Electronic Commerce Protection Regulations – Much Work Remains

September 20th, 2011 by Lorne Salzman and Barry Sookman Leave a reply »

Canada’s new anti-SPAM/anti-malware law, or CASL, was passed by Parliament in late 2010.  The draft Electronic Commerce Protection Regulations, which were intended to clarify and flesh out the law, were published for public consultation earlier this summer.  Fifty-seven organizations and individuals filed comments by the September 7, 2011 deadline.  The message from these commentators is clear: while all support the goal of reducing unwanted commercial electronic messages (CEMs) and malware, the draft regulations miss the mark, and much work remains before CASL can be proclaimed into law.

The CRTC and Industry Canada initiated the public consultation process by issuing the draft regulations in June and July 2011 respectively. Each organization published their own draft regulations as each has distinct regulation-making powers under CASL. The CRTC promptly published on its website all the comments that it received. Industry Canada indicated it will follow suit shortly. That said, most of the commentators submitted combined comments on the two sets of draft regulations, and thus the CRTC filings give a good picture of what has been submitted to Industry Canada as well.

Fifty-seven trade and public interest organizations, businesses, and individuals filed comments with the CRTC. Most of the commentators represented Canadian businesses, large and small. Many industry associations filed comments, including: Association of Canadian Advertisers (ACA), Association of International Automobile Manufactuers of Canada (AIAM), Canadian Bankers Association, Canadian Bar Association (CBA), Canadian Chamber of Commerce, (The Chamber), Canadian Federation of Independent Business (CFIB), Canadian Life and Health Insurance Association (CLHIA), Canadian Manufacturers & Exporters (CME), Canadian Marketing Association (CMA), Canadian Real Estate Association (CREA), Canadian Vehicle Manufacturers’ Association (CVMA), Canadian Wireless Telecommunications Association CWTA), Direct Sellers Association of Canada (DSAC),  Entertainment Software Association of Canada (ESAC), The Financial Advisors Association of Canada (FAAC), Information Technology Association of Canada (ITAC),  Insurance Bureau of Canada (IBC), Investment Industry Association of Canada (IIAC), Magazines Canada, Ontario Telecommunications Association (OTA), Retail Council of Canada (RCA), and The Investment Funds of Canada (IFC). A number of individual businesses also submitted comments, including: AVLA Audio-Video Licensing Agency Inc. (AVLA), Bell Canada, Johnson & Johnson Family of Companies in Canada (J&J), Microsoft Canada Inc. (Microsoft),  Primerica Financial Services, Re:Sound, Research In Motion Limited (RIM),  Rogers Communications Partnership (Rogers), Shaw Cablesystems G.P. (Shaw), Tbaytel, TELUS Communications Company (Telus),  and Wells Fargo & Company. Together these organizations represent hundreds of thousands of Canadian businesses.

Two consumer organizations filed comments: Public Interest Advocacy Centre/ Option consummateurs (PIAC) and Union des consummateurs.

Some individuals also filed comments. Among them, we personally filed detailed comments with the CRTC and Industry Canada. These comments followed on from an earlier paper that we published suggesting that CASL needed rethinking.

Canadian businesses all agreed with the goal of reducing unwanted CEMs, or “SPAM”, and malware, but most expressed concern that the proposed regulations contain significant problems that need to be addressed. In some cases, the problems are those of omission, namely failure to set out needed exemptions or needed clarifications. In other cases, the regulations impose requirements that are unworkable or unduly cumbersome and expensive to operate.

The purpose of this paper is to briefly describe and summarize the key positions parties submitted in their filings with the CRTC, with a particular focus on the concerns expressed by Canadian businesses and their representative associations. Distilled to the essence, their comments identify the following concerns:

1. Although all parties support the goal of reducing SPAM and malware, most considered that the draft regulations fail to address the overreach inherent in CASL. Consequently, CASL plus its regulations are a disproportionate response to the acknowledged problems of SPAM and malware.

2. Although many commentators had expected that the proposed regulations would target truly offensive conduct under CASL and, as well, clarify ambiguities, thereby enabling the law to better meet the Government’s objectives, this has not occurred. The proposed regulations fail to set out worthwhile classes of exempt conduct, and they impose extra compliance costs that many businesses found troubling.

3. Under CASL and the proposed regulations, some inoffensive communications will become illegal, an overreach that will invite challenges under the freedom of speech provisions of the Canadian Charter of Rights and Freedom, with unpredictable results.

4. The proposed regulations do not remedy the concerns that CASL will hinder the start up and growth of small business.

5. The proposed regulations do not look beyond CASL’s “email-focused” model and consequently they fail to fit well with other messaging systems. As a result, CASL is not technologically neutral in its regulatory approach.

6. The proposed regulations fail to address messaging systems where SPAM is not a problem, such as Common Short Code Messaging, Opt-in Instant Messaging and similar systems, and where the additional regulation would impose costs, be impractical or impossible to comply with.

7. The proposed regulations fail to address CASL’s territorial overreach, and the consequent risk to investment and innovation in cloud computing and outsourcing in Canada.

8. The proposed regulations fail to properly clarify what is included under the definition of a CEM, thereby subjecting non-CEMs to CASL’s unsubscribe and formality requirements.

9. The proposed regulations fail to recognize the value of other, reasonable, approaches to obtaining consent to send CEMs, such as under existing PIPEDA rules.

10.The proposed regulations fail to clear the confusion in CASL between holders of message accounts and recipients of messages.

11.The proposed regulations stipulate that requests for consent be in writing, a requirement that is both limiting and, in some cases, impractical.

12.Most commentators criticized as unworkable the CRTC’s proposed regulation which requires that each CEM and each request for consent to send a CEM include the physical and mailing address, a telephone number providing access to an agent or a voice messaging system, an email address and a web address of the sender and any other electronic address used by the sender.

13.The CRTC’s proposed regulation requiring that each request for consent include a statement that a consent can be withdrawn using any of the mandatory contact information is contrary to CASL and is unworkable. It would require organizations to monitor physical and mailing addresses, a telephone number, an email address and a web address and any other electronic address used by those persons.

14.The CRTC’s proposed regulation is unworkable where it requires that request for consent must be sought separately for each act described in sections 6 to 8 of CASL.

15.The CRTC’s proposed regulation permitting prescribed information to be made available on the web is not a practical or technologically neutral solution to the disclosure requirement problems created by CASL and the proposed regulations.

16.The proposed regulations fail to accommodate a business that does not maintain a web site from receiving unsubscribe requests. Further, the CRTC’s proposed regulation requiring the unsubscribe mechanism be performed in no more than two clicks is not technologically neutral or workable in many circumstances.

17.The heightened consent requirements in Section 5 of the draft CRTC regulations for computer programs that perform one of the functions listed in Section 10(5) is unworkable. It is impractical to require that such consents be in writing or to require the ser provide an acknowledgement. Further, there are many circumstances in which meeting these requirements would be either technically or commercially unfeasible.

