On December 30th, 2015, the Canadian Competition Bureau, which is responsible for administration and enforcement of the Competition Act, announced that Telus Communications Inc. (“Telus”), one of Canada’s “Big Three” wireless carriers, had entered into a consent agreement with the Competition Bureau for alleged misleading advertising in relation to “premium text messaging services”. Under the agreement, Telus agreed, without an admission of liability, to issue up to $7.34 million in rebates to current and former customers affected by the premium text messaging services, and donate $250,000 to Ryerson University Privacy and Big Data Institute; Educaloi and the Centre de recherché en droit public de l'Université de Montréal. This agreement highlights the Competition Bureau’s concern with respect to truthfulness and accuracy in digital advertising and serves as a warning that liability for false and misleading advertising can apply not only in respect of representations made directly by an advertiser but also, in some cases, where the advertiser facilitated the dissemination of false and misleading representations by third parties.
In 2012, the Competition Bureau sued Canada’s “Big Three” wireless carriers, Rogers Communications (“Rogers”), BCE Inc. (“Bell”) and Telus along with the Canadian Wireless Telecommunications Association (the “CWTA”) for allegedly enabling third party providers to trick their consumers into paying fees they weren’t expecting.
The case involved so called “premium-text messaging services” (such as trivia questions and ringtones) which were offered through advertisements in popular free apps on wireless devices, as well as online to Rogers, Bell and Telus’ customers. The Competition Bureau alleged that:
- The “premium text messaging services” delivered to Rogers, Bell and Telus’ customers violated the Competition Act’s prohibitions against false and misleading advertisement because consumers were given the impression that the content was free when in fact it was not, and were charged for content that they did not intend to purchase and for which they had not agreed to pay.
- Rogers, Bell, Telus and the CWTA made false representations about their policies against such unsolicited content: the companies had led their customers to believe that measures were in place to prevent such unauthorized charges but the companies were in fact allowing such content to be disseminated and further, were profiting from its dissemination (the companies allegedly kept between 27 and 60 per cent of the revenues from the premium text messaging services).
Liability for false and misleading statements made on the internet
The Competition Act contains both civil and criminal provisions related to misleading advertising. Both provisions prohibit false or misleading representations in promoting the supply or use of a product or any business interest.
In February 2003, the Competition Bureau released an Information Bulletin called “Application of theCompetition Act to Representations on the Internet” setting out its approach to enforcing the CompetitionAct concerning misleading representations and deceptive marketing practices on the Internet and, in particular, providing guidance on who can be held liable for false or misleading representations made on-line (e.g. liability as between, for example, the Web page designers who help create the representations, the Web hosts who own or operate the servers from which the representations are disseminated, the service providers who provide access to the Internet and the businesses on whose behalf the representations are made and disseminated).
According to the Bulletin, in assessing liability for false or misleading representations made in the digital world, the Competition Bureau will look at who caused or permitted a false representation to be made, which in turn depends on which party possessed decision-making authority or control over content and the nature and degree of such authority or control. The Bulletin makes clear, however, that the Competition Bureau’s focus will be primarily on those businesses responsible for content, or which have a degree of control over the content, rather than on businesses merely acting as conduits of content.
In the context of the case at hand, the Competition Bureau alleged that through an integrated business model between Bell, Rogers, Telus and the CWTA and the third party “premium text messaging services” providers, the companies gave the third parties access to their customers to promote, sell and charge for the third parties’ products and also pocketed a share of the revenues. In other words, as Rogers, Bell, Telus and the CWTA provided and controlled the means (i.e. infrastructure) through which the third parties false and misleading representations were disseminated to their customers, the wireless communication companies and the CWTA had become more than mere conduits through which the representations travelled but rather facilitated their dissemination.
This case highlights the continuing focus of the Competition Bureau on the truthfulness and accuracy of digital advertising, including on mobile devices, as emphasized in the Bureau’s Deceptive Marketing Practices Digest, which were previously reported on in our June 18, 2015 IP Update. In addition, this case serves as a warning to advertisers that liability under the Competition Act’s misleading advertising provisions is not limited to only those parties who create or control the content of a digital message: allowing a third party to take advantage of consumers through misleading advertising may also constitute a violation of the Competition Act.