes and voice messages.
An electronic message is considered to be "commercial" if one of its purposes is to encourage participation in a "commercial activity", which is broadly defined as a transaction, act or conduct of a commercial character (regardless of expectation of profit), including the purchase, sale, or lease of goods, services, or land, or a business, investment, or gaming opportunity. The prohibition also applies to an electronic message that requests a person's consent to receive a commercial electronic message. There are limited exceptions, including CEMs between friends or family (as defined in regulations) and inquiries or applications regarding the recipient's commercial activity.
CASL establishes an opt-in consent regime, which requires that each recipient consent to receive a prohibited CEM. Consent may be express or implied. A person who alleges consent to receive a CEM has the onus of proving it.
A request for express consent must "clearly and simply" specify the purpose of the consent and other prescribed information, including the identity of the person seeking consent and other persons on whose behalf consent is sought. The required consent is in addition to, and different from, consents required under other regulatory regimes (including privacy legislation).
Implied consent arises in limited circumstances where the sender and recipient of the CEM have an existing business or nonbusiness relationship (as defined in CASL) within the previous two years. An existing business relationship is defined as arising from certain commercial activities or a written contract between the parties. Consent may also be implied in other limited circumstances, including where the recipient conspicuously publishes his or her electronic address or discloses it to the sender, without prohibiting unsolicited CEMs, and the message is relevant to the recipient's business or official capacity.
There are also certain kinds of CEMs for which consent is not required, including messages that provide a requested estimate or quote for a commercial transaction, messages that facilitate, complete or confirm a commercial transaction previously agreed to by the recipient, messages that provide warranty, recall, safety or security information for a product or service used or purchased by the recipient, and messages that provide employment information.
In addition to consent, and even if consent is not required or is implied, a CEM must comply with certain formalities. The message must contain prescribed information about the identity of the actual and beneficial sender of the message and their contact information. The message must also provide an effective, no-cost unsubscribe mechanism accessible by the recipient using the same electronic means by which the message was sent or, if not practicable, an alternative electronic means. The message must also provide an electronic address or link to a website that can be used by the message recipient to unsubscribe to future messages. The contact information, unsubscribe mechanism and website link must remain valid for 60 days after the message is sent, and an unsubscribe request must be implemented within 10 business days.
CASL amends the Competition Act to prohibit knowingly or recklessly sending a false or misleading representation in an electronic message that promotes a business interest or the supply or use of a product. CASL prohibits any false or misleading representation in sender information (the part of an electronic message that identifies the sender), subject matter information (the part of an electronic message that summarizes or indicates the content of the message) or locator information (information, including a hyperlink/URL, in a message identifying a source of data). CASL also prohibits a representation in the body of an electronic message that is false or misleading in a material respect.
CASL applies if a computer system in Canada is used to send or access a prohibited CEM, regardless of the location of the sender or recipient. CASL imposes liability not only on persons that send prohibited CEMs, but also on persons that cause or permit a prohibited CEM to be sent, or who aid, induce, or procure the sending of a prohibited CEM.
CASL provides that employers are vicariously liable for violations by their employees and agents within the scope of their employment or authority, and corporate directors and officers are personally liable if they direct, authorize or assent to, or acquiesce or participate in, a contravention. Employers, directors and officers can avoid liability if they establish that they exercised "due diligence" to prevent the contravention.
The CRTC and the Competition Bureau have authority for enforcing different parts of CASL regarding CEMs. In addition, CASL provides a private right of action to any person who has been affected by a contravention of CASL. Class actions are not prohibited. Contravention of provisions regarding unsolicited CEMs are punishable by substantial administrative monetary penalties - $1 million per violation maximum for individuals, and $10 million per violation maximum for organizations. False or misleading representations in an electronic message are punishable by fines and imprisonment. In a private action, the court may award compensatory damages and a private fine, to maximum of $1 million for each day on which a contravention occurred.
PREPARING FOR THE ACT
CASL is not expected to come into force until required regulations have been enacted. In the meantime, Canadian organizations should prepare to comply with CASL. Following is a basic compliance action plan:
- Assessment: Determine how CASL applies to the organizations' operations and marketing activities.
- Education: Educate the organizations' personnel about CASL, and implement policies for compliance.
- Express Consent: Establish procedures for obtaining recipients' express consent to receive CEMs, and for maintaining an accurate and current list of consenting recipients for each kind of CEM. Current marketing databases may not be sufficient.
- Implied Consent: Establish procedures for maintaining an accurate and current list of recipients who have given implied consent to receive each kind of CEM, and removing recipients when their implied consent expires (usually after two years).
- Formalities: Establish procedures to ensure that all CEMs comply with prescribed formalities (information disclosure, unsubscribe mechanism, website unsubscribe process) and that unsubscribe requests are promptly implemented (within 10 days).
- Accuracy: Establish procedures to ensure that CEMs are not misleading.
- Contracts: Revise contracts with relevant third parties (e.g. agents, distributors and marketing agencies) to require compliance with CASL, and conduct appropriate verifying due diligence.
- Internal Due Diligence: Establish internal due diligence procedures for the organizations' directors and officers, to manage personal liability risk.
- Monitoring/Responding: Establish procedures for monitoring the organizations' compliance and responding to violations.
- Insurance: Obtain insurance for liability arising from violations of CASL.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.