18.Certain of the CRTC’s proposed regulations may be beyond the CRTC’s authority under CASL.

In the following, we expand on the concerns with the proposed regulations that have been identified by Canadian businesses and their representatives.

1. Although all parties support the goal of reducing SPAM and malware, most considered that the draft regulations fail to address the overreach inherent in CASL. Consequently, CASL plus its regulations are a disproportionate response to the acknowledged problems of SPAM and malware.

Although commentators agreed that containing the flood of SPAM and malware is desirable, CASL and the proposed regulations will impose costs and inefficiencies on Canadians that exceed the benefits. These costs and inefficiencies are significant. They are not just the substantial compliance costs that Canadian businesses must bear.  They extend to impeding the use of electronic means of communicating, putting Canadian businesses at competitive disadvantages to their foreign competitors, retarding the growth of small and start-up businesses, and potentially limiting the use by Canadian businesses of modern messaging platforms.

A key source of the problem is the design of CASL. Its approach is to forbid practically all commercial electronic messages, and then prescribe certain exemptions in both the law and the regulations. Thus, rather than targeting truly offensive conduct in the first place, the law and proposed regulations are based on the sweeping proposition that, in effect, nothing is permitted except that which is specifically allowed.  CASL takes the same prohibitory approach to regulating the installation of computer programs on computers, mobile phones, tablets and other devices.

The Chamber, which represents over 192,000 Canadian businesses, had this to say:

“The Act and proposed Regulations do not adequately balance the objective of preventing unwanted, or harmful behaviour with the objectives of ensuring that perfectly legitimate acts are not made illegal, and preserving the vitality of the Internet for electronic commerce. Furthermore, they introduce conflicting or unnecessary regulatory regimes that needlessly impose significant costs on legitimate business.”

”The overly broad language in both the Act and the proposed regulations could circumscribe legitimate business-to-business activities and inadvertently impact businesses ability to deliver products and services to consumers.”

“The over-broad scope of the Act and proposed Regulations, the lack of exceptions for socially valuable activities, unwieldy consent requirements, administrative monetary penalties and statutory damage provisions that have little relation to actual harm suffered may collectively have the opposite effect: rather than promoting Canada’s digital economy, the Act and proposed Regulations may actually create significant impediments to electronic commerce and the development of the digital sector.”

The Canadian Federation of Independent Business (CFIB) which represents over 108,000 small business owners from coast-to-coast commented as follows:

“This new level of regulation and oversight on industry seems contrary to the government’s stated objectives to encourage entrepreneurial growth and reduce the regulatory burden”, based on their announcements earlier this year designating 2011 the Year of the Entrepreneur, and the creation of the Red Tape Reduction Commission to tackle red tape”.

The Canadian Wireless Telecommunications Association (CWTA) is the authority on wireless issues, developments and trends in Canada.  It represents cellular, PCS, messaging, mobile radio, fixed wireless and mobile satellite carriers as well as companies that develop and produce products and services for the industry. It had this to say:

“The Act and the proposed Regulations are highly prescriptive and create a high degree of regulation for legitimate commercial messages.  This will result in significant compliance costs for businesses that communicate with their customers electronically”.

“No one wants to permit true spammers to continue operating unfettered, but it would be antithetical if the result of the Regulations were to dampen bona fide electronic business activities”.

The Entertainment Software Association of Canada (ESAC) represents Canada’s leading interactive entertainment software publishers and distributors, which collectively accounted for more than 90 per cent of the $2 billion in entertainment software and hardware sales in Canada in 2009. It stated as follows:

“We are deeply concerned that the extremely broad application of the Act to all forms of electronic messaging and software, the often onerous and inflexible requirements and the potential for massive, multi-million dollar liability for inconsequential breaches, will have a negative impact on the growth of electronic commerce in Canada that outweighs the benefits.”

2. Although many commentators had expected that the proposed regulations would target truly offensive conduct under CASL and, as well, clarify ambiguities, thereby enabling the law to better meet the Government’s objectives, this has not occurred. The proposed regulations fail to set out worthwhile classes of exempt conduct, and they impose extra compliance costs that many businesses found troubling.

In introducing CASL at second reading, Minister Clement stated that CASL’s purpose “is not to limit legitimate online business. It is to promote electronic commerce by increasing confidence in the use of the Internet to carry out business transactions”. CASL was passed to “deter the most damaging and deceptive forms of SPAM from occurring in Canada and help drive spammers out of Canada”[3] and to encourage the use of electronic means to carry of commercial activities.[4] These goals were intended to be accomplished without negatively impacting legitimate businesses that use electronic means to market their products and services to Canadians.[5]

With appropriate regulations, CASL could go a long distance to achieving its goal of deterring the most damaging and deceptive forms of SPAM and help drive spammers out of Canada. However, virtually all business commentators contended that the proposed regulations miss the mark. They do not address the issue of overreach by establishing categories of exempt conduct. Moreover, the proposed regulations add to the difficulty and cost of compliance with CASL.

The costs and inefficiencies are significant. They are not just the substantial compliance costs that Canadian businesses must bear.  They extend to impeding the use of electronic means of communicating, putting Canadian businesses at competitive disadvantages to their foreign competitors, retarding the growth of small and start-up businesses, and potentially limiting the innovation and use by Canadian businesses of modern messaging platforms.

The Canadian Marketing Association (CMA) is the national voice for Canada’s marketing community. It stated the following about the regulations:

“The proposed rules, as well as those published by Industry Canada, are problematic, cumbersome and ultimately serve to negatively impact legitimate marketing practices in Canada with consequent negative economic impact.”

The Canadian Bankers Association represents over 50 banks and lending institutions in Canada. The association was critical of the proposed regulations, stating as follows:

“The stated goal of the CRTC Draft Regulations is to clarify the required content and form of commercial electronic messages (“CEM”) and the request for consent under the Act. It is disappointing, however, and a cause for concern, that the CRTC Draft Regulations do not address some of the operational challenges created by the requirements of the Act”.

“Several additional requirements and a number of undefined terms have been introduced in the CRTC Draft Regulations that we believe are problematic for business, exceed best marketing practices, do little to protect customers from SPAM or malicious software and, therefore, should be reconsidered”.

“Our members anticipate significant planning and resource implications with respect to the implementation of the Anti-SPAM Act and the related Regulations (particularly with respect to technology systems and processes).”

Commentators strongly proposed that Industry Canada use the broad regulatory powers conferred on the Governor in Council by Section 64(1) to fix CASL to enable it to a achieve its objectives. The Chamber stated as follows:

“Several of the most problematic and unwieldy requirements imposed by the Act can be addressed by the introduction of judicious regulation that provides ‘greater flexibility and exempts legitimate forms of electronic communications.”

