COURT FILE NO.: CV-10-8993-00 CL

DATE: 20130819

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

THE COMMISSIONER OF COMPETITION

Applicant

– and –

CHATR WIRELESS INC. AND ROGERS COMMUNICATIONS INC.

Respondents

J. Thomas Curry, Jaan Lilles,

Paul-Erik Veel, for the Applicant

Kent E. Thomson, Anita Banicevic,

James D. Bunting, Sean R. Campbell, Nicholas Van Exan, Andrew Carlson, for the Respondents

HEARD: November 21,22, 23, 24, 25, 28, 29, 2011 August 7, 8, 9, 10, 13, 14, 15, 16, 17, 20, 21, 22, 24, 27, 28, 29, 30, 2012 March 20, 21, 22, 25, 26, 27, 28, April 2, 3, 4, 5, 8, 9, 10, 11, 12, 15, 16, 17 May 13, 14, 15 & 16, 2013

MARROCCO J.

Contents

The nature of this Application. 5

The grounds for this Application. 6

The Application claims the contentious representations are false and misleading. 7

The Application claims the contentious claims are material 7

The Application claims automobile drive tests are not adequate and proper tests. 7

The Issues. 8

The commencement of proceedings. 8

The Advanced Wireless Spectrum auction. 9

Videotron’s history. 10

The unlimited talk and text segment of the wireless services market 10

Rogers strategy for competing with the new carriers. 11

Wind Mobile and Public Mobile enter the market 14

The hard handoff. 15

Wind Mobile, Public Mobile and Mobilicity respond to the Chatr launch. 16

The abuse of dominance complaint 16

The false advertising complaint 17

The hard handoff/undue preference complaint to the CRTC.. 17

The nature of and context for the contentious advertisements. 19

The claims and expenditures of Wind Mobile, Public Mobile and Videotron. 19

Characterizing the consumer 20

The literal meaning of the contentious ads. 21

The visual images and sounds in the ads. 22

What is the relevant time period for the contentious ads?. 23

The general impression of the contentious ads. 24

Must the fewer dropped call claim be true in each city?. 26

Is Videotron captured by the reference to “new wireless carriers”?. 27

Conclusions concerning the nature of and context for the contentious advertisements. 30

The use of switch generated data. 31

Conclusions concerning the switch generated data. 37

Must the differences in dropped call rates be discernible?. 38

Is a one per cent dropped call rate a standard beyond which consumers are unconcerned?. 40

Adequate and proper testing. 41

No testing. 41

Drive tests. 42

Did Rogers’ drive test programme adequately and properly test its fewer dropped call claims?. 44

Is belief in a technological fact an adequate and proper test?. 47

Were the Rogers drive tests conducted too early after the launch of Wind Mobile and Public Mobile? 50

Conclusion concerning adequate and proper testing. 52

Filtering out hard handoffs. 53

Are the drive test results statistically significant?. 55

How long are the drive test results valid?. 59

Conclusions concerning hard handoffs, statistical significance and timing of the drive tests. 60

Indoor dropped call rates. 60

Conclusion concerning indoor walk tests. 63

Is s. 74.01(1)(b) of the Competition Act inconsistent with the provisions of the Charter of Rights and Freedoms? 64

Section 1 and s. 2(b) of the Charter. 64

Does s. 74.01(1)(b) have a pressing and substantial objective?. 64

The rational connection between s. 74.01(1)(b) and the protection of consumers, competitive firms and competition from the harmful effects of false or misleading performance claims. 66

Does s. 74.01(1)(b) interfere as little as possible with the right to freedom of expression?. 67

The claim is true. 67

The claim is false. 67

The applicant cannot prove the claim is false and the respondents cannot prove the claim is true (the uncertain claim) 68

Do the benefits of s. 74.01(1)(b) outweigh its deleterious effects?. 70

Does the $10 million administrative monetary penalty provided for in the Competition Act engage s. 11 of the Charter?. 73

Final Conclusions. 75

The nature of this Application

[1] The Commissioner of Competition commenced this Application on November 19, 2010. The original Application was amended on March 1, 2011.

[2] As amended, the Application requested:

• A declaration that Rogers Communications Inc. (“Rogers”) and Chatr Wireless Inc. (“Chatr”) had engaged in reviewable conduct contrary to paragraphs 74.01(1)(a) and 74.01(1)(b) of the Competition Act, R.S.C. 1985, c. C-34;

• An order that the respondents pay an administrative monetary penalty of $10 million;

• An order that the respondents stop making representations about dropped call performance for a period of 10 years;

• An order that the respondents stop making false or misleading representations to the public for the purpose of promoting the use of wireless telecommunication services for a period of 10 years;

• An order requiring the respondents to publish notices describing their reviewable conduct, including the geographic area to which the conduct related and a description of the manner in which the false and misleading representations were disseminated;

• A restitution order for the benefit of each Chatr customer for the period in which the offending representations were published;

• An order pursuant to s. 137(2) of the Courts of Justice Act, R.S.O. 1990 c. C. 43 preserving the confidentiality of confidential information referred to during the hearing of the Application; and

• An order that the respondents pay the costs of the applicant’s investigation as well as this Application.

[3] During closing argument all parties agreed that if this Application was successful a further hearing should be held concerning penalty.

[4] There were two responding parties named in the Application: Chatr Wireless Inc. and Rogers Communications Inc. It is not disputed that all shares of Chatr Wireless Inc. are owned or controlled by Rogers Communications Inc.

The grounds for this Application

[5] The Application set out the grounds upon which it was based. The grounds are important because the applicant did not serve affidavits with its Notice and Application. Therefore on November 19, 2010, when this Application was served and filed, the grounds for it were those set out in it.

[6] The grounds identified two offending representations:

• “Fewer dropped calls than new wireless carriers”; and

• After November 5, 2010, representations that Chatr subscribers would have “no worries about dropped calls.”

[7] For convenience, I will refer to the two offending representations throughout as the fewer dropped calls claim.

[8] The applicant claimed that these two representations, which appeared in both French and English, created a false or misleading general impression regarding the service offered by Chatr as compared to the “new wireless carriers.”

[9] When the Application was amended March 1, 2011, the applicant also claimed that the respondents made these two representations in the absence of adequate and proper testing.

[10] The grounds for the Application also set out that these two offending representations were part of an extensive social media and public relations campaign coincident with the launch of Chatr on July 28, 2010.

[11] The grounds for the Application assert that commencing August 9, 2010, there was a broad and nationwide public relations campaign composed of television, radio, digital, out of home and print advertising.

[12] The grounds set out that the two representations were sometimes accompanied by a disclaimer or explainer that stated: “Based on: cell site density; quality of indoor and underground reception; and seamless call transition when moving out of zone.”

[13] The Application claims that the disclaimer was inaccurate and ineffective. It claims that the detail in the disclaimer was meaningless to the ordinary average consumer.

[14] The grounds set out that the “no worries about dropped calls” advertisements made after November 5, 2010, included images similar to the images that accompanied the “fewer dropped calls than new wireless carriers” ads, causing the offending conduct to continue.

The Application claims the contentious representations are false and misleading

[15] The Application asserts that the two representations were false because, in certain markets, Chatr had higher dropped call rates than at least one wireless carrier. Specifically, the Application asserts that the advertisements were false because:

• In Ottawa, Chatr’s dropped call rate was higher than those of one new carrier on 84 of 92 days.

• In Toronto, Chatr’s dropped call rate was higher than one new carrier on 53 of 92 days.

[16] The Application also maintains that the representations were misleading because they conveyed the general impression that there was an appreciable dropped call rate difference among carriers, whereas the truth was that the difference was not appreciable or significant between July 28, 2010, and October 27, 2010.

The Application claims the contentious claims are material

[17] The Application asserts that the claims were material because they were made for the purpose of promoting the purchase of wireless services from Chatr rather than the new carriers.

[18] The Application also asserts that network reliability, including dropped call rates, was a material aspect of wireless telecommunication services and a component of a consumer’s decision to purchase a particular wireless telecommunication service.

[19] It is not disputed that dropped calls, and therefore claims concerning dropped calls, are material to consumers.

[20] It is not disputed that the fewer dropped calls claim was made to the public.

[21] It is not disputed that the fewer dropped calls claim was made to promote Chatr, which was a business interest of Rogers.

The Application claims automobile drive tests are not adequate and proper tests

[22] After March 1, 2011, the existence of adequate and proper tests for the fewer dropped calls claim was a live issue in this Application.

[23] The Application sets out that the respondents attempted to support the fewer dropped calls claim with automobile-based drive tests. The Application asserts that the drive tests do not constitute an adequate and proper test of the claim because:

• Given their purpose and limitations, drive tests cannot be used as the basis for market-wide conclusions about wireless network performance, including dropped call rates;

• Rogers’ own drive test data in Vancouver, Calgary and Edmonton did not show a statistically significant difference between Chatr’s dropped call rates and those of some or all of the new carriers;

• Rogers did not conduct any drive tests in Calgary or Edmonton before making the two offending representations; and

• Rogers’ drive tests in the greater Toronto area prior to September 27, 2010, did not include all of the new entrants operating in the greater Toronto area.

The Issues

[24] The Application raised three issues:

• The fewer dropped calls claim was false;

• The fewer dropped calls claim was misleading; and

• The fewer dropped calls claim was not adequately and properly tested before it was made.

[25] The respondents added two issues:

• Section 74.01(1)(b) of the Competition Act is inconsistent with s. 2(b) of the Canadian Charter of Rights and Freedoms; and

• The administrative monetary penalty provided for in 74.1(1)(c) of the Competition Act engages s. 11 of the Charter.

The commencement of proceedings

[26] I have set out the Application in detail because the respondents complained that they could not publicly respond to the initiation of this proceeding because supporting affidavits were not served with the Application. Specifically, the applicant failed to serve the affidavits of Andrew McAlpine, a Senior Competition Law Officer with the Competition Bureau; Ken Campbell, Chief Executive Officer of Globalive Wireless Management Corp. (Wind Mobile); and Aleks Krstajic, President and Chief Executive Officer of Public Mobile Inc.

[27] I attach no significance to the respondents’ complaints. The respondents knew on November 19, 2010, from the Application, if nothing else, in reasonably specific terms, the reasons why the applicant maintained that the “fewer dropped calls than new wireless carriers” and “no worries about dropped calls” claims were false or misleading.

The Advanced Wireless Spectrum auction

[28] In 2007, as a result of studies it had undertaken, the Government of Canada concluded that Canadian consumers and businesses were paying more for wireless services than consumers in other countries.

[29] In an effort to increase competition, Industry Canada conducted an auction of bands of wireless services radiofrequency spectrum known as the Advanced Wireless Services spectrum.

[30] Radiofrequency spectrum is a finite public resource made available through the infrequent issuance of licences. Not surprisingly, these seldom-issued licences are valuable.

[31] The Government of Canada’s stated goal in permitting this auction was lower prices, more choice and increased innovation for Canadian consumers of wireless services. Similar measures had been undertaken in the United States and the United Kingdom.

[32] At the time the auction was announced, the wireless sector of the Canadian telecommunications industry generated approximately $12.7 billion. At the time of the auction, Rogers, Bell Canada and TELUS dominated the wireless market with 94 per cent of the subscribers and 95 per cent of the revenues.

[33] Bell Canada and TELUS were never part of these proceedings.

[34] Industry Canada auctioned 105 MHz of Advanced Wireless Services spectrum: 40 MHz of this spectrum was reserved for persons with less than 10 per cent of Canada’s wireless revenue; 65 MHz of spectrum was available to all bidders.

[35] Rogers was precluded from bidding on licences of the 40 MHz of spectrum. Rogers successfully purchased $1 billion worth of spectrum available to all bidders.

[36] The results of the auction were announced on or about July 21, 2008. New wireless carriers were created: Globalive Wireless Management Corp., carrying on business as Wind Mobile; Public Mobile Inc., carrying on business as Public Mobile; Data & Audio-Visual Enterprises Wireless Inc., carrying on business as Mobilicity; and Videotron S.E.N.C.

[37] Prior to the auction, Wind Mobile, Public Mobile and Mobilicity had not provided wireless telecommunication services in Canada. Videotron had a different history.

[38] The amounts paid for the auctioned spectrum licences were as follows:

• Videotron approximately $550 million

• Wind Mobile approximately $442 million

• Mobilicity approximately $243 million and

• Public Mobile approximately $52 million.

Videotron’s History

[39] Videotron started in 1964 as a cable television network, and later broadened into other aspects of telecommunications. As far as wireless services were concerned, Videotron had been a reseller of those services in Québec. Specifically, in 2005 Videotron and Rogers began a strategic relationship. Videotron was able to offer Québec consumers Videotron branded mobile wireless services, in addition to its television, broadband Internet and cable telephone services.

[40] From 2005 and on, Videotron operated as a virtual mobile network operator, utilizing wireless voice and data services provided by Rogers. Videotron was responsible for acquiring, billing and technically supporting its customers.

[41] At the time of the events which concern us, Videotron had 1.8 million cable television subscribers, 1.2 million high-speed Internet subscribers, 1 million landline telephone subscribers and more than 80,000 wireless customers.

[42] Rogers’ 2010 Leger Brandwatch Study showed that consumers in Québec had a high awareness of Videotron.

[43] I am satisfied by the evidence that, during the time frame with which we are concerned (July 28, 2010, to November 30, 2010), Videotron was an established brand in the Province of Québec.

The unlimited talk and text segment of the wireless services market

[44] Wireless cell phone service began in Canada in the mid-1980s. The evidence established that during the time period referenced in this Application, approximately 75 per cent of Canadians had a cell phone.

[45] Dr. Michael Pearce, a witness called by the respondents who was qualified as an expert to give opinion evidence concerning marketing to consumers, including consumers in the wireless industry in Canada, explained that as an industry matures, different segments of customers for that industry can emerge.

[46] As a result of the Advanced Wireless Spectrum auction in 2008, and the marketing decisions of the new wireless carriers who acquired spectrum in that auction, a zone-based unlimited use segment of the Canadian wireless market emerged. A similar segment had already emerged in the United States in the mid-1990s. This zone-based unlimited use segment differentiated itself in its approach to pricing and usage. This segment did not emerge as a result of a change in technology.

[47] Dr. Pearce explained that market segmentation in the wireless industry encourages innovation, competitive pricing, better products and service and the publication of informative advertising.

[48] Zone-based unlimited use customers were offered prepaid use monthly plans with no term contracts. These plans are different than postpaid use plans, which require the subscriber to sign a term contract for periods longer than one month.

[49] Videotron did not offer prepaid plans during the relevant period of this Application.

[50] Zone-based unlimited use customers were heavy users of wireless services. For example, Chatr customers averaged 1,364 minutes of use per month in 2010, compared to 453 minutes per month on average for customers using other Rogers brand services.

[51] I infer from the fact that zone-based unlimited use customers were heavy users of wireless services that they were also experienced users of those services.

Rogers’ strategy for competing with the new carriers

[52] Based in part on the public statements of the new licensees, Rogers anticipated that the new licensees would try to appeal to the unlimited talking and texting segment of the wireless services market. Rogers took note of the US experience, which illustrated a significant demand for unlimited talking and texting services.

[53] Rogers concluded that the incumbent American carriers had waited too long to compete for this segment after it emerged, and resolved not to make the same mistake.

[54] In late 2008 or early 2009, Rogers began seriously considering the launch of a new brand. Mr. Garrick Tiplady, Senior Vice President of Chatr in the July 28, 2010, to November 30, 2010, time period testified that a small group was formed within Rogers to work on this project. The project was known internally as Project Columbia.

[55] The group produced a strategy brief entitled “Columbia the Brand Strategy Brief” dated October 22, 2009.

[56] This strategy brief identified the following problems for consumers:

• Wireless service plans were hard to understand;

• Devices may not work; and

• Discounts may change.

[57] The brief recorded that for customers, price was the dominant factor while network quality was next in importance.

[58] Significantly, the brief identified the challenges facing the new wireless carriers as follows:

• The spectrum that they had purchased had poor propagation qualities. It was harder for that spectrum to achieve in-building coverage and density of signal;

• The coverage offered by the new wireless providers would not be as good as Rogers’;

• It would cost the new providers more to achieve parity with Rogers; and

• Although the new wireless service providers must be allowed to roam on the Rogers network, their customers who leave their coverage area while engaged in a call will experience a dropped call, and will have to redial and roam on the Rogers network in order to continue the call (the “hard handoff”).

[59] The strategy brief stated that a new Rogers brand would compete head on with the new carriers using a zone-based unlimited talk and text offer. The new brand would offer a low monthly price, unlimited voice and short message service and a pay-in-advance approach.

[60] The brief identified Rogers’ objectives as follows:

• Disrupt the new entrants’ plan for easy market share steal;

• Take up shelf space, making distribution difficult for the new wireless carriers; and

• Insulate Rogers’ existing brands from this competition.

[61] The brief identified the primary target subscribers as follows:

• Heavy users wanting cost-certainty in their monthly cell phone spend;

• Persons for whom their cell phone was an indispensable connection device;

• Users wanting to spend much less on a monthly basis than they are presently spending; and

• Existing wireless users who no longer need a landline.

[62] According to the strategy brief, Rogers’ new brand would be different because it would provide low-priced unlimited usage that worked in more places than the new service providers. It was a service that did not drop calls and reliably connected you. The Rogers brand would not disconnect a user when the user moved out of zone (no “hard handoff”). It was worry-free wireless through certainty. It would provide brand-name and reliable devices at good prices, and it would be easy to manage because users could set up automatic payments with no surprises. Finally, there would be no term contract. If a user was not happy he or she could cancel.

[63] The brief noted that this strategy would likely catch the new wireless providers by surprise.

[64] The brief declared that the new brand would position itself as “unlimited wireless that works.”

[65] Rogers retained both an advertising agency and a public relations firm to assist with the new brand. The advertising agency produced a November 6, 2009, document entitled “Brand Positioning Recommendations.”

