Yesterday, the Ontario Superior Court (the "Court") imposed an administrative monetary penalty ("AMP") of $500,000 on Rogers Communications Inc./Chatr Wireless Inc. ("Rogers/Chatr") for not conducting adequate and proper testing prior to making claims that the Rogers/Chatr mobile network had dropped fewer calls than those of its competitors Wind Mobile and Public Mobile.
While the Court found that claims by Rogers/Chatr that it had fewer dropped calls than its competitors were ultimately substantiated (through testing after the claims were made), it also found that Rogers/Chatr had not conducted "adequate and proper" testing prior to making the claims in question, as required under the Competition Act.
According to the Court, Rogers/Chatr understood the necessity of validating performance claims before making them. Although Rogers/Chatr had an ongoing drive test program (implemented in 2005 at a cost of $20 million), it did not rely on the program to conduct adequate and proper testing before launching its "fewer dropped calls" campaign in the summer of 2010.
The Court also found that Rogers/Chatr had made a deliberate decision to make the claims based on results inferred from "technological facts" suggesting the superiority of their networks based on higher cell site density, indoor transmission systems, low-frequency spectrum and seamless handoffs. In other words, Rogers/Chatr had relied on technological facts instead of conducting the necessary testing – an approach that was held not to satisfy the "adequate and proper" testing requirement under the Competition Act.
In terms of the AMPs imposed, given that the performance claims were ultimately proven to be true and substantiated, this was viewed as a mitigating factor in determining the appropriate amount of the AMP to be imposed on Rogers/Chatr (it is worth noting that the Commissioner sought AMPs in the range of $5-7 million). The Court also took into account the reputational harm suffered by Rogers/Chatr and rejected the Commissioner of Competition's request for a prohibition order that Rogers/Chatr not engage in similar reviewable conduct for a period of 10 years.
The key take away is that businesses intending to launch marketing and advertising campaigns where claims relating to performance, efficacy or length of life are to be made must ensure that all such claims are substantiated by adequate and proper testing before they are made.
For a copy of the Bureau press release, please click here.
For a copy of the Ontario Superior Court decision, please click here.
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