“The more details that the CRTC can provide, through regulations or interpretation guidelines, and the more flexibility that is added to the regime, the less the impact on legitimate businesses and the smoother the transition to the new regime will be, especially for small businesses across Canada.”

“Using the regulations to achieve a reasonable balance of costs and benefits will be critical if unintended impacts, such as deterring suppliers of services, impeding businesses from developing new marketing strategies involving electronic communications and creating material costs and restrictions on enterprises carrying on business in Canada, are to be avoided.”

3. Under CASL and the proposed regulations, some inoffensive communications will become illegal, an overreach that will invite challenges under the freedom of speech provisions of the Canadian Charter of Rights and Freedom, with unpredictable results.

CASL prescriptive approach to regulating commercial speech will see the banning of all commercial electronic messages unless they are sent with express consent, or a consent which falls into an exclusive list of exceptions for which consent is deemed to be implied or not to be required and unless they comply with onerous, and sometimes impossible to meet, form, disclosure, and unsubscribe requirements. This wide regulatory sweep is bound to impinge on legitimate and beneficial commercial speech  thereby raising concerns as to compliance with the Canadian Charter of Rights and Freedoms.

RIM, one of Canada’s leading telecommunications companies, articulated this concern as follows in a brief that thoroughly commented on the proposed regulations:

“RIM notes that CASL’s approach to SPAM is to broadly prohibit the sending of all CEMs unless the messages are sent with express consent or fall into an excluded category.  It does not prohibit just the sending of only unwanted, false, fraudulent, misleading or otherwise harmful messages. Its “ban all unless allowed” structure guarantees that some legitimate and useful commercial speech will be become illegal. This restriction on legitimate CEMs, ultimately when challenged, will have to pass the scrutiny of the Canadian Charter of Rights and Freedoms. The limits on commercial speech imposed by CASL must be reasonable and justified, with minimal impairment of the free speech right and with the limits on free speech being in proportion to the harm that is being targeted.”

“In order to be consistent with the Charter and the intent of Parliament, the government must take steps in the regulations to ensure that legitimate online commercial activities are not unnecessarily hindered by CASL, while at the same time curtailing real and harmful SPAM. Unchanged, CASL will not achieve, and would undermine, some of its most important objectives.”

4. The proposed regulations do not remedy the concerns that CASL will hinder the start up and growth of small business.

Under CASL, it will be illegal to send a commercial electronic message unless the individual or business sending the message establishes and maintains a web site to receive unsubscribe requests.[6] Under the proposed CRTC regulations, the individual or business would have to have a physical and mailing address, a telephone number, an email address and a web address if it wants to obtain consents to send out CEMs or to send out a CEM. Not every individual or small business can meet these requirements.

Unlike established companies, start-up companies also do not have a ready list of electronic contacts they can approach to market their products and services.  Rather, they have to develop electronic lists from a variety of sources and use them to launch their products. Although few would find these activities offensive, they will all be potentially problematic under CASL.  Rather than using electronic communications, business start-ups will be forced to send their messages using the post or other more expensive and less convenient and efficient mechanisms, or limit the persons to whom they can send messages to the limited exception that permits use of conspicuously published e-mail addresses.

CFIB expressed its concern as to the impact of CASL and the proposed regulations on small businesses as follows:

“The proposed regulatory regime “may make it more difficult for smaller businesses to start up and grow and may even hinder some small-and medium-sized enterprise (SME) members from providing better and more customized products for their clients”.

“The Draft Regulations propose that all communications must contain the following: the names of every party involved, physical and mailing address, a telephone number, an email address and a web address.

The assumption is that every single business in Canada has a website, however only about half of small businesses have a website yet two-thirds use the web as part of their business.

Newer businesses trying to increase their customer base and garner revenue might not be able to initially spend money on a new website, but this requirement will force them to take time and money away from their priorities to comply with the rules”.

The Canadian Real Estate Association (CREA) is one of Canada’s largest single-industry trade associations, representing more than 100,000 real estate Brokers/agents and salespeople working through more than 100 real estate Boards and Associations. It stated the following:

“The Draft Regulations raise compliance to impractical levels for small businesses and their clients, and they go beyond the scope and jurisdiction provided by the government to the CRTC.”

“The CRTC regulations are “putting up unreasonable barriers to legitimate commerce and eliminating legitimate business tools and communications practices for small business.   As a result, small business will be impeded and opportunities will be lost.””

“The requirement for senders of requests for consent and CEMs to include a web address effectively excludes persons unless they have a website.”

“Not all businesses that use email have websites – particularly small businesses – and to require a website is unnecessary, unfair, and costly.   In addition, consumers wishing to seek consent on behalf of another person would be prevented from doing so unless they had a web address.’

5. The proposed regulations do not look beyond CASL’s “email-focused” model and consequently they fail to fit well with other messaging systems. As a result, CASL is not technologically neutral in its regulatory approach.

Although CASL is supposed to be technologically neutral, applying broadly to all electronic means of sending electronic messages, the CASL regulatory regime is modelled on regulating electronic messages that are sent as emails. This focus on emails means that other forms of electronic messaging, such as instant messaging and those through social networks, do not easily fit within the CASL framework. As a result, Canadian businesses that wish to exploit new and developing alternative electronic messaging systems will be impeded by CASL.

The CMA noted this problem as follows:

“In addition, there seems to be an underlying assumption that email communication is the sole or primary form of electronic communication covered by the Anti-SPAM Act.

Notwithstanding the additional detail included in the CRTC Draft Regulations, we believe they fall short of properly accommodating other forms of electronic communication (e.g. SMS communications, instant messaging, text messaging).

Digital communications continue to evolve.  To be relevant, the statutory framework needs to “fit” with new and emerging digital constructs including SMS messages and social media based communications, and be flexible enough to accommodate future technologies.

The technologically specific regulatory requirements of CASL are also discussed below.

6. The proposed regulations fail to address messaging systems where SPAM is not a problem, such as Common Short Code Messaging, Opt-in Instant Messaging and similar systems, and where the additional regulation would impose costs, be impractical or impossible to comply with.

The CASL regulatory regime is modelled on regulating electronic messages that are sent as emails. This focus on emails means that other forms of electronic messaging, such as those sent using opt-in messaging systems like RIM’s BBM, other social networks, and short form messaging systems like Short Code Messages social networks, do not easily fit within the CASL framework. Users who use opt-in messaging networks will face risks of offending CASL, and operators could face risks of aiding conduct that is contrary to CASL.

Social networks often operate under rules enforced by contract and by an administration that monitors and enforces compliance. As such, there are mechanisms in place to control unwanted commercial electronic messages. Where such protections are in place, CASL’s requirements are not needed, and can be counter-productive.  Faced with the risks of offending CASL, Canadian businesses will be wary of developing (or continuing to offer) innovative business models or implementing similar models that are legal in other countries such as the United States.

