Law Times

Law Times • June 6, 2016 Page 9 www.lawtimesnews.com Telecoms told review of third parties needed BY MICHAEL MCKIERNAN For Law Times W ireless operators will have to step up their vetting of third-party af- filiates after a second major telecommunications company settled with the Competition Bu- reau over premium text message ads, according to a Toronto com- petition and advertising lawyer. In December, Telus agreed to pay $7.3 million in rebates to current and former customers following allegations the com- pany "made, or permitted to be made," misleading advertise- ments for premium text message services in pop-up ads, apps, and on social media. Although Telus admitted no wrongdoing as part of the agree- ment, the Competition Bureau, which had already settled with Rogers over similar allegations, claimed its customers were charged by third parties for ser- vices, including ringtones and trivia questions, without ever in- tending or agreeing to purchase them. The bureau originally sought $10 million in adminis- trative monetary penalties from Telus, claiming it had pocketed a share of revenue for services consumers thought they were getting for free. Steve Szentesi, a Toronto law- yer who runs an advertising and marketing law practice, says the case shows companies can po- tentially be held responsible for facilitating misleading advertis- ing claims made by a service- providing partner, even if the settlement means there is no ju- dicial guidance on exactly when liability will kick in. "It's got to make companies more circumspect about their third-party affiliates, and cer- tainly be a bit more mindful of potential liability when partner- ing in joint marketing initia- tives," Szentesi says. "From the Telus settlement, you can see that they're already being more careful in terms of choosing business partners, because they terminated their relationships with some of their affiliate mar- keters very quickly after the in- vestigation was opened. There is a question as to how much these companies necessarily know about what third-party market- ers are doing." Peter Murphy, a partner in the business law group at Shibley Righton LLP, says achieving that extra layer of compliance could prove difficult. "The ultimate lesson here is that telecommunications com- panies have to make sure that customers fully understand when they will pay extra for ad- ditional services that they can take advantage of through the network. Not only must you avoid creating misleading rep- resentations, but you have to ensure your platform partners don't either," he says. "When you're operating a telecommu- nications network, there are so many partners that come into play who could be using your platform to sell services and goods that it creates a challenge to make sure the entire user experience ends up being one where the consumer has suf- ficient information about what they are buying." According to Szentesi, com- panies dealing in new media face practical challenges given the potential number of points of contact between advertisers and consumers. "If you're involved in apps, mobile, and social media, it's becoming increasingly difficult for brands and advertisers to get those critical disclosures to consumers upfront. Even for the ones who want to comply, it is a challenge," he says. Whatever the difficulties as- sociated with supervising mar- keting partners, Murphy says the sheer size of the Telus settle- ment is likely to spur them and other companies into finding solutions. "Clearly, this signals that the bureau is taking, and will continue to take, an aggressive stance when it comes to misrep- resentations made to consum- ers, particularly in situations where there are aggravating fac- tors like the involvement of large market operators and vulner- able consumers being affected," he says. According to the bureau, the Telus settlement was the largest ever obtained under one of its agreements, beating the previ- ous high of $5.4 million set earli- er in 2015 when Rogers agreed to repay that amount to its custom- ers as a result of the same premi- um text message investigation. "Consumers expect and de- serve truth in advertising. Al- lowing a third party to take ad- vantage of consumers through misleading advertising is a viola- tion of the Competition Act," said Matthew Boswell, the bureau's senior deputy commissioner of competition in a statement an- nouncing the Telus agreement. "We are pleased that Telus has taken steps to prevent this from happening again, as we continue our work to ensure that consum- ers benefit from accurate infor- mation in the digital economy." Customers who were billed for services delivered by two Telus affiliates between January 2011 and August 2013 will re- ceive a maximum rebate of $15 as part of the deal, which also includes a $250,000 donation by the phone company towards research on consumer issues at several bodies, including the Ry- erson University Privacy and Big Data Institute. In addition, both Rogers and Telus agreed in their settlements to enhance their corporate com- pliance programs to match stan- dards set by the bureau, particu- larly with respect to billing cus- tomers on behalf of third parties. Competition Bureau pro- ceedings remain ongoing as part of the same investigation against Bell and the Canadian Wireless Telecommunications Associa- tion, an advocacy group for tele- communications companies. John Lawford, the executive director and general counsel of the Public Interest Advocacy Centre in Ottawa, says he was pleased with the bureau's in- tervention, and the settlements reached so far. Premium text messages were a long-term con- cern for PIAC, which issued a major report on the issue before the bureau launched its own in- vestigation in 2012. "Well, $15 is better than a kick in the head. You can also unsub- scribe from these services much more easily now, so the end re- sult is probably very good for consumers," he says. "The message from the bureau is clear that companies shouldn't be engaging in that type of be- haviour, and if they do, they will have to give the money back. That is not a bad message, especially in the absence of a strong competi- tion plaintiffs' bar." Although the Competition Bureau premium text message enforcement has arisen in the context of new and emerging technology, Szentesi says the regulator is essentially delivering the same old message: "First and foremost, pricing has to be disclosed upfront. It's not rocket science: Tell consum- ers what they're going to pay, and don't charge them if they didn't agree to it," he says. According to Szentesi, pric- ing disclosure has been at the heart of several of the bureau's most significant actions over the last year or so, including a decep- tive marketing action launched against car rental companies, and an investigation into mat- tress sales at some of the coun- try's largest department stores. "I always tell my clients that adequate and upfront price dis- closure about pricing is right at the top of the enforcement list," he says. "This happens to be in the mobile space, but we've also seen it be a key issue in rela- tion to traditional bricks-and- mortar retailers, as well as in the online space. "The key message for brands is that they have to think about disclosure in advance. "The key terms and condi- tions have to be made clear to consumers before they buy anything and enter into a con- tract, because burying them in the back end or in agreements made after the point of pur- chase is often not going to be good enough." LT FOCUS Peter Murphy says telecommunications companies have to ensure customers fully understand when they will pay extra for additional services that they access through the network. 1-800-340-3234 | ghostpractice.ca GhostPractice is an integrated legal practice management software that offers case management functionality on the front end combined with the business management features of billing and accounting on the back end - all in one complete system. 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