It is time for franchisors and franchisees to begin considering the potential impact of Canada’s new anti-spam legislation (“CASL”) on their business, as it was recently announced that this legislation will be coming into force on July 1, 2014. 

CASL is designed to protect Canadian consumers from receiving unsolicited commercial electronic messages (a “CEM”). A CEM is any electronic message the purpose of which is to encourage participation in commercial activity. The definition of commercial activity is broad and includes such activity as offering for sale or advertising goods or services. CASL applies to CEM’s sent or received by a computer in Canada. The CASL will be regulated by the Canadian Radio-television and Telecommunications Commission (“CRTC”).

There are three broad prohibitions in CASL:

  1. A prohibition against sending a CEM unless the person receiving the message has consented to receiving it and the message is in a prescribed form and content. The prescribed form includes a requirement to identify the sender and its contact information, as well as include an “unsubscribe” mechanism.
  2. A prohibition against altering the transmission data in an electronic message so that the message is delivered to a destination other than, or in addition to, that specified by the sender, unless consent or a court order is obtained.
  3. A prohibition against installing a computer program on any other person’s computer system which causes an electronic message to be sent from that computer system, unless consent or a court order is obtained. This provision, and the other provisions related to the installation of computer programs, does not come into force until January 15, 2015.

CASL uses an “opt-in” approach, which means that businesses must obtain express or implied consent prior to sending a CEM. Where express consent is being obtained, the mechanism by which it is requested must comply with the requirements of CASL. In addition, the CRTC has stated that confirmation should be provided following receipt of the consent. Implied consent is, in certain limited circumstances, also permitted.

These circumstances include where the recipient has purchased goods or services from the person who sends the message within the 2-year period immediately before the date the CEM was sent. A transitional period of three years has been included in CASL, where a recipient will be deemed to have provided implied consent, if the sender and recipient have an existing business or non-business relationship at the time the legislation comes into effect and where that relationship included the communication between them of CEM’s.

Franchisors and franchisees should start evaluating the applicability of CASL to their communications with prospective franchisees and their current marketing strategies to customers. For example, consideration should be given to whether customers’ contact information is currently stored on a mutual database or individualized databases and how this information will either be deleted or updated pursuant to the legislation. 

Further, if a franchisor has a centralized marketing scheme but advertises to customers based on information provided by the franchisees, the franchisor will be relying on its franchisees to obtain the appropriate prescribed consents. These consents must be obtained in accordance with the requirements under the legislation in order to be used by the franchisor. These requirements include addressing whether the franchisor, franchisee, or both will be using the customers contact information, and setting out the purposes for which the consent is being sought. A franchisor should be cautious in relying upon its franchisees to obtain appropriate consents, because the consequences of non-compliance are severe.

A contravention of any one of the prohibitions can result in an administrative monetary penalty ranging up to $1,000,000 for an individual, and $10,000,000 for any other person. There is also a separate right for persons affected by the contravention to bring a statutory claim for compensatory damages; this provision, and the others related to the private right of action, will not come into force until July 1, 2017.

With the coming into force date for CASL only months away, it is advisable that businesses start considering its impacts now and start planning strategies for compliance.