January 6, 2016
On December 30, 2015, Telus agreed to a $7.3 million settlement with the Competition Bureau (“Bureau”) as part of the Bureau’s ongoing case against major Canadian telecoms for allegedly misleading advertisements for premium text messages in pop-up ads, apps and in social media. See: Telus customers to receive $7.34 million in rebates as part of Competition Bureau agreement. For a copy of the consent agreement see: here.
The Bureau alleged that Telus and Canada’s other major wireless providers facilitated charges to customers by third parties that were not adequately disclosed or agreed to, such as trivia questions and ringtones (so called “cramming” – i.e., billing for unwanted services). This case has raised issues that include, among other things, what constitutes adequate disclosure for additional mobile services and liability as among a telecom and affiliates involved in marketing add-on services.
This settlement is part of a wider ongoing case, which originally included Rogers, Bell, Telus and the Canadian Wireless Telecommunications Association (CWTA). Rogers settled last March for $5.42 million (see: Rogers agreement with Competition Bureau nets record refunds for wireless consumers). The Bureau’s case against Bell and the CWTA continues.
This case and settlement are interesting for several reasons, including:
1. In general, they show that the Bureau, like its enforcement counterparts in the US and Europe, continues to focus its advertising enforcement efforts on the digital marketplace and, in particular, mobile, social media and the web (including emerging issues such as mobile cramming and astroturfing). For a recent Bureau summary of key digital advertising enforcement issues, including disclaimers and astroturfing, see: Deceptive Marketing Practices Digest.
2. Also in general, they illustrate the importance of clearly disclosing key terms and conditions up-front, regardless of the platform. Or to put it another way, burying conditions in agreements or invoices that follow point-of-purchase marketing may well be insufficient to counter the misleading general impression of an ad.
3. Liability can potentially attach under the Competition Act’s (“Act”) misleading advertising provisions not only for those made directly by an advertiser but also in some cases where the advertiser assisted or facilitated false claims. A key complication in this case was that Telus had partnered with third party providers. According to the consent agreement, Telus has terminated its relationships with affiliate marketers involved in the claims challenged by the Bureau. While this issue remains unsettled in Canadian case law (e.g., the requisite test to determine which party has made a false or misleading claim), the Bureau has focused on the question of control (see: Application of the Competition Act to Representations on the Internet). In light of this and related cases, advertisers may well want to be more diligent in their relationships with affiliates (and contemplate stricter risk shifting provisions in agreements with affiliate marketers).
4. The penalty in this case – a $7.3 million consumer rebate rather than a civil penalty paid to the government – reflects the flexibility in negotiated settlements under the Act. In this respect, section 74.12 of the Act merely provides that civil advertising related consent agreements shall be based on terms that a court could order but may also include other terms regardless of whether they could be imposed by a court.
5. The Bureau is now routinely requiring settling companies to adopt new or enhance their existing compliance programs to be consistent with its recently updated and stricter Corporate Compliance Programs Bulletin.
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