OTTAWA - The Competition Bureau announced Friday it’s launching a $31 million lawsuit against Bell Canada, Rogers Communications and Telus Corporation and the Canadian Wireless Telecommunications Association (CWTA). The Bureau alleges that the telcos promoted premium texting services while giving the impression that they were free. It’s also demanding that they cease the misleading advertising and provide full refunds to customers.
The lawsuit, which seeks penalties of $10 million from each telco, and $1 million from the CWTA, follows a five-month investigation. It concluded that Bell, Rogers and Telus, in conjunction with the CWTA, “facilitated the sale to their own customers of premium-rate digital content (such as trivia questions and ringtones) for fees that had not been adequately disclosed” the Bureau stated in a news release.
It alleges that customers were misled into believing this content was free, when it was not. “In fact, in the case of Bell, Rogers and Telus, they pocketed a share of the revenues collected.” The Bureau says the situation was made worse by the telcos and the CWTA because they led customers to believe that measures were in place to prevent the unauthorized charges.
"Our investigation revealed that consumers were under the false impression that certain texts and apps were free," said Melanie Aitken, Commissioner of Competition. "Unfortunately, in far too many cases, consumers only became aware of unexpected and unauthorized charges on their mobile phone bills."
The premium-rate digital content at the heart of the dispute can cost as much as $10 per transaction, and up to $40 for a monthly subscription, rates over and above standard text messaging plans claims the Bureau.
The CWTA, which for weeks has been aware of the Bureau's intentions to move forward with litigation, responded that it rejects the Bureau’s allegations, but added that it still seeks the Bureau’s “cooperation to protect consumers.”
It cautioned however that the Bureau’s demand that CWTA and the carriers “accept liability for third-party advertisers could impede innovation and growth in e-commerce in Canada, which is in stark contrast to the Federal Government’s own focus on growing the digital economy.”
“It is most unfortunate that the Competition Bureau’s actions could potentially impact the ability of Canadian consumers to access the text messaging services they have come to enjoy and rely on,” said CWTA President & CEO Bernard Lord. “CWTA and our members will do everything we can to ensure our customers can continue to choose to access these services.”
But the Public Interest Advocacy Centre (PIAC), also issued a release that took issue with the CWTA’s efforts to protect consumers and applauded the Competition Bureau’s lawsuit.
"CWTA's self-regulatory model for premium text messaging code is not adequate to protect consumers where advertisements are misleading or where terms and conditions are unclear to consumers," noted Janet Lo, counsel at PIAC and author of the 2011 PIAC report "Paying a Premium: Consumers and Mobile Premium Services."
“Wireless service providers and the industry association have claimed for years that their self-regulatory code was sufficient to protect consumers from third party text messaging services, when in reality they have collected these charges and kept a share for themselves.”
She claims that consumers had suffered millions of dollars of unasked for and unwanted premium text messages charges for services that were hard to cancel and difficult to obtain refunds for, despite the CWTA code of conduct.
John Lawford, Executive Director and General Counsel for PIAC added that "Consumers have complained for years of misleading advertisements for premium text messages that appear to provide a one-time service - for example a contest entry or quiz - but subscribe a consumer to a costly ongoing subscription service."
Wind Mobile also commended the Bureau for taking action, stating that it "sends a clear message that Canadians no longer have to tolerate misleading advertising or hidden fees from the Big Three."
"We believe that Canadians deserve the benefit of an open and competitive marketplace, fair and transparent pricing and a clear focus on consumers," said Wind's Chairman and CEO Anthony Lacavera in a release. Lacavera boasted that Wind is the only "major Canadian wireless provider dedicated to making the wireless industry better for Canadians."
The CWTA responded to the lawsuit by claiming “carriers do not make or control the text messaging services, but instead they only manage the billing for the third-party creators and operators.” The association noted that there are “strict standards governing how consumers register for Common Short Code services, and CWTA and the providers have proactively put in place a set of detailed requirements, including how third parties can advertise these services.”
The CWTA says it's essential that consumers be provided with “clear and concise information before opting-in to text messaging services,” as well as how to deal with unwanted messages.
“For this reason, CWTA implemented a requirement that third-party creators and aggregators of these services obtain consent from each customer in accordance with a double opt-in process before commencing service.”
The CWTA claims it reached out to the Bureau last year “seeking guidance about what possible remedies exist under the Competition Act for non-compliant advertising by companies utilizing Common Short Codes, and to offer any assistance CWTA could provide the Bureau in pursuit of such remedies.”
The association said it was seeking “productive dialogue with the Bureau” but is “extremely disappointed” it has responded with litigation that it says will “ultimately yield no net benefit to consumers, while at the same time is refusing to pursue those advertisers who make the statements at issue and who are legally responsible for them.”
It charges that the Bureau’s commissioner is trying to “override Parliament by applying liability to the carriers and CWTA for the statements of others, where the law does not do so.”
The Bureau’s legal proceedings are before the Ontario Superior Court of Justice under the misleading advertising provisions of the Competition Act. The Bureau is seeking:
•full refunds for customers;
•administrative monetary penalties — $10 million each from Bell, Rogers and Telus, and $1 million from the CWTA;
•a stop to any representations that do not clearly disclose the price and other terms and conditions applicable to premium-rate digital content; and
•a corrective notice from each of Bell, Rogers, Telus, and the CWTA, to inform the general public about the terms and conditions of any order issued against them.
"We take misleading advertising very seriously," said Lisa Campbell, Deputy Commissioner, Fair Business Practices Branch. "We want to ensure that consumers are not misled about pricing terms and have greater control over third-party charges on their wireless invoices."
The Competition Bureau, an independent law enforcement agency, ensures that Canadian businesses and consumers prosper in a competitive and innovative marketplace.