Great. Thank you very much, Chair
My name is Josephine Palumbo. I am the deputy commissioner of the deceptive marketing practices directorate at the Competition Bureau. I am joined by my colleague Morgan Currie, associate deputy commissioner of the deceptive marketing practices directorate.
We are pleased to appear today on the committee’s review of Canada's Anti-Spam Legislation, or CASL.
I'll begin by providing some context about the Competition Bureau and its mandate, and then move to the bureau’s role with respect to CASL, as well as the bureau’s experiences with cases related to CASL.
Please allow me to begin by noting that the Competition Bureau does not enforce CASL per se. Rather, the Competition Bureau, as an independent law enforcement agency, ensures that Canadian consumers and businesses prosper in a competitive and innovative marketplace that delivers lower prices and more product choice.
Headed by the commissioner of competition, the bureau is responsible for the administration and enforcement of the Competition Act and the three labelling statutes.
The Competition Act provides the commissioner with the authority to investigate anticompetitive behaviour. The act contains both civil and criminal provisions, and covers conduct such as bid-rigging, false or misleading representations, price-fixing, and abusing a dominant market position.
The act also grants the commissioner the authority to make representations before regulatory boards, commissions, or other tribunals to promote competition in various sectors.
The deceptive marketing practices directorate, which deals with cases related to false and misleading representations, handles the vast majority of the complaints received by the bureau. To give you a sense of the scale of this, in the last year the bureau received approximately 11,000 complaints, of which 69%, or about 7,700, were relayed to the directorate.
As noted above, when conducting investigations, the bureau uses the Competition Act's relevant criminal and civil provisions. The passage of CASL brought about specific amendments to the Competition Act that enabled the bureau to more effectively address false or misleading representations and deceptive marketing practices in the electronic marketplace, such as false or misleading sender or subject matter information, electronic messages, and website content, such as a website or an IP address. The changes address rapidly changing technologies, allowing us to better address competition offences in the digital economy.
As I noted a moment ago, the Competition Bureau does not enforce CASL, and I would stress that CASL provided the bureau with no new powers or responsibilities. It provided the bureau with more specific tools and enforcement provisions to address certain kinds of online conduct and specific digital threats.
With respect to the digital economy, the bureau's thinking has evolved over the years. Initially, we viewed the digital economy as a somewhat separate entity. This thinking took place at a time when most Canadians were not conducting a significant portion of their transactions online. Today the digital economy “is” the economy. The world has indeed changed, and therefore, we focus on the online activities of fraudsters, and prioritize our enforcement efforts in response to threats in the digital economy where those efforts can be most effective.
In recent years we have observed some concerning online trends. These practices include subscription traps, spoof websites, drip pricing, and technical support scams.
I would note that, for the most part, the bureau’s investigations are initiated by a complaint from any number of potential sources, including consumers, businesses, industry associations, the media, and stakeholders.
Subscription traps occur when consumers are offered a free trial or purchase of a product, and consumers are given to understand that they have to pay only the shipping and handling with their credit card. Consumers later find themselves signed up to an unlimited subscription service with ongoing fees and unexpected charges. Contacting the company will only result in them pointing out their online terms and conditions, which are buried somewhere in the fine print. Consumers are told that by not returning the supposed free product ordered, they have in essence agreed to a monthly subscription to that product and that they have authorized monthly charges on their credit card. Once in this situation, it is often extremely difficult to stop the ongoing charges.
Spoofed websites occur when a scammer uses a website to mislead consumers into thinking that it represents a specific business, financial institution, government, or charity. These websites generally imitate the real website to sell products or services in order to obtain sensitive financial or personal information from users. Often, they will provide enough information to appear like the real thing, including store locations, phone numbers, terms and conditions, and logos—RBC being an example.
Drip pricing is a deceptive marketing practice whereby advertisers offer an attractive price up front for a product or service, only for consumers to discover that unexpected additional mandatory costs or fees have been added by the advertiser, leading to higher prices than initially advertised. The true total cost may only be revealed after the consumer has initially responded to the advertisement.
Technical support scams may take many forms, but in general they involve representations that induce consumers to believe that their computers have been infected with some form of a malicious virus or program. They appear in the form of pop-up advertisements in the user's browser, which make the false or misleading representation that the consumer's computer is infected.
The pop-up message provides instructions on how the malicious program or virus can be removed by directing the user to contact a technical support hotline to ensure the removal and cleanup. These representations are often accompanied by warnings of dire consequences to the user and the computer if they do not take corrective action immediately. Once the consumer reaches the call centre, the representative directs the consumer to grant remote access to the computer. From there, the representative may make additional representations, confirming that the computer is infected and that the user must pay—often hundreds of dollars—to remove the malicious program.
At present, we have a number of ongoing investigations examining these and other deceptive marketing practices.
In 2016 the bureau announced its first win involving the new provisions created by CASL. Following an investigation, the bureau concluded that Avis and Budget had engaged in false or misleading advertising for prices and discounts on car rentals and associated products.
Specifically, Avis and Budget had engaged in drip pricing, whereby certain prices and discounts initially advertised were not attainable because consumers were charged additional mandatory fees that were only disclosed later in the purchasing process. The prices were advertised on Avis and Budget's websites, mobile applications, and emails, as well as through other channels. As part of this settlement, Avis and Budget paid a $3-million penalty to promote compliance with the law going forward.
Similarly, as a result of an investigation into drip pricing, in April of this year Hertz Canada and Dollar Thrifty agreed to pay a total penalty of $1.25 million to ensure that their advertising complies with the law and to implement new procedures aimed at preventing advertising issues in the future.
Earlier this year, the CASL-related amendments to the Competition Act allowed the bureau to resolve false or misleading representations in all forms of electronic messages made by Amazon. In this instance, Amazon often compared its prices to a regular or list price, signalling attractive savings for Canadian consumers. Our investigation concluded that these claims created the general impression that prices for items offered on Amazon's website were lower than prevailing market prices.
We determined that Amazon relied on its suppliers to provide list prices without verifying that those prices were in fact accurate. In this case, the savings claims were advertised on amazon.ca, in Amazon mobile apps, and in other online advertisements, as well as in emails sent to customers. Amazon agreed to pay a million-dollar penalty and make a $100,000 payment toward the bureau's investigative costs, in a 10-year remedy.
In 2015 the bureau entered into 13 consent agreements, resulting in over $26 million in administrative monetary penalties, almost $25 million in consumer restitution, and over $1.5 million paid to charities and advocacy groups working in the public interest. Put another way, the bureau's enforcement activity has led to $52.6 million in combined financial penalties in the last two years alone. We believe that, on the whole, the bureau has benefited from CASL and has worked well within its existing resources to prioritize enforcement in the digital economy.
It is worth noting, however, that any shift in resources would undoubtedly impact our work and require us to re-evaluate how we prioritize our investigations and the allocation of our resources.
I would like to thank the committee for the opportunity to appear today. I would be happy to answer any questions you may have.