Rogers Communications Inc. will appear before the Ontario Superior Court in June, claiming that two aspects of the Competition Act dealing with civilly reviewable misleading advertising are unconstitutional: AMPs (administrative monetary penalties) in the millions of dollars, and the “adequate and proper” testing requirements. If they are ruled unconstitutional, the case stands to gut the Competition Bureau’s ability to seek multi-million dollar penalties under the civil misleading advertising provisions of the Competition Act, and may have implications for its ability to do so in abuse of dominance provisions as well.
The Competition Bureau’s legal proceedings against Rogers began in September, 2010 when Wind Mobile filed a formal complaint with the Competition Bureau regarding Roger’s new discount cell phone service, Chatr Wireless. In November 2010, the Commissioner started legal proceedings against Rogers to stop the allegedly misleading advertising of Chatr, based on claims that it had fewer dropped calls than competitors.
Section 74.01(1)(b) of the Competition Act makes it civilly reviewable conduct, among other things, to make a representation to the public in the form of a statement regarding the performance a product or service that is not based on an “adequate and proper test thereof”, the proof of which lies on the person making the representation. Under section 74.1(1)(c) of the Act, the Competition Tribunal or the courts may make orders prohibiting the conduct in question, requiring the issuance of corrective notices, requiring the payment of restitution to affected customers, and/or requiring the payment of up to $10 million in an “administrative monetary penalty” or “AMP” (for a first such “offence”, and up to $15 million thereafter). The Commissioner sought orders against Rogers seeking all four remedies, including an order to pay the maximum AMP of $10 million.
Rogers argues that a $10 million AMP is unconstitutional because penalties of that magnitude are essentially criminal fines, but under section 74.1 of the Competition Act they are awarded after a civil trial. The various aspects of criminal procedure that protect defendants, such as requiring the Crown to prove its case beyond a reasonable doubt, are lacking under section 74.1 proceedings.
In addition, Rogers is also asking the court to strike down section 74.01(1)(b) of the Competition Act which requires companies to make “adequate and proper” tests of a product’s performance before making advertising claims, arguing that the provision violates its right to freedom of expression under s. 2(b) of the Canadian Charter of Rights and Freedoms.
Interestingly, these same questions were previously addressed by the Competition Tribunal in its 2006 decision in the case of Commissioner of Competition v. Gestion Lebski Inc. et al (CT-2005/007). The Tribunal held that the “adequate and proper test” provision infringed the respondents’ rights to freedom of expression under section 2(b) of the Charterin that it penalized representations that could be true, on the ground that they were not based on a prior adequate and proper test. Turning to the question of whether the infringement was justified in a free and democratic society under section 1 of the Charter, the Tribunal held that no evidence had been led on the basis of which it could find that paragraph 74.01(l)(b) constituted minimal impairment of the right to freedom of expression. The provision therefore failed the Oakes test for justification of Charter infringements in that case and was found to be of no force or effect.
The AMP (which at the time was limited to a maximum of $200,000), on the other hand, was found by the Tribunal to be of a magnitude that was not penal in nature, and which was consistent with the stated aims of civil penalties to encourage compliance and to deter prohibited conduct. The Tribunal also found that since the proceedings were civil in nature, and the AMP is not a “true penal consequence” (if unpaid, AMPs are collected by civil means as a debt due to the Crown; failure to pay the AMPs is not a criminal offence). The AMPs in question in that case were found to violate neither section 11 nor section 7 of the Charter.
The Tribunal’s constitutional rulings expressly applied to that case alone, however, since under Supreme Court of Canada precedent (Nova Scotia (Workers’ Compensation Board) v. Martin), only the courts can rule definitively on constitutional questions while administrative tribunal rulings on such issues have effect only in the case at hand.
Moreover, the maximum AMP in question in the Rogers case increased in 2009 from $200,000 to $10 million. In addition, the views of the courts on constitutional questions can have precedential value. The courts’ views of Rogers’ constitutional claims stands, accordingly, to have important ramifications for the ability of the Commissioner to seek multi-million dollar AMPs in respect of non-criminal conduct, as well as for the Competition Act requirement that advertisers conduct “adequate and proper” tests prior to making performance claims. Although not at issue in this case, depending on its outcome, the ability of the Commissioner to seek AMPs of up to $10 million for “abuse of dominance” (also a civilly reviewable practice under the Competition Act) may also come into question.