Getting a competitor’s ad shut down with an interlocutory injunction in Canada can be difficult and uncertain business, although they have been granted more frequently in recent years.  The injunction was denied here, but the Telus Communications Company v. Mobilicity, 2012 BCSC 1933 case provides a great summary of factors that can determine success (or not):  Does the plaintiff have a far larger market share than the defendant advertiser?  Even if there were false statements, would consumers actually be influenced by them? Had the advertiser made the claims before without the complainant challenging them?  These are just some of the intriguing questions considered in this recent case, as discussed below.

The Context

“As the Christmas buying season approaches, competition in the profitable field of cellular communications heats up.”  This was the understatement made by Grauer, J. of the British Columbia Supreme Court, opening his decision in the interlocutory injunction application of Telus v. Mobilicity, 2012 BCSC 1933.

Christmas cellular competition has frequently been played out in the courts, most memorably in a flurry of litigation conducted in 2009.  On December 14, 2012, one of the three major industry players, TELUS Communications Company (“Telus”), argued that the holiday ad campaign of one of the industry’s recent entrants, Data & Audio-Visual Enterprises Wireless Inc. (“Mobilicity”), was false and misleading and should therefore be halted.  Although such claims have not been uncommon in the wireless industry, this was the first time that Mobilicity had been invited to the “holiday party” that is seasonal advertising litigation.  Telus v. Mobilicity was interesting in a number of respects, including the way the respective size of the parties’ market share (established player versus new “upstart”) affected the Court’s balancing of interests.

Telus’s Complaint

Telus’s application focussed on a television commercial of Mobilicity’s, which began running on November 21, 2012.  In it, a man warns the viewer that, “When it comes to mobile networks, what you see isn’t always what you get.  Look closer and sometimes you’ll find that the great deal you thought you were getting isn’t really a deal at all.” Illustrating what competitors allegedly advertise, a card appears, saying “Unlimited Plans”; the man turns it around to reveal the qualification, “After 6PM Evenings & Weekends”.  Another card appears, saying “$0 Phones”; the man turns it around to reveal “With a 3-Year Contract”.

“Unbelievable”, the man exclaims, but “not with Mobilicity”.  Several signs then appear, saying “No Contracts” and “No Hidden Fees”; the man turns one of the signs around to reveal exactly the same language on the back as there was on the front.  The man concludes by saying: “With Mobilicity, what you see is what you get.”

Telus argued that the ads falsely implied that Mobilicity’s competitors were deceptive, while Mobilicity itself dealt straightforwardly with its customers.  In particular, Telus argued that:

  1. none of Mobilicity’s competitors use the phrase “unlimited plans” in the way the commercial describes; and
  2. Mobilicity does in fact have contracts, and that it does place limits on its data plan.  Mobilicity has a so-called Fair Use Policy, which permits Mobilicity to engage in a practice called “throttling.”  Once a customer goes through a certain amount of data in a month, that customer’s data speed is dialed back and download times are correspondingly increased.  For a price, customers can have their speed dialed back up.  In Telus’s submission, this Policy has contractual effect and constitutes a clear “limitation” on data.

One of the unusual factors of the case was that the individual claims Mobility was making were not new – in fact they had been made for two years without prior action by Telus. However, Telus explained that it was the commencement of the TV advertising together with the particular juxtaposition of the claims in the TV ad that justified its action.  Telus submitted that not only did Mobilicity’s ad falsely accuse its competitors of being misleading, Mobility itself was being misleading precisely in the manner it falsely accused its competitors of being

Mobilicity’s Defence

In response, Mobilicity argued that none of the statements in its commercial were misleading.  On the contrary, it said, the fundamental theme of the commercial was the general importance of consumer due-diligence and, in particular, of the necessity of “looking closer” at cell phone offers. 

With respect to the various individual statements, Mobilicity:

  1. pointed to one ad from Rogers which it said used the term “unlimited data” in the manner it described in its commercial;
  2. argued that it was true in substance that it did not have “contracts”, because it was referring to service contracts into which the customer was locked for a fixed period of time; and
  3. while not disputing that its terms and conditions allowed for “throttling”, it argued that this only constituted a constraint on the speed of data, not a limit on its quantity, and therefore its “unlimited data” claim was true.

