ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: 12-55497
DATE: 20130612

BETWEEN:

THE COMMISSIONER OF COMPETITION
Plaintiff

– and –

ROGERS COMMUNICATIONS INC., BELL CANADA, TELUS CORPORATION, and the CANADIAN WIRELESS TELECOMMUNICATIONS ASSOCIATION
Defendants

David R. Wingfield, Derek Leschinsky and Parul Shah for the Commissioner of Competition

Sean Campbell and Anita Banicevic for Rogers Communications Inc.

Donald B. Houston for Bell Canada

Christopher P. Naudie and Lauren Tomasich for TELUS Corporation

William L. Vanveen, for Canadian Wireless Telecommunications Association

ARGUED: April 23-25, 2013 (Ottawa)

HACKLAND R.S.J.

reasons for decision

[1] The defendants seek an order requiring the plaintiff, the Commissioner of Competition (the Commissioner), to provide particulars of the allegations contained in the Commissioner’s Statement of Claim.

[2] The defendants TELUS, Rogers and Bell are companies engaged in the business of providing wireless services and products to the public, including text messaging services. The other defendant, the Canadian Wireless Telecommunications Association (CWTA) is an industry association that represents wireless service providers, including the named defendants.

[3] In the Statement of Claim, the Commissioner alleges that each of the defendants has engaged in anti-competitive conduct contrary to paragraph 74.01(1)(a) of the Competition Act, R.S.C. 1985, c. C-34 as amended (the “Act”). In particular, the Commissioner alleges that the defendants “made” or “permitted” misleading representations to the public, and the Commissioner identified two categories of misleading representations:

(i) The defendants make and permit to be made false and misleading representations to the public online and via wireless networks for the purpose of promoting the supply and use of Premium Text Messaging and Rich Content Services (the “Call-to-Action Representations”) (para. 8(a) of the Claim); and

(ii) The defendants make false or misleading representations to the public, that consumers are safeguarded or protected from having to pay unauthorized charges for Premium Text Messaging and Rich Content Services for the purpose of promoting the supply or use of Wireless Productions (the “Safeguarding Representations”) (para. 8(b) of the Claim).

[4] By way of factual background, I quote the following paragraphs from the defendants’ Notice of Motion:

(d) Within the wireless industry, a number of third parties have independently developed their own services, content and applications for users of wireless services. These third parties are known as “Content Providers” and “Aggregators”. These third parties develop, promote and offer a range of text messaging services and programs to consumers of wireless services, including but not limited to mobile games, voting applications, alerts, trivia contests, ringtones, electronic wallpaper and other content and application services. Given that the content associated with such text messaging is typically more expensive relative to standard text messages, these services are commonly referred to as “Premium Text Message Programs”;

(e) The Premium Text Message Programs that are at issue in these proceedings are ones that are purchased using what are known as “Common Short Codes” (namely, five or six digit codes that are leased from the CWTA by Content Providers or Aggregators). Typically, Content Providers or Aggregators will lease a Common Short Code from the CWTA to allow subscribers of more than one Wireless Service Provider to use the same five or six-digit code to sign up for Premium Text Message Programs, once the Wireless Service Providers have activated the Common Short Code. For example, if an Aggregator leases the Common Short Code “12345”, the Aggregator can advertise the same sign-up procedure to all customers of the Wireless Service Providers who have agreed to carry Common Short Code 12345 (e.g., “Text Sign-up” to the number “12345” to sign up for the Premium Text Program);

(f) The Content Providers and Aggregators promote the sale of Premium Text Message Programs through a variety of mediums including the use of banners and/or advertisements that are accessible on the Internet or banners and/or advertisements appearing in certain third-party mobile applications (such as games) and television commercials. In order to access Premium Text Message Programs, a consumer must specifically “click through” such banners and/or advertisements. Such banners and advertisements are commonly referred to as “Call-to-Action” promotions, as they are intended to encourage consumers to sign up for, or purchase, a Premium Text Message Program;

[5] The defendants complain that beyond the general description of these two broad categories of statements (“Call-to-Action Representations” and “Safeguarding Representations”), the Commissioner did not identify the specific Call-to-Action Representations and Safeguarding Representations that are said to constitute misleading consumer representations. The defendants’ position is that further particulars of the alleged misrepresentations which are the subject of the claim are required in order to allow them to prepare their statements of defence and properly defend the action.

