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Court Finds Partial Breach in Misleading Advertising Suit

November 21, 2013

By Philip Goldbach and Tamarah Luk

On August 19, 2013, the Ontario Superior Court released its decision on the misleading advertising application launched nearly three years ago by the Commissioner of Competition (the “Commissioner”) against one of Canada’s largest telecommunications companies, Rogers Communications Inc. (“Rogers”).  The Court ruled partially in favour of Rogers. Amongst other things, the Bureau sought a declaration that Rogers’ claims of “fewer dropped calls than new wireless carriers” and “no worries about dropped calls” associated with its discount service “Chatr” were false and misleading, and a penalty of $10 million.

The Court agreed with Rogers that drive tests, performed by the company in some markets to determine dropped call frequencies, were consistent with industry standards and were sufficient to satisfy the “adequate and proper test” requirements laid out in the Competition Act. However, Rogers failed to test its claims in Calgary and Edmonton against all new service providers (including Wind Mobile, Public Mobile and Mobilicity), and in Toronto and Montréal against Public Mobile.  A further hearing will be held to determine the amount of the monetary penalty owed as a result of the partial breach.

Other highlights from the decision:

  • The Court applied the “credulous and technically inexperienced consumer” standard from a recent Supreme Court decision, Richard v. Time Inc., but highlighted the fact that “credulous” and “inexperienced” should be defined with the purpose of the Competition Act in mind, as well as the particular consumer context. The Court stated the Competition Act is intended to maintain and encourage competition in Canada to “provide consumers with competitive prices and product choices”.
  • The Court dismissed all constitutional defences previously raised by Rogers under the Charter of Rights and Freedoms (the “Charter”). Rogers argued that the requirement to show “adequate and proper tests” violated the right to freedom of expression.  The Court held that the limit on the right was justifiable and reasonable under the Charter.  Rogers also argued that civil penalties for misleading advertising were unconstitutional because it violated rights associated with being charged with offences, including the right to be presumed innocent until proven guilty. The Court found that the civil penalties were not “true penal consequences” that were the result of an offence, and not criminal, but regulatory. The purpose of the penalties is to encourage conformity with the Competition Act, not to punish.

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