[66] The advertising agency suggested that Rogers name the new brand Chatr. The agency also suggested that coverage and reception were key advantages that Rogers had over the new wireless carriers, and that to exploit this advantage the communication strategy in part had to create doubt that the new carriers’ service would work. It pointed out that the phrase which defined its approach, namely “unlimited wireless that actually works,” suggested that others did not work. The agency suggested that Chatr should position itself on the side of heavy users who wanted cost certainty and suggested that Chatr differentiate itself on the basis that “it actually works.”

[67] The agency described the target customers as “mainstreamers”. They were persons who needed stability and valued authenticity. It speculated that the competition would be pursuing individualists. Ultimately, the brand positioning was defined as: “for mainstreamers who are heavy mobile phone users, Chatr is the unlimited wireless service that actually works.”

[68] The advertising agency speculated that demographically, the market would consist of urbanite adults between the ages of 18 and 54 earning less than $60,000 per year.

[69] Significantly for our purposes, the advertising agency asked the question: “how do we support our claims?”

[70] The advertising agency made more than one presentation in this regard but the essence of its approach remained unchanged.

[71] A public relations firm was retained to disseminate the marketing message. A briefing provided to the public relations firm on February 4, 2010, outlined Rogers’ strategy. This briefing added that the new Rogers brand would try to take customers from the new entrants and not from incumbent wireless providers. It would focus most heavily on Wind Mobile, while also considering Public Mobile and Mobilicity.

[72] Rogers decided that customers of the new brand (Chatr) would use the Rogers Network rather than a separate Chatr network. Chatr customers would use both the 850 MHz radio spectrum band and the 1900 MHz spectrum band to provide service. At all times, Chatr customers travelling within Canada would be on the Rogers Network whether or not the customers were within a Chatr zone.

[73] The briefing refers to Videotron on page 12, and records its prospective launch date along with the launch dates of Wind Mobile, Public Mobile and Mobilicity.

[74] I am satisfied that Rogers viewed Videotron as a new carrier. This is quite a separate question from how Videotron was viewed by consumers of wireless services in Québec.

Wind Mobile and Public Mobile enter the market

[75] While Rogers was preparing to compete with the new carriers, Wind Mobile and Public Mobile entered the market, albeit with considerable difficulty.

[76] Wind Mobile launched its services in Toronto and Calgary in December 2009. It launched in Edmonton and Ottawa on February 25 and March 26, 2010, respectively.

[77] Public Mobile launched in Toronto on May 26, 2010, and in Montréal on June 25, 2010.

[78] The evidence offered by the respondents established that Wind Mobile and Public Mobile were criticized in various publications and in the social media after their launch. I will offer four examples from the evidence.

[79] On January 22, 2010, TD Newcrest, a division of TD Securities Inc., published an article entitled: “Wind or just a light breeze?” The authors concluded as follows:

So our overwhelming conclusion from a month of usage is that [Wind Mobile’s] quality and coverage is significantly inferior to that offered by Rogers Wireless…One could argue that [Wind Mobile] will continue to add cell sites and improve its coverage over time, but this is something that customers will have to find out the hard way by enduring dropped calls and dead zones for an unknown period of time.

[80] On March 9, 2010, the Edmonton Journal reported that the Chairman of Wind Mobile acknowledged that Wind was experiencing weaknesses in the Toronto and Calgary networks, and that it was adding cell sites and towers to strengthen coverage.

[81] On July 6, 2010, the Globe and Mail published an article about Public Mobile that stated in part: “Public Mobile has admitted that several key areas in Montréal are without service and the company is refunding phone purchases and offering free service until the problems are resolved.” An article to the same effect was published on September 16, 2010, in the Montréal Gazette.

[82] Mr. Brian O’Shaughnessy, the Chief Technology Officer for Public Mobile, testified in these proceedings and confirmed that Public Mobile customers were receiving poor service as late as December 2010, although Mr. O’Shaughnessy indicated that this was true of all networks.

[83] Mobilicity launched in Toronto on May 15, 2010. The respondents did not lead evidence concerning Mobilicity because, apart from complaining to the Competition Bureau, Mobilicity did not assist the Commissioner in these proceedings. Mobilicity declined to provide data derived from the operation of its network to the Commissioner.

[84] The evidence established that the respondents conducted drive tests in Toronto during the relevant period which, among other things, compared the performance of the Rogers and Mobilicity networks. The drive test results demonstrated that the Rogers network had fewer dropped calls than Mobilicity’s network. I will elaborate further on the drive testing evidence elsewhere in these reasons.

[85] The inference I draw is that, if Mobilicity had produced the data requested by the applicant, it would have demonstrated that the respondents’ network had fewer dropped calls than Mobilicity’s network from July 28, 2010, to November 30, 2010. I will not seriously further consider Mobilicity in these reasons.

[86] I am satisfied that the well-publicized difficulties experienced by Wind Mobile and Public Mobile confirmed the respondents’ view that their network, during the relevant period, was more reliable and would drop fewer calls than the Wind Mobile or Public Mobile networks.

The hard handoff

[87] As indicated, Rogers planned to compete with the new licensees by taking advantage of the “hard handoff.”

[88] At the time of the spectrum auction in July 2008, Industry Canada required Rogers to permit the new licensees to roam on its network. This meant, for example, that Rogers was required to make its network available to a Wind Mobile subscriber who was outside a Wind coverage zone. Specifically, Wind Mobile paid Rogers a negotiated fee in accordance with the Industry Canada Policy Framework; Wind subscribers were permitted to use the Rogers network when outside a Wind Zone, and those subscribers paid Wind Mobile “roaming fees.”

[89] A Wind Mobile subscriber who had a call underway within the Wind Zone would experience a dropped call if the subscriber left that zone. In order to complete the call, the Wind subscriber would have to reinitiate the call using the Rogers network.

[90] Mobilicity and Videotron subscribers were in a similar position.

[91] Public Mobile had no roaming agreement at all with Rogers. As a result, Public Mobile subscribers could not use their handsets outside of Public Mobile coverage zones in Toronto and Montréal.

[92] For a Chatr subscriber who had a call underway and who left a Chatr coverage zone, the call continued. It did not drop. The Chatr subscriber was, however, charged a roaming fee by Rogers. This was known as a “seamless handoff.”

[93] The “hard handoff” created dropped calls for Wind Mobile, Mobilicity and Videotron subscribers, but not for Chatr customers.

[94] Precisely how the hard handoff affects the calculation of dropped calls is not obvious except to say it would increase dropped calls for Wind Mobile, Mobilicity and Videotron. The evidence established that Wind Mobile, Mobilicity and Videotron subscribers made 2.3 million calls roaming on the Rogers 2G network between August and November 2010. Because the location of the calls is not known, one cannot conclude that all of these calls occurred because customers left the Wind Mobile, Mobilicity or Videotron coverage areas, and therefore experienced a dropped call that they had to reinitiate. However, in some cases that is precisely what happened.

[95] It is also clear that Wind Mobile and Mobilicity complained to the Canadian Radio-television Telecommunications Commission (“CRTC”) about the problems created by the dropped calls caused by the hard handoff, demonstrating that these dropped calls had their attention and were important to them.

Wind Mobile, Public Mobile and Mobilicity respond to the Chatr launch

[96] The respondents launched Chatr in Vancouver, Calgary, Edmonton, Toronto and Ottawa on July 28, 2010. The respondents launched Chatr in Montréal on September 16, 2010.

[97] Wind Mobile, Public Mobile and Mobilicity responded to the launch of Chatr by making three complaints to regulatory bodies.

[98] Videotron made no complaints to any regulator.

The abuse of dominance complaint

[99] I elaborate on this complaint because it is contemporaneous with, and provides context for, the Wind Mobile and Public Mobile complaint about false or misleading advertising with which we are concerned.

[100] Shortly after the July 28, 2010, launch of Chatr, Mobilicity made an “abuse of dominance” complaint with the Fair Business Practices Branch of the Competition Bureau. Rogers began responding to this complaint in August 2010.

[101] Mobilicity’s complaint was that Rogers was exploiting its market power in the wireless services market to exclude or limit competition in that marketplace. Specifically, the complaint was that Rogers was using Chatr on a temporary basis to substantially lessen or prevent competition from Mobilicity.

[102] Public Mobile, in a September 2, 2010, letter to the Competition Bureau, also complained that Chatr’s actions in the marketplace were an abuse of Rogers’ dominant market position. Specifically, in an email dated September 24, 2010, Public Mobile complained that it had experienced difficulty in obtaining retail space at major malls because the space had been taken by Rogers and other incumbent carriers. Public Mobile also complained that it had received “unofficial feedback” from unnamed major electronics retailers that Rogers and the other incumbent carriers had taken steps to prevent its products from being sold in those points of distribution.

The false advertising complaint

[103] On August 24, 2010, counsel for Wind Mobile complained to the Competition Bureau about the fewer dropped calls claim which led to this proceeding.

The hard handoff/undue preference complaint to the CRTC

[104] In October 2010, Wind Mobile and Mobilicity complained to the CRTC about Rogers’ failure to permit “seamless handoffs.” They argued that dropped calls caused by the lack of seamless handoffs conferred an “undue preference” on Rogers under s. 27(2) of the Telecommunications Act, S.C. 1993, c. 38.

[105] Wind Mobile told the CRTC that Chatr’s fewer dropped calls claim created the false impression that the networks of the new wireless carriers were less reliable.

[106] Wind Mobile in part asked the CRTC to make an order directing Rogers to provide the same seamless call transition to Wind Mobile subscribers moving out of zone that it provided to Chatr customers. Wind claimed that the current situation was causing ongoing harm to competition in the marketplace and to itself. Wind acknowledged that Industry Canada had declined to make seamless handoffs a requirement when Rogers purchased additional spectrum during the July 2008 auction.

[107] Wind Mobile pointed out that when it began building its network, the only feasible out-of-territory roaming agreement was one with Rogers. Rogers was the only incumbent wireless service provider on whose network Wind subscribers could roam.

[108] Wind Mobile then made submissions concerning whether Rogers had engaged in conduct that was preferential. Wind Mobile complained that Chatr advertised using a tag line of: “fewer dropped calls than new wireless carriers,” and in that advertisement relied upon “seamless call transition when moving out of zone.” Wind objected to the fact that Rogers, through Chatr, relied upon “fewer dropped calls” as a differentiator while Rogers at the same time dropped its competitors’ calls.

[109] Wind Mobile specified the injuries caused by Rogers’ conduct as follows:

• Prospective Wind subscribers were offered identical commercial arrangements by Chatr except that Chatr subscribers were offered seamless handoffs while Rogers prevented Wind from making the same offer. As a result, Chatr subscribers were offered the opportunity to avoid the threat of dropped calls;

• Wind subscribers experienced degrading call quality followed by a dropped call as they moved out of a Wind Zone, but were not told why it had occurred. The dropped call was described as an annoyance on social calls, an acute disadvantage on business calls and possibly a matter of life or death on 911 calls; and

• Wind complained that Rogers’ conduct put Wind at an undue and unreasonable disadvantage because it undermined potential Wind subscribers’ confidence in Wind’s ability to provide access to reliable communications.

[110] Pursuant to the CRTC’s procedure, Rogers provided an Answer, and Wind Mobile was permitted a Reply.

[111] In its Answer, Rogers referenced that in submissions to the Competition Bureau in this Application, Wind had stated that calls dropped due to hard handoffs were “an extremely low statistical event.”

[112] In its Reply, Wind Mobile made the following statement:

Put simply, every dropped call matters. Prospective subscribers selecting a mobile provider and to whom Rogers Chatr now offers commercial arrangements that are virtually identical to those offered by Wind neither know nor need to know how often they will be affected by the threat of dropped calls. Instead prospective subscribers are offered an opportunity to avoid the problem altogether.

[113] Wind also stated that Rogers’ Answer ignored “the reputational effects and basic consumer consequences of each dropped call”.

[114] On March 31, 2011, Wind Mobile answered additional questions posed by the CRTC. In that submission, Wind Mobile asserted that by prominently advertising “fewer dropped calls than new wireless carriers,” based in part on its seamless network, Rogers created the impression that the new networks were generally less reliable.

[115] On June 3, 2011, the CRTC declined the complaint concerning a preference on the basis that Wind Mobile had not negotiated seamless call transitioning with Rogers. In addition, the CRTC found that there was insufficient evidence to permit a decision mandating seamless roaming.

[116] It is helpful to consider the statements in these complaints. Regardless of their truth, they provide evidence that Wind Mobile and Public Mobile thought dropped calls, including those caused by hard handoffs, were a significant problem. They thought that dropped calls, including those caused by hard handoffs, negatively reflected on the reliability of their networks. Their statements prove to me that the leaders of Wind Mobile and Public Mobile thought that the public was concerned with the risk of dropped calls rather than their comparative frequency.

The nature of and context for the contentious advertisements

[117] A portion of this Application deals with the assertion that the fewer dropped calls claim is both false and misleading. As a result, the nature of the advertisements containing the claim, as well as the context in which the advertisements were relayed, is relevant.

The claims and expenditures of Wind Mobile, Public Mobile and Videotron

[118] Dr. Michael Pearce, called by the respondents as an expert to give opinion evidence concerning marketing to consumers, including consumers in the wireless industry in Canada, collected the advertisements of Chatr, Videotron, Wind Mobile, Public Mobile and Mobilicity during the period with which we are concerned. Copies of those advertisements were received into evidence. I am satisfied that Dr. Pearce collected a representative sample of those ads.

[119] Wind Mobile, Public Mobile and Mobilicity engaged in aggressive price competition with each other and with Chatr. Their ads provided little information concerning roaming costs or dropped calls resulting from a customer leaving their coverage zone.

[120] The evidence disclosed that in 2010, Wind Mobile spent $36.9 million on advertising while offering services in 5 cities. Mobilicity spent $6.1 million while offering services in 4 cities. Public Mobile spent $6.8 million while offering services in 2 cities. The evidence disclosed that in 2010, Chatr spent $7.1 million on advertising; Chatr was offering services in 6 cities.

[121] Videotron took a different approach. Videotron concentrated on bundling its wireless services with existing Internet, telephone and cable services. Mr. Aleks Krstajic, the President and Chief Executive Officer of Public Mobile during the relevant time period, testified that Videotron was trying to attract a different demographic than Public Mobile. He testified that Videotron was competing for a higher end customer than his company. His evidence in this regard was not contentious and I accept it.

[122] The evidence disclosed that in 2010, Videotron spent $5.3 million on advertising in the Province of Québec; Videotron offered wireless services, according to Tab 14 of Exhibit 37A, in three Québec cities.

Characterizing the consumer

[123] The applicant contends that the general impression conveyed by the advertisements in question is to be assessed from the perspective of a credulous and inexperienced consumer. The applicant describes this perspective as the average consumer who is “credulous and inexperienced and takes no more than the ordinary care to observe that which is staring him or her in the face upon first entering into contact with an entire advertisement.” The applicant cites Richard v. Time Inc., 2012 SCC 8, [2012] 1 S.C.R. 265, at paras. 65-68, 71, as authority for its position.

[124] The Richard v. Time Inc. decision involved a representation by means of a direct mail campaign to the public at large, and not to a targeted group of consumers. Mr. Richard was convinced that he had been awarded a cash prize of $833,000, and that all he had to do was return a reply coupon to claim his prize. Time Inc. refused to pay. Mr. Richard commenced proceedings in the Québec Superior Court, alleging prohibited business practices contrary to Québec’s Consumer Protection Act, R.S.Q. c. P-40.1. It is in this context that the Supreme Court of Canada determined that the average consumer contemplated by Québec’s Consumer Protection Act was credulous and inexperienced.

[125] The respondents contend that in determining the general impression conveyed by the contentious advertisements, the court should consider the advertisements from the perspective of the average consumer to whom the statements were targeted.

[126] There is a difference between the purpose of Québec’s Consumer Protection Act and the purpose of the Competition Act. The Québec legislation is intended to protect vulnerable persons from the dangers of certain advertising techniques: see Richard v. Time Inc., at para. 72. The Competition Act is intended to maintain and encourage competition in Canada in order to “provide consumers with competitive prices and product choices”: see s. 1.1 of the Competition Act.

[127] The difference in purpose between Québec’s Consumer Protection Act and the Competition Act is a relevant consideration in determining the proper consumer perspective to be applied to the contentious representations.

[128] Richard v. Time Inc. defines the person considering the advertisement in three ways: credulous, inexperienced and a consumer. I take this as a starting point for determining the proper consumer perspective for the purposes of this Application.

[129] The consumer in Richard v. Time Inc. was less of a consideration because that case involved a representation made to the public at large. In this Application, a consideration of the mass media advertising leads to the conclusion that the consumer is a person wanting unlimited talking and texting wireless services, as well as cost certainty.

[130] Accepting that the consumer is credulous in the context of this Application means that the consumer is willing to believe the fewer dropped calls claim because it is contained in public representations to that effect.

[131] The requirement that the consumer be inexperienced is more difficult to apply. The consumer by definition resides in a segment of the wireless services market that wants unlimited talking and texting wireless services. Such a consumer cannot be viewed as inexperienced with wireless talking and texting, otherwise the consumer would not reside in a segment of the wireless services market. For example, the consumer might know that he or she wants certainty in their wireless monthly bill due to a previous bad experience with unexpected cell phone fees. In addition, the consumer knows that he or she wants talking and texting wireless services and that he or she wants those services in an unlimited way. Accordingly, I am satisfied that the lack of experience relates to the technical information contained in the advertisements. For example, the advertisements claim that Chatr will drop fewer calls because of its cell site density. It is this aspect of the claim with which the consumer lacks experience.

[132] I am satisfied therefore that the consumer perspective in this case is that of a credulous and technically inexperienced consumer of wireless services.

The literal meaning of the contentious ads

[133] Section 74.03(5) of the Competition Act provides that in proceedings under s. 74.01, the literal meaning and the general impression conveyed by a representation must be taken into account in determining whether or not the person making the representation engaged in reviewable conduct.

[134] A literal read of the fewer dropped calls ads conveys the following to a prospective credulous and technically inexperienced consumer exposed to the claim:

• You will have no worries when talking on your cell phone (parle relax);

• You will have worry-free unlimited talk (appels illimités sans souci)(parle au max, parle relax);

• You will have fewer dropped calls than customers of the new wireless carriers (moins d’appels interrompus qu’avec les nouveaux opérateurs sans-fil);

• Your zone plan will be unlimited;

• You will pay a flat fee;

• You will not be asked to sign a term contract;

• You will have great coverage in and out of your zone;

• When you leave your zone, you get unlimited usage in any other Chatr zone;

• You can keep talking and texting as if you never left your zone;

• You will have great reception indoors and underground;

• You will be on a reliable network; and

• You will have a quality phone.