[6] The defendants delivered lengthy demands for particulars. By way of response, the Commissioner provided “screen shot” examples of 61 Call-to-Action Representations made or communicated by 2 content providers. The content providers are not parties to this action. The defendants complain that in the particulars provided, the Commissioner did not provide any other particulars as to how, when or where these statements or representations were made, including: the date of each alleged representation, the name of the mobile application in which the alleged misrepresentation appeared, and whether the mobile application, and thus, the alleged misrepresentation, was accessible on a wireless device operating on any of the defendants’ networks.

Position of the Defendants

[7] The defendants submit that they need to know the specific alleged misrepresentations that are the subject of the Commissioner’s complaint in this proceeding, as well as, at a bare minimum, the basic details relating to the time, place, content and forum of the alleged misrepresentations, and the associated Common Short Code with respect to each alleged misrepresentation, so that each of the Defendants can investigate the alleged misrepresentation and assess their response to the Commissioner’s allegations.

[8] The defendants TELUS, Rogers and Bell point out that they each provide wireless services to millions of consumers who may choose to access any one of the hundreds of thousands of different mobile applications that are available or visit any one of the millions of web pages available on any given day. It would seem to be common ground that there were and are at present a very large number of Call-to-Action Representations running on some 350 short codes. The defendants assert that they cannot identify “all of” the specific representations that the Commissioner intends to pursue in this proceeding. In argument counsel suggested that they are being required to search out “a needle in a haystack”.

Position of the Commissioner

[9] The Commissioner argues that the defendants’ claims that they need the particulars of each representation are disingenuous and are an attempt to narrow the inquiry into the defendants’ conduct, to discrete misrepresentations with the purpose of precluding the Commissioner from addressing the entirety of the defendants’ deceptive marketing practices. They say the Commissioner’s objective, as contemplated by the legislation, is to remedy the harm caused by the deceptive marketing practices for the benefit of the public at large. To that end, the Commissioner intends to seek a remedy (and to pursue) discovery with respect to the conduct in issue and not merely to canvass a discrete set of misrepresentations. The Commissioner also argues that the defendants are in essence seeking evidence and the information sought should be the subject of examination for discovery.

[10] The Commissioner submits that the defendants select the digital content they wish to offer to consumers, in relation to premium text messaging, and to that end they enter into contracts with content providers who create or make the digital content available. The defendants evaluate and then select the digital content they wish to distribute to their customers and they charge their customers for this content by using the short code system. Through this system, the defendant wireless companies engage in their business of selling premium text messages. This is a lucrative business in which the defendants Bell, Rogers and TELUS keep between 27% and 60% of the gross revenue they collect (usually via the monthly billing statement) from their customers from premium text message charges.

[11] The documentation reveals, according to the Commissioner, that the CWTA also receives millions in revenues from overseeing and controlling the short code system. The Commissioner alleges that defendants are in a position to control the misleading representations which they make to the public. Furthermore, the Commissioner alleges that the defendants have the means to track each customer complaint to a specific short code and thereby to stop or at least investigate the misrepresentations. In short, the Commissioner alleges that there is a close working relationship between the defendant wireless companies and certain content providers to put out digital Call-to-Action Representations which they know to be false and they (the defendant wireless companies and the content providers) then share the revenues collected through the billing process utilized by the defendants to their customers.

Analysis

[12] Each of the defendant wireless companies filed an affidavit of a senior executive deposing that the respective companies require the Commissioner to identify the specific representations which are relied on and these affidavits also at least imply that the companies are not aware of the particulars or the scope of any significant problems with respect to the misleading consumer representations in question. Counsel for the Commissioner cross-examined on these affidavits with a view to determining or obtaining admissions about what the defendants knew about these representations and with a view to exploring the relationship between the defendants and the content providers, in order to establish that the particulars sought were not required for pleading and were within the defendants’ knowledge or ability to identify and investigate.

[13] On my review of the transcripts, excerpts of which were filed in evidence, the efforts of the Commissioner’s counsel to pursue legitimate cross-examination were significantly and inappropriately objected to. The objections were not that the questions were irrelevant, but that they were the proper subject matter for discovery. I would observe that an exploration of the evidence is indeed a proper subject for discovery, but evidence going to the defendants’ knowledge or potential knowledge about their premium text messaging business and the consumer complaints directed to the companies concerning this business, is relevant to the companies alleged need for the specifics of the misleading consumer representations, in order to plead. Objections which unduly limit a proper inquiry into the moving parties genuine need for particulars in order to plead, serves to undermine the proposition that such particulars are needed.

