Introduction

The recent decision of the District Court of Maryland rendered on 4 August 2014, concerning Aegis Mobile, LLC1 signals a major development in cross-border regulatory enforcement and co-operation between Canada and the United States (US).  Made pursuant to the USSafe Web Act, the Aegis case demonstrates a growing willingness on the part of the authorities of both countries to work to share information in building and prosecuting cases against individuals and companies accused of unfair business practices.

Background

In September 2012, Canada’s Competition Bureau (the Bureau) began legal proceedings under the deceptive marketing provisions of the Canadian Competition Act against the three major Canadian wireless telecom service providers, as well as the Canadian Wireless Telecommunications Association (CWTA) in its Premium Text Messaging Case.  At issue in the case was the practice of marketing so-called premium services to customers (such as trivia questions and ringtones) without adequate disclosure of the significant fees associated with these services.

Aegis Mobile, a company based in Columbia, Maryland, had been contracted by the CWTA to collect and analyse the advertising through which the service providers promoted their premium content.  As it was this advertising that the Bureau alleged was false and misleading, the Bureau asked the US Federal Trade Commission (the FTC) to seek documents and testimony from Aegis related to the services it had provided to the CWTA.

In November 2013, the FTC applied for and was granted an order authorizing an FTC attorney to act as commissioner of the court for purposes of obtaining information from Aegis, and a subpoena was served on Aegis thereafter.  Aegis initially declined to comply with the subpoena, causing the FTC to seek and obtain an order compelling compliance.  Aegis then sought an order quashing the subpoena.

The Safe Web Act and the decision not to quash the subpoena

The US Safe Web Act, enacted in 20062, is designed to combat the ‘increasing threats facing US consumers in the global marketplace from the proliferation of spam, spyware, telemarketing, and other cross-border fraud’.3  Among other things, the Act provides the FTC with the tools to provide assistance to and request assistance from foreign trade authorities in connection with the investigation and regulation of online and digital trade practices.

Aegis challenged the FTC’s reliance on the Safe Web Act in several ways, including an allegation that Aegis and/or the defendants in the Canadian proceeding were ‘common carriers’ and thus exempt from application of the Safe Web Act, and alternatively that the conduct at issue was not ‘substantially similar’ to any conduct prohibited by a law administered by the FTC.

Both of these contentions were rejected.  First, the Court found that neither Aegis nor any of the Canadian wireless carriers were subject to the ‘Acts to regulate commerce’, and thus not covered by the exemption in the Safe Web Act relied on by Aegis.  Second, the Court held that the allegations of false and misleading advertising under the Canadian Competition Act were, in fact, substantially similar to conduct prohibited by the FTC Act, and so the Safe Web Act did authorize the FTC to assist the Bureau in seeking information abroad.

As Aegis was therefore not exempt from application of the Safe Web Act, the Court ordered compliance with the subpoena.

Major co-operation

While the Safe Web Act has resulted in some significant developments between the FTC and foreign regulatory agencies (including the UK Office of Fair Trading, the Australian Communications and Media Authority and the New Zealand Department of Internal Affairs), the Aegis case marks the first in which a US court has ordered such assistance to aid in an investigation by the Bureau.

The case represents a significant broadening of the scope of the Bureau’s investigative powers.  It also demonstrates the continued willingness of the US courts to breathe life into the Safe Web Act and to allow the FTC to work with foreign authorities in the investigation and prosecution of unfair business practices at home and abroad.