Canada's Competition Bureau promises vigorous enforcement to protect consumers in the digital economy

14 April 2020

There is often a real cost to "free" digital products and services - a consumer's data. Canada's Competition Bureau (the "Bureau") has taken a clear position that businesses must be careful not to mislead consumers in today's data economy. Data is non-traditional currency, but this "non-monetary transaction" is not immune to the deceptive marketing provisions of the Competition Act. The Bureau has promised to vigorously pursue deceptive online marketing practices that undermine consumer trust in the digital marketplace.[1] As a result, it is imperative that organizations review their data collection and use practices to ensure that they are providing an adequate level of transparency to consumers.



The Collection and Use of Consumer Data

Keeping in tune with its mandate to investigate and raise awareness about deceptive marketing practices in the online marketplace, on March 4, 2020, the Bureau published The Deceptive Marketing Practices Digest - Volume 5. This publication addressed marketing issues that impact online consumers and businesses, namely the collection of consumer data in exchange for "free" online products and services. According to the Bureau, the collection, use and trade of data about individual consumers is a "big part of the data economy", which involves collection and use of consumer data by businesses or the purchase of such data from third-party companies that is then used to develop a sophisticated understanding of the attributes of each digital consumer. As stated by the Bureau:

"Today, the cost of a product or service frequently includes consumer data. This is information about our behaviours as consumers: what we eat, where we go, where we shop, our age, our marital status, where we live and work, who our friends are, and a myriad of other attributes".[2]

The Exchange of Consumer Data for a "Free" Product or Service is Considered a Non-Monetary Transaction

The collection of consumer data in the online space can be broadly categorized into: (1) digital products and services that require consumer data to operate; and (2) digital products and services that collect consumer data for other secondary purposes. Despite often being marketed as "free", consumers ultimately may be paying for these products and services with their own data. The Bureau reiterates that these forms of exchange are considered "non-monetary transactions" between a business and a consumer and that such transactions fall within the ambit of the Competition Act ("Act").[3]

Business Should Not Mislead Consumers About the Collection and Use of Consumer Data

Part VII.1 of the Act emphasizes that businesses should avoid marketing practices that mislead or deceive consumers. The Act's marketing framework applies equally to traditional and non-monetary transactions. Pursuant to subsection 74.01(1)(a), representations that are false or misleading in a material respect are considered reviewable conduct. Upon establishing that a party has engaged in reviewable conduct, a court may publically disseminate information about a party's deceptive practices and further order: (1) the cessation of such conduct; (2) the imposition of a monetary penalty; and/or (3) reimbursement to be issued to affected consumers.

Vigorous Enforcement for the Protection of Consumers

The Bureau has indicated that investigating and addressing issues arising in relation to the digital economy is a priority. It plans to "vigorously pursue online marketing practices that undermine consumer trust in the digital marketplace".[4]

The Bureau has also highlighted the importance of collaboration in its enforcement efforts, a concept that has been discussed in recent decisions of Canadian privacy regulators in light of a global digital economy that transcends borders.[5]

The Bureau has specifically stated that its mandate aligns with that of the Office of the Privacy Commissioner of Canada ("OPC") in that both mandates are important to protect consumers in the digital economy: "The Bureau will continue to enforce provisions of the Act even if the offending actions may be subject to enforcement under the Personal Information Protection and Electronic Documents Act. The Bureau shares OPC's view of the importance of collaboration in this area and looks forward to working with the OPC to protect Canadian consumers."[6] The Bureau has signalled a similar intention in its "strategic vision" for 2020-2024, which our colleagues discuss in Competition Bureau Flexes Muscles in the Privacy Sphere .

Recommendations for Online Businesses

In light of the serious consequences of a breach of the Competition Act, which attracts monetary penalties of up to $1,000,000 for individuals and $15,000,000 for corporations, businesses must ensure that they offer their products and services in a transparent manner that does not mislead consumers into making uninformed decisions. From the Bureau's standpoint, information about whether and how a company collects, uses, handles, and shares data has the potential to be a material factor in the consumer's decision making process.

The Bureau has stressed that lengthy and complex privacy policies are not enough. Instead, businesses are expected to clearly delineate: (1) Whether and what kinds of data will be collected; (2) The frequency and duration of data collection; (3) The underlying purpose for which data is collected; (4) Whether data will be sold or otherwise shared with third parties; and (5) The level of control consumers have in relation to the storage and destruction of their data.

Conclusions

In this digital era, the exchange of data for online products and services is now considered a marketplace transaction that is directly comparable to or equivalent with more traditional monetary transactions. In order to ensure compliance with existing legal frameworks, Canadian businesses must take steps to provide a high level of transparency and clarity around their data collection and management practices, or risk significant fines and other forms of enforcement action.

Footnotes

[1] Competition Bureau Canada, "The Deceptive Marketing Practices Digest – Volume 5" (4 March 2020).
[2] Ibid.
[3] Competition Act, RSC 1985, c -34.
[4] Ibid.
[5] Office of the Privacy Commissioner of Canada, "PIPEDA Report of Findings #2019-004: Joint investigation of AggregateIQ Data Services Ltd. by the Privacy Commissioner of Canada and the Information and Privacy Commissioner for British Columbia" (November 26, 2019).
[6] Competition Bureau Canada, "Big data and innovation: key themes for competition policy in Canada" (19 February 2018).


NOT LEGAL ADVICE. Information made available on this website in any form is for information purposes only. It is not, and should not be taken as, legal advice. You should not rely on, or take or fail to take any action based upon this information. Never disregard professional legal advice or delay in seeking legal advice because of something you have read on this website. Gowling WLG professionals will be pleased to discuss resolutions to specific legal concerns you may have.