The visual images and sounds in the ads

[135] The visual images that accompany the wording are more general. They convey the sense that the person who is not a Chatr customer is having difficulty with his or her phone, which is obviously not working properly. This person has a cloud or fuzzy speech bubble over his or her head.

[136] The visual portion of the advertisements leaves open the possibility that the non-Chatr customer cannot place a call. The non-Chatr customer is pictured having difficulty in an open area, where there is no obvious obstruction to the wireless communication.

[137] The Chatr customer pictured in the ads is smiling, talking on his or her cell phone and unconcerned about communicating wirelessly. This person has a Chatr balloon over his or her head.

[138] The picture of the smiling unconcerned Chatr customer is usually the picture of someone talking on their cell phone in a covered space, a subway or underground where one might expect reception to be difficult.

[139] The radio ads are accompanied by the Bobby McFerrin song “Don’t Worry, Be Happy.”

[140] Despite the ambiguity in the visuals, I am satisfied that the visuals, in addition to the English or French words, create the general impression that the representation is in reference to dropped calls only.

[141] I am not satisfied that the “Don’t Worry, Be Happy” song, when coupled with the words in the radio ads, broaden the literal reference to dropped calls to give the general impression that the Chatr subscriber will not only have no worries about dropped calls, but also no worries about accessing the Chatr network.

[142] However, I am also satisfied that the constant references to “worry free unlimited talk” and “no worries talk happy” (parle au max parle relax) (appels illimités sans souci) in the contentious ads give the general impression that the Chatr network is more reliable than the networks of the new wireless carriers.

[143] Professor Moorthy, who was called by the respondents and qualified as an expert to give opinion evidence in the areas of marketing and economics, testified that in his opinion, dropped calls were a proxy for the performance of the network. Professor Moorthy, like the other expert witnesses, was well qualified. Where I have not accepted his evidence, it is because I have disagreed with his conclusion for reasons other than his credibility or reliability.

[144] Wind Mobile, in its hard handoff/undue preference complaint submissions to the CRTC, stated that Rogers undermined confidence in Wind’s ability to provide access to reliable communications.

What is the relevant time period for the contentious ads?

[145] The relevant time period is not entirely straightforward. Although Chatr launched on July 28, 2010, its national advertising campaign did not begin until August 9, 2010.

[146] On July 28, Rogers began making the fewer dropped calls representation on its website, on social media, through public relations channels and on product packaging.

[147] Chatr commenced operations on July 28, 2010, in Toronto, Ottawa, Edmonton, Calgary and Vancouver. This meant that Chatr phones were available for purchase at Chatr retail kiosks, as well as through third-party retailers and distributors in each of these places on that date. In addition, the Chatr Wireless Call Centre was open and the Chatr website was operational on July 28, 2010.

[148] The “fewer dropped calls” representation was made between July 28, 2010, and November 30, 2010. The “no worries about dropped calls” representation was made in November 2010. I am satisfied that these two advertising campaigns had one central theme during the period of July 28, 2010 to November 30, 2010. This theme was that the Chatr network dropped fewer calls than the networks of the new wireless carriers, and was therefore a more reliable network.

[149] I am satisfied that, with the exception of Montréal, in order for the fewer dropped calls representation not to be false or misleading, the Rogers network would have to have had fewer dropped calls than the Wind Mobile and Public Mobile networks during the period of July 28, 2010, to November 30, 2010.

[150] Chatr launched in Montréal on September 16, 2010. Accordingly I am satisfied that in order for the fewer dropped calls representation not to be false or misleading, the Rogers network would have to have had fewer dropped calls than the Public Mobile network in Montréal during the period of September 16, 2010, to November 30, 2010.

[151] For the sake of completeness, while the “no worries network” (December 2010) representation did follow a continuous national media campaign about dropped calls that began in August 2010, and while there is a similarity in visual presentation, I am satisfied that this version of the advertising was not comparative and did not literally or by general impression continue to convey the fewer dropped calls claim.

The general impression of the contentious ads

[152] As indicated elsewhere, Dr. Michael Pearce was called as an expert by the respondents. I will not review in detail Dr. Pearce’s lengthy and impressive resume. I will simply point out that Dr. Pearce has a doctorate from the Harvard Business School in marketing. He has been a faculty member at the Ivey Business School for almost 40 years. He has consulted in consumer marketing in Canada, the United States, Europe, Asia and the Middle East.

[153] There were issues raised about the admissibility of Dr. Pearce’s evidence; there was no attack upon his credibility. Dr. Pearce was an impressive and reliable witness. I have relied on portions of Dr. Pearce’s evidence for the purposes of deciding this Application, and I will describe those portions in these reasons.

[154] Dr. Pearce testified that he was provided with copies of marketing communications for Chatr and the new wireless carriers, including Videotron, for the period with which we are concerned. Dr. Pearce included 153 pages of Chatr advertising as an Appendix to his report. I am satisfied that this appendix (Appendix 7) is representative of the marketing communications that the applicant characterizes as false or misleading.

[155] The evidence disclosed that in 2010, Chatr spent $7.1 million on advertising. During this period, Chatr was offering services in six cities: Vancouver, Calgary, Edmonton, Toronto, Ottawa and Montréal.

[156] Chatr’s media communications programme consisted of: newspaper banner ads, newspaper display ads, third-party retailer ads, merchandising material, packaging, online ads, television ads, radio ads, outdoor ads and transit ads.

[157] During the relevant period, Chatr’s ads were part of a national advertising campaign. There were no Chatr zones in Eastern Canada.

[158] Chatr used national media and national retailers to publicize itself.

[159] Dr. Pearce testified that during the relevant period, the Chatr communication programme comprised of the following three advertising campaigns: August 2010 to November 2010 (“fewer dropped calls”); November 2010 to December 2010 (“no worries about dropped calls”); and December 2010 (“no worries network”).

[160] Chatr began to transition to its second campaign in the week of October 11, 2010. This transition was mostly completed by mid-November. The second campaign put forward a broader proposition, namely “no worries about dropped calls.” A Chatr balloon that had been pictured in the first campaign continued to be prominently pictured in the second campaign print ads.

[161] I am satisfied that the second campaign drew less of a comparison to the new wireless carriers. This can be seen from a comparison of the explanations for the claims that appeared in the ads. For example the first ad campaign contained this explanatory note: “Seamless Canadian network-no need to switch on to other networks when zipping in and out of your Chatr Zone, which means fewer dropped calls.” The second campaign version of this explanatory note provided as follows: “[T]he Chatr no worries network has got you covered in over 94% of the Canadian population, whether you’re in or out of a Chatr zone.”

[162] After the commencement of this Application on November 19, 2010, Chatr began moving to the “no worries network” tagline. These ads were again less comparative than the ones they were replacing. For example, as indicated, the second ad campaign contained the note: “the Chatr no worries network has got you covered in over 94% of the Canadian population, whether you’re in or out of a Chatr zone.” The third ad campaign version of this explanatory note provided: “Coast-to-coast footprint that covers over 94% of the Canadian population.” Finally, the third campaign version of the ads focused more on price, although Chatr did not claim to offer the lowest price for its wireless services. The central messages and taglines were: “No worries. Talk happy or Worry-free unlimited talk.”

[163] All three versions of these ads were part of an extensive media campaign suggesting that a Chatr customer would have “fewer dropped calls”, “no worries about dropped calls (oublie les appels interrompus)” and finally a “no worries network.” While the “no worries network” representation followed a continuous national media campaign about dropped calls that began in August 2010, and while there is a similarity in visual presentation, I am satisfied that that version of the advertising was not comparative and did not literally or by impression continue to convey the fewer dropped calls claim.

[164] I am satisfied that the credulous and technically inexperienced consumer would have had the general impression from all of the “fewer dropped calls” and “no worries about dropped calls” versions of the ad campaigns that there were no worries about dropped calls on the Chatr network because there were fewer dropped calls on that network.

[165] I am satisfied that a credulous and technically inexperienced consumer would not have had the general impression from the “no worries network” campaign that a comparative dropped call claim was being made.

[166] I am satisfied that the credulous and technically inexperienced consumer would also have the general impression that the Chatr network was more reliable.

Must the fewer dropped call claim be true in each city?

[167] The applicant submits that the contentious ads are false unless the evidence proves that the fewer dropped calls claim is true in each of Vancouver, Calgary, Edmonton, Toronto, Ottawa and Montréal.

[168] The respondents take the position that consumers would have expected the fewer dropped calls claim to be true on average across all cities where Chatr operated.

[169] There were no Chatr zones in Eastern Canada during the relevant period, and so Chatr was not nationally available.

[170] There was no statement in the ads that suggested that the claim was based on a national average or national calculation.

[171] The $35 per month Chatr plan provided unlimited outgoing calls to anywhere in the province. I take this to mean the province where the Chatr customer is located. It was only the more expensive Chatr plan that offered unlimited outgoing calls to anywhere in Canada from a Chatr zone.

[172] It was suggested during the course of closing argument that Mr. G. McPhail, the Vice President and Associate General Counsel of Rogers at the relevant time, on behalf of Rogers, admitted in a letter dated October 8, 2010, that Rogers had to demonstrate dropped call superiority both at a national level and in each urban area in which the new entrants had launched. I do not read Mr. McPhail’s letter as such an admission. Rather, I interpret his reference to “each urban area in which the new entrants have launched service” as a response to what he termed a specific concern of the Competition Bureau that “in some cities where Chatr and the new wireless carriers operate, the representations… are false.”

[173] As indicated elsewhere, Dr. Michael Pearce, an expert witness called by the respondents, collected as many of the Chatr advertisements as possible for the period of July 28, 2010, to December 30, 2010. Copies of these advertisements were filed as an Appendix to a Slide Brief summarizing his expert report. There was no suggestion that Dr. Pearce’s collection was deficient. I am satisfied that Dr. Pearce collected a representative and complete sampling of the contentious advertising claims.

[174] A perusal of Dr. Pearce’s sampling is extremely helpful on this issue.

[175] When I consider the evidence, including the evidence to which I referred, I am satisfied that the fewer dropped calls claim represents to a credulous and technically inexperienced consumer that use of a Chatr phone within any Chatr zone will result in fewer dropped calls than would be true for a Wind Mobile, Public Mobile or Mobilicity customer.

[176] Accordingly, I am satisfied that, in order for the fewer dropped calls claim to be neither false nor misleading, the Rogers network should have offered fewer dropped calls than Wind Mobile or Public Mobile in each of Montréal, Toronto, Ottawa, Edmonton, Calgary and Vancouver during the relevant time period.

Is Videotron captured by the reference to “new wireless carriers”?

[177] There is an issue concerning whether a credulous and technically inexperienced consumer of wireless services in Québec who saw, heard or read the Chatr advertisements between September 24, 2010, and November 30, 2010, would have considered Videotron a new wireless carrier.

[178] At the relevant time Videotron was a wholly-owned subsidiary of Québecor Media Inc. It was also an integrated communications company engaged in cable television, interactive multimedia, Internet access, cable telephone and wireless telephone services.

[179] According to the evidence, Videotron started in Québec in 1964 as a cable television network with 66 subscribers. At the time of the events that concern us, Videotron had 1.8 million cable television subscribers, 1.2 million high-speed Internet subscribers, 1 million landline telephone subscribers and more than 80,000 wireless customers.

[180] The Videotron footprint of its services in Montréal was larger than the Rogers footprint. Unlike the other new wireless service networks, Videotron had a large footprint in Québec that was not limited to metropolitan areas.

[181] Videotron announced for the first time in a press release dated September 20, 2005, that it was providing wireless services in Québec. The press release stated in part that “Videotron plans to launch its mobile wireless offering in the first half of 2006”. Videotron also stated in the release that it was offering “one stop shopping: one customer service number.”

[182] From 2006 onward Videotron operated wireless services under its own brand name in the province of Québec. Prior to the Advanced Wireless Spectrum auction in July 2008, Videotron provided wireless services as a mobile virtual network operator, utilizing wireless voice and data services provided by Rogers. Videotron, under its own brand name, was responsible for acquiring and billing customers, as well as providing technical support.

[183] Videotron was precluded by its agreement with Rogers from associating itself with Rogers in any way.

[184] Prior to acquiring its own spectrum, Videotron could not offer unlimited talking and texting because Rogers would not offer a low enough wholesale price per minute.

[185] Aleks Krstajic, the President and Chief Executive Officer of Public Mobile at the time he gave evidence, described Videotron as a “very powerful presence in the Québec market”. This evidence was not contentious and I accept it.

[186] After acquiring spectrum in July 2008, Videotron marketed its wireless services by bringing all of its services, namely its cable television, Internet and wireless services, under one umbrella. It marketed one bundled set of services exclusively in Québec using the media tagline “The Infinite Power.”

[187] In January 2010, Videotron announced in a press release that it would be soon rolling out its own Advanced Wireless Services network.

[188] Videotron offered competitive bundling arrangements and postpaid zone-based unlimited talking and texting.

[189] Public Mobile, Wind Mobile, Chatr and Mobilicity offered prepaid zone-based unlimited talking and texting.

[190] Mr. Garrick Tiplady, Senior Vice President of Chatr at the relevant time, testified that the prepaid segment of the wireless services market was markedly different than the postpaid segment. His evidence in this regard was not contentious and I accept it.

[191] Reference was made to the fact that Industry Canada referred to Videotron as a “new entrant” during the July 2008 auction. I do not view this as helpful when considering whether a credulous and technically inexperienced wireless services consumer in Québec, between September and November 2010, would have considered Videotron a new wireless carrier. Apart from the fact that the perspectives of a consumer and Industry Canada would be different, the Industry Canada definition of a new entrant included entities that held less than 10 per cent of the national wireless market based on revenue. This suggests that existing carriers could be new entrants for purposes of the Industry Canada July 2008 auction.

[192] The applicant also suggested that Videotron was defined as a new wireless carrier by the respondents in two affidavits that they filed in this Application. These references are not helpful. It is true that Mr. Berner and Mr. Garrick Tiplady, both Rogers employees, referred to Videotron as a new carrier in their affidavits. Rogers may have considered Videotron a new carrier but the issue for me is whether a credulous and technically inexperienced wireless services consumer in Québec, between September and November 2010, would have considered Videotron a new wireless carrier. Mr. Berner and Mr. Garrick Tiplady hardly match the credulous and technically inexperienced description of the consumer with whom I am concerned.

[193] The applicant pointed out that in Montréal, Chatr was competing with Public Mobile and Videotron, and that the ads in French make the statement “moins d’appels interrompus qu’avec les nouveaux opérateurs sans-fil.” The reference to operators in the plural at a time when the only competing operators were Public Mobile and Videotron, according to the applicant, is some evidence that a consumer in Québec would think that the ads referred to Videotron.

[194] It is true that Chatr was created to compete directly with Mobilicity, Wind Mobile, Public Mobile and Videotron. Mr. Garrick Tiplady testified that Chatr delayed its launch in Montréal to see if Videotron was going to go to market with a prepaid wireless services plan. Mr. Garrick Tiplady testified that Rogers wanted to make sure that Chatr was as competitive as possible with Videotron if Videotron made a prepaid wireless plan available.

[195] Videotron launched its network on September 9, 2010. The respondents launched Chatr service in Montréal on September 16, 2010. The respondents maintained that their advertising campaign did not begin until September 24, 2010. However, a press release dated September 8, 2010, was introduced and appended to the affidavit of Mr. McAlpine.

[196] When Videotron launched its network on September 9, its strategic relationship with Rogers ended. Videotron was no longer a mobile virtual network operator. Videotron’s customers moved to the new Videotron network.

[197] The new Videotron network offered similar plans to those it had been operating as a mobile virtual network operator. Videotron did not, however, offer a prepaid plan when it launched. This created a situation in which Chatr had a prepaid offering and Videotron did not, while Videotron had a postpaid offering and Chatr did not. It is for this reason that I accept Mr. Garrick Tiplady’s evidence that Rogers and Videotron were not competitors in the prepaid market. An October 22, 2008, press release issued by Québecor Media and Videotron is consistent with Mr. Tiplady’s evidence. In that press release, Québecor Media and Videotron announced a $1 billion investment “to roll out their own advanced wireless network.” They announced their intention to bring an unprecedented offering of advanced wireless telecommunications to consumers and small businesses. They announced that the project would create an additional 1000 jobs at Videotron. Québecor Media and Videotron announced that the creativity of the members of the Québecor Media family would be their chief asset in facing the challenges of creating a new business model for Québecor Media and its subsidiaries.

[198] The October 22 press release contained a quote from the president and CEO of Videotron as follows: “True to its track record of bringing its customers the best in technology and entertainment, Videotron intends to launch an unprecedented offering of advanced wireless telecommunication services on the Québec market.”

[199] The October 22 press release provided that 100 experts would be added to Videotron’s engineering department staff of 800 engineers.

[200] The press release provided background about Québecor Media and Videotron. Québecor Media was described in part as a communications company with operations in North America, Europe and Asia. Videotron was described as a wholly-owned subsidiary engaged in cable television, interactive media development, Internet access services, cable and wireless telephone services. Videotron described itself as a leader in new technologies. Finally, the press release described Videotron as a leader in high-speed Internet access with over one million customers.

[201] This press release is quite dissimilar from the Chatr concept.

[202] There is a reference to Videotron being “new” in the October 22 press release. Specifically, Videotron claimed that, because it was a new entrant in the industry, its network would be designed using the latest technology.

[203] Public Mobile, on the other hand, was a new wireless carrier in the sense that it had no history of carrying on business in the Province of Québec. Further, by the time Videotron and Chatr launched in Québec in September 2010, Public Mobile had already launched there.

[204] I make two final observations. First, Videotron launched in Québec under its own name. It maintained a consistent brand image as demonstrated by the Videotron ads that were admitted into evidence. Second, from 2005 and onward, Videotron existed side-by-side with Rogers in the Province of Québec and had 80,000 wireless customers in its own name.

