The Ontario Superior Court recently imposed an administrative monetary penalty (AMP) of $500,000 against Chatr Wireless Inc. and Rogers Communications Inc.1 This amount was significantly lower than the $5 to $7 million AMP sought by the Commissioner of Competition. In addition, the court denied the Commissioner’s request to issue a 10-year prohibition order that would have prevented Chatr and Rogers from engaging in similar reviewable conduct.  

The decision highlights the importance of performing adequate and proper tests before one makes a performance claim about a product, and provides guidance on how a court will determine the AMP amount  if a party violates the Competition Act’s misleading advertising provisions.

Background

As explained in greater detail in a previous update, this case began in 2010 when the Commissioner commenced proceedings against Chatr and Rogers alleging that certain of the performance claims made by Chatr were false and misleading. The Commissioner also alleged that the claims had not been adequately and properly tested prior to being made, as is required by paragraph 74.01(1)(b).

In August 2013, the court found the claims that Chatr dropped fewer calls than other networks in certain markets were neither false nor misleading. However, the court also found Chatr and Rogers had failed to conduct adequate and proper tests prior to making those claims in certain markets.2

Administrative monetary penalties

AMPs are administrative penalties intended to promote compliance with the Competition Act. In determining it would impose an AMP on Chatr and Rogers, the court considered the following factors:

  • the amount of the AMP must be proportional to the person whose conduct is to be changed;  
  • administrative remedies under the Act are not meant to be used for general deterrence or punishment;
  • evidence showed that Chatr and Rogers had conducted adequate and proper testing in some but not all markets prior to making the statements;
  • Chatr and Rogers did not exercise due diligence by completing adequate testing prior to making the statements. Instead, they relied on “technological facts” to infer that their network would outperform their competitors’ networks, which the court found was insufficient;
  • the untested claim was later proven correct with adequate testing; and
  • other statutory factors listed in the Competition Act, such as the geographic reach of the conduct, the frequency of the conduct, the vulnerability of the persons likely to be adversely affected by the conduct, the effect of competition in the market, and the gross revenue from sales affected by the conduct.

In weighing these factors, the court concluded that $500,000 was a sufficient amount to promote future compliance with the Competition Act.

Reaction to the decision

In a statement issued after the court’s decision, Rogers announced that it was “pleased” with the court’s decision and it had been “shocked and surprised the Competition Bureau tried to levy such a significant and unwarranted fine.” By contrast, the Commissioner said in a statement that, “We are examining the modest amount of the penalty imposed and the decision not to issue a prohibition order. The Bureau will take the time necessary to review the Court’s reasons in order to make a determination as to next steps.”

Take-away: do not make claims without testing

In this case, Rogers and Chatr relied on certain technological facts about the relative performance of their cellular network compared to their competitors. They claimed those technological facts, coupled with testing in other markets, validated their claims in the cities where they had not completed testing prior to making the claims. The court rejected this approach, saying there is no “technological facts” exemption under the Act, which requires that adequate and proper testing be done prior to the claim being made.   

Although some may question whether the AMP amount imposed (and the court’s reasoning in reaching its conclusion on the amount) will be sufficient to ensure compliance with the Act, the decision nonetheless serves as an important reminder to have proper support for any claim, before that claim is made. It is also important to remember that, particularly with technology products, tests must be undertaken on an ongoing basis to ensure they continue to support the claims as technologies evolve and develop.