The country’s three biggest wireless carriers face penalties of up to $10 million each after the federal Competition Bureau demanded they stop allowing other companies to promote so-called premium texting services to subscribers they unknowingly have to pay for.
"Our investigation revealed that consumers were under the false impression that certain texts and apps were free," Melanie Aitken, Commissioner of Competition, said in a statement Friday.
"Unfortunately, in far too many cases, consumers only became aware of unexpected and unauthorized charges on their mobile phone bills."
The apps are content such as trivia questions and ring tones.
The federal agency said that after a five month investigation Bell Canada Inc., Rogers Communications Inc. and Telus Corp. and their industry lobby group, the Canadian Wireless Telecommunications Association (CWTA), are accused of misleading advertising.
Bell, Rogers and Telus billed their own customers and pocketed a share of the revenues, the bureau alleged, typically between 27 and 60 per cent.
But the CWTA immediately issued a statement saying the agency should be going after the third-party services, not carriers.
The bureau’s “unprecedented” demand that the association and carriers accept liability for third-party advertisers could impede innovation and growth in e-commerce, it said in the statement.
In the statement CTWA CEO Bernard Lord also said the bureau’s actions could disrupt text messages such as severe weather alerts, appeals for charitable donations, flight status updates or sports scores.
“CWTA and our members will do everything we can to ensure our customers can continue to choose to access these services,” he said in the statement.
The Competition Bureau is an independent agency that enforces the federal Competition Act.
Here’s how cellular subscribers sometimes get calls from unknown companies:
The bureau said a tool known a "common short code," a number assigned by the CWTA's Short Code Council — a group that includes Bell, Rogers and Telus – is leased to a third party for the sale and delivery of digital content.
While text messaging and digital content delivered through common short code can be free to a wireless customer or billed at standard text messaging rates, the commission said in explaining the charges, these codes can also be used to impose charges at higher rates. Premium-rate digital content, including things like trivia questions and ringtones, can cost up to $10 per transaction, and up to $40 for a monthly subscription.
The bureau said the digital content at issue was offered through advertisements in popular free apps on wireless devices, as well as online, and consumers were led to believe that these products were free, when they were not.
The key, said the bureau, is that users need to understand and knowingly accept these charges. To date, the disclosure has been wholly inadequate, and Bell, Rogers and Telus profited from these charges, at their own customers' expense.
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The charges were laid in the Ontario Superior Court under the Competition Act.
The bureau is seeking full refunds for customers, administrative penalties of $10 million each against the three carries and $1 million against the CWTA, a stop to any wireless messages that don’t clearly disclose the price and other terms to subscribers, and a public notice from the carriers and the association about any judgement against them.
The CWTA said in its statement that wireless carriers don’t make or control the text messaging services, only manage the billing for the third-party creators and operators. There are strict standards governing how consumers register for Common Short Code services, the statement said, and CWTA and the providers have proactively put in place a set of detailed requirements, including how third parties can advertise these services.
The association requires third-parties who contract with it for short codes get consent from each customer with a double opt-in process.
The statement said that last year the association spoke to the bureau about dealing with non-compliant advertising. Wireless carriers, it said, don’t have the legal power to deal with misleading advertisers.