Now that 2017 has arrived, we are less than seven months away from private enforcement (particularly through class actions) for false or misleading electronic messages. CASL’s amendments to the Competition Act sought to address deceptive marketing practices in the electronic marketplace. Three reviewable practices were created – all within section 74.011 of the Competition Act – that focus on false or misleading representations in electronic messages, such as in the subject line of an email, the body of an email and in URLs and metadata.
To date, public enforcement of section 74.011 through the Competition Bureau has taken place on two occasions: the Avis and Budget Consent Agreement (following a contested application before the Competition Tribunal) and the Amazon Consent Agreement.
As discussed below, private enforcement of section 74.011 of the Competition Act by way of class actions is forthcoming. Companies that engage in any form of digital marketing are best served by being proactive to prevent becoming a defendant of choice.
CASL Amendments to the Competition Act
Canada’s Anti-Spam Legislation (“CASL”) came into force on July 1, 2014, with the objective of encouraging the growth of electronic commerce by ensuring confidence and trust in the online marketplace. CASL caused amendments to the Competition Act with a view to enabling the Commissioner (and, in turn, private persons affected) to more effectively address false and misleading representations, and deceptive marketing practices in the electronic marketplace.
CASL created three reviewable practices in the Competition Act focused on electronic messages:
- false or misleading representations in the sender information or subject matter information of an electronic message, such as the subject line of an email (74.011(1));
- material false or misleading representations in an electronic message, such as the body of an email (74.011(2)); and
- false or misleading representations in locator information, such as URLs and metadata (74.011(3)).
In aid of these reviewable practices, the Competition Act contains technology-neutral language that is flexible enough to capture emerging technologies. In this regard, the Act defines electronic message, sender information, subject matter information and locator very broadly:
- Electronic message: a message sent by any means of telecommunication, including a text, sound, voice or image message.
- Sender information: the part of an electronic message — including the data relating to source, routing, addressing or signalling — that identifies or purports to identify the sender or the origin of the message.
- Subject matter information: the part of an electronic message that purports to summarize the contents of the message or to give an indication of them.
- Locator: a name or information used to identify a source of data on a computer system, and includes a URL.
Salient features of the reviewable practices under section 74.011 include the following:
- No Materiality Necessary: For two of the three reviewable practices (section 74.011(1) and section 74.011(3), the Commissioner or a private plaintiff need not prove that the representation is false or misleading in a material respect. The omission of materiality means that any false or misleading representation in the sender information, subject matter information of an electronic message or in a locator (however insignificant) may be captured.
- Sent Electronic Messages Suffice: The Commissioner or a private plaintiff need not prove that the representation was made to the public – only that it was sent. Further, an electronic message is considered to have been sent once its transmission has been initiated. It is immaterial whether the electronic address to which an electronic message is sent exists, or whether the electronic message reaches its intended destination.
- Those Who Permit Are Also Captured: Persons captured by these reviewable practices include those who make or send false and misleading representations – directly and indirectly – and persons who permit a false or misleading representation to be made or sent.
Private Rights of Action
As of July 1, 2017, private plaintiffs who allege they are “affected” by an act or omission that constitutes conduct that is reviewable under section 74.011 of the Competition Act, may apply to a court for damages, namely:
- compensation in an amount equal to the actual loss or damage suffered, or expenses incurred, by the applicant; and
- $200 for each occurrence of the conduct, not exceeding $1,000,000 for each day on which the conduct occurred.
The meaning of “occurrence” in this context is a matter for determination by the courts. If “occurrence” is interpreted to capture each sent electronic message (particularly when electronic messages are frequently sent to large distribution lists of Canadian consumers), the daily maximum of $1,000,000 could easily be triggered. This is particularly significant when assessing exposure to class action litigation.
Private plaintiffs may seek an order against the persons alleged to have committed the act or omission, or persons alleged to be liable for the contravention or the reviewable conduct. Salient considerations in this regard include the following:
- Officers, Directors and Agents Captured: Officers, directors or agents of a corporation can be liable if they directed, authorized, assented to, acquiesced to or participated in the commission of any contravention, or engaged in that conduct, whether or not the corporation is sued in the private action.
- Vicarious Liability: Corporations can be liable for the conduct of their employees acting within the scope of their employment, or their agent acting within the scope of their authority, whether or not the employees or agents are sued in the private action.
- Due Diligence Defence Applies: Persons alleged to have engaged in the reviewable conduct can avoid liability if they establish a due diligence defence, namely by showing that they have exercised due diligence to prevent the contravention or conduct. The scope of due diligence required to meet this defence is a matter to be determined by the courts. The Competition Bureau’s bulletin on corporate compliance, however, is a good starting point.
- Competition Bureau Will Be Engaged: Private plaintiffs must serve their private actions on the Commissioner of Competition. As a practical matter, this will afford the Competition Bureau the opportunity to review the conduct as described in the private action, investigate it if the Commissioner sees fit (if it is not already being investigated) and potentially intervene in the proceeding. Accordingly, a private action can trigger dual public and private enforcement.
With less than seven months before private rights of action are triggered, companies that engage in any form of digital marketing ought to proactively ensure compliance with section 74.011 of the Competition Act.
As a starting point, businesses that advertise digitally in any way – e.g., email, websites, SMS or text messaging, social media, blogs, URLs, other locators, and other applications – should audit their digital marketing closely to identify any potential contraventions of section 74.011. Other take-aways include:
- Consider any form of digital marketing engaged in by employees or agents of the advertiser, including an employee’s conduct on social media, third party agencies and affiliated marketers.
- Implement (or update) a comprehensive and credible due diligence program for anyone participating in digital marketing for, or on behalf of, the company. This is particularly important due to the availability of a due diligence defence for companies alleged to have contravened section 74.011.
- Avoid, in particular, potentially misleading phrases in the subject line of an email or electronic message, or in a locator. As noted, materiality is not an element the reviewable practices involving these elements. Bolder claims can perhaps be used in the body of an email or electronic message (where materiality is an element), though not without a close look as well.
- Global companies should ensure that promotions advertised in Canada through electronic messages are, in fact, available to Canadian consumers as advertised. A “one-size-fits all” approach can lead to inadvertence, and in turn, significant exposure.