In a previous post,Evaluating the Industry Canada CASL regulations: why they are needed, I suggested that close scrutiny needs to be given to Industry Canada’s new draft Electronic Commerce Protection Regulations. CASL’s “ban all” structure makes it imperative that generous regulations be adopted to ensure that the goal’s of Canada’s new anti-spam/anti-malware law (CASL) are met. In another post, Evaluating the Industry Canada CASL regulations: how to assess them, I proposed a framework for assessing the regulations. I then evaluated the proposed family and personal relationships exception in the post, Evaluating the Industry Canada CASL regulations: family relationships and personal relationships, finding them very troubling and materially failing to meet CASL’s objectives.
In this post I will examine the proposed new business to business regulation.
The proposed regulation would create the following new complete exceptions from CASL:
Section 6 of the Act does not apply to a commercial electronic message that is sent by an employee, representative, contractor or franchisee of an organization
(i) to another employee, representative, contractor or franchisee of the organization and that concerns the affairs of the organisation, or
(ii) to an employee, representative, contractor or franchisee of another organization if the organizations have a business relationship at the time the message was sent and the message concerns the affairs of the organization or that person’s role, functions or duties within or on behalf of the organization;
These new regulations are justified and necessary. They should be retained. However, they only partially solve the need for business to business exceptions created by CASL. They do nothing, for example, to remedy that CASL will hinder the start-up and growth of small and medium sized businesses (SMEs) who, in many cases, do not have and cannot get express consents and need to send out CEMs to develop business relationships.
Last week, the Honourable Maxime Bernier, Minister of State (Small Business and Tourism), met with entrepreneurs in Montréal to discuss how to improve Canada’s business environment for SMEs. He pointed out that “entrepreneurs are key to Canada’s success”. In Canada, SMEs are very important to our economy, accounting for 99 percent of companies, employing 60 percent of working Canadians, and contributing to about 40 percent of the GDP. He stressed that the Canadian Government is attempting to “cut-red tape”, find ways for SMEs to access needed investment capital and to create “a business environment driven by entrepreneurs that encourages jobs, growth and long-term prosperity for Canadians.” See, Montréal’s Entrepreneurs Key to Long-Term Growth and Prosperity.
Ironically, CASL will create enormous red tape. It will also hit SMEs very hard and create exactly the obstacles Minister Bernier seeks to eliminate. The Canadian Federation of Independent Business (CFIB) warned the Government about this in its submission to the original Industry Canada regulatory consultations saying:
“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”.
Unlike established companies, start-up companies do not have existing business relationships or ongoing business relationships to leverage to give them implied consents to send CEMs. They have to rely on family and personal relationships, referrals, or on compiling or acquiring lists of contacts to solicit new business, make new business relationships, and to seek capital investments and customers. CASL will impede them at every turn, however.
As I previously pointed out, SMEs won’t be able to send CEMs to extended family because of how narrow the family relationship definition is. The “personal relationship” exception might have helped if it included relationships between individuals such as friends and acquaintances and people who know each other from being members of the same clubs and associations, from going to school or engaging in recreational activities together, or from business, professional or other settings. However, the personal relationship definition appears to be limited to only “best friends” or close friends”, thus preventing SMEs from reaching out to these important connections.
SMEs will not be able to rely on the existing business relationship exception because that is only a dream for most often. An established business can introduce a new product or service to customers including business and consumer customers. But, an SME doesn’t have that option while it is in start up or growth mode. CASL favors established businesses over SMEs in respect of the existing business relationship exception, something the proposed new exception for ongoing business relationships perpetuates and does not rectify.
It will also be illegal under CASL for an SME to send an introductory CEM to any potential customer or business partner that seeks consent to send those potential connections a CEM.
The new proposed regulation provides a once in a life time referral exception, but it is also quite narrow, in part because the referrer has to be connected to both the sender and the recipient by other exceptions. However, as the family and personal relationship exceptions are narrow and as connections between persons who have ongoing business relationships (as defined in the new proposed regulation) cannot be considered, SMEs cannot leverage their important relationships to help start and grow their businesses.
It will also be next to impossible for SMEs to buy lists of contacts to send CEMs because the regulations related to obtaining consents on behalf of third parties is so onerous and creates such high levels of red tape and vicarious liability that these important sources of contacts is likely also to dry up. An SME will be able to access and use existing trade and professional directories to send letters to potential business partners, investors, customers, and others. They could also use these sources to send electronic messages legally under PIPEDA. However, this will become illegal under CASL which will impede the most useful and efficient means for SMEs to start and grow their businesses. SMEs also will not be able to use the “conspicuously published” or “business card” implied consent exceptions if they are seeking new connections with non-business organizations such as hospitals or educational institutions. More on that later.
The new business to business exemption will not help many SMEs who do not have “a business relationship at the time the message was sent”. They hope to develop one after the message is sent. Broadening the exception to include this purpose would soften the impacts of CASL on SMEs and would have not result in consumers receiving unsolicited messages.
CASL’s impacts on SMEs is directly contrary to the Government’s policy of reducing red tape and improving Canada’s business environment for SMEs. Enabling SMEs to use electronic messaging systems would also not undermine CASL’s goals of deterring and protecting consumers and businesses from the most damaging and deceptive forms of spam and to drive spammers out of Canada.
To the contrary, rather than focusing on those threats, which CASL may do little to affect in any event, CASL will impair and discourage the optimal use of electronic means to carry out commercial activities by SMEs (and others), impediments which they would not have in foreign markets.
The Government’s efforts to combat SPAM will end up hurting legitimate organizations like SMEs who are really not the problem. In a recent blog post, Is Canada’s Anti-Spam Law a joke?, Allen Mendelsohn summarised the problem as follows:
The only people or organizations who will work hard to comply with the CASL are legitimate companies. Sure, the Bells and Krafts of this country have the resources to make sure they comply. But that small start-up company that could be the next Facebook which uses email as their only marketing tool? They’re fucked. And that’s fucked. The stated purpose of the CASL is to “promote the efficiency and adaptability of the Canadian economy”. It will have the opposite effect on that start-up. The real spammers, the guys running bots and banks of computers from their basements, have no interest in complying. Sure, put a law on the books that targets these guys with large penalties. But the onerous nature of the CASL on legitimate businesses is a joke.
And here’s the thing about legitimate Canadian businesses who send CEMs – virtually all of them already have some opt-out mechanism. I’ve used them, and they work just fine thank you very much. It’s good business practice to do so. Legitimate businesses don’t want to piss of their customers or potential customers by spamming them. Legitimate businesses aren’t the ones sending the spam that’s the problem (such as it is), but they’re the ones who will bear the burden of the CASL. That’s a joke.
The particular impacts of CASL on SMEs also raises the question as to whether the restraints on SME’s commercial freedom of speech rights would be found to be reasonable and justified, to minimally impair the right, and be proportionate to the harm that is being targeted by CASL’s prohibitions so as to withstand a Charter of Rights and Freedoms challenge.
CASL’s “ban all” approach to regulating CEMs will inevitably have overreach “inadvertent consequences”; SMEs is one of them. Fixing CASL to prevent this is not a “loophole”. It is good for SMEs, our economy, jobs, taxes, consumers who benefit from innovative products and services and market competition, and other members of the public.
In the next post, I will focus on the failure of the new business to business exception to correct the flaws in CASL that make it even more burdensome for educational institutions, libraries, archives, museums, hospitals, the health professions, charities, associations, clubs and other non-business organizations to comply with.
For more information about CASL, see, CASL: the unofficial FAQ, regulatory impact statement, and compliance guideline.