On May 11, 2018, the Québec Court of Appeal rendered its decision in Vidéotron v Girard, 2018 QCCA 767. Vidéotron was appealing a Superior Court judgment which had partially allowed a class action against it, resulting in Vidéotron being condemned to pay of $6.4 million in damages and $1 million in punitive damages for having made misleading representations to consumers about Local Program Improvement Fund (“LPIF”) fees. While Vidéotron was unsuccessful in reversing the lower court’s findings of liability, the Court of Appeal did review the punitive damages awarded, reducing them to $200,000.

Background

From September 1, 2009 to September 1, 2014, section 29.1 of the Broadcasting Distribution Regulations, SOR/97-555 required distributors like Vidéotron to contribute a percentage of their gross revenues derived from broadcasting activities to the LPIF. Vidéotron decided to pass on this cost to consumers by levying an additional fee of 1.5% on broadcasting charges. It disclosed to consumers that it would do so by way of notices on its invoices, incorporated the fee in its contract and indicated the existence of the fee and the amount charged on its invoices.

The problem raised by the class action was that Vidéotron was calculating the charge on the base price of a consumer’s television subscription, not on the actual price charged for that subscription. Indeed, as is common in the broadcasting distribution industry, Vidéotron would publish a base price for its services and then would offer consumers targeted discounts that would lower the price actually paid by consumers. However, it would continue to charge its 1.5% LPIF fee on the base price, not on the price actually paid by the consumer for broadcasting services.

Because the gross revenues from broadcasting activities for the purpose of calculating the LPIF contributions payable by Vidéotron were based on actual revenues, namely the charges paid by consumers, and not the theoretical base price set by Videotron for its services, Vidéotron was actually collecting more in LPIF fees from consumers than it was paying in LPIF contributions.

Reasons and conclusions

Noting that there was nothing wrong with Vidéotron deciding to charge consumers for the LPIF fees it was required to pay, and that Vidéotron had disclosed this practice in a variety of ways, the Court nonetheless agreed with the trial judge that Vidéotron made misleading representations to consumers in the context of these disclosures.

Indeed, the Court found that Vidéotron’s failure to explicitly inform consumers that the 1.5% fee would be calculated on the base prices, and not on the prices actually paid by consumers, constituted a misleading representation under the Québec Consumer Protection Act (“CPA”).

The only way for a consumer to discover this practice was to carry out calculations and compare the amounts arrived at with those appearing on his or her invoice, where the LPIF fee was disclosed in dollars and cents. The Court concluded this was too onerous a burden to place on a “credulous and inexperienced” consumer, which is the applicable standard for assessing breaches of the CPA. The compensatory damage award of $6.4 million, representing the entirety of the LPIF fees collected, was therefore upheld.

However, the Court found that awarding $1 million in punitive damages in the circumstances was excessive and disproportionate. The Court reiterates that not every violation of the CPA warrants an award of punitive damages – the conduct of the merchant at the time of the violation and afterwards must warrant it. The Court also warns against employing a formula to determine punitive damages awards (such as the multiplication of an amount by the number of class members), as this can distort the analysis and result in unreasonable awards.

In this case, the Court found that punitive damages were justified to dissuade Vidéotron and other merchants from being less than fully transparent with consumers. That said, in implementing and disclosing the LPIF fee, Vidéotron may have made questionable business decisions, but there is no evidence of a concerted attempt to overcharge consumers without their knowledge. While Vidéotron’s disclosure was inadequate as concerns the way it calculated the LPIF fee, it never attempted to hide the fact that it was charging the LPIF fee. In the end, the breach of the CPA was not a particularly grave one.

In these circumstances, the Court notes that Vidéotron’s breach is already largely punished by the compensatory damage award, which deprives Vidéotron from the entirety of the LPIF fees collected. A $6.4 million compensatory damages award in this context also has a dissuasive effect on Vidéotron and merchants generally. Applying the principle that the amount of punitive damages awarded must be the lowest amount required to achieve their preventative purpose, the Court concludes that an amount of $200,000 is appropriate.