This is a guest blog post by Donald Houston and Jonathan Bitran of McCarthy Tétrault LLP.**
While much has been written about the impending CASL private rights of action, less has been said about the new private right of action CASL will tack on to the Competition Act for misrepresentations in electronic messages.
The new CASL private right of action for reviewable conduct under section 74.011 of the Competition Act is an aberration, which will be inconsistent with and offensive to the current regime by which the Competition Act addresses deceptive marketing practices. It will make misrepresentations in electronic messages the only such reviewable conduct which will be subject to private damage claims, and it will expose legitimate advertisers to potentially significant damage claims for immaterial misrepresentations that cause no harm. We urge the relevant decision-makers to reconsider this very bad idea before it comes into force on July 1, 2017.
Background – Sections 52.01 and 74.011
In 2014, CASL amended the Competition Act to add sections 52.01 and 74.011, dealing with false or misleading representations in electronic messages. Section 52.01 makes it a criminal offence to “knowingly or recklessly” send a false or misleading statement in an electronic message. Section 74.011 makes it reviewable conduct to send such a message. There is no mens rea provision in section 74.011, just a due diligence defence. Further, there is no materiality requirement for representations made in the sender information, subject information or locator of an electronic message. That is different from the other deceptive marketing provisions in the Competition Act. Finally, by virtue of section 52(1.2) of the Competition Act, persons who “permit” misrepresentations to be made are liable, not just persons who make the representations.
As things stand presently, section 74.011 is only actionable by the Commissioner of Competition, who can seek prohibition orders and administrative monetary penalties in proceedings before the Competition Tribunal, the Federal Court or a provincial superior court. There is no private right of action under section 74.011, but there is a civil damage claim available for those who are harmed by conduct that contravenes the criminal provision (section 52.01). That is consistent with the other deceptive marketing provisions of the Competition Act, which create criminal offences for the most egregious conduct, and reviewable conduct provisions for everything else. Under section 36 of the Competition Act, civil damage claims can be brought for conduct contrary to the criminal provisions, but not for reviewable conduct, which is only actionable by the Commissioner of Competition, who can seek prohibition orders, administrative penalties and, in some cases, restitution for consumers.
Private Right of Action
That will change, however, on July 1, 2017, when section 74.011 will become the only reviewable deceptive marketing practice in the Competition Act that will be subject to private damage claims. That right of action will not even be found in the Competition Act, it will be in CASL, and it will expose businesses to potentially significant damage awards for immaterial misrepresentations in electronic messages. Section 51 of CASL will provide for compensation for actual losses plus $200 per “occurrence” up to a maximum of $1 million per day. Plaintiffs’ class action lawyers can be expected to commence class actions claiming millions of dollars in damages, which may be recoverable even for immaterial misrepresentations that cause no actual harm.
In summary, whatever may be the merits of the other provisions in CASL, tacking on private damage claims for reviewable conduct under section 74.011 of the Competition Act is a misguided idea, which we urge the relevant decision-makers to reconsider before it comes into force on July 1, 2017.
** Donald Houston is a partner in the McCarthy Tétrault LLP National Competition Group, and a former Chair of the CBA National Competition Law Section. Jonathan Bitran is an associate in the McCarthy Tétrault LLP National Competition Group, and the current chair of the Economics & Law Committee of the CBA National Competition Law Section.