Numerous commentators asked for new classes of exceptions for these messaging systems. The CWTA stated the following on this point:

“The Act, and therefore the Regulations have been framed on the basis that every Commercial Electronic Message will be an email.  For CWTA’s membership, this drafting bias causes a considerable challenge for compliance.”

“Compliances with the form requirements in the Act in the context of CSC messages could be exceedingly challenging in light of the severe constraints on message size (typically 136 or 140 characters )”.

Telus which filed a very comprehensive brief to both sets of regulations, for example, stated the following:

“By imposing an additional layer of regulation on top of existing governance regimes, CASL threatens to reduce the utility of certain modem messaging platforms, without having a material impact on the volume of SPAM experienced on those platforms (which is typically none).  These platforms, such as BlackBerry Messenger (BBM) and Common Short Code (CSC) SMS text messaging, are inherently opt-in environments with existing anti-abuse rules and tools that empower users to protect themselves from unwanted messages (in the unlikely event that they should receive any).”

“Application of CASL in these circumstances [where Canadians are already protected by other regimes, such as through contractual arrangements] would add an unnecessary and inefficient layer of regulation that would have little to no effect on actual SPAM or malware, and, to the contrary, could actually reduce the utility (and/or increase the cost) of electronic messaging and software installation for legitimate purposes.”

RIM made the following submission on this point:

“Some messaging platforms are “closed” such that users can only receive messages from others in an opt-in contact list.  For example, BlackBerry Messenger (BBM) is a strictly opt-in system. That is, users specifically invite contacts, or accept requests from contacts, before any messages can be sent between them.  As these messaging systems will not allow messages from senders that the user has not pre-approved, these types of “closed” platforms should be exempted from the requirements of CASL.

“RIM recommends such an exemption for at least three reasons.  First, the user has already consented to receiving messages.  Second, the user has the ability to “unsubscribe” using system tools.  Third, users would find it a burden and unnecessary to comply with the consent, form, disclosure and unsubscribe requirements, especially given the short message format and the informality associated with this type of messaging system.  Section 2(2) of the CRTC Regulations does not provide a practical solution to complying with the form requirements of Section 6(2) of CASL over social networks such as BBM.  We also note that there is no equivalent to Section 2(2) of the CRTC Regulations in Section 4 of the CRTC Regulations to help address obtaining consents under Section 10(1) or 10(3) of CASL in similar circumstances.”

7. The proposed regulations fail to address CASL’s territorial overreach, and the consequent risk to investment and innovation in cloud computing and outsourcing in Canada.

CASL applies to commercial electronic messages that are sent from computer systems in Canada to recipients outside of Canada.  As such CASL imposes the Canadian standards of disclosure, consent and unsubscribe on non-Canadians. This will inevitably discourage the use of Canadian facilities for activities that are perfectly lawful in other countries.

The problem is particularly troubling where companies rely on cloud computing. Under cloud computing, a company can use a variety of servers in a variety of locations to perform computing work, including the sending of messages.  The location of the server sending particular messages may vary, depending on demand and other factors. Under CASL, however, cloud computing activities that are undertaken in Canada must comply with the CASL requirements, even where the recipients of the messages are located outside Canada. Faced with this regulatory imposition, companies will be discouraged from operating in Canada.  As such, those computer activities, and the jobs and other economic spin-offs that result, will be lost to Canada.

The Information Technology Association of Canada (ITAC) is the voice of the Canadian information and communications technologies (ICT) industry. Its member companies account for more than 70 per cent of the 572,000 jobs, $140.5 billion in revenue, $6.0 billion in R&D investment, $31.4 billion in exports and $11.4 billion in capital expenditures that the ICT industry contributes annually to the Canadian economy.  ITAC is a prominent advocate for the expansion of Canada’s innovative capacity and for stronger productivity across all sectors through the strategic use of technology. ITAC had the following to say about this problem.

“Given that section 6 of CASL will apply when a computer system located in Canada is used to send or access a CEM, CASL will impact a range of business decisions that could have unintended negative effects on the competitiveness of a wide range of Canadian technology companies.  At least three scenarios can be contemplated.

First, Canadian multi-national companies sending messages to non-Canadian customers are incented to use vendors located outside Canada to send those messages, because otherwise the messages will have to comply with CASL.  This would result in service jobs leaving the country.  ITAC understands that some Canadian organisations that are already contemplating moving their foreign market-related messaging operations outside Canada.

Second, foreign companies deciding where to locate server farms and other facilities related to cloud computing that could be used to send messages or provide services on behalf of vendors located anywhere in the world, to customers located anywhere in the world, may choose against Canada because of the extra cost of complying with CASL.  That would have significant unintended negative consequences for the growth of cloud computing in Canada.

Third, Canadian providers of outsourced services to non-Canadian businesses will be at a major disadvantage compared to competitors in other countries.  By selecting foreign service providers, the foreign entities can avoid the costs and complications of complying with CASL.”

8. The proposed regulations fail to properly clarify what is included under the definition of a CEM, thereby subjecting non-CEMs to CASL’s unsubscribe and formality requirements.

Many organizations expressed concerns that CASL deems service, transactional, informational and other messages to be CEMs, even when they do not by any reasonable interpretation encourage participation in a commercial activity.  This expansion of CASL is due to paragraph 6(6) of CASL which describes a range of messages which it exempts from the consent requirements without also exempting them from CASL’s unsubscribe and formality requirements. The problem is that these messaging types would, in many cases, not be considered CEMS in the first place, but the wording of section 6(6) appears to deem them to be so. Not only does this confuse what is or is not a CEM, but message recipients will be enabled to unsubscribe from receiving non-CEMs, a requirement that would create considerable operational problems for organizations wanting to do business electronically including those that have contracted with their customers to do business that way. Organizations will need to develop and operate, at additional cost and expense, non-electronic ways of communicating with third parties.  In some cases, it could even make it illegal for organizations to deliver messages electronically, even though they are required to do so under other legislation.

The CMA stated the following in this regard:

“A fundamental issue with CASL is that of its scope.  The definition of commercial electronic message (CEM) is sufficiently wide that it is conceivable to argue that any and all electronic communication is commercial in nature.  This thereby imposes strict, and costly if not followed correctly, rules on the delivery of all electronic messages. CASL further confuses the issue by clearly defining CEM In Section 1(2), exempting certain messaging from consent requirements In Section 6(6), but still requiring that they meet the unsubscribe requirements laid out in Section 11(1).”

The Canadian Bankers Association addressed this point as follows:

“We note that, while the categories of messages listed in subsections 6 (6) (a) through (f) are exempt from the consent requirements in subsection 6 (1) (a), it seems that some non-marketing messages may still be subject to the form and content requirements listed in subsection 6 (2) of the Anti-SPAM Act and further detailed in the CRTC Draft Regulations.”

