snIP/ITs Insights on Canadian Technology and Intellectual Property Law

CRTC CASL Compliance and Enforcement Update

Posted in Anti-Spam, Regulatory Compliance
Keith Rose

On February 10, 2016, Lynne Perrault and Dana-Lynn Wood of the CRTC provided the latest in what is becoming a series of CASL briefings, which the presenters described as part of an “on-going dialogue” with industry. The CRTC now has a year and a half of enforcement experience under its belt for the Commercial Electronic Messages (CEMs) provisions of CASL, so this presentation focused on patterns and issues that have emerged in that period, and some guidance in response to those issues.  However, the presenters took some pains to note that the guidance offered was not intended to be prescriptive and was not binding on the Commission (or anyone else).

[Note: some phrases in quotation marks below are paraphrases and may not reflect the exact words used by the presenters.]

Complaints

The presentation began with some interesting statistics and information about the complaints the CRTC has received via the Spam Reporting Centre (SRC). As of early February 2016, the SRC has received over 500,000 complaints.  These have been received fairly steadily at a rate of about 22,000 per month (5,000 – 6,000 per week), although there is a noticeable spike each time the CRTC issues an enforcement announcement.

More than 80% of the submissions from Canadians (a subset – the SRC accepts submissions from non-Canadians as well) have been about email. SMS is the next largest category, at about 13%.  However, this may reflect (at least in part) the fact that the collection mechanisms that the SRC uses were largely designed with email in mind and it is much easier to report an email message to the SRC than any other kind of CEM.  The CRTC is currently working with mobile service providers to make it easier to report SMS message, including by forwarding them to a short code like 7726 (SPAM), as is currently in place in New Zealand.

Reading between the lines, it seems reasonable to conclude that the CRTC intends to put more enforcement emphasis on SMS in the future. Organizations should not make the mistake of thinking that CASL enforcement is in any way limited to email.

The presentation also included an analysis of the subject matter of the complaints. An overwhelming 94% of complaints involved some form of consent issue (including both initial consent and withdrawal of consent/unsubscribe issues).  Approximately 1/3 of complaints involved the identification requirements, and slightly less than that (28%) involved some allegation of deceptive marketing practices.  (The numbers do not add up to 100% because complaints may involve multiple issues.  Also, to be clear, the analysis is of issues reported by the complainants without any attempt to assess their merits.)

One clear implication for organizations is that consent has to be taken seriously. Recipients who believe their wishes are being respected are much less likely to complain than those who do not.  Only 6% of all complaints appear to have come from people who had no concern about having consented to receive the messages.

However, the presenters also noted that they do not rely solely on complaints. They also make use of honeypot data, which the Commission considers to be more representative of real message traffic than complaints, which may reflect some form of selection bias.

Prioritization

The volume of complaints makes it impossible for the CRTC to investigate them all. The presenters noted that one common question that they get is how they prioritize their investigation and enforcement activities.

The answer given was that they rely, at least in part, on automated analyses to identify “clusters”, “spikes” and other anomalies in the SRC submissions and the honeypot data. From this, they attempt to identify common issues or “sectors” for closer attention, as well as individual actors who stand out from the crowd.

Enforcement Tools: Advisories, Warnings, and Citations

The presenters also noted that the CRTC continues to develop its enforcement approach and toolkit. While the public announcements to date have dealt with formal Notices of Violation and Undertakings (both of which are provided for by the statute), the CRTC has also been at work developing a wider range of softer enforcement tools, including advisories, warnings and citations.  These are less well-known, because they are not conducted publicly.  (Apparently, around “30-some” cases were closed in 2015, altogether.)

These options are not a sequence: the CRTC will not always issue a warning before taking other action, for example. But they do represent a continuum of responses and the presenters indicated that the Commission’s goal is to achieve compliance in an efficient way.

Advisories are informational communications that are issued to a particular sector or class of actors when the data analysis suggests a common problem. They do not allege any non-compliance and are not targeted at particular organizations or individuals.  However, the presenters noted that they have observed measurable decreases in complaint volumes as a result of sending out such advisories, suggesting that the recipient organizations do make changes in their systems and practices in response to them.

Warnings are more targeted, but still do not allege a specific non-compliance. They are sent to inform organizations that an anomaly or “bump” in complaints has been noted, but before any investigation is conducted.  The presenters described these warnings as an “opportunity to look at your systems”, before any further enforcement action takes place.

Citations are a tool the CRTC has brought over from the Unsolicited Telecommunications Rules (e.g. telemarketing) enforcement practice. These were described as “a bit more of a stern warning”.  They are issued after an investigation.  They indicate that the CRTC considers that the allegations of non-conformance have some merit but has decided in the particular case not to take the matter any further.

Any organization which receives such a citation should be aware that the CRTC will consider failure to address the complaint as an aggravating factor in future enforcement actions, including as a factor under s. 20(3)(c) relevant to the assessment of any Administrative Monetary Penalty (AMP).

Organizations should also note that the CRTC will conduct on-going monitoring after any such enforcement contact (likely including any of the above). So this should probably be taken as an indication that the organization will be subjected to additional scrutiny in the future.