[205] After considering the evidence, including the evidence to which I have referred, I am satisfied that a credulous and technically inexperienced consumer of wireless services in Québec would view Québecor Media and Videotron as companies in Québec with a proven track record who were rolling out their own advanced wireless network. I am satisfied that such a consumer in Québec would have considered Videotron an established presence in Québec, and a known service provider. In short, I am satisfied that a credulous and technically inexperienced consumer of wireless services in Québec would not view Videotron as captured in the Chatr ads by references such as “les nouveaux opérateurs sans-fil.”

Conclusions concerning the nature of and context for the contentious advertisements

[206] When I consider the evidence, including the evidence to which I have referred, I am satisfied that the fewer dropped calls and more reliable network general impressions represented to the credulous and technically inexperienced consumer of wireless services that these advantages were available to consumers in each Chatr zone (appels illimités sans souci dans ta zone chatr) (emphasis added).

[207] I am satisfied that the literal meaning of the contentious claims is consistent with this general impression.

[208] I am satisfied that the combined effect of the literal meaning of the contentious ads and their general impression is that the Chatr advantages of fewer dropped calls and network reliability represented in the ads were available to Chatr customers in each Chatr zone.

[209] Finally I am also satisfied that a credulous and technically inexperienced consumer of wireless services in Québec would not view Videotron as captured by the references in the contentious ads to new wireless carriers (les nouveaux opérateurs sans-fil).

The use of switch generated data

[210] An issue arose during the proceedings concerning the use of “switch generated” data. The term switch comes from the fact that initial hardline telephone communication systems required a mechanical switch to connect the caller to the person called.

[211] At the time with which we are concerned, the switching function was performed by multitasking computers. These computers form the highly complex brain of a wireless network. The dialogue between network components is controlled, monitored and recorded by these multitasking computers.

[212] The development and manufacture of switches can occupy the time of thousands of engineers and software developers for a number of years. These multitasking computers operate 24 hours a day, 7 days a week and 365 days a year, and must perform reliably at all times.

[213] Mr. Harri Pietila, called as a witness by the respondents, was qualified to express opinions on the design and use of wireless network switches, switch generated data and the appropriateness of using switch generated data to compare the performance of wireless networks. Mr. Pietila characterized these multitasking computers as one of the most complicated software-controlled computer systems in the world.

[214] Mr. Pietila testified that the mobile switching centers used in the LM Ericsson wireless system utilized a software control logic that had been developed by thousands of engineers over a period of more than 20 years. He testified that the system was still under development.

[215] Competing manufacturers of these multitasking computers do not share their hardware and software.

[216] Each switch collects data. This data describes and logs the operation of the switch. Switch generated data helps the network operator understand what happened on the network on a day-to-day basis. It can help the network operator understand what happened to a customer who experienced a particular issue during a call.

[217] A multitasking computer has thousands of software blocks, which are pieces of software that perform a dedicated task. The software blocks contain counters that track what happens during each call connected by the switch. The software endeavors to capture these “events” into a centralized database. A combination of events is used to calculate key performance indicators, such as the rate at which the network drops calls.

[218] Switch generated data is analyzed by performance management tools that constitute a computer system outside the switch. These computers collect raw data and produce reports. The nature of the reports produced is defined by the operator.

[219] Generally speaking, this switch generated data is used by network operators to modify and improve their network.

[220] Switch generated data is also proprietary. Competing operators do not share their switch generated data. In part, this is because doing so would disclose the improvements in their network.

[221] The applicant submits that regulators in different parts of the world rely on switch generated data. Specifically, the applicant referred to the Australian regulator and to OFCOM, the British telecommunications regulator.

[222] The applicant submitted that there are standards that define how dropped calls should be calculated on a wireless carrier’s network. The 3rd Generation Partnership Project (“3GPP”), is an international standards body. It governs GSM and WCDMA technologies. It provides a high level definition for dropped call rates.

[223] Dr. Robert Ziegler, a witness called by the respondents, was qualified as an expert to give opinion evidence concerning the configuration and performance of wireless networks, and the measurement and evaluation of the performance of those networks. Dr. Ziegler testified that while the 3GPP dropped call definition was at a “very high level”, there were no established standards for implementing the definition at the operational level.

[224] Rogers, Wind Mobile and Videotron complied with 3GPP at this “high level.” Public Mobile had a different methodology, and was not a part of 3GPP.

[225] The applicant produced evidence that established that Ericsson publishes comparisons of different carriers using Ericsson switches. It provides each of those customers/carriers with that anonymized information so that the customers can see how they rank on a variety of metrics, including dropped call rates. The applicant submits that this means that Ericsson believes that the comparisons are meaningful, and points out that the respondents relied on one such report in a submission to the Competition Bureau.

[226] The applicant’s position is that switch generated network data is helpful because it contains data about every call on the network. It is the applicant’s position that network data can be used by the court to assess whether representations are false or misleading.

[227] The applicant takes the position that switch generated data, provided to the Competition Bureau by Wind Mobile, Public Mobile and the respondents, demonstrate that the fewer dropped calls claim is false with respect to Videotron and Wind Mobile in Montréal and Ottawa respectively. As indicated elsewhere, I am not satisfied Videotron would be viewed as a new wireless carrier in Québec. As a result, I will not comment further on Videotron.

[228] The applicant takes the position that the switch generated data demonstrates that the representations are misleading with respect to Wind Mobile in Toronto and Edmonton because the differences in drop call rates in those two locations are insignificant.

[229] It is the applicant’s position that the dropped call statistics produced using switch generated data constitute real evidence of the dropped call rates of each network. Accordingly, it is the applicant’s position that network generated data is admissible evidence capable of being used to prove and compare the dropped call rates of Chatr, Wind Mobile and Public Mobile during the relevant period.

[230] It is the applicant’s position that the court can determine from the evidence whether the different networks have counted the same events.

[231] The applicant relied upon the fact that Wind Mobile compares dropped call rates on its own network, despite the fact that different portions of the network use switches manufactured by different manufacturers.

[232] The applicant called Dr. Raymond Nettleton. He was qualified as an expert witness entitled to give opinion evidence on electrical engineering and wireless telecommunications, including the collection and analysis of network key performance indicator data, drive test results and the adequacy of drive tests undertaken by the respondents.

[233] Dr. Nettleton testified that the Rogers and Wind Mobile formulae for measuring dropped calls reflect the same data. Dr. Nettleton pointed out that the switch data provided by the carriers contained details of more than 3 billion calls, including over 23 million dropped calls. It was his view that this volume overrode minor differences that might introduce errors into switch-based data comparisons between carriers.

[234] Dr. Nettleton offered the opinion that differences in counting formulae used by different equipment vendors would be inconsequential. In his opinion, switch generated data was comparable across carriers.

[235] It was also Dr. Nettleton’s view that even if a small amount of network generated data was lost, for example, due to network upgrades, the omission would not impact dropped call rates.

[236] The respondent’s position is that switch generated data is not a fair or reliable basis for comparing the dropped call rate performance of one network with another. This view was supported by the evidence of Mr. Berner, the Chief Technology Officer for Rogers, Dr. Ziegler, Harri Pietila and Michael Tiplady. Mr. Michael Tiplady was qualified as an expert to give opinion evidence concerning the measurement and evaluation of the performance of wireless networks. He is no relation to Garrick Tiplady, Senior Vice President of Chatr at the relevant time, who also testified in this proceeding.

[237] I found Mr. Pietila’s evidence quite helpful on this question. Mr. Pietila has a Master of Science degree in electrical engineering from the Technical University of Helsinki. Mr. Pietila was a switch engineer with Ericsson until he retired in 2010. During his 25 years with Ericsson, Mr. Pietila specialized in wireless switching-related products and solutions. He was responsible for Ericsson’s GSM switching systems, including all research and development activities at one point in his career.

[238] Mr. Pietila’s evidence that he was heavily involved in research and development activities for Ericsson switches was not contentious. I accept not only this aspect of his evidence, but I accept his evidence entirely. Of all the expert witnesses, Mr. Pietila had the most practical work experience with multitasking computers or switches. He designed software for GSM switches. He was responsible for the deployment and support of Ericsson cellular switching technology in northern Europe. He has Canadian work experience. He was the head of research and development at Ericsson’s Research and Development Centre in Montréal; this facility employed approximately 2000 researchers when he was there.

[239] Mr. Pietila explained that there are several different suppliers of switches or multitasking computers. These different suppliers compete with each other. Each supplier develops, separately and independently, their own multitasking computers as well as the software that operates them.

[240] Mr. Pietila explained that the data recorded by switches is always used as a diagnostic tool within a single network. It assists the network operator in understanding how the network is performing, and what changes should be made to improve its performance.

[241] Mr. Pietila testified that different wireless networks use different technology, software and multitasking computers. He testified that there are no standards governing the design and manufacture of switches. Switches developed by different vendors are not the same. In his experience, every wireless network is configured differently, and each operator has the ability to adjust the results in numerous ways. It was Mr. Pietila’s view that there is no way to assess the impact of any one factor on the results generated by each switch. Mr. Pietila testified that comparing switch generated data derived from different switches supplied by different manufacturers is exceedingly difficult. He testified that comparing the performance of one Ericsson-supplied wireless network to another Ericsson-supplied network is exceedingly difficult using switch generated data.

[242] Mr. Pietila testified that there are at least two parties who have an interest in manipulating switch generated data: the vendor of the switch and the network operator’s personnel. Mr. Pietila indicated that there are financial and reputational incentives tied to switch generated network performance results.

[243] Mr. Pietila examined the switch data that was made available in this case. He reached the conclusion that it could not be used to perform a fair or reliable comparison between the performance of the wireless networks of Rogers, Wind Mobile and Public Mobile. Mr. Pietila noted that Rogers uses Ericsson switches, while Public Mobile and Wind Mobile do not. Mr. Pietila was concerned that the underlying data for each counter used to calculate the daily drop call rates provided to the Competition Bureau was not available. The underlying data was not available because it had been destroyed by Wind Mobile and Public Mobile after these proceedings were commenced as part of their routine destruction of such data.

[244] Mr. Pietila’s concern about using switch generated data to compare networks was confirmed in this case. Public Mobile excludes seven counters from its dropped call formula. One of those counters captures “customer forced terminations.” Rogers does not exclude “customer forced terminations” from its dropped call formula; Rogers counts such terminations as dropped calls. On the Public Mobile network, during the relevant time period, a customer forced termination occurred when the network lost contact with a handset during a call, the channel remained open and a new call was established on the network by that same handset within 18 seconds. Customer forced terminations accounted for 35 to 38 per cent of the total monthly abnormal termination events captured on the Public Mobile network during the relevant time period.

[245] Public Mobile did not disclose these exclusions, including the very significant exclusion of customer forced terminations, to the Competition Bureau when Public Mobile provided its dropped call rates in 2010. These exclusions were not disclosed in the affidavits sworn by Public Mobile’s representative in these proceedings. These terminations would have to be added to Public Mobile’s dropped call rate calculation to fairly compare Rogers’ and Public Mobile’s dropped call rates. Adding customer forced terminations to Public Mobile’s dropped call rate increases that rate significantly.

[246] It was not contentious that the software used to operate these multitasking computers is regularly upgraded. This means that two wireless networks using multitasking computers manufactured by the same source may be using different software versions to operate. For example, Wind Mobile’s network in Eastern Canada, and Videotron’s network in Montréal, both use Nokia switches. However, they use different versions of the operating software. The dropped call formulae are different. The more recent version of the Nokia software takes an event that was previously counted by one counter and splits that event into three different sub-events. These sub-events are counted by three different counters. Dr. Ziegler testified that he was unable to determine how this change affected a comparison of their dropped call rate calculations.

[247] Dr. Ziegler testified that had he been asked to verify the comparability of switch generated data in making key performance indicator comparisons, he would have declined because it was at odds with his professional experience. I accept Dr. Ziegler’s evidence in this regard. Dr. Ziegler testified that this was the only time he had testified as an expert. Dr. Ziegler testified that Applied Communication Sciences, his employer, rarely provides opinion evidence in proceedings by deliberate choice.

[248] The European Telecommunications Standards Institute published a paper in April 2005 that dealt in part with two approaches to quality of service issues in the area of mobile communications. The two approaches were drive tests and measurements based on switch generated data.

[249] The paper set out the advantages of switch generated data as follows:

• It includes the effects of all calls and therefore provides better comparability of congestion and network failures;

• It takes into account changes in terminals and the actual performance achieved by real terminals used by real users; and

• Quality indicators are produced from the same database for the whole network as well as for different regions and periods.

[250] The paper set out disadvantages of switch generated data as follows:

• Call attempts made out of coverage are not taken into account because the network does not get that information; and

• Measurements based on network counters depend on software algorithms in the switches and base station controllers that implement the counters. The algorithms of different manufacturers may differ, and there may be differences in the algorithms in different versions of the same software.

[251] It is the latter disadvantage that is concerning. There is no evidence that persuades me that the software algorithms in the Rogers, Wind Mobile and Public Mobile switches are the same, or that explains the differences if there are any.

[252] I have not referred to Videotron in this portion of the reasons because, as indicated elsewhere, I am not satisfied that a credulous and technically inexperienced consumer of wireless services in Québec would have viewed Videotron as a new wireless carrier.

[253] I also considered whether Rogers’ switch generated data could be used to confirm or deny Rogers’ drive test results for the Rogers network. Drive testing is discussed elsewhere in these reasons. Suffice it to say here that drive testing is a standardized and highly utilized method of comparing the performance of different wireless networks. Drive testing was undertaken at times between July 28, 2010, and November 30, 2010, and the results were introduced into evidence.

[254] Dr. Dippon was a witness called by the applicant. Dr. Dippon was qualified to give expert opinion evidence on the wireless telecommunications industry. He provided a statistical analysis of drive test results in Table 9 of his report. The analysis compared Rogers’ drive test data of dropped call rates for Chatr, Wind Mobile and Public Mobile. It also addressed network dropped call rates produced by network generated data from the Rogers, Wind Mobile and Public Mobile networks.

[255] Dr. Dippon’s Table 9 suggests that Rogers’ drive test generated dropped call rates were lower than Rogers’ switch generated dropped call rates in Calgary, Edmonton, Montréal, Ottawa and portions of Vancouver. Table 9 suggests that Rogers’ drive test generated dropped call rates for portions of Vancouver were higher than Rogers’ switch generated dropped call rates for those same areas of Vancouver.

[256] I am unable to conclude that there is any consistent correlation between Rogers’ drive test generated dropped call rates and Rogers’ switch generated dropped call rates.

[257] I disagree with Dr. Dippon’s conclusion that the deviations between drive test generated dropped call rates and switch data generated dropped call rates mean that the drive test data is unreliable. I prefer the conclusion that the deviations, which occur in both directions, make it impossible to safely use Rogers’ switch generated dropped call results to confirm or deny Rogers’ drive test generated drop call results.

Conclusions concerning the switch generated data

[258] I agree that switch generated data is admissible in this proceeding. However, I am satisfied, based on the evidence, that it is dangerous to place significant weight on a comparison of the Wind Mobile, Public Mobile and Chatr switch generated dropped call rates when determining whether the Chatr fewer dropped calls claim is false or misleading.

[259] The Commissioner bears the burden of proving that Rogers’ fewer dropped calls claim is false.

[260] The applicant’s assertion that the fewer dropped calls claim is false is based upon switch generated data.

[261] When I consider all of the evidence in this matter, as well as the fact that I consider switch generated data of little help for the purposes of comparing the dropped call performance of different wireless networks, I come to the conclusion that I am not satisfied that the applicant has proven on a balance of probabilities that the respondents’ fewer dropped calls claim is false in Ottawa with respect to Wind Mobile.

[262] Similarly I am not prepared to conclude on the basis of switch generated data that the fewer dropped calls claim was misleading in Calgary, Edmonton and Toronto with respect to Wind Mobile.

Must the differences in dropped call rates be discernible?

[263] I do not accept the applicant’s view that differences in drop call rates must be discernible.

[264] I indicated elsewhere that I am satisfied the ads gave the general impression that there were no worries about dropped calls on the Chatr network. They suggested there were fewer dropped calls on that network, and that the Chatr network was more reliable.

[265] I recognize that the Advertising Standards Canada Guidelines provide that comparative performance claims should not be made when the difference is barely discernible to consumers. Similarly, the Canadian Marketing Association’s Code of Ethics and Standards of Practice provides that marketing communications should not stress insignificant differences designed to lead the consumer to draw a false conclusion.

[266] At the same time, it is true that there are many claims about products that are not discernible, and yet still important to consumers. Dr. Pearce offered the example of food safety claims or nutritional claims.

[267] On April 17, 2012, Rogers received a Port-Out Analysis that was designed to test the importance of dropped calls to customers who had left Rogers for another telecommunications provider. The customers whose accounts were examined were postpaid term contract customers. The analysis concluded that dropped calls have a statistically significant impact on postpaid customers who have decided to change wireless carriers.

[268] Further, this report identified that the precipice for port-outs (leaving Rogers for another telecommunication provider) and dropped calls in the postpaid long-term contract segment of the telecommunications market was between three and six dropped calls per month. The report concluded that targeting customers with five dropped calls would likely improve Rogers’ port-out rate.

[269] The Chatr market was a prepaid services market with no term contracts. It is easier for a prepaid no term contract customer to move to another wireless provider than it is for a postpaid long-term contract customer. I conclude therefore that the precipice for port-outs and dropped calls in the prepaid no term contract segment of the market is likely lower than 3-6 dropped calls per month.

[270] In addition, during the relevant time period, no wireless service provider had a pricing advantage over the other. There was aggressive pricing prior to Chatr’s launch in July 2010. Aleks Krystajic testified that from March to June 2010, price competition from other wireless carriers, particularly Mobilicity, forced Public Mobile to respond. Mr. Krystajic described the pricing plans offered by Wind Mobile and Mobilicity as “bordering on lunacy.”