[14] In my view, the Commissioner’s Statement of Claim adequately describes the activity which gives rise to the misleading misrepresentations in such a way that the defendants are well able to respond. The so-called Safeguarding Representations are clearly spelled out and the necessary particulars are provided in the Statement of Claim. As for the more contentious “Call-to-Action Representations”, which are apparently the essence of the Commissioner’s action, and of this motion for particulars, these number apparently in the hundreds or perhaps thousands and are properly characterized as evidence. As evidence they are the proper subject of discovery but are not required for the purposes of pleading.

[15] The court is not at this stage in a position to sort out the remarkably conflicting factual submissions from counsel on the subject of what knowledge and information the defendants have concerning their premium text messaging business and the misrepresentations to the public that have apparently become a significant problem, generating huge volumes of complaints from the defendants’ customers. In essence, the Commissioner says the defendants are well aware of the nature and scope of the problem, have significant information about the problem and have deliberately avoided doing anything about it because the business is highly lucrative for them. Defendants’ counsel deny this on behalf of their clients.

[16] In my opinion what is required in the present circumstances are examinations for discovery relating to all aspects of the allegedly misleading Call-to-Action Representations in the defendants premium text messaging business. I agree that the discoveries should not simply consist of a review of a discrete number of allegedly misleading consumer representations. The Commissioner is entitled to explore whether these alleged misrepresentations are generically the product of a close business or working relationship between the defendant wireless companies and the content providers who create the products in question and who, the Commissioner argues, are in effect partners with the defendant wireless companies in the premium text messaging business.

[17] It is well settled that an important function of particulars to a Statement of Claim is to define the claim sufficiently to all a defendant to respond intelligently to it. I respectfully adopt these observations from the judgment of Perell J. in Brigaitis v. IQT Ltd. (c.o.b. IQT Solutions), 2012 ONSC 6584:

37 An order for particulars is a discretionary order, and the court must be satisfied that the order is just in the circumstances of each case: Fairbairn v. Sage, supra at p. 471; Obonsawin v. Canada, 2001 28431 (ON SC), [2001] O.J. No. 369 (S.C.J.) at para. 42; Reichmann v. Koplowitz, 2012 ONSC 5063 at para. 11(Master). Particulars for pleadings are normally ordered only if: (a) they are not within the knowledge of the party demanding them; and (b) they are necessary to enable the other party to plead his or her response: Fairbairn v. Sage, supra; Physicians’ Services Inc. v. Cass, supra.

38 The ability to plead is the focus of the need for particulars, and particulars will be refused if the demand for particulars is being used instead as a way to discover evidence before the examinations for discovery: Blatt Holdings Ltd. v. Traders General Insurance Co., 2001 62756 (ON SC), [2001] O.J. No. 949 (S.C.J.) at para. 23. As evidence is not to be pleaded; it is not to be ordered by way of particulars: Caputo v. Imperial Tobacco Ltd., [1996] O.J. No. 1396 at para. 8 (Master).

[18] It has been observed that: “Broadly speaking, particulars are to explain what one party is going to try to prove against the other: how a party intends to prove his or her case is a matter of evidence”, see Premakurran v. Canada, 2003 FCT 635, 2003 F.C.T. 635 at para. 9.

[19] The Commissioner has indicated in its response to the defendants’ demand for particulars that certain of the Call-to-Action Representations referred to in specified paragraphs of the Statement of Claim are those created by one of the content providers “Jesta” and in other specified paragraphs, those created by “Mobile Messenger”. With respect to most of the demands for particulars, the Commissioner has pleaded:

To the extent these demands request detail beyond that which is pleaded, they are requests for evidence, including evidence within the knowledge of the defendants.

[20] As stated above, I am persuaded that the defendants are indeed, for the most part, seeking particulars that are properly viewed as evidence and indeed evidence of facts and data, procedures and relationships that are apparently within their own knowledge.

[21] The issues raised in this motion are similar to those discussed in the recent decision of Rennie J. sitting on the Canada Competition Tribunal in Canada (Commissioner of Competition) v. Reliance Comfort Ltd. Partnership, [2013] C.C.T.D. No. 4 (Comp. Trib. 4). In that case the defendant sought an order requiring the Commissioner to amend the application to more clearly define the geographic and product markets at issue as well as the exact conduct that was alleged to constitute the alleged anti-competitive acts. Alternatively, the defendants sought an order requiring the Commissioner to provide further and better particulars. As in the present case, the Commissioner argued that the defendant was seeking, through its demand for particulars, to limit artificially and at an early stage of the case, the Commissioner’s case against it. The defendant sought particulars concerning the Commissioner’s definition of geographic market including details of which cities, towns or regions formed part of the relevant market. Rennie J. held at paragraph 48:

I find it difficult to conceive that Reliance cannot identify the local markets within Ontario where Union Gas Ltd. supplies natural gas and the local rural markets in Ontario that are not supplied natural gas. Further, Reliance has failed to establish, through proper evidence, why these particulars were not within its knowledge and were necessary to reply intelligently to the Application. No affidavit was filed by an officer of the corporation detailing the limitations of its knowledge in respect of these matters. While such evidence is not determinative of the outcome, its absence, in this context, is sufficient.