“We believe that this is a serious problem with the Anti-SPAM Act, and one which we had hoped would be addressed through the Regulations.  We are concerned, in particular, that subsection 6(6) of the Anti-SPAM Act implies that customers have the ability to opt-out of receiving essential service messages (e.g. messages that confirm transactions, or that provide warranty, product recall, safety or security information). We do not believe this was the intent of the legislation”.

“Under a variety of legislation, including the Bank Act, and provincial securities legislation, financial institutions are largely required to send specific information to their customers and these types of messages, if sent electronically, should not be regarded as CEMs covered by the Act”.

Telus, which along with the Canadian Bankers Association dealt with this issue in depth, added a further concern as follows:

“There may be circumstances in which a business might be mandated by law to send certain information or a certain type of message to its customers and/or the public.  This might have to do with public safety, consumer protection, or some other form of regulation.  As it stands now, given that section 6(6) deems a wide range of messages to be CEMs, there is a risk that compliance with a legal regime that mandates the sending of certain messages which the CRTC might consider to be CEMs would put the sender in violation of CASL.”

9. The proposed regulations fail to recognize the value of other, reasonable, approaches to obtaining consent to send CEMs, such as under existing PIPEDA rules.

Many companies have previously determined that they had consent to send commercial electronic messages, either because express consent had been given or because it was a reasonable expectation of the recipients. Indeed, making such determinations would have been part of their compliance with PIPEDA.[7] These companies now face the need to check that the names on their list of consenting recipients all either comply with the express consent requirements of CASL, or fit under one of the few implied consent categories. This can be a daunting and expensive task, given that these lists were assembled over time and they may be quite extensive. Many commentators questioned the obligation to comply on an ongoing basis with two overlapping regulatory regimes with the attendant expense of doing so.

The CMA made the following submission on this point:

“As a result of potential contradictions with existing privacy law, the new regime may disqualify entire databases of personal contact data obtained using responsible consent processes which meet, and in some cases exceed, the requirements of the Personal Information and Protection of Electronic Documents Act (PIPEDA).  The failure to grandfather existing databases that meet the requirements of PIPEDA will not reduce the amount of SPAM messages Canadians receive, but will in turn create a massive financial burden on Canadian organizations.”

The ESAC stated the following:

“The exception for implied consent in the Act is quite narrow and specific, and in light of the diversity and rapidly changing nature of business communications there is a very significant risk that a CEM could violate the provision and subject the sender to considerable liability even if consent could reasonably be inferred from the circumstances simply because it did not happen to fall within the narrow definition of “existing business relationship”.  Furthermore, this inflexible approach is not only inconsistent with the approach adopted in other jurisdictions, where implied consent can generally be inferred from the conduct, the nature of the business, and the other relationships of the intended recipients without limiting it to prescribed circumstances/ but also with the Personal Information Protection and Electronic Documents Act (PIPEDA), which deems that consent can be implied where consent may reasonably be inferred from the action or inaction of the individual.”  This creates a significant inconsistency between federal legal regimes intended to govern relationships with end users.  Recognizing implied consents that would be valid under PIPED would resolve this issue and further render the implied consent regime under the Act consistent with PIPEDA and other jurisdictions.”

Some commentators are concerned that the closed categories of implied consents are too narrow and would impede legitimate, recognized and desirable ways of doing business. For example, Re:Sound, a copyright collective that represents performers and makers of sound recordings, noted that the definition of the term “existing business relationship” does not include organizations that collectively license copyright materials under tariffs certified by the Copyright Board. Canada’s copyright collectives which administer rights on behalf of hundreds of thousands of Canadian artists, composers, performers or other rights holders would not be able to use many of the publically available materials PIPEDA excludes from its consent requirements because these exclusions are not carried forward into CASL.

Other commentators noted the failure by the proposed regulations to exempt referral relationships which are the life blood of many business and professional opportunities.

CREA noted this omission saying the following:

“Canada’s anti SPAM legislation already places an onerous burden on a person making a referral to act as an intermediary beyond the initial referral, requiring them to obtain consent on behalf of the professional.  However, when combined the requirement for consent to be in writing, as set out in the draft CRTC regulations, the regime places an “unreasonable and impractical responsibility on the intermediary and adds insurmountable barriers to the referral process”.

“In practice, it is highly unlikely that a client would be willing to seek consent from the person they are referring once they become aware of their obligations to provide the information proposed in the CRTC Regulations, including: the need for the intermediary to identify in writing the professional’s name, business name, mailing address, telephone number, web address and all electronic addresses belonging to the professional”.

The CFIB made a similar criticism of the lack of an exception for referrals:

“The requirement to have any referral in writing could cause a small business to choose between non-compliance and a much more difficult, and time-consuming process, thereby putting small-and medium-sized enterprises in a difficult position and making them less competitive.”

“The process as described in the proposed regulations is not realistic for today’s rapidly changing business.”

10.The proposed regulations fail to clear the confusion in CASL between holders of message accounts and recipients of messages.

CASL prohibits sending CEMs unless the person to whom the message is sent has consented to receiving it, whether the consent is express or implied.[8] CASL states that “a reference to the person to whom an electronic message is sent means the holder of the account associated with the electronic address to which the message is sent, as well as any person who it is reasonable to believe is or might be authorized by the account holder to use the electronic address.”[9]

CASL imposes an unworkable burden in determining who must consent to receiving a CEM in circumstances in which the holder of an account is different from the person to whom the message is sent.  For example, in business to business communications in which organizations operate, or outsource the operation of, accounts, consents could conceivably be required both from someone in authority in a business as well as the intended recipient.

This double requirement poses additional challenges in considering whether a person has an implied consent to send a CEM. The existing and non-business relationship exception, for example, requires the person who sends the message to have an existing business relationship or an existing non-business relationship with the person to whom it is sent.[10] This could potentially require existing relationships with both the organization and employees of the organization. This double standard is unlikely to be made out in most cases, unless an inference can be made that a transaction such as a sale to an organization is sale to its employees.

A similar problem exists with respect to the “conspicuously published” exemption.[11] It cannot necessarily be assumed that a conspicuously published electronic address has been published by both the account holder and the person whose electronic address is published.

11.The proposed regulations stipulate that requests for consent be in writing, a requirement that is both limiting and, in some cases, impractical.

Section 4 of the CRTC proposed regulations requires that a request for consent be in writing, a requirement that many commentators considered to be unworkable for many organizations and frustrating for consumers.

The CWTA stated the following:

“The requirement that all requests for consent must be in writing is an onerous obligation for legitimate marketers with questionable additional benefit to consumers.  The requirement is also inconsistent with requirements for express consent in other contexts.”

“In Telecom Decision CRTC 2003-33, the Commission found it appropriate to permit Canadian carriers to use other forms of express consent as alternatives to written consent.  The Privacy Commissioner of Canada does not prescribe a method of obtaining express consent required under the Personal Information Protection and Electronic Documents Act (PIPEDA).  In fact, guidance documents from the Office of the Privacy Commission clearly state that consent can be obtained in person, by phone, by mail, via the Internet, etc, provided the person seeking consent considers the reasonable expectations of the individual and the circumstances surrounding the consent”.