[271] In their hard handoff/undue preference complaint submission to the CRTC, Wind Mobile and Public Mobile emphasized the importance of dropped calls. Specifically, in its submissions to the CRTC, Wind Mobile stated:

Put simply, every dropped call matters. Prospective subscribers selecting a mobile provider and to whom Rogers Chatr now offers commercial arrangements that are virtually identical to those offered by Wind neither know nor need to know how often they will be affected by the threat of dropped calls. Instead prospective subscribers are offered an opportunity to avoid the problem altogether.

[272] In an email to the Competition Bureau dated September 24, 2010, Public Mobile stated that a differential in drop call rates as small as 10 per cent would be significant.

[273] The statements made by Wind and Public to the CRTC provide, regardless of their truth, significant evidence that Wind Mobile and Public Mobile thought dropped calls, including those caused by hard handoffs, were a significant problem. The statements also prove that they thought that dropped calls, including those caused by hard handoffs, reflected badly on the public’s perception of the reliability of their networks. Their statements prove that the leaders of Wind Mobile and Public Mobile thought that the public was concerned with the risk of dropped calls rather than their relative frequency.

[274] Michael Tiplady, whose qualifications are discussed elsewhere, testified that a dropped call can be quite significant if the customer is experiencing other problems with the network.

[275] Finally, as a matter of common sense, dropped calls can have a significance that is not quantitative. The customer is not making a comparative analysis to other carriers in that situation. This significance was captured by Wind Mobile in its submission to the CRTC, to which I have referred elsewhere. In that submission, Wind Mobile described a dropped call as an annoyance on social calls, an acute disadvantage on business calls and possibly a matter of life or death on 911 calls.

[276] When I consider the evidence, including the evidence to which I specifically referred, I am satisfied that the credulous and technically inexperienced wireless services consumer between July 28, 2010, and November 30, 2010, would be more inclined to be a customer of a network that offered fewer dropped calls. Where price is not a factor, I find it difficult to believe that a consumer would choose a network that offered only a few more dropped calls. Even if one network only had a few more dropped calls, one of those calls could be extremely important.

[277] This notion was captured by Wind Mobile in its Reply submission to the CRTC in its hard handoff/undue preference complaint. The Reply stated as follows:

Prospective subscribers selecting a mobile provider and to whom Rogers Chatr now offers commercial arrangements that are virtually identical to those offered by Wind neither know nor need to know how often they will be affected by the threat of dropped calls. Instead prospective subscribers are offered an opportunity to avoid the problem altogether (emphasis added).

[278] I am satisfied that the credulous and technically inexperienced consumer would choose a network that offered fewer dropped calls to avoid the possibility of an important call being dropped.

[279] This is not a case where an indiscernible difference means that the services are indistinguishable.

[280] I am not satisfied that the credulous and technically inexperienced consumer viewing the Chatr ads expected the dropped call experience to be discernibly different.

[281] Accordingly I am not satisfied that the fewer dropped calls claim is misleading unless there is a discernible difference in drop call rates among the respondents, Wind Mobile and Public Mobile.

Is a one per cent dropped call rate a standard beyond which consumers are unconcerned?

[282] The applicant contends that the fewer dropped calls claim is misleading because the dropped call rates of Wind Mobile and Chatr are below one per cent in Calgary. It is the applicant’s submission that a dropped call rate of one per cent is a standard below which consumers are unconcerned about dropped calls.

[283] Kenneth Campbell, Wind Mobile’s CEO, and Aleks Krystajic, Public Mobile’s CEO, testified that consumers are unlikely to consider dropped call rates discernible where the rates are below one per cent.

[284] I do not accept this evidence, nor do I accept the applicant’s contention in this regard.

[285] Dr. Bekheit, the Vice-President of Access Network for Wind Mobile, testified that Wind Mobile continued to work and invest money to improve its dropped call rate in Toronto and Ottawa after the rate fell below one per cent in those cities.

[286] Dr. Bekheit testified that as a matter of general policy, Wind Mobile did not stop working to improve its dropped call rate when it fell below one per cent.

[287] In an email to the Competition Bureau dated September 24, 2010, Public Mobile stated that a 10 per cent differential in dropped call rates was significant.

[288] Wind Mobile submitted to the CRTC that “every dropped call matters.”

[289] I do not accept the applicant’s contention that the fewer dropped calls claim is misleading because the dropped call rates of Wind Mobile and Chatr in Calgary were, during the relevant period, below what it termed the one per cent threshold for dropped calls.

Adequate and proper testing

[290] As indicated earlier, the Application was amended on March 1, 2011. The amendment maintained that Rogers and Chatr made the “fewer dropped calls than new wireless carriers” and “no worries about dropped calls” performance claims in the absence of adequate and proper testing.

[291] The burden of proving adequate and proper testing lies upon the respondents by virtue of the express wording of s. 74.01(1)(b) of the Competition Act.

[292] The adequate and proper test must be made prior to the representation to the public: see Canada (Commissioner of Competition) v. Imperial Brush Co., 2008 Comp. Trib. 2, [2008] C.C.T.D. No. 2 (Canadian Competition Tribunal), at para. 125.

[293] The respondents do not dispute that they made the contentious claims about the performance of their wireless network to the public. They do not dispute that they did so for the purpose of promoting the use of wireless services provided by Chatr, and to the detriment of Wind Mobile, Public Mobile and Mobilicity.

[294] The phrase “adequate and proper test” is not defined in the Competition Act. Whether a particular test is “adequate and proper” will depend on the nature of the representation made and the meaning or impression conveyed by that representation. Subjectivity in the testing should be eliminated as much as possible. The test must establish the effect claimed. The testing need not be as exacting as would be required to publish the test in a scholarly journal. The test should demonstrate that the result claimed is not a chance result: see Imperial Brush Co., at paras. 122, 124, 126, and 127.

[295] The respondents must show that adequate and proper testing supported the fewer dropped calls claim (“fewer dropped calls than new wireless carriers” and “no worries about dropped calls.”)

No testing

[296] Chatr was launched in Calgary and Edmonton on July 28, 2010. Although at this time the fewer dropped calls claim was first made, the respondents had not conducted any tests of the performance of Wind Mobile in Calgary or Edmonton.

[297] With respect to Montréal, the respondents first made the fewer dropped calls claim in a press release issued on September 8, 2010, prior to the Chatr launch in that city. The respondents conducted their first set of drive tests in Montréal from September 15-19, 2010. The results of these drive tests were not available on either September 8 or 16, 2010, and therefore could not have formed the basis for the fewer dropped calls claim in relation to Public Mobile in Montréal.

Drive tests

[298] Drive testing involves placing simultaneous calls on competing wireless networks within a coverage area. These calls are placed at exactly the same location and contain exactly the same content.

[299] Wireless devices using competing wireless networks are attached to a vehicle equipped with an expensive and sophisticated drive test measuring system. The vehicle travels a predetermined route that has been designed having regard to population density and traffic patterns. While the vehicles are traveling the predetermined routes, the wireless devices use both competitors’ networks as well as Rogers’ network. The devices automatically make calls to particular land lines. The results of these calls are monitored and evaluated.

[300] The respondents offered drive test results both as an adequate and proper test, as well as helpful evidence concerning the fewer dropped calls comparative claim. The applicant asserted that the drive tests did not constitute adequate and proper testing of the fewer dropped calls claim because:

• Given their purpose and limitations, drive tests could not be used as the basis for market-wide conclusions about wireless network performance, including dropped call rates;

• Rogers’ own drive test data in Vancouver, Calgary and Edmonton did not show a statistically significant difference between Chatr’s dropped call rates and those of some or all of the new carriers;

• Rogers did not conduct any drive tests in Calgary or Edmonton before making the claim there; and

• Rogers’ drive tests in the greater Toronto area prior to September 27, 2010, did not include all of the new entrants operating in the greater Toronto area.

[301] There are three issues that I must consider:

• Are drive tests capable of adequately and properly testing the respondents’ fewer dropped calls claim?;

• If drive tests are capable of adequately and properly testing the fewer dropped calls claim, did the drive tests actually conducted adequately and properly test it?; and

• If the drive tests conducted did in fact adequately and properly test the fewer dropped calls claim, do the results of those tests provide a basis for the claim?

[302] The burden of proving that the fewer dropped calls claim was adequately and properly tested lies upon the respondents. Furthermore, the reliability of a new network can change over time, and therefore it is necessary to consider whether the drive testing results were always sufficiently current.

[303] I recognize that drive tests do not actually provide a measure of all dropped calls experienced on a network. Drive tests estimate the actual dropped call rate. As well, drive test results are results occurring in the particular conditions under which the drive test took place. These qualifications are counterbalanced by evidence that proved that benchmark drive testing is used all over the world to compare network performance.

[304] I also recognize that drive testing is conducted outdoors. According to the evidence, more than half of the cell phone calls with which we are concerned were likely made indoors. Indoor testing occurred after the fewer dropped calls claim was made. Mr. Michael Tiplady reviewed the indoor testing results and offered the opinion that the results of the indoor testing were consistent with Rogers’ earlier drive test results. Mr. Tiplady’s evidence, which as indicated earlier I accept, and the evidence that wireless networks improve with time, support the conclusion that the drive testing results are an adequate and proper basis for the fewer dropped calls claim both indoors and outdoors.

[305] The Competition Act requires an adequate and proper test of a performance claim. Significantly, benchmark drive testing is accepted universally as a way of comparing key performance indicators, including dropped call rates, on different networks. Drive testing does not have to be a perfect test to be an adequate and proper test.

[306] The demand of wireless operators for reliable drive test results has given rise to a $300 million per year industry. To state that billions of dollars have been invested world-wide in wireless networks is to state a well-known and easily confirmed fact. Some significance must be attached to evidence that the persons who invested these significant sums rely on benchmark drive testing.

[307] Evidence, which was not contentious, was introduced describing instances where wireless companies had sought to distinguish themselves in comparative advertising by claiming superior dropped call rates. These claims were based on drive test results.

[308] Rogers tendered two witnesses who were qualified to offer opinion evidence about drive testing. Michael Tiplady, who served as the Chief Technology Officer for O2, a large wireless service provider in the United Kingdom, was one of those witnesses. As Chief Technology Officer for O2, Mr. Tiplady was responsible for an annual budget of approximately £250 million. Mr. Tiplady has extensive experience with the actual operation of wireless networks.

[309] Mr. Tiplady testified that drive testing is globally recognized as the most accurate method of comparing different networks from the user’s perspective. I accept Mr. Tiplady’s evidence in this regard.

[310] Dr. Robert Ziegler was the second expert called by the respondents. Dr. Ziegler has a PhD in electrical engineering from Stanford University. He manages approximately 250 people at Applied Communication Sciences. The Wireless Systems and Networks Research Department at Applied Communication Sciences provides research and engineering services to government and commercial customers. Applied Communication Sciences’ clients include agencies of the United States government, including both defence and non-defence agencies. Its clients also include AT&T, Q West, Verizon, Sprint and other wireless network operators around the world.

[311] Applied Communication Sciences is a wholly-owned subsidiary of Telcordia Technologies, which is ultimately owned by LM Ericsson. I recognize that LM Ericsson manufactured the multitasking computers used by the respondents.

[312] Dr. Ziegler testified that drive testing is an established and well-thought-out industry-accepted practice for providing comparative assessments of the performance of wireless networks. I accept Dr. Ziegler’s evidence in this regard.

[313] The evidence of Dr. Ziegler and Michael Tiplady is consistent with public submissions made by Verizon and AT&T to the United States Federal Communications Commission concerning drive testing. These submissions were to the effect that drive testing is an excellent way to compare the performance of wireless networks in respect of dropped calls.

[314] Vimplecom, Wind Mobile’s parent company, uses drive testing to compare the performance of its networks with its competitors.

[315] I am satisfied by the evidence that drive testing is a standardized international method for comparing the performance of wireless networks.

[316] I am satisfied by the evidence that drive tests are capable of adequately and properly testing the respondents’ fewer dropped calls claim.

Did Rogers’ drive test programme adequately and properly test its fewer dropped call claims?

[317] Rogers began its drive test programme in 2005. Rogers has spent approximately $20 million on the development and implementation of its drive testing programme. Each year since 2005, Rogers has conducted drive tests across Canada four times per year in metropolitan areas.

[318] Rogers uses vehicles equipped with specially calibrated drive testing equipment provided by a company known as SwissQual AG. SwissQual AG is a Swiss company specializing in wireless network benchmarking and wireless network optimization. The evidence established that SwissQual AG is internationally known in this area, and is independent of Rogers.

[319] Rogers’ drive test vehicles adhere to SwissQual AG’s standards in hardware and software configuration. The test script, speech clips, sequence and frequency used during Rogers’ drive tests are predetermined in accordance with established SwissQual protocols.

[320] The applicant submitted that Rogers’ drive tests had to be carried out with third-party validation in order to be an adequate and proper test.

[321] There is no provision in the Competition Act that expressly provides that an adequate and proper test of a comparative performance claim must be validated by a third-party. Case law has established that courts have applied a flexible and contextual analysis when assessing whether a representation is based on an adequate and proper test. It is not consistent with the notion of a flexible and contextual analysis to invariably insist on third-party validation of test results. I am satisfied that such validation is not a prerequisite to an adequate and proper test: see Imperial Brush Co., at para. 122.

[322] If I am wrong about this, I am satisfied also that Rogers’ drive testing and drive test results have been independently validated. Specifically, Telcordia Technologies prepared an audit of Rogers’ drive test methodology in 2005 and 2011. I recognize that Telcordia Technologies did not audit the methodology or the results of the specific drive tests relied upon in this Application. Rogers engaged Score Technologies and Nielsen Mobility to conduct drive tests to validate and supplement its own drive test results. Score Technologies and Nielsen Mobility are independent of Rogers. The evidence established that these two companies have specialized expertise in the field of drive testing, and that they are used by other wireless service providers for the same purpose. Score Technologies conducted four of the drive tests relied upon in this Application. Score and Neilsen conducted drive tests in the same area that Rogers conducted drive tests. Their results were compared with Rogers’ results to provide a level of independent assurance concerning those results.

[323] The applicant submitted that handsets are an important element in a drive test. The applicant relied on the fact that the handsets used to conduct drive tests of Rogers 2G network and the networks of at least some of the new wireless carriers were not handsets purchased from those carriers, nor were they handsets that were commercially available from them.

[324] Specifically, for testing Wind Mobile and Rogers, Score Technologies used the Samsung T-819. The applicant suggested that there was no evidence that this handset was purchased from a Wind Mobile store. The evidence established that it was a common practice to purchase a Wind Mobile handset and then use that handset in the drive test to test the Wind Mobile network.

[325] Rogers’ drive test programme uses equipment supplied by SwissQual, one of the leading drive test firms in the world. Evidence was adduced from SwissQual in the form of an email that suggested that Wind Mobile had informed SwissQual that it uses the Samsung T-819. Rogers provided the Competition Bureau on November 4, 2010, with an email from SwissQual confirming that the Samsung T-819 is compatible with its equipment.

[326] Dr. Ziegler testified that the Samsung T-819 uses a common chipset and was specifically validated by SwissQual for use with the drive test equipment used by Rogers in 2010. I accept Dr. Ziegler’s evidence in this regard.

[327] The applicant also criticized the fact that Rogers used the Nokia N95 when drive testing its own network. The applicant claimed that this device was not sold by Chatr in 2010. Mr. Berner, the respondents’ Chief Technology Officer at the relevant time, testified that this device was fully validated and tested for use on the Rogers GSM network, and that it was used by customers on the network.

[328] I accept this aspect of Mr. Berner’s evidence. Mr. Berner was clearly concerned about the Rogers network. He arranged for Rogers’ drive testing methodology to be audited by Telcordia Technologies. He arranged for independent testing by Score Technologies and Nielsen Mobility. It seems only reasonable that he would avoid handsets that invalidated or undermined the drive test results that he had otherwise made efforts to verify.

[329] Mr. Michael Tiplady testified that SwissQual tests handsets and recommends to its customers handsets that work well with SwissQual equipment. It was Mr. Tiplady’s evidence that the important thing was to use a handset that was so recommended. I accept Mr. Tiplady’s evidence in this regard.

[330] I am satisfied that the handsets used by Rogers during its drive tests were compatible with the SwissQual equipment used by the respondents. I am also satisfied that this was an important fact in terms of the validity and reliability of Rogers’ drive test results.

[331] Mr. Berner testified that he had no direct knowledge of the conduct of the drive tests with which we are concerned. Mr. Berner’s only knowledge about the drive test programme and methodology came through conversations with persons reporting to him. Mr. Berner could not be effectively cross-examined concerning the methodology used on the actual drive tests. This circumstance goes to the weight attached to the drive test results. Its negative effects, however, are offset by the fact that independent auditing of the tests with which we are concerned, was conducted by Mr. Michael Tiplady.

[332] Michael Tiplady conducted a full review of the Rogers drive tests referred to in this proceeding. He reviewed the information provided by Mr. Berner in his affidavit. He reviewed the methodology and he examined the information from the subcontractors Score Technologies and Nielsen Mobility. He looked at information on the equipment used. Mr. Tiplady examined printouts of the drive test routes to see whether the routes were consistent with the area Rogers was purporting to test. Mr. Tiplady concluded that the drive tests were conducted according to the normal international standard. He concluded that the drive tests were well-thought-out and what you would expect from an operator of Rogers’ standing. The tests were what you would expect from similar operators in other countries. I accept Mr. Tiplady’s evidence in this regard.

[333] I am satisfied that Mr. Tiplady’s validation offsets to a significant degree the fact that no persons were called with personal knowledge of the actual drive tests with which we are concerned.

[334] I reject the applicant’s criticism of the Rogers benchmark drive testing.

Is belief in a technological fact an adequate and proper test?

[335] Rogers has invested billions of dollars in capital expenditures to develop and enhance its wireless network. Rogers has a national network that provides services to approximately 95 per cent of the Canadian population. When Wind Mobile and Public Mobile commenced operations, Rogers had been in business for over 25 years.

[336] It was not contentious that the deployment of a wireless network is an iterative process that requires the operator to make constant adjustments to optimize performance. Mr. Berner testified that “we’re never done deploying a network”. Mr. Berner explained that if a wireless service provider has a brand-new network, its objective is to get as much coverage as it can in order to have a competitive product. As a result, he explained a wireless service provider will not be able to immediately build all the infill sites needed to solve specific coverage problems within its coverage area. In short, it was his evidence that a network gets better over time.

