Competition Bureau suing Big Three over premium text messaging advertisements

The federal Competition Bureau is suing Canada’s three largest wireless carriers for more than $30 million over what it calls “misleading advertising” relating to “premium” text messaging costs. In a release posted on its website Friday, the Competition Bureau said it has launched legal proceedings at the Ontario Superior Court against BCE Inc., Rogers Communications Inc., Telus Corp. and the Canadian Wireless Telecommunications Association (CWTA) after a five-month investigation found the companies had pushed “costly ‘premium texting services’” on their customers without adequately informing them of the costs of those services. “The Bureau's investigation concluded that Bell, Rogers and Telus, in conjunction with the CWTA, facilitated the sale to their own customers of premium-rate digital content (such as trivia questions and ringtones) for fees that had not been adequately disclosed,” the Competition Bureau wrote. “Customers were misled into believing this content was free, when it was not. In fact, in the case of Bell, Rogers and Telus, they pocketed a share of the revenues collected.” The bureau alleges the three carriers gave third-party companies access to their wireless subscribers to advertise and sell their digital content products over common short code messages, a form of text messaging that allows wireless subscribers to send text messages without entering a full, 10-digit phone number and which is commonly used for wireless trivia competitions and other interactive messaging products. Earlier this month, the CWTA said Canadians sent 599 million common short code messages in the first three months of 2012. The bureau said the content was advertised through free mobile applications and online, and that “consumers were led to believe that these products were free, when they were not.” It added that Bell, Telus and Rogers often collected between 27 and 60 per cent of the revenues from the content sales, which can cost as much as $10 for each transaction or up to $40 per month for subscriptions, the bureau said. “The key is that users need to understand and knowingly accept these charges,” the bureau said in a backgrounder posted on its website Friday. “To date, the disclosure has been wholly inadequate, and Bell, Rogers and Telus profited from these charges, at their own customers’ expense.” The federal agency said it is seeking “full refunds” for each carrier’s affected subscribers, as well as a $10 million administrative penalty from each of the three carriers. It said it was also seeking a $1 million administrative penalty from the CWTA, which assigns common short code numbers, and which “leases out the number to a third party for the sale and delivery of digital content.” It has also asked that any ad that does not “clearly disclose the price and other terms and conditions applicable to premium-rate digital content” be removed, and that Bell, Telus, Rogers and the CWTA each release a “corrective notice … to inform the general public about the terms and conditions of any order issued against them.” In a release, the CWTA said the wireless carriers’ only role in the common short code services was to “manage the billing for the third-party creators and operators,” and that the Competition Bureau’s lawsuit could disrupt legitimate common short code services and could “impede innovation and growth in e-commerce in Canada.” It said more than 700 common short code services exist in the Canadian market at any point in time, and that many were services Canadians rely on, including news alerts, weather updates, real estate services, public transit schedules and personal banking, among others. The CWTA said it has imposed “strict standards” that control how consumers register for common short code services, and that these include “detailed requirements” about how third parties can advertise their short code services. It said its members do not have the “legal authority” to deal with companies that do not follow its advertising guidelines. The group added that it had reached out to the Competition Bureau last year to see what measures it could take against companies that do not abide by industry rules for advertising common short code products and services. “It was CWTA’s expectation that the Competition Bureau would welcome this proactive and collaborative approach to protecting consumers from misleading advertisers,” the trade organization wrote. Instead, it said, the Competition Bureau issued an “ultimatum” that the CWTA either enter into “a specific settlement agreement” relating to the inappropriate common short code advertising “or face immediate litigation.” In August, the Competition Bureau and Rogers appeared before an Ontario Superior Court judge over a separate $10 million false advertising proceeding the bureau launched against Rogers’ Chatr subsidiary for 2010 ads the company ran that said it had “fewer dropped calls” than new wireless entrants. Rogers has argued that the $10 million administrative penalty the Competition Bureau has asked it to pay in that case is large enough to be considered “criminal in nature” and should not be doled out as penalty that does not give the company “the procedural and other safeguards of the criminal law process.” Rogers, Telus and Bell each directed requests for comments on this story to the CWTA. news@thewirereport.ca

Competition Bureau suing Big Three over premium text messaging advertisements

News | September 14, 2012

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Competition Bureau suing Big Three over premium text messaging advertisements

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