CREA stated the following:

“The regulations, when combined with the general prohibition from the Act against obtaining consent by email in situations where the sender does not have implied consent, results in a prohibition against obtaining consent orally.  This result, combined with the reality that professionals often use electronic messages to follow up with consumers on earlier telephone or in-person discussions, create restrictions that do not reflect the realities of business communication.”

These restrictions would require professionals to write a letter or have consumers sign a document in person to obtain consent.  “This will slow the speed of business and result in lost opportunities while the professional waits for a response in order to send an electronic message”.

HB Global Advisors Corp explained the impracticality of the “in writing” standard for consents as follows:

“In our view, the writing requirement will effectively preclude organizations from obtaining express consent for the sending of Commercial Electronic Messages (“CEMs”) in person or over the phone.  By way of example, it is a common practice in the retail sector for express consents to be obtained verbally at points of sale, at customer service desks or on the phone through customer service agents.  Once the regulations come into force, retailers and other organizations will practically no longer be able to use these entirely legitimate means of obtaining express consent of consumers, thus adversely impacting both business and consumers.  Valid express consent can be obtained orally under the Personal Information Protection and Electronic Documents Act (“PIPEDA”) and provincial private sector privacy legislation, under the CRTC Unsolicited Telecommunications Rules and at common law.  In our view, there is no policy rationale for imposing the burden of a writing requirement on organizations in the course of obtaining express consent.  Such a requirement, in and of itself, will not serve to advance the purposes of the Act in any re In our view, the requirements of Section 4 of the Draft Regulations are unnecessarily onerous and restrictive and will pose significant challenges for organizations seeking to obtain express consent in compliance with the Act.”

12.Most commentators criticized as unworkable the CRTC’s proposed regulation which requires that each CEM and each request for consent to send a CEM include the physical and mailing address, a telephone number providing access to an agent or a voice messaging system, an email address and a web address of the sender and any other electronic address used by the sender.

Numerous commentators objected to the CRTC’s proposed regulation that requires each request for consent and each CEM to include “the physical and mailing address, a telephone number providing access to an agent or a voice messaging system, an email address and a web address of the person seeking consent and, if different, the person on whose behalf consent is sought and any other electronic address used by those persons”.[12] Businesses considered that this inflexible approach requiring detailed contact information would be inconsistent with CASL, would impose additional costs for Canadian businesses and would cause confusion and frustration among consumers.

According to ITAC

“Meeting all of these requirements will be challenging for organisations, particularly when the message is being sent on behalf of multiple third parties (such as dealers, resellers, franchisees or affiliates).”

“Including each category of contact information is unnecessary, as section 6(2) of CASL already requires the disclosure of information that would enable the recipient of a message to “readily contact” the sender.”

“Including each category of contact information will discourage the use of electronic means to conduct business, as many internet companies do not maintain a mailing address and telephone number to receive written and oral communications from consumers, relying instead on electronic communications.

The ESAC said the following:

“The wide range of contact information that must be provided under subsection 2(1)(d) is impractical and excessive, and may not be applicable in some cases.  The subsection assumes that all businesses sending CEMs have both physical and mailing addresses, and telephone numbers with voice messaging, and email addresses, and web addresses where they may be contacted. While this will generally be true of large companies, many internet start-ups and independent game developers operate entirely online and do not have physical addresses or telephone numbers with voicemail. In order to comply with the Regulations, such legitimate e-commerce businesses will be required to establish all these forms of contact, including a formal address, which represents an unnecessary and burdensome cost to small early stage technology companies and game development studios.”

PIAC was one of the few commentators to approve of requiring several modes of contact, although it too questioned the need for the “any other electronic address” stipulation in Section 2(1)(d).

Numerous commentators were also critical of the requirement to provide “any other electronic address used by those persons. This requirement was viewed as excessive. ESAC noted that the “requirement to include all electronic addresses is excessive and will present a massive burden for all but the smallest companies.” CREA made a similar comment stating: “strictly interpreted, a sender could be required to list dozens of electronic addresses, which is clearly burdensome, unnecessary, and confusing to consumers.”

13.The CRTC’s proposed regulation requiring that each request for consent include a statement that a consent can be withdrawn using any of the mandatory contact information is contrary to CASL and is unworkable. It would require organizations to monitor physical and mailing addresses, a telephone number, an email address and a web address and any other electronic address used by those persons.

The Canadian Bankers Association described the problems with the proposed regulation as follows:

“Requiring the sender to include a list of “other electronic address[es]” is onerous and, in any case, will be of limited use to recipients of CEMs since most Canadian financial institutions operate thousands of electronic addresses, as the term is defined in the Act (e.g., individual e-mail and telephone accounts assigned to employees), and these addresses change frequently.

“Requiring the sender to continuously monitor every one of these electronic addresses and other Channels (e.g. mail. telephone, physical address) for withdrawals of consent for an extensive time period, would be extremely difficult, if not impossible, to implement operationally”.

RIM summarized the problems as follows:

“Subsection 4(e) requires the sender to include a statement telling recipients that they can withdraw consents using any of this contact information.  This regulation is also beyond the power of the Commission. As noted above, the unsubscribe mechanism is set out in subsection 11(1) of CASL.  The Commission does not have the power under that subsection to prescribe the particular way in which businesses must permit individuals to unsubscribe to receiving CEMs.  But, requiring a statement telling recipients that they can withdraw consents using any of this contact information would be an attempt to do indirectly what the Commission cannot do directly…   Lastly, this requirement will mandate that companies and their agents maintain multiple mechanisms to collect these indications, making it inefficient and costly.

14.The CRTC’s proposed regulation is unworkable where it requires that request for consent must be sought separately for each act described in sections 6 to 8 of CASL.

Section 4 of the proposed regulation requires that consent “must be sought separately for each act described in sections 6 to 8 of the Act.”[13] Organizations such as the CLHIA pointed out that it is not clear what is intended by “sought separately for each act.”  Further, it points out that “It does not seem unreasonable that a single request for consent could expressly identify more than one activity for which the consent is being sought”.

The ESAC noted that the draft language suggests that consent must be obtained separately for each and every occasion a message is sent or re-directed or software is installed.  “This would effectively negate the ability to obtain consent for future actions, and create an overwhelming burden for businesses (due to the vast number of consents) and consumers (who would have to consent before receiving each and every message).”

15.The CRTC’s proposed regulation permitting prescribed information to be made available on the web is not a practical or technologically neutral solution to the disclosure requirement problems created by CASL and the proposed regulations.

The draft CRTC regulations recognize the impracticality for many message types to comply with the form and disclosure requirements of CASL. The short nature of many message types, such as instant or SMS messages and those used over social networks could not accommodate the legal formalities mandated by CASL.