[337] Dr. Ziegler testified that there was no way that a new entrant or any other operator could catch up to 25 years of experience in a few months.

[338] I accept the evidence of both Mr. Berner and Dr. Ziegler in this regard.

[339] I am satisfied that Mr. Berner honestly believed that it was impossible for Wind Mobile and Public Mobile to build and develop a wireless network to match the reliability and performance of the Rogers network in less than one year.

[340] Mr. Berner’s belief in Rogers’ technical superiority, which was also Rogers’ belief, was based on the three components contained within the explainer or disclaimer in the contentious representation: greater cell density; quality of indoor and underground reception; and seamless call transition when moving out of a Chatr zone. In addition, it was Mr. Berner’s view that Rogers’ use of lower frequency 850 MHz spectrum would also lead to fewer dropped calls.

[341] The applicant claims that knowledge or belief in a technological fact cannot constitute an adequate and proper test within the meaning of s. 74.01(1)(b) of the Competition Act.

[342] In my view, the matter is best given factually specific consideration. Lower frequency 850 MHz spectrum is said to have better propagation qualities, which means that the power of the radio waves decreases less quickly on this lower spectrum than it does on higher spectrum. Wind Mobile and Public Mobile both used higher spectrum than 850 MHz. If the applicant wished to question this principle, then the burden would be on the respondents to provide the applicant with references to the Friis Transmission Formula that was published in 1945, and which established the principle that lower frequency spectrum has better propagation qualities. The Competition Act does not require that the respondents duplicate the test but they must provide it.

[343] The respondents have made the fewer dropped calls comparative performance claim. The applicant has asked for the adequate and proper test of that claim. If the respondents rely upon lower frequency spectrum, they are required to show that they have adequately and properly tested whether their radio wave propagation advantage appears to have actually resulted in fewer dropped calls. The law permits a flexible and contextual analysis when assessing whether a claim has been adequately and properly tested, but there must be a test.

[344] Accepting for a moment that the respondents have greater cell site density, more indoor transmitters and other devices to improve indoor and underground reception and seamless call transition, it is still necessary for the respondents to adequately and properly test whether these technological advantages appear to have actually resulted in fewer dropped calls.

[345] The applicant sought to place in doubt the advantages of lower frequency spectrum in an urban environment. The applicant’s position is undercut significantly by statements from the complainants themselves. The benefits of lower radio spectrum were acknowledged explicitly by Wind Mobile and Public Mobile in recent submissions to Industry Canada.

[346] Wind Mobile explicitly acknowledged that lower frequency spectrum is better able to penetrate structures than higher frequencies. It further explicitly admitted that it was at a substantial competitive disadvantage because lower frequency spectrum had superior propagation characteristics.

[347] Public Mobile made similar statements to Industry Canada.

[348] The applicant sought to place in doubt the respondents’ assertion that they had greater cell site density than Wind Mobile or Public Mobile. Wind Mobile, through its chairman, explicitly acknowledged Rogers’ cell site advantage during the relevant period. Specifically, on December 15, 2010, in an interview with the Globe and Mail, he stated: “[W]e have never made the claim nor will I make the claim today that we have greater coverage than Rogers. They have more sites than us in the greater Toronto area and that leads to better coverage in buildings…” Mr. Armeanca, the former Chief Technology Officer of Wind Mobile, confirmed that three of the four specific causes of dropped calls can be remedied by adding more cell sites.

[349] In addition, it appears that lower frequency spectrum also has to be accounted for when considering cell sites. In October 2010, Wind Mobile had 88 cell sites in Ottawa compared to Rogers’ 91 sites. However, it turned out that 63 of the Rogers 91 sites were deployed at 850 MHz. Dr. Ziegler testified that this meant that Wind Mobile would require 3-4 times as many cell sites to match Rogers’ signal quality.

[350] Mr. Berner testified that, despite having substantial cell site density, there are many locations inside buildings that are effectively dead zones. The only solution to this problem is to provide customized coverage.

[351] The evidence established that Rogers had invested tens of millions of dollars in purchasing and installing an extensive network of transmitters, signal repeaters and other devices in buildings and underground structures. Rogers deployed dedicated systems within buildings to pick up, amplify and redistribute signals inside the buildings. Rogers built specific cell sites and indoor antenna systems to deal with these coverage problems.

[352] Mr. Berner testified that Rogers also built and installed specific outdoor cell sites to solve specific indoor coverage problems.

[353] Indoor transmission systems have been tested extensively, and had the applicant challenged the effectiveness of those systems, the external testing done by others would have perhaps been a complete answer. However, this begs the question of whether the indoor transmission systems that were in place actually resulted in fewer dropped calls than Wind Mobile and Public Mobile.

[354] To the extent that actual testing of dropped call rates prior to making the fewer dropped calls claim occurred and supported that claim, the technological advantages previously mentioned would have to be capable of confirming the adequacy and propriety of that testing as well as the claims.

[355] The applicant suggested that the respondents’ network was congested, and that this reduced or eliminated advantages that the respondents might have otherwise derived from the maturity of their network, their superior spectrum, greater cell site density, superior indoor network and seamless handoffs.

[356] Dr. Nettleton reviewed the respondents’ capacity utilization data and offered the opinion that the respondents’ network was in fact congested during the relevant period, and that this congestion would have resulted in dropped calls.

[357] I do not accept Dr. Nettleton’s evidence in this regard. In my view, Dr. Nettleton’s conclusions are not supportable. In his first report, Dr. Nettleton failed to account for the fact that Rogers uses half-rate voice coders that essentially double Rogers’ capacity. Dr. Nettleton addressed this in his Reply Report. However, in his Reply Report, Dr. Nettleton identified 300 half-rate congested cells in Toronto. Dr. Nettleton agreed when testifying that he had made a mistake in his capacity analysis, and that only 33 half-rate cells were congested.

[358] Dr. Ziegler undertook a detailed congestion analysis which I accept. Dr. Ziegler demonstrated that in September 2010, of the 33 individually half-rate congested cells, virtually all were co-located with 1900 MHz Rogers’ cell sites. These cell sites were not congested. Rogers’ network automatically transfers calls to an uncongested co-located or adjacent cell site when a cell site is at capacity.

[359] Dr. Nettleton also suggested that Rogers’ 2G network was aging, and that as a result Rogers was dismantling it. I do not accept Dr. Nettleton’s evidence in this regard. Instead, I accept the evidence of Mr. Berner that the Rogers 2G network was being demoted as a result of the normal course of Rogers’ business. Rogers was gradually moving traffic to its third-generation or “3G” network.

[360] Dr. Nettleton also suggested that Rogers’ network was experiencing co-channel interference or radio interference from adjacent cell sites. Dr. Nettleton agreed on cross-examination, however, that a properly designed network will minimize co-channel interference. He conceded that this was a basic principle in the design of cellular systems. I attach no weight to this aspect of Dr. Nettleton’s evidence.

[361] I have elsewhere discussed seamless call transitioning or hard and soft handoffs. It is clear that the hard handoff results in actual dropped calls.

[362] I am satisfied that Rogers’ network had the technical advantages that the respondents claimed that it had in the fewer dropped calls claim. These advantages, however, do not relieve the respondents of testing the comparative fewer dropped calls claim. The technological advantages are, however, capable of confirming the adequacy and propriety of a test that appears to substantiate the fewer dropped calls claim.

Were the Rogers drive tests conducted too early after the launch of Wind Mobile and Public Mobile?

[363] The applicant suggested that one of the drive tests was conducted immediately after Wind Mobile had launched, and that this was too soon to permit a meaningful comparison. Specifically, Rogers tested Wind Mobile in Vancouver from June 16-23, 2010. Wind Mobile launched in Vancouver on June 3, 2010.

[364] I do not accept this criticism. Wind Mobile was offering wireless services to the public from and after June 3, 2010. Rogers was under no obligation to wait before testing the wireless service that Wind Mobile was offering to the public.

[365] The idea that Wind Mobile’s service would have improved over time, and that a later drive test would reflect that improvement does not change the results of the drive tests that were in fact conducted, and whether they provide for a time an adequate and proper basis for the fewer dropped calls claim.

[366] The applicant also argued that the fewer dropped calls claim became misleading because Rogers’ advantage, if it had one, changed over time. The applicant used Vancouver as an example.

[367] As indicated, Rogers tested against Wind Mobile in Vancouver in the period June 16-23, 2010. It then tested against Wind Mobile in Vancouver in the period August 10, 2010, to September 3, 2010. During the June drive test, Chatr experienced 6 dropped calls, while Wind Mobile experienced 13 drop calls. During the August/September drive test, Chatr had eight dropped calls, while Wind Mobile experienced seven dropped calls. A third test was conducted in Vancouver during the period of October 1-14, 2010. During the October drive test, Chatr experienced six dropped calls, while Wind Mobile had nine dropped calls.

[368] I have concluded elsewhere that Rogers’ decision to filter out hard handoffs after August 9, 2010, resulted in these drive test results understating Wind Mobile’s and Public Mobile’s dropped calls.

[369] It is the applicant’s position that things changed between June and September, and therefore the fewer dropped calls claim had become misleading with the passage of time. In short, it was the applicant’s position that the circumstances were changing, and therefore the advertising had to change. I agree in principle, however whether these ads were misleading is a more precise question.

[370] In the June 2010 drive test, Wind Mobile experienced slightly more than two times as many dropped calls as Chatr. In the October drive test, Wind Mobile had one and one half times as many dropped calls as Chatr. When I consider all three Vancouver drive tests, I am not satisfied that they demonstrate any comparative change between Wind Mobile and Chatr in the periods of June 16-23, 2010, and October 1-14, 2010.

[371] Such a conclusion is not inconsistent with statements made by representatives of the complainants. For example, Mr. Anthony Lacavera, Wind Mobile’s chairman, said on September 13, 2011, “if there was a knock against us in the beginning it was [the quality of] our networks but the gap between us and the big guys is quickly going away.” The events that concern us occurred in the period August to December 2010. It is clear that Mr. Lacavera thought that there was a gap between Wind Mobile and “the big guys” in September 2011, although it was also his view that the gap at that time was narrowing. Accordingly, there must have been a gap between Wind Mobile and “the big guys” during the period we are concerned. There is no reason why Mr. Lacavera would make a statement acknowledging the network superiority of competitors unless his information was that it was true. Mr. Lacavera’s statement tends to confirm Rogers’ interpretation of its 2010 drive test results against Wind Mobile.

[372] The applicant criticizes the fact that the drive testing conducted September 15-19, 2010, which tested Public Mobile in Montréal, was methodologically unsound because it was an expedited drive test. Specifically, the Public Mobile Montréal drive test was conducted over 4 days for 24 hours each day. Dr. Ziegler testified that the expedited drive test could not by itself be used as a basis for an unqualified comparison between Rogers and Public Mobile, and I accept his evidence in that regard.

[373] I am satisfied that the expedited Montréal drive test was not an adequate and proper test of the fewer dropped calls claim. Additionally, it is clear that Chatr launched in Montréal on September 16, 2010, and that these drive tests could not have substantiated the fewer dropped calls claim made at that time.

[374] There was an expedited drive test that tested Wind Mobile in Toronto from September 26, 2010, to October 2, 2010. This test could not, by itself, be used as a basis for an unqualified comparison between the Rogers and Wind Mobile networks in Toronto. However, this drive test was in addition to a normal drive test conducted August 20, 2010, to September 8, 2010, that compared those two networks in Toronto.

Conclusion concerning adequate and proper testing

[375] It is obvious that on July 28, 2010, when Rogers began making the fewer dropped calls representation on its website, in social media, through public relations channels and on product packaging, Rogers had only conducted drive tests against Wind Mobile in Vancouver, Toronto and Ottawa. However, as of July 28, 2010, Wind Mobile and Chatr offered services in Calgary and Edmonton. Rogers did not conduct tests in either of these markets prior to July 28, 2010.

[376] The idea that comparative performance claims had to be adequately and properly tested was well known to the respondents. Specifically, the advertising agency retained to promote Chatr asked in a November 6, 2009, document: “How do we support our claims?”

[377] Rogers began its extensive advertising campaign on August 9, 2010. By this time it had conducted a drive test in Calgary, but it had lost its 2G network benchmark drive test results.

[378] I accept the respondents’ submission that drive testing is capable of adequately and properly testing the fewer dropped calls claim.

[379] I am satisfied that the Rogers drive testing with which we are concerned adequately and properly tested the fewer dropped calls claim when those drive tests were conducted prior to the claim being made.

[380] I am satisfied that the respondents failed to conduct an adequate and proper test in Calgary and Edmonton prior to July 28, 2010, when they began making the fewer dropped calls claim.

[381] The drive test conducted in Calgary on August 6, 2010, is not an adequate and proper test because the results were lost and are therefore not known and cannot be verified.

[382] No adequate and proper test against Public Mobile was conducted in Montréal prior to the respondents making the fewer dropped calls claim at the time of Chatr’s launch on September 16, 2010.

[383] No adequate and proper test against Public Mobile was conducted in Toronto prior to July 28, 2010, when Chatr began making the fewer dropped calls claim in Toronto.

[384] I attach no significance to the fact that Rogers did not test against Videotron in Montréal before September 16, 2010, because I have concluded elsewhere in these reasons that a credulous and technically inexperienced wireless services consumer in Québec would not have considered Videotron a new wireless carrier.

Filtering out hard handoffs

[385] The evidence was that prior to August 9, 2010, Rogers’ drive test results included dropped calls due to hard handoffs. Rogers’ drive test results for Montréal from September 15-19, 2010, included dropped calls due to hard handoffs as well.

[386] Mr. Berner, Rogers’ Chief Technology Officer, decided that he wanted to look at the drive test results with and without the hard handoffs. As a result, calls originating in the Wind Mobile, Public Mobile, Mobilicity and Videotron coverage zones or footprints that terminated outside those zones were removed from their dropped call totals.

[387] The applicant submits that when using drive test results to compare networks, the respondents’ results should be those with hard handoffs removed.

[388] The applicant relies in part on the fact that Applied Communication Sciences (a.k.a. Telcordia Technologies) filtered out of its drive test audit results calls concluding outside a new wireless carrier’s coverage area. Dr. Ziegler’s concern was that if vehicles were driving in and out of the new carrier’s coverage area, there would not be a proper comparison. While I agree with Dr. Ziegler’s expressed concern, I do not agree that there was evidence that Rogers’ drive test vehicles were inappropriately driving in and out of new carriers’ coverage zones. The evidence of Michael Tiplady is to the contrary.

[389] Telcordia was performing a third-party evaluation of Rogers’ use of quality measurements procedures, selected drive test measurements, data collection, processing and reporting procedures to compare Rogers’ wireless voice and data services with those of other carriers. Performance of this exercise was obviously not hindered by the systematic removal of hard handoffs and the disclosure of that fact to Telcordia. Finally, both sets of drive test results were available to Applied Communication Sciences.

[390] Dr. Nettleton, in his expert report dated June 14, 2012, stated that filtering out hard handoffs was necessary to avoid “an artificial increase in dropped calls that does not reflect how the service is intended to be used by its subscribers.”

[391] I do not accept this aspect of Dr. Nettleton’s opinion. Some subscribers of Wind Mobile and Public Mobile will leave their coverage area while engaged in a call, their signal strength will degrade and eventually the Wind Mobile or Public Mobile network will drop the call. Wind Mobile and Public Mobile may not have intended that customers use the service in this way, but it is foreseeable that this type of dropped call would occur. Wind Mobile negotiated a roaming agreement with Rogers to allow customers to use their phones outside the Wind coverage zones.

[392] In somewhat of an about-face, Dr. Nettleton agreed on cross-examination that a fair comparison of the rates at issue in these proceedings would appropriately include hard handoff dropped calls.

[393] Mr. Michael Tiplady testified that he would not have filtered out hard handoffs when comparing the networks using drive test data because this filtering was inconsistent with the customer’s experience. Mr. Tiplady testified that, in reviewing Rogers’ drive testing, saw no evidence of oversampling at coverage area borders.

[394] I prefer Mr. Tiplady’s approach, although I view the matter somewhat differently.

[395] The fewer dropped calls claim stated that one reason Chatr had fewer dropped calls was because Chatr offered a seamless Canadian network, and therefore there was no need to switch to other networks when “zipping in and out of your Chatr zone.” The comparative nature of the fewer dropped calls claim invites consideration of calls dropped when Wind Mobile and Public Mobile customers are “zipping in and out” of their Wind Mobile and Public Mobile zones. Accordingly, filtering out such calls is not helpful for purposes of this Application.

[396] In addition, this Application carries serious reputational risks, as well as a significant administrative monetary penalty should it succeed. Accordingly, the claim should be somewhat strictly construed. The court should try to avoid altering genuine test results when trying to determine whether the representation is false or misleading.

[397] I am satisfied therefore that Rogers’ drive test results after August 9, 2010, understated the difference between Rogers dropped call rate and the dropped call rates of Wind Mobile and Public Mobile during the drive tests because dropped calls due to hard handoffs were filtered out of the drive test results. This does not apply to the Montréal results for September 15-19, 2010, that included dropped calls resulting from hard handoffs.

[398] Mr. Berner testified that, if dropped calls attributed to hard handoffs are added back into the results for drive tests conducted after August 9, 2010, the respondents’ network had fewer dropped calls than Wind Mobile and Public Mobile in every drive test conducted between June 16, 2010, and December 15, 2010. I accept his evidence in this regard. While the applicant challenged whether certain differences in dropped call rates were statistically significant, the mathematics of the exercise were not challenged.

[399] At the risk of belaboring the obvious, I have not referred to Videotron because, elsewhere in these reasons, I determined that Videotron would not be viewed by a credulous and technically inexperienced wireless services consumer in the Province of Québec as a new wireless carrier. I have not referred to Mobilicity because, elsewhere in these reasons, I have drawn an adverse inference concerning Mobilicity’s dropped call rate during the relevant period. This inference is based on Mobilicity’s refusal to cooperate with the Competition Bureau in this proceeding.

Are the drive test results statistically significant?

