Broken Telephone: Telco Ordered to Pay $300,000 for Misleading Advertising

In mid-September, Comwave Networks Inc. (Comwave) entered into a consent agreement with the Commissioner of Competition regarding allegations that it contravened the civil misleading advertising provisions of the Competition Act (the Act). Under the consent agreement, Comwave is required to pay an administrative monetary penalty (AMP) of $300,000, and $60,000 towards the Bureau’s costs of the investigation. Additionally, Comwave has agreed to remove all problematic representations (across all media), issue a corrective notice to the public to its customers, and establish and implement a corporate compliance program. 

The Representations

Based on its investigation into Comwave’s advertising since 2011, the Bureau concluded that Comwave made false and misleading representations to the public about the pricing and level of services for its various telecommunications services. With respect to pricing, Comwave allegedly engaged in two problematic representations:

  • Services were advertised for prices that were not actually attainable because “non-optional fees” were charged to each customer over and above the price representation; and
  • Special price offerings such as (“6 months free home phone service”) that were subject to additional terms and conditions (e.g., mandatory contract terms) prior to the completion of the sale and installation of the services.

With respect to the level of services, Comwave made representations on “unlimited” services using phrases such as “unlimited local calling” for its home phone services and “no caps on downloads”, “limit free”, “now you can watch all the movies you want” and other similar phrases for its internet service offerings. However, in reality, residential phone services were subject to a 3000 minutes per month cap, and internet usage was effectively limited for consumers by significantly slower download speeds after certain amounts of data usage. 

Use of Disclaimers

Although Comwave used fine print disclaimers in its representations through advertisements and its telephone intake process, the Bureau found that these disclaimers were insufficient to alter the general impression conveyed to consumers about the advertised prices and level of services that Comwave advertised, but that were effectively unattainable. 

This is yet another case involving attempts by various telcos using disclaimers to “cure” inherently false and misleading representations regarding pricing and service levels. This case also serves as a useful reminder regarding the permitted use of disclaimers under the misleading advertising provisions of the Act, namely that:

  • While “fine print” can expand on representations made to promote a product and provide other useful information, they cannot be used contradict or negate the main message. In the case of Comwave, the fine print used to disclaim the words “unlimited” and other similar language essentially restricted and contradicted the main text. 
  • Online advertising can complicate the use of effective disclaimers. When using different platforms for representations, businesses need to ensure that disclaimers are still readily accessible, located where they are likely to be read by consumers, and not “lost in translation” if shared between users on different platforms.

Lessons Learned

This case reiterates the Commissioner’s focus on both the misleading advertising provisions of the Act and the use of disclaimers in the digital/mobile space. Accordingly, in addition to ensuring their use of disclaimers is compliant generally, businesses must proactively ensure that their disclaimers are effective across all electronic platforms on which it is likely to appear.  

Click here for a copy the Bureau's press release and consent order

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