Commercial Litigation and Dispute Resolution Blog

Canada already has one of the world’s strictest regimes regulating commercial electronic messages, and, just in time for the country’s 150^th birthday, the consequences for breach are about to get much more severe. On July 1, 2017, this regime will add additional teeth in the form of a private right of action, which could drastically increase the threat of legal proceedings and financial consequences for those who violate it.

Until July 1, 2017 the primary concern is that violations of Canada’s Anti-Spam Law (“CASL”) would be prosecuted by the bodies responsible for its enforcement (Canadian Radio-television and Telecommunications Commission (the “CRTC”), the Competition Bureau, and the Office of the Privacy Commissioner).  After July 1, 2017 those who send commercial electronic messages also face the risk of class proceedings specifically permitted by CASL.

What is CASL?

CASL creates a broad and comprehensive set of offences, enforcement mechanisms and penalties applicable to a number of activities, including the unauthorized installation of computer programs on computers and electronic devices, the alteration of transmission data and various other forms of online fraud. However, for the vast majority of organizations, CASL’s requirements with respect to commercial electronic messages (“CEMs”) are the primary concern. Subject to limited exemptions, CEMs may only be sent if the recipient has given his or her informed consent and the CEM contains certain prescribed information, including a functioning “unsubscribe” mechanism.  Further, deemed or implied consent is only permitted in specific circumstances and there are rules and limitations on how express consent can be obtained.

What is the private right of action?

Once the relevant provisions are in force on July 1, 2017, CASL will allow individuals and organizations to bring a private action in civil courts against those who violate certain CASL provisions.

Starting July 1 individuals will be able to commence an action in court where they are affected by an act or omission:

1.               that constitutes a contravention under sections 6 through 9 of CASL (those sections set out the fundamental rules for the sending of CEMs, the alteration of transmission data and the installation of computer programs);
2.              that relates to a violation of the email harvesting and use provisions in sections 7.1(2) and (3) of the Personal Information Protection and Electronic Documents Act (“PIPEDA”); or
3.               that results from false or misleading electronic messages within the meaning of the Competition Act.

Importantly, only one of these conditions needs to be satisfied for the private right of action to be available.

Currently, CASL is enforced jointly by the CRTC, the Competition Bureau, and the Office of the Privacy Commissioner. These public bodies have a range of enforcement mechanisms at their disposal, including imposing administrative monetary penalties on those who contravene CASL. Thus far, enforcement has been generally limited to more flagrant offences and also limited by each public regulator’s own internal resources.

Why should companies be concerned with the private right of action?

There are three primary reasons to be concerned with the private right of action that will come into force July 1:

1. CASL is already a broadly drafted statute which creates an enhanced risk of a violation even inadvertently;
2. CASL also allows a court to award damages regardless of whether actual loss has occurred to the plaintiff (up to a capped amount) which may encourage more claims to be advanced; and
3. The private right of action may be particularly amenable to a class proceeding.

These three reasons are explored in greater detail below.

Broad scope of CASL: CASL has been criticized for its broad drafting and that criticism applies well to the private right of action provisions (sections 47-51).  Those sections provide that any person who alleges that he or she has been “affected” by a contravention of sections 6 through 9 may bring an action in court. This, coupled with CASL’s definition of CEM – which includes any electronic message that seeks to “encourage participation in a commercial activity” and effectively captures millions of messages sent each year – creates the potential for a large number of plaintiffs to commence lawsuits over a massive number of potential contraventions.

Different liability standard: Further and as noted above, in addition to compensatory awards for amounts equalling the actual loss suffered by the claimant, a court may also award non-compensatory damages up to $200 for each CASL breach and up to $1 million for each day during which a breach occurs.  These “statutory damages” favour the claimant, because they do not require the same level of proof as other types of damages. A claimant need only prove that he or she was “affected” by the CASL contravention.

Class action concerns: As the actual losses suffered by an individual as a result of a breach of CASL are likely to be modest in most cases, the viability of bringing individual civil suits is low. However, given that CASL’s broad language captures a vast range of messages, combined with the fact that enormous numbers of individuals could be “affected” by contraventions, the conditions may be ripe for class actions arising from breaches of CASL.

The availability of statutory damage awards only increases the amenability of class actions to this private right of action. Under CASL’s provisions, courts may award the $200 per violation, $1 million per day non-compensatory awards without evidence being provided of actual loss or injury. These potential non-compensatory award amounts could be multiplied by hundreds, if not thousands, depending on the scope of the violation.

The CRTC has handed out several substantial fines in the past pursuant to its regulatory authority under CASL, but these amounts would be paltry compared to the amounts that could conceivably be awarded by a court for a private right of action. For instance, in March of 2015, Vancouver-based online dating service PlentyofFish paid $48,000 as part of a voluntary settlement (known as an “undertaking” under CASL). This payment was for alleged violations involving CEMs that contained a deficient unsubscribe mechanism that were sent over a three-month period.  If such a contravention was pursued by way of a private right of action after July 1, and with a potential $1 million in statutory damages for each day the contravention occurred, PlentyofFish could theoretically have been liable for an amount in the vicinity of $90 million.

Consider also the $200,000 fine that Rogers Media Inc. paid to the CRTC in 2015 for allegedly sending contravening emails over a one-year period. Under a private right of action, Rogers’ liability could have exceeded $365 million.

What are the limitations?

Two aspects of CASL’s private right of action may limit statutory damage awards in practice. First, there are a number of factors that a court must consider when determining the amount of an award, including the offender’s ability to pay, any financial benefit obtained from the commission of the contravention, and any previous contraventions. Courts must also consider the purpose of an award, which is to promote compliance with CASL, PIPEDA, or the Competition Act, and not to punish offenders.

Second, under section 48(1) of CASL, where an offender has entered into an “undertaking” to comply with CASL, or has been served with a notice of violation (essentially, if regulatory proceedings have been commenced), then a court may not consider a private right of action against that person. This provision could potentially allow for parties who are faced with a multi-million dollar class action to enter into a settlement with the CRTC for a lesser amount so as to bar any further private right of recovery.

Conclusion

CASL has been in force for nearly three years now, and most organizations should be familiar with the legislation’s requirements. Come July 1, however, the availability of CASL’s private right of action will undoubtedly increase the consequences of violations, making compliance with the legislation essential for anyone engaged in sending CEMs.

With thanks to articling student Zander Grant for his assistance.