[400] The applicant also maintains that Rogers’ drive test results do not show a statistically significant difference between Rogers’ wireless network and the networks of the new wireless carriers. It is the applicant’s position that, even if the court considers drive testing an adequate and proper test in principle, it is not sufficient for the court to look at raw drive test dropped call rates and determine that Chatr had the lower rate. It is submitted that the court must also determine whether the differences in dropped call rates are statistically significant.

[401] We are dealing with dropped calls in circumstances where there was no price differential among Chatr, Public Mobile and Wind Mobile services. There was also no evidence suggesting that changing wireless carriers meant the loss of one’s phone number.

[402] I am satisfied that a credulous and technically inexperienced wireless services consumer would not analyze the problem from a statistical perspective. I am satisfied that such a consumer would not want an important call dropped, and would be influenced in his or her choice of a wireless carrier by the idea that one wireless carrier dropped fewer calls than another, regardless of the statistical significance of the difference. To put the matter differently, if price and cell number are not issues, why choose more dropped calls?

[403] Despite my view that no difference in dropped call rate is sufficiently small to be insignificant or immaterial, I propose to consider the dispute in the evidence about the statistical significance of the differences in dropped call rates of Chatr, Wind Mobile and Public Mobile.

[404] The applicant called Dr. Christian Dippon to testify in part on the statistical significance issue. Dr. Dippon is an economist. He is a Vice-President of National Economic Research Associates, which is a firm of economists. He specializes in the economics and business of telecommunications and other high-tech industries. Dr. Dippon holds a PhD in economics from Curtin University in Perth, Australia. Dr. Dippon has been qualified as an expert many times in the past by courts in the United States and Singapore.

[405] The respondents entered evidence from 16 drive tests. Dr. Dippon considered these drive test results without filtering out hard handoffs. These drive tests were performed in Vancouver, Calgary, Edmonton, Toronto and Montréal. Dr. Dippon used these tests to do hypothesis-testing.

[406] Dr. Ennis was called by the respondents. He was qualified in part to give expert opinion evidence on statistics, and in particular the statistical significance of the Rogers drive test results. Dr. Ennis testified that in hypothesis-testing, there are two hypotheses. A null hypothesis is considered true until proven false, while an alternative hypothesis contradicts the null hypothesis and is only accepted when there is sufficient statistical evidence. The null hypothesis is the hypothesis that the experimenter needs to reject in order to support the alternative hypothesis. The alternative hypothesis is the hypothesis that the experimenter wishes to establish.

[407] Dr. Dippon used as his null hypothesis the proposition that Rogers had statistically the same amount of dropped calls as the new wireless carriers. He used as the alternative hypothesis the proposition that Rogers did not have the same amount of dropped calls as the new wireless carriers. Dr. Dippon worked to a confidence level of 95 per cent, which meant that he wanted only a 5 per cent chance that the drive test was a chance comparison.

[408] Dr. Dippon concluded, after considering these 16 drive test results, that on 8 occasions, the drive test data accepted the null hypothesis, while the drive test data rejected the null hypothesis on 8 occasions.

[409] On the occasions where the drive test data accepted the null hypothesis, Dr. Dippon concluded that Rogers’ sampled dropped call rate was not sufficiently lower than the sampled dropped call rate of the new carriers to permit the conclusion that Rogers had fewer dropped calls.

[410] Although not explicitly stated, Dr. Dippon’s conclusion with respect to the eight sets of drive test data which rejected the null hypothesis must have been that Rogers’ sampled dropped call rate was sufficiently lower than the sampled drop call rate of the new carriers to permit the conclusion that Rogers’ dropped call rate was not the same as the new wireless carriers.

[411] Dr. Dippon did not explain what his conclusions would have been if he had chosen a confidence level of less than 95 per cent. Dr. Dippon offered no evidence concerning the confidence level that would equate to rejecting the null hypothesis on a balance of probabilities.

[412] As indicated earlier, eight sets of drive test data rejected the null hypothesis in. Dr. Dippon’s analysis, and therefore must have rejected the null hypothesis using Dr. Dippon’s confidence level of 95 per cent.

[413] Dr. Ennis has two doctorate degrees, one of which is in mathematical and statistical psychology. Dr. Ennis has published on statistical significance and statistical equivalents. Dr. Ennis also employed hypothesis-testing. Dr. Ennis chose as his null hypothesis the conclusion that Chatr’s dropped call rate is equal to the dropped call rate of the new wireless carriers. His alternative hypothesis was that Chatr’s dropped call rate was superior to the new wireless carriers’ dropped call rates. Dr. Ennis tested these hypotheses using different statistical tools than those used by Dr. Dippon.

[414] Dr. Ennis testified that his review of the Rogers drive test results led him to the conclusion that those results are statistically valid, and establish that Chatr had fewer dropped calls than both Public Mobile and Wind Mobile during the relevant period. Once again I decline to refer to Mobilicity and Videotron.

[415] It was also Dr. Ennis’ opinion that Chatr’s dropped call rates were significantly better than the new wireless carriers. Dr. Ennis’ confidence level in his results was 95 per cent.

[416] Dr. Ennis also created confidence interval charts. Dr. Ennis first calculated each carrier’s mean dropped call rate. Next, Dr. Ennis calculated the 95 per cent confidence interval for each of Chatr and the new wireless carriers’ mean dropped call rates. A 95 per cent confidence interval means that one can be 95 per cent confident that the carrier’s true mean dropped call rate falls within that interval. Dr. Ennis produced a graphic illustration of the confidence intervals for the mean dropped call rates of Chatr and the new wireless carriers. He concluded that this exercise established that Chatr had statistically significant fewer dropped calls than each of the new wireless carriers during the period with which we are concerned.

[417] Dr. Ennis also performed a similar exercise with something he called the “call success rates” of Chatr and the new wireless carriers. This calculation measured calls that did not fail and were not dropped during drive testing. Dr. Ennis calculated mean successful call rates for Chatr and each of the new wireless carriers. Once again Dr. Ennis calculated 95 per cent confidence intervals for these mean successful call rates.

[418] After performing these two exercises, Dr. Ennis concluded that both demonstrated the statistically significant superiority of Chatr in respect of dropped calls and successful calls during the period with which we are concerned.

[419] Dr. Ennis testified that these exercises quantified the degree to which Chatr’s mean dropped call rate and mean success rate were superior to the new wireless carriers during the period with which we are concerned.

[420] The second test performed by Dr. Ennis was the Wilcoxon Sign Test. This test assigns a “+” where a drive test recorded that Chatr had a lower dropped call rate than the new wireless carriers. The test assigns a “-” where the drive test recorded that Chatr had a higher dropped call rate. Chatr had a lower dropped call rate than the new wireless carriers in 15 out of 16 drive tests. Dr. Ennis then calculated the odds of Chatr having a lower dropped call rate in 15 out of 16 drive tests as a result of mere chance, and calculated that the likelihood of this happening by chance was less than 0.03 per cent.

[421] Dr. Dippon criticized the fact that in some of his testing, Dr. Ennis aggregated drive test results for the new wireless carriers across the cities in which they operated. The two exercises of Dr. Ennis to which I referred dealt with the drive test results on a disaggregated basis.

[422] Dr. Dippon made no attempt to attack the accuracy or legitimacy of Dr. Ennis’ confidence interval calculations. Dr. Dippon did not refer to these confidence interval charts in his initial or reply reports.

[423] I prefer the evidence of Dr. Ennis. Dr. Ennis has a Doctor of Science degree in Mathematical and Statistical Psychology. He taught statistical quality control at the University of Guelph. He has experience designing and analyzing test data to determine whether tests support claims made in advertisements. He has provided advice on a pro bono basis to the National Advertising Division of the Better Business Bureau Division, which conducts proceedings to resolve advertising claim disputes in the United States. Finally, he has published in the area of statistics.

[424] I find Dr. Ennis’ dropped call rate and success rate calculations logically compelling and un-assailed.

[425] Finally, although not necessary for resolving a dispute concerning statistical analyses, but helpful when considering what constitutes a significant difference in dropped call rates for purposes of this Application, Public Mobile, in an email to the Competition Bureau dated September 24, 2010, stated that a differential in dropped call rates as small as 10 per cent was significant.

[426] Dr. Dippon and Dr. Ennis both used the 95 per cent confidence level standard in their analyses. As a result, I have not considered the appropriateness of that confidence level in deciding to accept the evidence of Dr. Ennis that Chatr’s dropped call rate was superior to the new wireless carriers. However, I do not wish to leave this question without commenting that I am not persuaded that, in deciding whether the respondents have discharged the burden of proving that their fewer dropped calls claim was based upon an adequate and proper testing, a 95 per cent confidence level is consistent with a balance of probabilities standard of proof. The level of confidence required in the result of the test before it can be considered adequate and proper must be consistent with that standard of proof.

How long are the drive test results valid?

[427] The benchmark drive test results were collected and filed as Tab 14 of Exhibit 37A. These test results indicate that consistent with Mr. Berner’s evidence, Rogers engaged in ongoing benchmark drive testing.

[428] Full market drive tests occurred in Vancouver in June, August to September and October, 2010. There were partial market drive tests in Vancouver in November 2010.

[429] Full market drive tests occurred in Calgary in September and December, 2010. There were no partial market drive tests in Calgary during the relevant period.

[430] Full market drive tests occurred in Edmonton in August and September, 2010. There were no partial market drive tests in Edmonton during the relevant period.

[431] Full market drive tests occurred in Toronto in June, August to September, September to October and November, 2010. No partial drive tests were conducted in Toronto. Indoor walk testing took place in Toronto in November to December, 2010.

[432] Full market drive tests occurred in Ottawa in July and November, 2010. Indoor walk testing took place in Ottawa in December 2010.

[433] Full market drive tests occurred in Montréal in September 2010. Partial market drive tests occurred in Montréal in October 2010. Three partial market drive tests occurred in different parts of Montréal in November 2010.

[434] It was Mr. Berner’s evidence that the deployment of a wireless network is an ongoing iterative process. This means benchmark drive testing must be ongoing. I do not wish to imply that benchmark drive testing should be continuous. Nevertheless, the environment can change and benchmark drive testing must continue to occur to ensure that performance claims are always adequately and properly tested.

[435] Dr. Ziegler testified it was clear that Wind Mobile and Public Mobile operators were building out their networks, and that as a result he would expect changes at least every two months.

[436] Garrick Tiplady testified that removing the fewer dropped calls claim from the market started in October 2010. He testified that television ads, radio spots and print ads can be changed quickly; however, third-party distribution took longer because the respondents did not control the third-party distributors. It was his estimate that, depending on the medium, it would take from 2-6 weeks to remove the fewer dropped calls claim from the market.

[437] The respondents forwarded a timeline to the Competition Bureau that indicated that the fewer dropped calls claim would be showing in television and radio ads until October 11, in digital online ads until November 1, in mini posters until November 8, in brochures until November 11, in third-party retail flyers until November 14, on handset packaging until November 30 and in third-party retailer in-store magazines until November 30, 2010.

[438] Accepting these timelines, as well as Dr. Ziegler’s suggestion that two months is about as long as drive test results could be considered current, I am satisfied that the drive tests conducted by the respondents were sufficiently contemporaneous with the fewer dropped calls claim with which we are concerned.

Conclusions concerning hard handoffs, statistical significance and timing of the drive tests

[439] I am satisfied that the Rogers drive test results with which we are concerned should be considered without filtering out hard handoffs.

[440] I am satisfied that the drive tests conducted by the respondents were sufficiently contemporaneous with the fewer dropped calls claim with which we are concerned.

[441] I do not accept the applicant’s submission that the Rogers drive testing results support a finding that the fewer dropped calls claim is either false or misleading.

[442] I am satisfied that the Rogers drive testing results are an adequate and proper basis for subsequent claims by Chatr that its network will drop fewer calls than the networks of the new wireless carriers.

[443] I am also satisfied that the Rogers drive testing results that postdate the comparative fewer dropped calls claim are not an adequate and proper test for those claims because s. 74.01(1)(b) has been interpreted as requiring that the adequate and proper testing take place before the performance claim is made.

[444] I am satisfied that the Rogers drive testing results demonstrate that the Rogers 2G network, in a statistically significant way, dropped fewer calls during the relevant period than the networks of Wind Mobile and Public Mobile.

Indoor dropped call rates

[445] The applicant points out that networks may perform differently outdoors than they do indoors. The evidence established that the majority of wireless calls are made indoors. Drive testing is outdoor testing. It is the applicant’s position that a claim concerning indoor wireless communications should have been qualified or not made at all.

[446] The applicant submits the fewer dropped calls claim conveyed the general impression that it applied to indoor calls. Having reviewed the ads in question, I agree that the ads with which we are concerned gave the impression to the credulous and technically inexperienced wireless services consumer that the fewer dropped calls claim applied to both indoor and outdoor calls. The applicant maintains that in giving that impression, the fewer dropped calls claim is misleading because Rogers did not conduct tests specifically comparing indoor dropped call rates prior to publicly making the fewer dropped calls claim.

[447] Mr. Michael Tiplady testified that in his experience, the level of radio signal inside a building, although attenuated as it passes through the structure, will generally be in proportion to the level outside. It was his opinion that if one operator had better results than another outdoors, that operator would most certainly have better results indoors at that location.

[448] Nextgen Innovation Labs LLC (“NIL”) was retained by Rogers to carry out an independent comparative in-building benchmarking study. The study was meant to determine failed and successful call rates, as well as other key performance indicators on Rogers’ 2G network and the networks of Wind Mobile, Public Mobile and others.

[449] The NIL indoor walk testing occurred in Ottawa and Toronto in November and December, 2010. It occurred in Montréal in February and March, 2011.

[450] None of this testing was conducted prior to the launch of Chatr.

[451] Mr. Sushil Chawla, a witness called by the respondents, was qualified to give opinion evidence on comparative in-building and walk testing of wireless network performance, including the testing done for the respondents. Mr. Chawla is Vice President-Innovative Engineering of NIL.

[452] The evidence established that in 2010, indoor testing emerged as a necessary adjunct to drive testing. Mr. Chawla testified that NIL had only begun this type of indoor walk testing in early 2010. He also testified that he was not aware of any other company that offered comparable indoor testing at that time. Michael Tiplady testified that the indoor testing offered by NIL was likely the first of its kind.

[453] The technology to conduct indoor walk testing was not commercially available prior to July 28, 2010, the date of Chatr’s launch.

[454] The words adequate and proper have been held to be synonymous with sufficient and appropriate. Traditional or scientific testing is not required. Courts have applied a flexible and contextual analysis when assessing whether a representation is based on an adequate and proper test: see Imperial Brush Co., at para. 122; R.v Big Mac Investments Ltd. (1988), 1988 CanLII 7291 (MB QB), 24 C. P. R. (3d) 39, at p. 45, [1988] M.J. No. 586 (Man. Q.B.).

[455] The evidence established that Rogers had an extensive indoor network in 2010. Mr. Berner testified that Rogers had invested tens of millions of dollars in purchasing, installing and maintaining a network of transmitters, signal repeaters and other such devices in buildings and underground structures to improve coverage. Mr. Berner also testified that for substantial buildings, Rogers deployed an in-building distributed antenna system to transmit signals throughout the building.

[456] Transmitters, signal repeaters and other such devices are not tests but they are capable of confirming an assertion that Rogers’ superior outdoor performance, adequately and properly tested by drive tests, was duplicated indoors in the same geographic area. Of course, such confirmation is not possible until drive testing has occurred, because until that time there are no test results from which to extrapolate.

[457] The indoor walk testing results are not capable of being an adequate and proper test of the fewer dropped calls claim because the testing occurred after the performance claims had been made.

[458] The indoor walk testing results are capable of supporting an inference that the 2010 drive test results in Toronto, Ottawa and Montréal adequately and properly tested both outdoor and indoor dropped call performance.

[459] In addition, the evidence is that Wind Mobile and Public Mobile were constantly working to improve their networks. Therefore, any difference in indoor dropped call rates favoring the respondents, and measured in December 2010 or February to March, 2011, was likely to be less than it would have been between July 28 and November 30, 2010. No one suggested that the Wind Mobile or Public Mobile networks worsened over time.

[460] The indoor walk testing results are helpful in deciding whether the respondents’ fewer dropped call claim in Ottawa in reference to Wind Mobile was false or misleading. Dr. Nettleton, who was called to give expert evidence by the applicant, testified that the performance of Wind Mobile and Public Mobile at the time of the NIL walk testing was likely better than it was earlier in 2010.

[461] I am satisfied that Rogers made use of indoor walk testing as soon as it was commercially available.

[462] Dr. Nettleton testified that Chatr had superior dropped call rates to Wind Mobile and Public Mobile on those indoor walk tests. I am satisfied that the indoor walk testing results indicated that Chatr had better in-building dropped call rates than Wind Mobile in Toronto and Ottawa, and better in-building dropped call rates than Public Mobile in Toronto and Montréal.

[463] The applicant urged caution with respect to the NIL study. The applicant pointed out that the Toronto study was organized and designed within a few days. The applicant also took the position that NIL did not conform to its methodological criteria.

[464] The applicant also points out that Dr. Ennis did not statistically analyze the NIL results.

[465] It is also clear that NIL used a Blackberry to test Rogers’ 2G network in circumstances where Chatr did not offer a Blackberry for sale during the relevant period.

[466] One specific criticism concerns the choice of indoor sites. Prior to retaining NIL, Rogers had conducted its own informal indoor walk testing. NIL indicated that it chose its indoor sites using Google maps. A comparison shows that the sites used by Rogers in its own indoor testing and the sites chosen by NIL for its indoor testing were substantially similar and, in some cases, the sites were listed by both Rogers and NIL in the same order.

[467] Dr. Nettleton, called as an expert by the applicant, offered the opinion that the walk tests were well executed.

[468] I am satisfied that Rogers shared with NIL the locations that it informally tested, and that these locations in Toronto were adopted by NIL. This affects the weight to be given to the indoor testing, because one of the requirements of the indoor walk testing methodology is that the indoor sites be selected randomly. At the same time, a review of the sites indicates that the testing was done in the major indoor locations in Toronto.

