Cellphone case challenges Competition Act
By Sarah Schmidt, Postmedia News
August 5, 2012
OTTAWA — A company’s right to free expression is up against Canada’s truth-in-advertising rules as Rogers Communications and the Competition Bureau begin to duke it out in court Tuesday over the constitutionality of the Competition Act.
In the first of its kind in Canada, Rogers will ask the Ontario Superior Court to strike down a key provision in the federal law requiring companies to have “adequate and proper” tests of a product’s performance before making performance claims in advertisements. Rogers says this testing requirement violates its right to freedom of expression enshrined in Canada’s Charter of Rights and Freedoms.
The telecom giant will also argue the hefty financial penalties that the Competition Bureau can slap on a company for making a false or misleading claim are unconstitutional because a $10-million administrative penalty is in effect a criminal fine, yet the process does not afford the company the safeguards of the criminal law process guaranteed in the Charter.
The company’s legal manoeuvre comes after the Competition Bureau went to court in November 2010 seeking to levy a $10-million penalty for an alleged misleading advertising campaign involving a discount cellphone carrier of Rogers.
The Chatr advertising campaign, launched with the entry of upstart competitors like Wind Mobile in the market, claimed that Chatr had “fewer dropped calls than new wireless carriers” and its customers have “no worries about dropped calls.”
If Rogers is successful, the case could have ramifications for other laws in Canada — and the advertising industry, Michael Janigan, executive director and general counsel at Public Interest Advocacy Centre, said in an interview.
“At its root, the case effectively advances the proposition that companies that advertise shouldn’t be forced to actually have the facts and evidence on hand before they make a claim and it somehow devalues public discourse if they are forced to do so. With all due respect to that position, it sounds a bit like a Madison Avenue wet dream,” said Janigan, a reference to New York City’s iconic street that housed most ad agencies in the industry’s early years and is now used rhetorically for advertising.
In a statement, Rogers countered that its beef with the Competition Act is a narrow one.
“We’re committed to truth in advertising and support legislation that prevents false claims and protects consumers, including the Competition Act. We’re not challenging that fundamental principle. We’re raising two specific, narrow concerns with the act as it now stands,” spokeswoman Patricia Trott said.
Commissioner of Competition Melanie Aitken says these two provisions dealing with false or misleading representations and the requirement for proper and adequate testing are “essential to the bureau’s efforts to protect consumers and businesses from anti-competitive behaviour.”
Aitken added in a statement that the bureau is “confident” in its legal position.
In launching its case against Rogers, the bureau said it conducted an investigation that involved an extensive review of technical data obtained by a number of sources, and concluded there were “no discernible differences in dropped call rates between Rogers’ discount service and new entrants.”
The bureau relied on an updated provision in the Competition Act brought in by the Conservative government in 2009. It increased the maximum administrative monetary penalty remedy available under the misleading advertising provisions to $10 million for first-time violation corporations, up from $100,000, in effect since 1999. A penalty, considered a civil matter in the act, is different than a fine, reserved for criminal cases.
Under this new regime of higher AMPS, the bureau struck a deal with Bell Canada in June 2011. The company agreed to pay the maximum administrative penalty of $10 million after the bureau concluded that Bell had charged higher prices than advertised for many of its home services.
Janigan said the Tory government’s push for large administrative monetary penalties in other acts, including its signature Consumer Product Safety Act in 2011, means the outcome of the case could have a ripple effect.
“If the court found that the quantum is a mechanism subject to criminal procedure, then it would certainly have a chilling effect on the use of AMPs,” said Janigan.
The court has reserved a full month to hear the case, with time initially set aside for evidence about the constitutionality of key provisions of the Competition Act.
The case is certainly on the government’s radar, according to internal correspondence released to Postmedia News under access to information. Both the offices of Justice Minister Rob Nicholson and Industry Minister Christian Paradis inquired separately with Department of Justice officials about the case after Postmedia published a story in January about the preliminary outline of arguments filed in court by Rogers to support its constitutional validity motion.
Rogers, represented by counsel at Davies Ward Phillips & Vineberg, argued that administrative monetary penalties “of this magnitude are criminal in nature and constitute true penal consequences. Yet the civil proceedings under which Financial Penalties of this nature can be imposed deny respondents many of the procedural and other safeguards of the criminal law process guaranteed by Section 11 of the Charter.”
Those safeguards include: presumption of innocence, the right to a fair trial and to make full answer and defence, and the privilege against testimonial compulsion.
Rogers also argued the “adequate and proper’’ test requirement in the Competition Act, requiring tests be performed before a company makes a performance claim, violated the company’s right to freedom of expression. This section in the Competition Act “prohibits and penalizes entirely truthful claims, including claims made on a reasonably held belief that such claims are entirely accurate and claims that are proven to be entirely accurate through post-claim testing. Not only are these types of claims entirely harmless, but they play an important role in consumer choice and may have a significant positive impact on prices and product innovation,’’ Rogers argued in court records.
Rogers has also previously said that the company stands by the ad campaign and said its claims were backed up by tests.
ref. - http://www.edmontonjournal.com/business ... story.html