Compliance Issues

The presenters canvassed some compliance issues that seem to have emerged as common problems, including proof of consent (and record-keeping, generally), relationships with third party service providers, and unsubscribe practices.

The presenters stressed that organizations under investigation have burden to prove consent for every contact to whom they send CEMs. Investigators will not consider a general statement of a policy or practice that is not supported by records to meet this burden.  Furthermore, the records must be complete and up-to-date.  They should be created contemporaneously, not in response to a Notice to Produce, and Investigators will look for evidence that the records are actually used by the organization to monitor and ensure compliance in practice.

One specific example raised was that some organizations purported to rely on the “conspicuous publication” implied consent (s. 10(9)(b)) without having records to prove that the publication was “not accompanied by a statement that the person does not wish to receive unsolicited commercial electronic messages” (as required by the statute). The presenters stated that the “best practice” in this regard would be to capture a record (such as a screenshot) of the publication in each case.

The presenters also noted that a number of organizations have taken the view that they have outsourced their messaging functions and that compliance was the service provider’s concern, not theirs. The CRTC will not accept this view.  The organization may be held accountable for the failures of its service providers, unless it can demonstrate due diligence in managing that relationship.  The presenters recommended that organizations clearly address CASL compliance in their service contracts and monitor and audit the compliance of their service providers.

There seem to be three or four common issues that arise in relation to unsubscribe mechanisms. One is failure to comply with the 10 day window for processing an unsubscribe request.  Another is failure to keep the unsubscribe link included in a CEM active for 60 days following the message.  A third is basic failure of the system to work properly.

The presenters advised proper testing and regular auditing to ensure the unsubscribe mechanism works in practice. Organizations should also note that the presenters took the view that the burden of proof to demonstrate compliance lies with the organization in this case as well (although it could be noted that s. 13 of the Act only refers to proof of consent, not of compliance generally).  Organizations may be called upon to prove compliance with the time windows noted above.

A fourth issue relating to the unsubscribe mechanism involves the requirement that it be “readily performed”. The CRTC FAQ document indicates that a “six step approach”, involving multiple login or confirmation stages would not be compliant. But there has been some uncertainty as to what counted as a “step”, or how many “steps” are OK.

The presenters acknowledged this uncertainty, and that there has been internal discussion on this point within the CRTC. They noted that additional guidance might be helpful on this point.

Generally, while stressing that this was neither prescriptive not binding, they suggested that clicking on the initial link in the CEM would not be counted as a step (although it is one of the six enumerated steps in the FAQ example) and that relatively common practices like requiring a (single) confirmation or a why-are-you-leaving form were generally OK on their own. It was the cumulative effect of layering multiple such steps that was problematic.  (However they did not offer any bright-line rule.)

Furthermore, in the real-world case that led to this example, the problem was compounded by the fact that it simply was not clear what the user was supposed to do. So organizations may be able to mitigate complexity by taking pains to clearly guide the user through the process.

Due Diligence

The presenters also addressed the interpretation of the due diligence provisions of the Act. As they explained it, whether an organization has exercised due diligence is an all-or-nothing question; there is no partial defence.

The presenters referred to a number of factors or tests that might be applied, including having adequate written policies with adequate on-going training, contemporaneous record-keeping, active monitoring and enforcement to put those policies into practice as well as responsiveness to complaints, problems and to inquiries from the CRTC. It was not entirely clear whether these were factors to consider, if relevant, or tests that would apply on a cumulative basis.  But in any case, the Commission’s view seems to be that due diligence is not a one-time activity; it is an on-going, day-to-day activity that organizations will have to practice and document if they want to be able to rely on it as a defence.

One might question whether that approach is entirely consistent with the statutory language of s. 33, which includes that “Every rule and principle of the common law that makes any circumstance a justification or excuse in relation to a charge for an offence applies in respect of a violation to the extent that it is not inconsistent with this Act.” The applicable common law rules and principles are arguably more nuanced than the presentation suggests and are typically not amenable to bright-line rules.  An overly-narrow test (if that is what the presenters intended to suggest) might not be upheld by a reviewing court.

The presenters also specifically noted that some organizations have voluntarily reported compliance issues (particularly when they have resulted from simple mishaps or mistakes, such as accidentally sending an email blast to the wrong address list). The presenters repeated that their goal was to “help achieve compliance” and extended an invitation to organizations in a similar situation to “pick up the phone”.  There is no guarantee an organization would be giving any kind of immunity for such a voluntary admission, but the presenters did suggest that voluntary cooperation is viewed favourably, including in the assessment of AMPs.  They also noted that a formal undertaking under the Act provides immunity from the private right of action, which comes into force in 2017, in respect of that conduct.

Organizations should carefully assess the risks of taking up this invitation and should consider obtaining qualified legal advice. Unlike the Canadian privacy regime to date (which may be more familiar to many compliance officers), there are substantial monetary penalties at stake under CASL.  Moreover, there are (or may be) other issues to consider, including preservation of privilege and third party liability (which will be increasingly important as the in-force date for the private right of action approaches) and the CRTC’s ability to share information with other enforcement and regulatory agencies, including those in the US and other countries.