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January 2, 2013

In an interesting case decided just before the holidays, which I fleetingly Tweeted, the Supreme Court of British Columbia denied an attempt by TELUS to block seasonal advertising by newcomer Mobilicity (see: TELUS Communications Company v. Mobilicity).  Now that I’ve had my fill of Christmas turkey, I’ve had a chance to take a look at the decision which, though brief, includes a few interesting points.

In this case, TELUS’ challenge focused on three Mobilicity television advertising claims:

1.  That Mobilicity’s competitors (including TELUS) make deceptive offers to customers, including offers of “unlimited plans” (when in fact their plans are limited to “after 6 PM evenings and weekends”);

2.  That Mobilicity offers customers wireless services with “no contracts” (when Mobilicity does in fact require contracts); and

3.  That Mobilicity offers “unlimited data” plans (when its plans are subject to a fair use policy that can limit speed).

TELUS sought an interlocutory injunction stopping Mobilicity from continuing with its claims through the end of December, arguing that the claims violated section 52 of the Competition Act (the criminal misleading advertising provision of the Act, which allows civil damages actions).

In denying TELUS’ injunction application, the Court reviewed the availability of injunctions under the Competition Act, the test for granting interlocutory injunctions and made several interesting comments relating to the interpretation of advertising for the misleading advertising provisions of the Act (and the balance between the need for accurate advertising and free speech).

As a threshold matter, the Court reiterated the BC Court of Appeal’s holding in earlier TELUS litigation in 2009 that the private action provision of the Competition Act, which speaks only of compensatory damages (i.e., the ability for private plaintiffs to recover actual loss or damage suffered) does not prevent the Supreme Court from exercising its inherent jurisdiction to grant injunctions.

With respect to the test to obtain interlocutory injunctions itself, the Court relied on (and the parties accepted) the test as set out in RJR-MacDonald Inc. v. Canada and Bell Mobility Inc. v. Telus Communications) (a fair question to be tried, balance of convenience and, as articulated in the three-prong test in RJR-MacDonald, irreparable harm).

While the Court concluded that TELUS met the first prong of the test, it held that it was not clear that the literal meaning or general impression of Mobilicity’s ads was that competitors’ offers were deceptive (as opposed to the fact that plans can be confusing generally and customers should be mindful of small print), was not convinced the general impression of Mobilicity’s ads suggested no contracts at all (rather than no plans that lock in customers for specific terms) and that data limitations would be best determined on the merits.  Under the civil and criminal misleading advertising provisions of the Competition Act, representations, including business claims, can contravene the Act where they are literally false or where the general impression is false or misleading.

Interestingly, in assessing the general impression of the “no contracts” claim, the Court relied on the Supreme Court of Canada’s recent decision in Richard v. Time Inc., a Quebec consumer protection legislation case, which adopted a lower general impression test than in previous Competition Act cases based on a “credulous and inexperienced” consumer.  This lower standard is also being argued by the Competition Bureau in its misleading advertising challenge against Bell, Rogers and TELUS (though it still remains to be seen whether this lower standard will be adopted more widely by other Canadian courts).

The Court, however, found that TELUS had failed to meet the balance of convenience prong of the test.  In coming to this conclusion, the Court pointed to the more fragile market position of Mobilicity, the weakness of TELUS’ overall case, the public interest of free commercial speech and a reluctance to “intervene in the competitive marketplace” (despite the public policy of the Competition Act to restrain misleading advertising).

The Court also reiterated in its decision that in assessing whether claims are false or misleading under the Competition Act, the entire context, including the general impression of claims, must be considered.

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