The draft CRTC regulations purport to make it easier for short message types to comply with CASL’s message form requirements by enabling users to provide prescribed information by using a link to a web page on the World Wide Web that is clearly and prominently set out and that can be accessed by a single click or another method of equivalent efficiency at no cost to the person to whom the message is sent.[14]

There are significant limitations with the approach taken. For example, there is no equivalent mechanism in Section 4 of the draft CRTC regulations to enable users of instant messaging, SMS, or social networks or similar networks to use a link to a web page to make the necessary disclosures to obtain consents under Section 10(1) or 10(3) of CASL.  Accordingly, given the limitations of those networks, it would be problematic to seek consent to send a CEM using many modern messaging systems.  Further, it requires anyone seeking to use modern messaging systems to have and maintain a website.  This will be especially burdensome on individuals and small businesses. The solution will often not be practically implementable because the character limitations on short messages cannot even accommodate even the solution proposed. Nor can the link always be accessed in just “one click”. Moreover, the “one click” proposal is not technologically neutral.  As well, users of mobile devices would often have to pay data charges and thus cannot be provided at no charge, thereby making the solution unworkable for one of the fastest growing sectors of the communications marketplace. In any event, there are questions as to whether it is realistic to impose the disclosure requirements on users of social networks.

The CFIB had the following to say about this solution to the disclosure problems created by CASL

“The assumption is that every single business in Canada has a website, however only about half of small businesses have a website yet two-thirds use the web as part of their business.”

“Newer businesses trying to increase their customer base and garner revenue might not be able to initially spend money on a new website, but this requirement will force them to take time and money away from their priorities to comply with the rules”.

“The reference to a “single Click” in Subsection 2(2) implies that the “link to a web page on the World Wide Web” is accessed using an Internet connection, but this is unclear, as is the meaning of “another method of equivalent efficiency.”

“For example, is the provision of a toll-free telephone number which the text message recipient may use to access the information a ‘method of equivalent efficiency’?”

ITAC said the following:

“Including all of the mandatory information on a single web page is impractical and unnecessarily restrictive, particularly where a message is being sent on behalf of multiple third parties (such as dealers, franchisees or affiliates) or using short messaging platforms. Links to additional information should be permitted.”

The Canadian Bankers Association made the following comments on this point:

“We assume that the underlying purpose of the inclusion of the phrase “at no cost to the person to whom the message is sent”, is to ensure that consumers are not charged by the sender to access contact information of the sender or unsubscribe from a CEM.”

“However…there are data costs associated with many forms of digital communication (e.g. as levied by ISP and mobile telephony service providers) over which a sender of a CEM has limited knowledge and no control.  The recipient of a CEM may subscribe to a ‘pay as you go’ mobile plan that offers a bundle of minutes for a set fee, so every use of the mobile device results in a cost to the user, even to dial a toll-free telephone number.  Many data plans with Internet services for mobile devices have a limit over which the user is charged fees to send additional messages or for additional Internet access.”

ESAC made the following statement:

“Subsection (2) specifically requires that the information must be on a “web page” on the “World Wide Web” that can be accessed by a “single click”.  This is not a technologically neutral solution, and effectively precludes the use of any non-web-based interfaces.  The section essentially dictates the form of communications technology companies are permitted to use. While subsection (2) does permit information to be accessed by “another method of equivalent efficiency”, the scope of this provision is unclear.  It immediately follows the requirement that the information be accessed in a “single click”, suggesting that the” method of equivalent efficiency” only applies to the equivalent of a “click”.  If it is intended to be applied more broadly, this must be clarified.”

“The imposition of a “single click” limit is also problematic.  There may be situations where it would take 2 or more “clicks” to access the complete range of information that the Regulations require.  The fact that all of the prescribed information must be accessible at a “single click” is very restrictive and inflexible, especially as a single extra “click” may result in significant punitive measures against the sender.”

16.The proposed regulations fail to accommodate a business that does not maintain a web site from receiving unsubscribe requests. Further, the CRTC’s proposed regulation requiring the unsubscribe mechanism be performed in no more than two clicks is not technologically neutral or workable in many circumstances.

Individuals and organizations cannot send CEMs or request a consent to send a CEM unless they have a website to disclose the prescribed information and receive unsubscribe requests.[15] This will be onerous for individuals and small businesses as well as users of social networks.

The requirements also cannot be met for all messaging systems including for messaging systems in which the subscribe and unsubscribe mechanisms are under the control of a third party. It is also not a technologically neutral solution.

The ESAC made the following comments on this draft regulation.

“While the Act and proposed Regulations appear to assume that only the sender controls the transmission of a message, there are many circumstances in which the subscribe and unsubscribe are actually under the control of a third party (often a messaging platform), and where it is the user who determines the messages he or she wishes to receive.  For instance, in the case of CEMs sent via social networking sites such as FaceBook or Twitter, it is the social networking site that establishes the unsubscribe process, and recipients themselves may unsubscribe without any action required by the sender by simply “un-friending” or “un-following” or adjusting their settings.  Similarly, most mobile “apps” including mobile games include a setting that permits users to switch notifications that could be construed as CEMs off.”

“The requirement that the recipient be able to unsubscribe in “two clicks” is not a technologically neutral requirement and appears designed for email messages.  Moreover, requiring that the recipient be able to unsubscribe in “two clicks” is arbitrary.  There may be situations where it would take 3 or more “clicks” to complete the unsubscribe process.  Given the potential penalties associated with the Act, such a limit is punitive.”

“Not every communication device or medium to which messages are sent will be web-enabled. Given the broad application of CASL to all digital technologies, this exception needs greater flexibility to ensure technologically neutral application.”

The CMA stated the following:

“The restrictive form of the unsubscribe mechanism will effectively prevent the practice of allowing recipients to select within a preference centre the types of messages to which recipients wish to unsubscribe, as multiple clicks are typically necessary to allow for the narrowing of a subscription.  This valid practice should not be discouraged as it provides recipients with greater control over the type of information they receive.”

“The use of the term “click” itself creates problems as it is not technologically neutral. The term does not allow for the use of platforms such as mobile and tablet.”

“The number of permitted clicks is arbitrary and will result in existing senders of commercial electronic messages that have otherwise legitimate unsubscribe mechanisms (i.e. that do not require the recipient to provide a reason, or other types of information, to unsubscribe) having to alter, at a cost, these mechanisms unnecessarily.”

The Canadian Bankers Association stated:

“The requirement that the unsubscribe mechanism be performed in no more than two “clicks” does not reflect current industry standard.

At minimum, one click is needed to click on the link to move from the GEM to access the web page which houses the unsubscribe mechanism, A second click is then needed to select unsubscribe.  A third click is often needed to “confirm” or “submit” the unsubscribe request”.

