Do Not Call Comes to Canada 


Summer 2005 - (Lang Michener Advertising & Marketing Brief)

Lang Michener Advertising & Marketing Brief
Ed.: this article was originally published in the May/June 2005 edition of the Association of Canadian Advertisers Bulletin. 

In June 2003, the United States Federal Trade Commission ("FTC") launched its consumer "Do Not Call" registry, permitting U.S. residents to register their phone numbers in a central registry and thereby avoid unsolicited commercial telemarketing. The maximum penalty for wrongfully calling people whose numbers appear on the U.S. registry is a civil damages award in the amount of $11,000 (U.S.) per violation. 

According to the most recent FTC registration and complaint figures, over 62 million phone numbers were registered by consumers as of mid-June 2004. By late December 2004, published media reports indicate that the national registry contains some 81 million numbers. The FTC and the Federal Communications Commission ("FCC") began enforcing the national registry on October 1, 2003. By mid-June 2004, consumers had submitted 428,764 complaints against 130,000 companies. At present, FTC officials indicate that there are now over 600,000 complaints pending and that the system for processing complaints is "full." 

In August 2004, the FTC announced that it would bring its first enforcement action seeking civil damages in connection with violations of the rules governing operation of the registry, against Braglia Marketing Group ("Braglia") and its two principals, Frank and Kate Braglia. Braglia, a Las Vegas telemarketing firm, is alleged to have made in excess of 300,000 calls to registered phone numbers on behalf of sellers of time share resort properties. It is also alleged that Braglia made more than 10,000 calls to phone numbers without paying the mandated annual fee to access registered numbers and that it abandoned calls to consumers by failing to connect the individuals to a sales representative within the prescribed 2-second limit of the call being answered. 

With a maximum penalty of $11,000 (U.S.) per violation, the potential liability faced by Braglia in this case is more than $3 billion (U.S.). Since December 2003, the FTC's sister enforcer, the FCC has issued fifteen citations for failure to honour national Do Not Call rules and has obtained a $400,000 (U.S.) consent decree against Primus Telecommunications, Inc. 

This program has literally been the most popular initiative ever undertaken by the FTC. 

Popularity of the magnitude generated by the U.S. Do Not Call registry was certain to attract attention north of the 49th parallel – and it has. On December 13 of last year, the Minister of Industry introduced Bill C-37, An Act to amend the Telecommunications Act, into Parliament. That Bill would empower the CRTC to establish a national Do Not Call list for Canada. It would also give the CRTC the power to impose penalties or corporations of $15,000 per offending call. The legislation contemplates that before putting in place an enforcement system, the CRTC will consult on the establishment of a possible Do Not Call list including, in particular, which organizations should be subject to it. An interesting question is whether charities, not-for-profit organizations and/or public opinion surveying will or will not be subject to such a registry. 

The Standing Committee on Industry, Natural Resources, Science and Technology is presently considering amendments proposed to the Bill which, if adopted, would include exemption from the Do Not Call registry where there is an established business-to-business client relationship and for charities registered under either federal or provincial law. 

While details of the proposed Do Not Call list are not yet known, there seems little doubt that it will become a reality. In a minority Parliament, there is no certainty as to what Bills will become law. That said, a Bill that is as popular as this one is likely to proceed, in this Parliament or the next. In a recent Environics survey, 79% of Canadians said they supported a Do Not Call list. Furthermore, the Canadian Marketing Association has publicly stated that it favours the establishment of an appropriate Do Not Call system for Canada. 

Given the penalties, designated not as fines but as administrative monetary penalties – of $15,000 per call – the consequences of non-compliance with the new registry may be severe. Furthermore, the penalties are stated not to be a maximum of $15,000, but as simply $15,000 for "every contravention of a prohibition or requirement of the Commission…." Further, the Bill provides that a violation continued on more than one day constitutes a separate violation for each day. Even assuming the $15,000 is a maximum but not a mandatory minimum penalty, the consequences are significant. 

The Competition Act already contains fairly stringent rules respecting improper telemarketing. These rules not only apply to corporations that breach the telemarketing provisions, but also to officers and directors of those corporations, even if those officers and directors did not know of the improper conduct but were in a position to prevent it. Those officers and directors are protected, however, if they take appropriate steps – known in law as due diligence – to prevent occurrence of the conduct. The Bill also provides a defence for exercising due diligence to prevent a violation. 

Given the existing telemarketing rules in the Competition Act, firms engaging in telemarketing are already well advised to have a sophisticated, detailed and actively enforced compliance regime requiring ongoing periodic reports to the Board of Directors. The additional penalties that firms may face under the proposed Do Not Call law are another good reason to put in place an effective compliance policy with respect to telemarketing.

This article appeared in Marketing & Advertising Brief Summer 2005.