[22] I note that the judgment of Rennie J. in the Reliance Comfort case was recently upheld by the Federal Court of Appeal (May 14, 2013), in which Noel J.A. observed at paragraphs [8] and [9]:

[8] Rennie J. also held that these open-ended pleadings did not entitle the respondent to further and better particulars. He did so because he was satisfied that whether additional items should be included as a result of these open-ended pleadings is a matter within the knowledge of the appellant. Thus, the open-ended terminology does not prevent the appellant from knowing the case it has to meet (reasons, para. 46).

[9] Given the limited evidence filed by the respondent in support of its motion for particulars, we can detect no error in this reasoning. The issue on a motion for particulars is whether the particulars are necessary for the purpose of allowing the other party to respond, and it was open to the Federal Court judge to hold that the appellant knows the case to which it must respond.

[23] As the Reliance Comfort decision illustrates, a motion judge has a considerable discretion in deciding whether to order particulars and this is dependent on the defendant satisfying the court that it lacks the essential information required to plead. In circumstances where the defendants have sufficient information or, in any event, have failed to satisfy the court that they lack sufficient information, or have obstructed a proper inquiry by way of cross-examination on that issue, the court is entitled to exercise its discretion to refuse to order particulars.

[24] The defendants rely on Rule 25.06 (8) of the Rules of Civil Procedure which requires that when fraud or misrepresentation are pleaded, “the pleading shall contain full particulars...” and they argue that this applies to any civil action in the Ontario courts including consumer protection statutes such as the deceptive marketing provisions under Part VII of the Competition Act. The defendants state that to the extent that the Commissioner has pleaded the existence of a misrepresentation under section 74.01(1)(a) for the purpose of his enforcement proceeding against TELUS, Bell, Rogers and the CWTA, the Commissioner is subject to the ordinary pleadings rules of the Ontario Superior Court. More specifically, the Commissioner is required to deliver basic particulars regarding the identity of the misrepresentation at issue, including “when, where, how, by whom and to whom it was made”.

[25] While I accept the foregoing submissions in general terms, in a proceeding such as this which is focused on allegedly widespread and numerous false or misleading representations to the public, possibly numbering in the hundreds or more, the “full particulars” required need not include the details of each and every misrepresentation. Instead what is required is a full description of the alleged deceptive marketing practice. The details of each representation are more properly characterized as evidence. This is particularly so when the details of the alleged practices relate to the operation of the defendants’ businesses, a matter which common sense would dictate is within the knowledge of those directing the operation of the businesses and their trade association (the CWTA).

[26] In summary, the defendants have not persuaded the court that the particulars sought are necessary to allow them to prepare their respective Statements of Defence, or that such particulars are not within their knowledge or ability to investigate. Accordingly the motion for particulars is dismissed.

[27] In concluding I would note that in the course of argument, counsel for the Commissioner advised the court that he had agreed with counsel for the defendants to specify in writing the exact time period within which the alleged misrepresentations occurred and the calculation of the monetary amounts sought against each defendant in the prayer for relief. Counsel also agreed to attempt a resolution of the issue of the need for a sealing order for certain of the commercially sensitive documentation filed in the court record.

[28] The court’s ruling on this motion does not of course preclude the parties from seeking further direction on disclosure issues if the information made available on discovery or pursuant to proper requests for undertakings, does not allow the defendants to fully appreciate the case they have to meet at trial.

[29] If the plaintiff is seeking costs of this motion, the court will require a written submission within 14 days of the release of these reasons and the defendants are to reply within 14 days of receiving the plaintiff’s submissions.

“Hackland, R.S.J.”

Mr. Justice Charles T. Hackland

Released: June 12, 2013

COURT FILE NO.: 12-55497
DATE: 20130612

ONTARIO
SUPERIOR COURT OF JUSTICE

BETWEEN:

THE COMMISSIONER OF COMPETITION
Plaintiff

– and –

ROGERS COMMUNICATIONS INC., BELL CANADA, TELUS CORPORATION, and the CANADIAN WIRELESS TELECOMMUNICATIONS ASSOCIATION
Defendants

REASONS FOR DECISION

HACKLAND R.S.J.

Released: June 12, 2013