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February 10, 2013

On February 6, 2013, the Competition Bureau released its submission responding to the CRTC’s Wireless Code Working Document issued on January 28th.  In its submission, the Bureau takes issue with two main aspects of the CRTC’s proposed approach to a new wireless code: potential switching costs for consumers (including plan lengths) and advocating for effective disclosure of key terms, particularly price and service limitations.

Consistent with recent enforcement, notably in the abuse of dominance area including in connection with its challenges against the Toronto Real Estate Board and Ontario hot water heater suppliers, the Bureau raises several potential switching cost concerns relating to long-term contracts, handset locking and excessive termination fees.  Some of the potential adverse effects that, in the Bureau’s view, may flow from these wireless contract and handset features include reducing the incentive for incumbent carriers to innovate, raising rivals’ costs and acting as a barrier for new wireless entry.

Not surprisingly, and consistent with many Canadians, the Bureau takes particular issue with the fact that the contemplated code does not include any limit on the duration of wireless agreements.  With respect to handset locking, the Bureau takes the position that device locking should be prohibited and that service providers should be required to unlock any previously locked devices free of charge.  The Bureau also advocates for the uncoupling of current device subsidy contracts (i.e., for the financing of mobile devices over the life of a plan) from wireless service contracts generally, allowing consumers to continue with device financing agreements after switching to alternate providers.

Some of the more interesting aspects of the Bureau’s wireless submission relate to proposed disclosure for wireless terms.  The Bureau takes the position, among other things, that any wireless code should not restrict advertising more than necessary, that advertised prices should disclose all mandatory costs and that limited plans should not be advertised as unlimited.  In particular, the Bureau argues that any additional mandatory costs should be clearly disclosed (not placed in fine print disclaimers) and that claims that a service plan are “unlimited” could be misleading if a plan is in fact limited in some material way.

The Bureau’s advertising related points are consistent with its enforcement over the past several years, including increasingly pressing for upfront disclosure of total price, shifting more information into primary claims (and away from disclaimers) and more fulsome and upfront disclosure of material terms generally.

Having said that, several points are worth noting.  A number of the Bureau’s recent and ongoing challenges rely heavily on interpretation and reliance on the “general impression” test under the Competition Act (including in cases where claims may be literally true).  Also, several of the Bureau’s points, both in its wireless submission and recent/ongoing cases, do not necessarily have clear authority, notably ongoing calls by the Bureau for total upfront price disclosure and its drive to minimize the use of disclaimers (which, if used effectively, can be a perfectly legitimate tool to qualify primary claims).

In any event, it will be interesting to see whether the Bureau’s submissions are ultimately adopted by the CRTC and what balance the CRTC will strike between the concerns of consumers and consumer advocates (including the Bureau) and wireless carriers.

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