Opening arguments are to begin on Wednesday in a civil trial into whether Rogers Communications Inc. misled consumers with its ad campaign promoting the discount cellphone brand Chatr — a case shaping up as an early test of the constitutionality of Canada’s recently amended Competition Act.
The proceedings at Ontario Superior Court of Justice in Toronto will examine the Competition Bureau’s assertion that Rogers was misleading during a November 2010 ad campaign that claimed its cellphone and text service “had fewer dropped calls than new wireless carriers.”
The Chatr spots drew complaints from upstart wireless companies in Canada, including Wind Mobile, and was pulled within a month of the Bureau filing its application for a hearing, the enforcement agency said.
The Bureau maintains that Rogers had not carried out “adequate and proper testing” before making the claim and unfairly discredited its competitors.
The Bureau demanded an end to the campaign, a public corrective notice, restitution to affected customers and a levy of up to $10 million against Rogers, the maximum allowed under 2009 amendments to the Competition Act in so-called administrative monetary penalties.
Rogers says the Bureau is demanding substantiation that would require tests of network switching systems, technology controlled by competitors who protect the systems as proprietary assets. That switch test requirement is so onerous it infringes on its right to free expression as a result, Rogers claims.
In a pre-hearing into the constitutional arguments on Tuesday, an expert witness for the defence, J. Howard Beales, former director of the U.S. Federal Trade Commission’s Bureau of Consumer Protection, said a guilty ruling against Rogers could actually limit dissemination of information in wireless industry marketing.
In some cases, testing standards can be too rigorous, too costly and not necessary to assure truth in advertising, Beales said. The result can be to discourage advertisers from making reasonable claims that lack test-based support — claims that can otherwise promote innovation and price competition in the marketplace.
Rogers also argues that the hefty administrative penalty amounts to a criminal fine in a proceeding where defendants lack the normal protections afforded in criminal matters.
The Bureau has challenged a number of performance-based advertising claims in diverse industries, with Bell Canada last year agreeing to pay the $10 million penalty after the Bureau found it had charged higher prices than advertised for services including home phone, Internet, satellite TV and wireless.
The Rogers case is the first case to challenge the constitutionality of the administrative penalties for misleading advertising. The trial is expected to last several weeks.