In June 2020, the Federal Court of Appeal released its decision in 3510395 Canada Inc. v. Canada (Attorney General), 2020 FCA 103. The Federal Court of Appeal upheld the constitutionality of the Canada’s anti-spam legislation (CASL). The decision provides businesses in Canada with a degree of guidance on how to comply with CASL’s requirements on the commercial electronic messages (CEMs).
In 1998, the Appellant began its operations in Quebec. It offered approximately 300 professional training courses in areas such as effective use of social media and budget planning. E-mail marketing was the Appellant’s primary means of business development.
In 2014, An Act to promote the efficiency and adaptability of the Canadian economy by regulating certain activities that discourage reliance on electronic means of carrying out commercial activities, and to amend the Canadian Radio-television and Telecommunications Commission Act, the Competition Act, the Personal Information Protection and Electronic Documents Act and the Telecommunications Act (“CASL”) came into force in Canada. The CASL provides regulations for the sending of commercial electronic messages (“CEM”) of the electronic commerce.
Between July and September 2014, the Appellant sent out 317 commercial electronic messages (“CEM”) to various recipients to promote its educational and training services. Most of the recipients are young individuals working in Quebec.
On March 5, 2015, following the investigation, the Appellant was issued a Notice of Violation (NOV) pursuant to section 22 of CASL. The NOV alleged that the Appellant had not obtained recipients’ consent prior to sending the promotion emails in question, contrary to paragraph 6(1)(a) of CASL. Besides, the commercial electronic messages (“CEM”) did not contain a functioning “unsubscribe” link, contrary to paragraph 6(2)(c) of CASL. Consequently, the NOV imposed a $1,100,000 administrative monetary penalty (“AMP”) on the Appellant.
On May 15, 2015, the Appellant made representations to the Canadian Radio-Television and Telecommunications Commission (the CRTC) pursuant to section 24 of CASL, denying its violation of CASL, complaining of bias in the investigation into its activities. Furthermore, the Appellant asserted that the CASL is unconstitutional.
On August 9, 2016, the Appellant filed a notice of intention to make a proposal under the Bankruptcy and Insolvency Act, R.S.C. 1985 c. B-3.
On October 19, 2017, the CRTC dismissed the Appellant’s constitutional challenge to the CASL. In fact, the CRTC bifurcated its decition into two parts. The first decision stated that the CASL is intra vires Parliament’s trade and commerce power under section 91(2) of the Constitution Act, 1867 and that its infringement of freedom of expression is justified under section 1 of the Canadian Charter of Rights and Freedoms. The second decision found that the appellant had committed four violations of CASL. Thus, the CRTC imposed a $200,000 administrative monetary penalty (“AMP”) to the Appellant after comparing the Appellant’s conduct against the factors in subsection 20(3) of CASL. Furthermore, the CRTC found that its review of NOV was unaffected by the Appellant’s bankruptcy proceeding.
On November 28, 2016, the Appellant listed the CRTC as an unsecured creditor in its bankruptcy proceeding.
The Appellant appeals the CRTC’s decisions pursuant to subsection 27(1) of CASL, which permits appeal to the Federal Court of Appeal of the CRTC decisions made under CASL.
Main Issues to Analyse
1. Did the CRTC err in its interpretation and application of the business-to-business exemption?
2. Did the CRTC err in its interpretation and application of CASL’s implied consent requirements regarding conspicuous publication?
3. Did the CRTC err in its interpretation and application of CASL’s requirements regarding unsubscribe mechanisms?
1. The Appellant argues that the CRTC erred in finding that the Appellant’s proposal to its creditors pursuant to the Bankruptcy Act had no effect on the NOV. The Appellant argues that the CRTC failed to consider the proper legal test for determining whether the appellant’s liability created by the NOV is a “claim provable” under the Bankruptcy Act set out in Newfoundland and Labrador v. AbitibiBowater Inc., 2012 SCC 67,  3 S.C.R. 443. As the liabilities arising from the NOV were provable claims, the appellant argues that it was released from them pursuant to its proposal proceedings under the Bankruptcy Act. The Appellant argues that the AMP is unenforceable outside the insolvency process.
2. The Appellant argues that the CRTC erred in finding that the 317 CEMs are unqualified for the business-to-business exemption stipulated in subparagraph 3(a)(ii) of the Governor in Council Regulations. The Appellant argues that the CRTC’s interpretation of the relevance requirement for the business-to-business exemption was overly restrictive.
