The Competition Bureau is taking legal action against Canada's big three mobile carriers, along with their industry association, to force them to stop what it alleges is misleading advertising for text-based services that blindside consumers with hidden fees.
Arguing that Canadians deserve more control over their wireless bills, the competition watchdog said Friday it is suing Rogers Communications Inc., BCE Inc., Telus Corp., and the Canadian Wireless Telecommunications Association to seek refunds for consumers and to levy $31-million in fines.
Those monetary penalties would include $10-million each from Bell, Rogers and Telus, and $1-million from the CWTA. The bureau says the big three incumbents collectively control 93 per cent of Canada's wireless market, and stressed that although it is has not named small carriers in this suit, the message should filter down to the remaining 7 per cent of the industry.
The industry said it was surprised by the decision to sue. The CWTA said the Competition Bureau should go after the advertisers who send the allegedly deceptive messages, and added it was the industry that alerted the bureau to the problem in the first place. A Telus spokesman slammed the bureau for being more interested in "scoring political points."
Commissioner of Competition Melanie Aitken has made a name for herself by cracking down on controversial practices in a number of industries by taking on big companies including Visa and MasterCard. She leaves the post next week.
At the crux of the bureau's case this time is the allegation that the three carriers, in conjunction with the CWTA, "facilitated the sale" of content, such as ringtones and trivia questions, that appear to be free but end up slapping consumers with costly fees.
There are roughly 700 text-message based services that operate in Canada. About one-fifth of them are considered "premium" – meaning they charge fees that are over and above a consumer's regular plan. The bureau estimates premium-texting services cost up to $10 per transaction or a maximum of $40 for a monthly subscription.
Ms. Aitken said she's been investigating for five months, and although she tried to reach a deal with the providers it became clear in the last week that they wouldn't stop billing customers for the services on their own.
She said the companies pocketed between 27 and 60 per cent of the charges being passed along to their customers, who often unwittingly signed up for the messages while playing games and entering contests on mobile phones and tablets.
"Our investigation revealed their agreements not only gave them access to customer information and their bills but it allowed them to charge you for content you didn't know you were paying for," she said. "Then sometimes they even added an additional charge for the privilege of having you be misled by a third party."
She said she was particularly concerned that many of the apps were popular with children, and made it very easy for them to subscribe to expensive services with the simple push of a button.
"If you tap at the wrong time when playing a game then you've suddenly signed up for something that costs $40 a month," she said. "That's why I won't let my 7-year-old turn on the Wi-Fi on his iPod Touch. You are incredibly vulnerable as a consumer."
None of the allegations has been proven in court.
Rogers and Telus accused the bureau of passing the buck of enforcement on to the carriers.
"We don't have the authority to regulate advertising by other companies. The Competition Bureau is the enforcement body that does, and we asked them to enforce that. They ignored that," Telus spokesman Shawn Hall said. "It seems to be more of political move aimed at three high profile targets rather than going after the real culprits here."
He added: "Due to the Competition Bureau's actions today, we may have no choice but to cancel premium text message services in Canada altogether."
The CWTA, meanwhile, warned the bureau's legal proceedings could "disrupt" other text messaging services including severe weather alerts, charitable donations, flight status updates or sports scores, while also creating a hurdle to the introduction of new e-commerce technologies.
"We sent them thousands and thousands of files and documents and they never came back with one supplementary question or clarification or anything. And then they gave us ultimatums and ultimately, they filed this action today. But what is surprising is that they don't go after those that they claim that make the direct false representations," said CWTA president and chief executive officer Bernard Lord.