The Competition Bureau’s record settlement with Telus (TSX:T) over misleading ads will send a message to service providers that they don’t have “clean hands” when helping third parties deceive customers, according to one expert.
The Competition Bureau reached its largest-ever settlement December 30 when Vancouver-based Telus agreed to repay some of its current and former customers a total of $7.34 million.
The Ottawa-based law enforcement agency began investigating telecom giants Telus, Rogers (TSX:RCI.B) and Bell (TSX:BCE) in 2012 over concerns they were helping third parties engage in unauthorized billing of their customers for premium services.
After a five-month investigation, the Competition Bureau determined that Telus helped make and distribute misleading ads for premium text messages in pop-up ads, apps and social media and then pocketed part of the revenue.
The bureau said many customers believed trivia questions and ringtones Telus transmitted or created were free when in fact they could cost up to $10 per transaction and up to $40 for a monthly subscription.
“[The] message that the Competition Bureau’s trying to send is that facilitators don’t have clean hands if they pass [on] misleading information,” said Tom Ross, a professor specializing in regulation and competition policy at the Sauder School of Business at the University of British Columbia.
In addition to the big three telecom carriers, the Competition Bureau also targeted in its investigation the Canadian Wireless Telecommunications Association (CWTA) advocacy group. None of the third parties were included in the agency’s legal proceedings.
“They may well go after the other firms themselves but you can see why it’s very efficient for them to target at least the firms that are conveying this kind of information and facilitating these consumer deceptions,” Ross said.
“The carriers might function as gatekeepers to this to the extent that they’re being held responsible … for misbehaviour that they’re facilitating through their customer base. They could be very helpful allies in avoiding the worst abuses.”
A spokesman from Telus declined to talk to Business In Vancouver about the record-setting agreement.
Rogers reached its own $5.42 million agreement with the Competition Bureau in March 2015; legal proceedings against Bell and the CWTA are continuing.
While the $7.34 million sum is the largest amount ever agreed upon in a Competition Bureau settlement, the agency originally sought fines and penalties of $10 million from each of the big three carriers and $1 million from the CWTA.
As part of the agreement, the Competition Bureau has dropped legal proceedings against Telus.
The wireless provider agreed to donate $250,000 to Ryerson University’s Privacy and Big Data Institute, which specializes in research on consumer issues.
“Probably the best strategy is what Rogers and Telus have done, which is to fess up,” Ross said.
“[The $7.34 million] is a big enough number and the associated publicity, which does not look good for the company as well, I think is enough to get attention. It’s not going to bring the company to its knees, and I’m sure the company is pleased the money is going back to its customers.”
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