3. The Appellant argues that the CRTC erred in its interpretation and application of para. 10(9)(b) of CASL, which provides that consent for the receipt of CEMs can be implied where the recipient has conspicuously published its electronic address.
4. The Appellant argues that the fact that non-functioning links were included in some CEMs does not negate the fact that the functioning links also present in those CEMs complied with the express wording of the CRTC Regulations.
1. Standard of Review: The Court’s review of the Notice of Violation Decision, concerning the application of the CASL to the facts, will be based on the standard of reasonableness or standard of palpable and overriding error (para. 38 of Benhaim v. St-Germain, 2016 SCC 48; para. 37 of Canada v. Vavilov, 2019 SCC 65).
2. Application of the Bankruptcy Act: Both parties agreed that the NOV is unenforceable outside the insolvency process. Both parties agreed that the Appellant’s Bankruptcy Act proceedings would not affect the CRTC’s ability to conduct the review proceedings at issue.
3. The interpretation and application of the business-to-business exemption (Section 6 of the CASL)
This exemption applies where three conditions are met: (i) a CEM is sent by an employee of one organization to an employee of another organization; (ii) those organizations have a relationship; and (iii) the CEM concerns the activities of the receiving organization.
The Court finds that the CRTC did not commit palpable and overriding error in this issue. The Appellant submitted proofs of payment from the recipient organization to the Appellant for a single training session for one or two of the recipient organization’s employees. The Court finds that it is reasonable that the CRTC determined that the contractual relationships comprehending a very limited number of transactions affecting very few employees do not constitute relationships for the purposes of the business-to-business exemption.
The Court analyzes the issue of what constitutes an “activity” of an organization for the purposes of the relevance requirement. The Oxford English Dictionary defines “activity” as, inter alia, any “project, task, or exercise”. The Court notes that organizations engage in many activities that are not directly related to their core business operations and maintain relationships with other organizations to facilitate those supplementary activities. In the present case, the CEMs would satisfy the relevance requirement if the appellant were able to show that the recipient organizations purchased similar courses in the past or planned to do so in the future. However, the Appellant failed to demonstrate its relationship with the recipient organizations.
4. Interpretation and Application of CASL’s Implied Consent Requirements regarding Conspicuous Publication (10(9)(b) of the CASL)
Paragraph 10(9)(b) of the CASL permits the sending of CEMs where the following three conditions are met: (i) the recipient has conspicuously published or caused to be conspicuously published their electronic address; (ii) the publication is not accompanied by a statement that the recipient does not wish to receive CEMs; and (iii) the CEM is relevant to the business, role, functions or duties of the recipient individual or organization.
In the present case, the Appellant submitted a table setting out the email address of each recipient for which it claims consent can be implied under this provision. The CRTC found that some email addresses were taken from third-party directory websites that did not indicate whether the site’s content was user-submitted. Besides, the CRTC found that some email addresses had been gathered from sites containing disclaimers to the effect that unsolicited CEMs are not to be sent to the addresses found therein.
The Court finds no palpable and overriding error in the CRTC’s findings.
5. Interpretation and Application of CASL’s Requirements regarding Unsubscribe Mechanisms (Section 6 of the CASL)
In the present case, 87 CEMs sent by the Appellant were found to contain two unsubscribe links or mechanisms: one that functioned properly and another that produced error message when accessed.
The Court finds that the CRTC was not wrong in determining that CEMs containing a second non-functioning unsubscribe mechanism fail to conform to the requirement in subsection 3(1) of the CRTC Regulations that unsubscribe mechanisms be set out clearly and prominently.
Besides, the Court finds that the CRTC committed no error in finding that the CEMs in question failed to conform to the requirement in subsection 3(3) of the CRTC Regulations that unsubscribe mechanisms must be able to be readily performed.
For these reasons, the Court dismisses the appeals with costs.
In light of the Federal Court of Appeal’s analysis and interpretation of the CASL, it is important that the businesses sending CEMs ensure that:
1. They should provide sufficient records of the transactions with the recipient organizations in order to invoke the business-to-business exemption;
2. They cannot use the emails listed on the third-party address directories that did not indicate whether the information was user-submitted as this does not meet the conspicuous publication requirement for implied consent;
3. The unsubscribe links in the CEMs are functional and presented clearly, prominently and readily performed.
(Reminder: The purpose of this article is to provide general legal information. It does not contain a full analysis of the law nor does it constitute a legal advice on the points of law discussed. To minimize the legal risk for your business, you must take specific legal advice from a lawyer on any particular matter which concerns you. Thanks for your attention.)