Competition Bureau lawsuit challenges ‘intermediary’ roles online: CWTA

The Competition Bureau's $31-million dollar lawsuit against Canada's incumbent wireless carriers for their role in misleading mobile advertising “goes in the other direction” of regulatory moves to ensure telecom operators are treated as third-party intermediaries, said Bernard Lord, president and CEO of the Canadian Wireless Telecommunications Association (CWTA). The Competition Bureau said Sept. 14 it launched a civil action suit with the Ontario Superior Court against BCE Inc., Rogers Communications Inc., Telus Corp., and the CWTA, seeking a total of $31 million for their role in misleading advertising that promoted premium texting and rich content services for mobile devices. “There is one very specific thing that is very puzzling in this situation,” Lord said in a phone interview. “The Competition Bureau alleges that some companies, not wireless service providers but other companies, made some false representations in misleading advertising. That's the conclusion of the bureau, and instead of going after those companies, the commissioner has decided to launch a legal action against the service providers and the association. This sends a signal that companies can be held responsible for other companies' representations.” When asked what the decision means for telecom carriers and Internet companies that have sought exemptions as “intermediaries” under the copyright and broadcasting statutes, Lord said: “This goes in the other direction.” He said he could not answer all questions about the lawsuit because it is now in court. The lawsuit relates to premium text messages and rich content services, such as contest prizes, alerts, trivia, horoscopes, ringtones, mobile wallpaper, and programs and applications, which content companies offer through text messages or clickable ads on mobile devices. According to the Competition Bureau's statement of claim filed with the court Sept. 14, Bell, Rogers and Telus had commercial agreements with Jesta Digital LLC, operating under the brand Jamster, and Mobile Messenger North America Inc., both non-Canadian companies providing premium text messaging and rich content services. Under revenue sharing agreements with those companies, the carriers charge their mobile customers on behalf of Jesta and Mobile Messenger using text messaging or direct billing. The telecom companies typically took 27 to 60 per cent of the monthly revenues generated by the Jesta and Mobile Messenger services, the claim said, leading the carriers to collect “millions of dollars” in revenues. Jesta ran banner ads in free mobile apps such as the game Angry Birds, which, when clicked, took consumers to a mobile Jamster website where consumers were invited to download digital content, according to the claim, obtained by The Wire Report from the court. The ads were false or misleading because they conveyed “the general impression” that consumers could download and receive premium text messaging and rich content services like ringtones “for free, when they are not,” the claim said. The services can cost up to $10 per transaction or $40 per month. Consumers unknowingly subscribed to the services and the wireless companies invoiced them on their monthly wireless bills to collect the charges, the claim said. Similarly, Mobile Messenger's services, “distributed widely online, including through pop-up advertisements and social media websites,” led to customers being unknowingly charged on their monthly wireless bills, the claim said. The Competition Bureau said Bell, Telus and Rogers also posted false and misleading messages on their websites that gave the “general impression” that customers are safeguarded from the unwanted charges. It said in the claim the companies made the false or misleading statements on their websites since “at least December 2010.” The carriers violated section 74 of the Competition Act by making these false or misleading representations “for the purpose of promoting the supply or use of wireless communications products” while they “actively facilitated and collected unauthorized charges from their customers” for the services and retained significant portion of the revenues, the claim said. The Competition Act says it is a “reviewable conduct” to make, or permit others to make, false or misleading representations related to promoting products or business interests. Lord said the lawsuit could have implications for e-commerce in Canada and third parties involved in the sector. “This could have a significant, serious impact on e-commerce and carriers and other types of providers,” he said. When asked whether be believes the lawsuit could impact Internet companies like Google Inc., which brokers online advertising, he said, “Well, you've hit the nail on the head.” The Conservative government's passage of amendments to the Copyright Act this year provided exceptions for Internet “intermediaries.” The Supreme Court said this year that Internet service providers (ISPs) play a “content-neutral role” in the transmission of data. The CWTA said in a release last week there are more than 700 text messaging services in a “market at any time,” covering services such as charitable giving, news alerts, voting on television programs, weather updates, real estate services, public transit schedules, contests, airline schedules, sports highlights, personal banking, parking payments, and other services. Bryan Parker, a spokesman for the Competition Bureau, said in a phone interview that “our investigation is ongoing” when asked about seeking penalties from Jesta and Mobile Messenger. "The Bureau will not hesitate to investigate misleading representations and deceptive marketing practices having an effect on the Canadian market, regardless of whether the representation originates in Canada or abroad," Parker said in a follow-up email. "Assessed on a case-by-case basis, the Bureau will determine the most effective means to remedy misleading representations and deceptive practices that originate abroad and impact on Canada consumers, which may include legal proceedings and/or the assistance of foreign agencies, as appropriate." For the lawsuit the bureau said it is seeking full customer refunds and administrative monetary penalties of $10 million each from Bell, Rogers and Telus, as well as $1 million from the CWTA for its coordinating role. The claim said the CWTA permitted the representations by facilitating the messages and controlling and administering common short codes for premium text messaging and rich content services. Those codes allow for the delivery of the premium content and messages. “The CWTA has been influenced in its approach to Common Short Codes by the business interests of the Defendant wireless companies which have a combined market share of approximately 93% of the Canadian wireless market,” the claim said. The bureau is also seeking court and legal costs related to the proceeding, the claim said, as well as $15-million penalties against any of the companies for “whom an order has been previously made.” Rogers is currently fighting a legal battle with the Competition Bureau over a $10 million penalty for advertising that promoted its discount Chatr wireless service. The Competition Bureau claim filed with the court in Ottawa cited “aggravating factors” in the case, including the large number of consumers who use wireless devices and services; the “vulnerability” of unaware consumers such as children; and the unlikely prospect of the market self-correcting the issue. The claim said the misleading representations on the carriers' websites are exacerbated because unauthorized charges “often go undetected by consumers, who remain unaware, sometimes for months, that they have incurred these charges.” According to the claim, Bell's website statement said: “As a Bell Mobility customer, your risk of receiving and having to pay for unwanted text messages (or spam) is very low because Bell Mobility does not give out customers' mobile numbers to any third-party sources unless we have prior consent from you. Furthermore, Bell Mobility employs rigorous spam filters.” “However, if you notice you've been charged for unsolicited messages, you can call 1 800 667 0123 or email us at mobilespam@bell.ca. We will review and remove any related text messaging charges that are invalid.” The Competition Bureau lawsuit was filed with the Ontario Superior Court in Ottawa. Its docket number is CV-12-55497. sdoyle@thewirereport.ca

Competition Bureau lawsuit challenges ‘intermediary’ roles online: CWTA

News | September 19, 2012

Unlock all the Canadian telecom, broadcasting and digital media news you need.

FREE TRIAL

SUBSCRIBE

Inside The Wire Report

Information

Hill Times Publishing

Get in Touch With Us