Canadian COMPETITION LAW

November 18, 2009

The Globe and Mail reported earlier today that Telus Communications has commenced an action against Rogers Communications in British Columbia for alleged misleading advertising in relation to its network.

In our comments to the Globe and Mail we noted that this case was interesting for several reasons including the potential challenge for Telus to show actual damage as a result of Rogers’ alleged misleading claims (a necessary element of establishing a private misleading advertising action), as well as a misleading advertising private action involving major Canadian telcoms and direct competitors (as compared to the more common actions between suppliers and customers, suppliers and distributors, etc.).  With respect to Telus’ burden to show damages, the challenging aspect (assuming Telus intends to pursue the case) would be to show actual damages in the relatively short period between the launch of its new (allegedly faster) network and the present, a relatively short period of some three weeks.

Telus claims that claims made by Rogers in its advertising claiming that it provides “Canada’s Fastest Network: 2x Faster than Any Other” (and similar variations) are false and misleading under the Competition Act, as Telus’ recently introduced new network is now faster than Rogers.  Whereas Rogers introduced its High Speed Packet Access in 2007, Telus launched its new HSPA/HSPA+ wireless network earlier this month.

Telus is also alleging that Rogers advertising claims that it provides “Canada’s Most Reliable Network” (and similar variations) are also false and misleading.

Perhaps the most interesting aspect of this recently filed case are Telus’ arguments regarding alleged damages suffered as a result of Rogers’ advertising claims:

“The pre-Christmas months are the busiest time of the year for consumer sales in the wireless service communications market.  Due to the economic slowdown in Canada, this year the competition for wireless service communications customers will be even more competitive than normal. … Further, given the economic downturn in Canada, consumers are becoming more price conscious and, as such, the false and misleading Fastest Network Representation and the false and misleading Most Reliable Network Representation are particularly damaging to TELUS. … As a result of Rogers’ wrongful acts and omissions as set forth herein, the Plaintiff has suffered, and will continue to suffer, loss, damage and expense, including depreciation of its’ goodwill and competitive advantage …”

While private actions under the Competition Act are now not uncommon (most are commenced under the criminal conspiracy or criminal misleading advertising provisions of the Act), it is relatively uncommon for a direct competitor to commence a private action against a competitor, given that actual damage as a result of the alleged illegal conduct must be shown.  As such, many private actions commenced under the Act are in the context of vertical arrangements (e.g., supplier/customer, supplier/distributor, etc.) – for example, consumers commencing actions (or class actions) for criminal price fixing agreements or misleading advertising engaged in by upstream suppliers, where it is, generally speaking, easier to quantify damages.

This most recent case also follows a relative upswing in the number of private actions commenced under the Competition Act, a trend which is expected to continue as a result of recent amendments to the conspiracy provisions of the Act (lowering the bar for price-fixing private actions) and several recent plaintiff favourable class action certification cases in British Columbia and Ontario.

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