“A two click requirement may impact current industry practice where the recipient of a CEM is directed to a web page to select his or her electronic communication preferences…”

The requirement “also appears to directly conflict with the requirement in subsection 11(1) (a) of the Anti-SPAM Act to enable the recipient of a CEM to indicate his or her wish to no longer receive “any specified class” of such messages.  Depending on the scope of specified classes offered by the sender of the CEM in the unsubscribe mechanism, it is likely that more than two clicks would often be required in order to properly perform an unsubscribe mechanism”.

The comments also had considerable criticisms of CASL and the draft regulatory approaches to regulating “spyware” and other malware.  These include the following problems.

17.The heightened consent requirements in Section 5 of the draft CRTC regulations for computer programs that perform one of the functions listed in Section 10(5) is unworkable. It is impractical to require that such consents be in writing or to require the user provide an acknowledgement. Further, there are many circumstances in which meeting these requirements would be either technically or commercially unfeasible.

The ESAC provided extensive comments on this point.

“The requirement that any description of the specified functions listed in subsection 10(5) of the Act be brought to the attention of the person from whom consent is being sought “separately from any other information” is unclear.  It suggests that this information must be included in a separate notice. Section 10(4) of the Act already requires that consent for the installation of a computer program that performs a specified function be separate and apart from the licence agreement, so requiring an additional, separate notice is excessive, confusing and creates unnecessary records.”

“The requirement that the consent be obtained, in writing, and include a specific acknowledgement from the user that they understand and agree that the computer program will perform the specified functions is deeply problematic.  The only way to obtain the acknowledgement of consent to a specific function will be to generate an electronic message to be sent to the company.  However, this would constitute installing a computer program that causes an electronic message to be sent, which is also prohibited and for which a separate consent will be required.  This will multiply the number of consents that must be obtained, which will be extremely onerous for business and overwhelming to the consumer.  Further, in the event that a consumer declines to consent to the transmission of the acknowledgement, the company will be unable to comply with the requirement and thus be penalized for not obtaining the required acknowledgement in writing, when the reason for doing so was outside their control.”

“There are many circumstances beyond the permitted exceptions where express consent cannot be obtained, and attempting to obtain consent (including the prescribed information) would not only be not technically feasible but disruptive to the end user’s experience.  For instance, many software, mobile “app” and game developers provide frequent updates and upgrades for their programs, but do so as a courtesy rather than pursuant to formal terms and consequently would not benefit from the “updates and upgrades” exception.  Under these circumstances, consent will need to be obtained for each separate update, and will need to include all the required information.  This applies even if the user has requested automatic updates, or the developer has no control over the information that can be provided with an update.  This will similarly occur if an update or upgrade could alter settings or data on a device, as these “functions” trigger enhanced disclosure obligations and requiring obtaining separate consent regardless of the circumstances or actual impact on the end user.”

“Many electronic devices are not designed in a manner that would enable them to display a request for consent or accompanying prescribed information (e.g. some MP3 players, printers, scanners, appliances, etc.), and are incapable of satisfying the consent requirements (especially in circumstances where enhanced disclosure would be required).”

Telus also had very extensive comments on this issue:

“However, due to the way section 10(5) is drafted, this provision has the potential to interfere with common, accepted business practices that are adequately governed by contracts.  The concern arises from the definition of the types of functionalities that trigger the heightened disclosure and consent requirements.  Section 10(10) refers to “any of the following functions that the person who seeks express consent knows and intends will cause the computer system to operate in a manner that is contrary to the reasonable expectations of the owner or an authorized user of the computer system.”  One of those functions – the only one that causes TELUS concern at present – is (c), “changing or interfering with settings, preferences or commands already installed or stored on the computer system without the knowledge of the owner or an authorized user of the computer system.”

The reality is that within many kinds of client/service provider relationships, there are times when functionalities and settings are changed in a way that may cause a device to operate in a manner that the user does not expect.  These changes typically take the form of updates, upgrades, or program installations which, while they might make a device work differently, are technical in nature and fall within the scope of contractual consents.

Programs may also be installed from time to time for the purposes of network management, security, diagnostics, technical support or repair, or the detection or prevention of unauthorized or fraudulent use of a service or system.  Installations for these purposes are also typically within the scope of applicable contracts.”

“…the “alteration of transmission data” provisions include an exception for network management. Section 7(2) specifies that that rule “does not apply if the alteration is made by a telecommunications service provider for the purposes of network management.”  A telecommunications service provider may need to install programs from time to time for the purposes of network management, security, diagnostics, technical support or repair, or the detection or prevention of unauthorized or fraudulent use of a service or system.  In some cases, particularly anti-fraud measures, it would defeat the purpose to disclose the action to the user and seek his or her consent.”

18.Certain of the CRTC’s proposed regulations may be beyond the CRTC’s authority under CASL.

Several commentators argue that the CRTC does not have the authority to promulgate the regulations in the form proposed. Comments filed by the CBA, The Chamber, ITAC and RIM, among others, deal with these points. Conversely, PIAC maintains that the CRTC indeed has the requisite jurisdiction.

Conclusion

Canadian businesses have identified a number of important concerns with the proposed regulations under CASL. Unless the proposed regulations are reformulated, many worry that CASL will impede rather than facilitate e-commerce. It will hurt small and large businesses, cause significant economic harm and stifle innovation in the use of electronic messaging systems. It will hinder investment and job creation and drive new and emerging businesses to locate outside of Canada. Its red tape will be costly and inefficient to comply with.

As a last point, many commentators made suggestions related to the go forward process. For example, several organizations, such as the Chamber, endorsed the need for a second round of consultations once revised draft regulations are issued.  Many organizations also asked for sufficient lead time from when the regulations are finalized until the date that CASL comes into legal force. Finally, many comments contained thoughtful solutions to the problems summarized above. These might well form the basis for reformulating the existing regulations and for drafting additional regulations.


[1] lsalzman@mccarthy.ca

[2] bsookman@mccarthy.ca

[3] See http://www.ic.gc.ca/eic/site/ecic-ceac.nsf/eng/gv00521.html

[4] See section 3 of CASL.

[5] For additional information on the history, goals and objectives of CASL, see Government of Canada, Backgrounder, Questions and Answers, and Online Threats, http://www.ic.gc.ca/eic/site/ecic-ceac.nsf/eng/h_gv00567.html),  Government of Canada Moves to Enhance Safety and Security in the Online Marketplace http://www.ic.gc.ca/eic/site/ic1.nsf/eng/05596.html

[6] CRTC draft regulation Section 2(1), 2(2), 4.

[7] Personal Information Protection and Electronic Documents Act

[8] CASL Section 6(1)

[9] CASL Section 1(1)(5)

[10] CASL Section 10(10)(a)

[11] CASL Section 10(10)(b)

[12] CRTC draft regulation, Sections 2(d) and 4(d)

[13] CRTC draft regulation, Section 4.

[14] CRTC draft regulation, Section 2(2)

[15] CRTC draft regulation Section 2(1), 2(2), 4.

* Updated Sept 21.

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