Mobilicity also emphasised that it was a small player in an intensely competitive industry, whose relatively recent entry into the market was prompted by a deliberate governmental policy of increasing competition.  It said that this was its first national television campaign, and that enjoining the commercial would therefore cause incalculable harm to its efforts to establish itself in the marketplace.  It argued that Telus was a large, well-established entity, able to attempt to rebut Mobilicity’s claims through its own ads and to quantify the loss caused by the allegedly misleading commercial. 

In its reply, Telus argued that while it was certainly larger than Mobilicity, both parties were large, well-funded, sophisticated entities in absolute terms and that Mobilicity therefore should not be entitled to any particular protection from the Court because it has a relatively smaller market share than Telus.

The Result

Grauer J. denied Telus’s request for an injunction.  In so doing, his Lordship found that Telus had an arguable case that the commercial was misleading, but that it was not a strong case in his view and that the balance of convenience tilted in favour of Mobilicity. 

Strength of Case

In Telus’s favour, his Lordship agreed that Mobilicity’s “unlimited data” claim was particularly problematic in light of the throttling practice, observing that the commercial’s advice to “look closer” was “as aptly directed at Mobilicity as it is at any of its competitors” (Para. 23) and that:

It certainly appears that a consumer attracted to Mobilicity's offer of ‘unlimited data’ would be wise to check the fine print. Ironically, what you see may not necessarily be what you get. (Para. 30).

Grauer J. also found Mobilicity’s representation that it has “no contracts” to be “demonstrably untrue” in that its relationship with its customers is governed by terms and conditions that form a contract. 

However, there were extenuating factors.  On the “unlimited data” point, his Lordship pointed out that this wasn’t a claim of focus in the commercial; the claim was used in the context of offering a “holiday offer” on the already existing “unlimited data + talk + text plans” that had been in place for some time.  (Para. 31) On the “no contracts” point, his Lordship stepped back and said that, taking the phrase in context (juxtaposed to the “3 YEAR CONTRACT” sign), he entertained some doubt that a consumer, even a “credulous and inexperienced one” (referencing the recent Supreme Court of Canada case of Richard v. Time Inc. 2012 SCC 8) “would take it to mean that he or she could obtain wireless service from Mobilicity free of any contractual terms or conditions” as opposed to simply meaning that fixed terms were not required (Para. 26). Again we see the importance of context in advertising.

Ultimately, Grauer J. found that Telus had surmounted the initial prong of the injunction test of whether there was a fair case to be tried, but did not find the case strong.

How Did the Balance of Convenience Play Out?

In terms of balance of convenience, Grauer J. first found that neither side was likely to suffer loss or damage that could not be made good through an award of damages.  This is always a matter of hot debate in advertising injunction applications and courts have exhibited different feelings on the matter.  Grauer J. found that even though quantification of damages might be difficult, it wouldn’t be insuperable given that both parties were sophisticated and capable of the task. 

Looking at the status quo factor (whether one party has acted so as to alter the balance of relationship and affect the status quo), the fact that Telus had not previously objected to the “no contracts”, “unlimited plans” and “what you see is what you get” claims came back to haunt it. Grauer J. found that the commercial, even though relatively new, was not a true change in the status quo.  He observed, rather, that Mobilicity had based its marketing strategy on these three propositions since 2010 and thus that the status quo factor favoured Mobilicity.

Moving on to the market share factor, his Lordship further commented that Telus was not attacked individually in the commercial, and that it, along with the other two big players, make up 90% of the wireless market.  He characterised Mobilicity, in contrast, as a newcomer with a competitive position that is “significantly weaker” than Telus’s individual position and “incomparably weaker” and thus more “fragile” than the position of the big three players considered collectively (Para. 38).  Grauer J. found that given this, and in the absence of a strong case that the commercial was misleading, the Court should more properly be concerned with maintaining freedom of speech and refraining from intervening in a competitive marketplace.

What Do We Take Away from This?

The decision underscores once again that injunction applications can be complicated. Multi-factorial proceedings, where context can be king not only in what ad claims are taken to mean, but in whether yanking the ad will be found to be the most appropriate remedy. As seen above, considerations may include how long the claims have been made; how quickly the complainant complained about them; the size, sophistication, market share and prior conduct of each party; whether the complainant is clearly suffering damage as a result of the claims; whether the harm is really irreparable or whether it could be calculated and compensated by a damage award; and how clear it is that the claims are false or misleading in a way that may actually alter consumers’ buying decisions.  Lots to throw into the hopper and not exactly a walk in the park.  Having said that, the successful injunction applications that have been brought in the last few years show that it is not impossible to put together a persuasive case – and often it is incredibly important to try.