[469] The applicant asserts this demonstrates that the NIL indoor walk testing was not independent of the respondents. I do not draw this conclusion. I am satisfied that a shortcut was taken in choosing the locations. I am also satisfied that the appropriate indoor locations in Toronto were tested using well-executed indoor walk tests.

Conclusion concerning indoor walk tests

[470] I am satisfied that the NIL indoor walk tests indicate that Rogers’ 2G or GSM network had better dropped call rates than Wind Mobile and Public Mobile in Toronto, Ottawa and Montréal when the indoor walk testing was conducted in December 2010 and early 2011.

[471] The indoor tests were not conducted prior to the fewer dropped calls claim and therefore are not an adequate and proper test of that claim. They do confirm its accuracy with respect to indoor calls at the time of the indoor tests. Because I am satisfied that the networks of Wind Mobile and Public Mobile improved with the passage of time, I am satisfied that the indoor walk tests also confirm that the fewer dropped calls claim was accurate indoors in Toronto, Ottawa and Montréal during the relevant time period.

[472] I do not accept the applicant’s contention that the fewer dropped calls claim was misleading because it gave the impression that the claim was true indoors as well as outdoors.

[473] The indoor walk tests cannot be an adequate and proper test within the meaning of s. 74.01(1)(b) because those tests were conducted after the fewer dropped calls claim was published.

Is s. 74.01(1)(b) of the Competition Act inconsistent with the provisions of the Charter?

[474] The applicant accepts that s. 74.01(1)(b) of the Competition Act infringes s. 2(b) of the Charter.

[475] The applicant does not concede that s. 74.01(1)(b) infringes s. 11 of the. Charter.

Section 1 and s. 2(b) of the Charter

[476] As a result of the applicant’s concession, the only issue to be decided with respect to the infringement of s. 2(b) is whether s. 74.01(1)(b) is a demonstrably justifiable and reasonable limit on the freedom of expression guaranteed by s. 2(b) Charter. The applicant bears the burden of proof concerning this issue.

Does s. 74.01(1)(b) have a pressing and substantial objective?

[477] Sections 74.01(1)(a) and (b) are part of a scheme of protections against false or misleading advertising.

[478] False or misleading claims made intentionally or recklessly are addressed in s. 74.01(1)(a), as well as s. 52, of the Competition Act.

[479] Section 74.01(1)(b) protects against false or misleading performance claims made in the absence of prior adequate and proper testing. These claims may occur because the provider of the good or service is careless about the performance claim, or because the provider of the good or service overconfidently believes that the performance claim is true and therefore has not tested the claim before making it.

[480] The specific aim of s. 74.01(1)(b) is contained in the section itself, namely the prohibition of performance claims in the absence of prior adequate and proper testing. This specific purpose occurs in the context of the purpose of the Competition Act set out in s. 1.1. Section 1.1 provides that the purpose of the Competition Act is as follows:

[T]o maintain and encourage competition in Canada in order to promote the efficiency and adaptability of the Canadian economy…in order to ensure that small and medium-sized enterprises have an equitable opportunity to participate in the Canadian economy and in order to provide consumers with competitive prices and product choices.

[481] Professor Kenneth Corts, a witness called by the applicant, was qualified as an expert to give opinion evidence on the subject of economics, competition policy, industrial organization economics and business strategy. He discussed the effect of false or misleading performance claims upon the consumer.

[482] Professor Corts explained that the consumer who takes false claims at face value may very well, before discovering that the claim is grossly exaggerated or outright false, misallocate resources by mistakenly purchasing the good or service, by mistakenly buying too much of the product or service or by mistakenly paying too high a price for it. The consumer will, as a result, divert resources from other products that he or she would have been better off buying.

[483] Professor Corts also said that there is harm to competing firms. One type of harm is direct in the sense that consumers divert their demand away from truthful firms providing a higher quality product.

[484] Professor Corts testified that a skeptical consumer will be harmed and will misallocate resources, but not to the same degree as a more naïve consumer. More skeptical consumers also lose confidence in advertising claims in general, which makes it harder for legitimate firms to communicate with them.

[485] In the longer run it becomes very hard for truthful firms to credibly convey the quality of their products, and to be rewarded for producing such products. One consequence of permitting false or misleading claims is that legitimate firms find it more difficult to survive.

[486] Dr. J. Howard Beales III, a witness called by the respondents, was qualified as an expert to give opinion evidence concerning the United States Federal Trade Commission’s (“FTC”) consumer protection regulation and enforcement. Dr. Beales testified that he had been involved with the FTC for over 25 years, and that during that period he had held a variety of senior positions.

[487] Dr. Beales testified that truthful information in the marketplace promotes market efficiency. It leads to lower prices for consumers. It leads to more product innovation. According to Dr. Beales, “[G]etting truthful information out there is the goal of both the prohibition on deceptive claims and a lot of what the FTC tries to do.”

[488] Professor Michael Pearce, a witness called by the respondents, was qualified as an expert to give opinion evidence on marketing to consumers, including the wireless industry in Canada. He agreed that false or misleading representations are harmful to competition, consumers and competitive firms.

[489] Parliament is not required to provide scientific proof based on concrete evidence of the problem that it seeks to address. If the social science evidence relating the harm to Parliament’s measures is inconclusive or conflicting, the court may rely on a reasoned apprehension of that harm. In Thomson Newspapers Co. v. Canada, 1998 CanLII 829 (SCC), [1998] 1 S.C.R. 877, evidence concerning the influence of polls on voters’ choices was uncertain, nevertheless a majority of the Supreme Court of Canada concluded that the possible influence of polls on voters’ choices was a legitimate harm that Parliament could seek to remedy, and thus was a pressing and substantial objective: see also Harper v. Canada, 2004 SCC 33, [2004] 1 S.C.R. 827, at paras. 77-78.

[490] No one suggested that the publication of false or misleading claims was a benefit.

[491] I am satisfied that the protection of consumers, competitive firms and competition from the harmful effects of false or misleading performance claims is the ultimate objective to which s. 74.01(1)(b) is directed. I am satisfied that it is a pressing and substantial objective.

The rational connection between s. 74.01(1)(b) and the protection of consumers, competitive firms and competition from the harmful effects of false or misleading performance claims

[492] It seems reasonable, and almost intuitive, to suppose that prohibiting the advertising of untested claims will reduce the publication of false or misleading claims and their attendant harmful effects.

[493] It seems reasonable to suppose that it will, for the most part, be impossible to adequately and properly substantiate a false claim.

[494] It is possible that a claim can be adequately and properly substantiated and later turn out to be false due to the availability of more accurate testing. The Competition Act addresses this possibility. It provides that in such a situation, the only remedy available to the applicant is an order that the false representation cease. No administrative monetary penalty can be imposed.

[495] The FTC introduced a substantiation policy in the United States in the mid-1970s. Two academic papers were introduced into evidence that considered the effect of the introduction of the policy on advertising claims. The papers were published in peer-reviewed journals. Both papers concluded that the introduction of a substantiation requirement resulted in an increase in the credibility of advertising. The John Healey and Harold Kassarjian paper, published in 1983, concluded that “[o]n overview it appears that advertisers were more conscientious about claims being made after being asked to provide substantiation.”

[496] In Canada, it has been held in Alberta v. Hutterian Brethren of Wilson Colony, 2009 SCC 37, [2009] 2 S.C.R. 567, at para. 48, that to establish a rational connection, “[t]he government must show that it is reasonable to suppose that the limit may further the goal, not that it will do so.”

[497] The Supreme Court of Canada has stressed the need for deference when considering the rational connection test. Specifically, in Canada (Attorney General) v. JTI-Macdonald Corp., 2007 SCC 30, [2007] 2 S.C.R. 610, at para. 41, the court stated the following:

Deference may be appropriate in assessing whether the requirement of rational connection is made out. Effective answers to complex social problems… may not be simple or evident. There may be room for debate about what will work and what will not, and the outcome may not be scientifically measurable. Parliament’s decision as to what means to adopt should be accorded considerable deference in such cases.

[498] Section 74.01(1)(a), which prohibits false claims, will not deter a firm that overconfidently believes that a false performance claim about its product is true. However, s. 74.01(1)(b) will prevent the overconfident firm from mistakenly making a false performance claim because it will require testing of the claim before it can be made.

[499] If the Competition Bureau was confronted with a performance claim that it believed to be false, it could demand the testing upon which the claim was based. In the absence of such testing, the Bureau could move to prevent the claim from being made. This would not be possible if only s. 74.01(1)(a) was available. If the only recourse was s. 74.01(1)(a), the Competition Bureau, in order to obtain an injunction, would require evidence proving that the claim was likely false.

[500] I am satisfied that there is a rational connection between s. 74.01(1)(b) and the protection of consumers, competitive firms and competition from the harmful effects of false or misleading performance claims.

Does s. 74.01(1)(b) interfere as little as possible with the right to freedom of expression?

[501] This case concerns the fewer dropped calls claim. There are three significant possibilities: the claim is true; the claim is false; and the applicant cannot prove the claim is false, while the respondents cannot prove the claim is true.

The claim is true

[502] Section 74.01(1)(b) of the Competition Act interferes with the freedom to express the true claim by first requiring substantiation. If the claim is tested properly, the testing will likely suggest that the claim is true, and the claim can be made publicly.

[503] Section 74.01(1)(b) can also interfere with the expression of this claim despite the fact that it is true. This could occur in circumstances where the cost of testing the claim appears to exceed the likely increase in revenues to be gained by publicizing the claim. Such a situation implies that the market for the product or service is either small or relatively unprofitable.

The claim is false

[504] Section 74.01(1)(b) interferes with the freedom to express the false claim by first requiring substantiation. The applicant is not required to demonstrate in a prima facie way that the claim is false before taking steps to prevent its continued publication.

[505] No one suggested that it was in the public interest to permit the public expression of false claims.

[506] Section 74.01(1)(a) of the Competition Act already prohibits the expression of false claims. Accordingly, s. 74.01(1)(b) does not further interfere with the freedom to express a false claim because such a freedom never existed.

The applicant cannot prove the claim is false and the respondents cannot prove the claim is true (the uncertain claim)

[507] Section 74.01(1)(b) prohibits the publication of the uncertain claim unless it is substantiated.

[508] The respondents urge that the uncertain claim be permitted to enter the marketplace until the applicant can demonstrate that it is false. The respondents argue that this is less impairing of freedom of expression than s. 74.01(1)(b).

[509] In putting this position forward, the respondents are urging a policy choice that is different than the one chosen by Parliament.

[510] The respondents’ policy choice is less impairing of freedom of expression because it forces the marketplace to tolerate the risk that the uncertain claim is false. Parliament chose not to tolerate that risk by insisting that the uncertain claim be substantiated before it is made.

[511] Parliament decided not to permit the uncertain claim to enter the marketplace because it might be false. The respondents urge the court to permit the uncertain claim to enter the market place because it might be true.

[512] Professor Corts pointed out that if the law only contains a false claim penalty, a firm will reason that its exposure to that penalty is related to the probability of enforcement and whether they think the claim is false. The firm that is overconfident about the truth of the performance claim will discount a false claims penalty dramatically because it does not believe the claim is false. Such a firm would not discount a substantiation requirement or the penalty for the lack of substantiation because they know that they are subject to that penalty whether the untested claim is true or false.

[513] In RJR-MacDonald v. Canada, 1995 CanLII 64 (SCC), [1995] 3 S.C.R. 199, at para. 160, the Supreme Court of Canada made the following statement:

The impairment must be “minimal”, that is, the law must be carefully tailored so that rights are impaired no more than necessary. The tailoring process seldom admits of perfection and the courts must accord some leeway to the legislator. If the law falls within a range of reasonable alternatives, the courts will not find it overbroad merely because they can conceive of an alternative which might better tailor objective to infringement…

[514] Similarly, the choice of a reasonable policy alternative from a range of reasonable policy alternatives is a matter in which the courts must accord some leeway to the legislator.

[515] The minimal impairment test under s. 1 of the Charter should not be used to force Parliament to adopt the policy decision that the marketplace will be better off with a higher tolerance for false performance claims.

[516] Section 74.01(1)(b) applies only to performance claims. In the United States, the FTC substantiation policy applies to “objective claims.” The only claims exempted from the FTC substantiation requirement are subjective or immaterial claims. For example, the claim that Rogers used low frequency spectrum is an objective claim for which substantiation would be required in the United States but not in Canada. I refer to this in order to demonstrate that Parliament has narrowed the scope of s. 74.01(1)(b). This is relevant when applying the minimal impairment test.

[517] I recognize that s. 74.01(1)(b) is not restricted to performance claims that are “material,” but rather applies to all performance claims, whereas the FTC regulatory regime focuses on material claims. However, this is not a differentiating characteristic because the evidence established that the FTC presumes performance claims to be material. Specifically the FTC presumes that performance claims might affect a consumer’s decision in relation to the product. I agree with this presumption. It is impossible to believe that a performance claim would be immaterial to a consumer’s decision in relation to a product. Accordingly, I am satisfied that limiting s. 74.01(1)(b) to performance claims incorporates the notion of materiality into the section. I do not view the absence of the word material in s. 74.01(1)(b) as indicative that the section is overbroad.

[518] Evidence was led that established that in the United States, the substantiation of a claim after it has been disseminated may inform the FTC’s decision to commence proceedings. Obviously the applicant has the same discretion in Canada. However, the fact that the applicant, like all applicants, may elect not to proceed, is unhelpful as far as the minimal impairment test is concerned.

[519] The courts have applied a flexible and contextual analysis when assessing whether a representation is based on an adequate and proper test.

[520] The applicant has suggested that in order for a test to be proper and adequate, testing must be done to a 95 per cent confidence level. I have not accepted that submission. The burden of proof is upon the respondents to prove adequate and proper testing on a balance of probabilities. No higher standard of proof can logically be required to prove a fact relevant to whether that standard of proof has been met.

[521] The applicant has suggested that the notion of a test requires elimination of the possibility that the result relied upon was a chance occurrence. This is simply consistent with the requirement that a claim be tested. I take the same view of the applicant’s suggestion that the sample tested must be a representative one. These suggested requirements of s. 74.01(1)(b) do not additionally impair freedom of expression beyond the impairment flowing from the use of the phrase “an adequate and proper test thereof.”

[522] As stated elsewhere, the respondents urge that the uncertain claim be permitted to enter the marketplace until the applicant can demonstrate that it is false. While this may be less impairing, it does not address Parliament’s conclusion that the harm resulting from false uncertain claims is so significant that it is better to prohibit all uncertain claims. Parliament is entitled to a measure of deference and I accept its conclusion in this regard.

[523] When I consider all of this, I come to the conclusion that s. 74.01(1)(b) only minimally impairs the fundamental freedom guaranteed by s. 2(b) of the Charter.

Do the benefits of s. 74.01(1)(b) outweigh its deleterious effects?

[524] At the risk of stating the obvious, a few preliminary observations are necessary. Section 74.01(1)(b) does not affect a truthful performance claim that can be tested in advance. Prohibiting a false claim from entering the marketplace is not a deleterious effect. Section 74.01(1)(b) requires substantiation of performance claims only. The reference to performance claims incorporates the notion of materiality because performance claims will always affect a consumer’s decision with respect to a product or service.

[525] One deleterious effect of s. 74.01(1)(b) is that a truthful performance claim that cannot be proven true, or cannot be substantiated prior to publication, will be withheld from consumers. Related to this effect is the fact that post-publication substantiation is not a complete answer to an allegation of reviewable conduct.

[526] A second proposed deleterious effect is that a performance claim may be ambiguous. As a result, the provider may undertake a number of tests to cover all possible interpretations of the performance claim and pass those costs on to the consumer. Alternatively the provider may guess at the interpretation and face prosecution if the guess is wrong. Finally, the provider might decide to drop the claim.

[527] Professor Moorthy offered the opinion that if the provider chooses to perform all possible tests, this will delay the dissemination of the truthful information and increase the cost of the good or service.

[528] Obviously, guessing at the interpretation exposes the provider to the risk of proceedings and dropping the claim deprives the consumer of truthful information.

[529] Section 74.01(1)(b) is not ambiguous. Language in a performance claim, on the other hand, can always be ambiguous and require interpretation. In addition, disputes can arise about whether a claim is a performance claim. This problem cannot be avoided. This is not a deleterious effect associated with s. 74.01(1)(b); it is a deleterious effect associated with language itself.

[530] One benefit of s. 74.01(1)(b) is that a performance claim that cannot be proven true or false prior to publication, but which is in fact false, will be withheld from the marketplace.

[531] Professor Moorthy expressed the opinion that by restricting the provision of information, the Competition Act makes it difficult for those who provide goods and services to make people aware of their product. In his opinion, it could hinder the ability of those persons to disseminate the truth about the strength of their product.

[532] However, it is also true that when a performance claim that cannot be proven in advance to be true or false, but which turns out to be false, is permitted to enter the marketplace, a negative effect on consumers’ confidence in advertising will result. The provider of the good or service may be able to more readily convey information but the consumer is likely to be less willing to accept it. Preventing performance claims that cannot be proven in advance to be true or false will, at a minimum, maintain the current level of consumer confidence in advertising claims and presumably make it easier for providers of goods and services to communicate with consumers. I do not accept Professor Moorthy’s opinion in this regard. I prefer the evidence of Dr. Corts.

[533] Dr. Corts testified that in his opinion, lowering the incidence of unsubstantiated claims increases consumer confidence and allows more truthful firms to more credibly and more reliably communicate their information to consumers.

[534] Dr. Beales testified that the FTC believes that an onerous substantiation requirement might deter truthful advertisements.

[535] Section 74.01(1)(b) does not impose an onerous substantiation requirement. The words adequate and proper have been held to be synonymous with sufficient and appropriate. Traditional or scientific testing is not required. I have stated elsewhere in these reasons that I do not accept the applicant’s suggestion that 95 per cent testing certainty is required. Courts have applied a flexible and contextual analysis when assessing whether a representation is based on an adequate and proper test.

[536] As a practical matter, this is not a case in which the respondents were prevented from making a truthful claim because they were unable to substantiate it in advance. The respondents did make the fewer dropped calls claim. The respondents claim that in the case of more than one city, they proved the fewer dropped calls claim in advance. This Application arises because the Competition Bureau has a contrary view. Even if s. 74.01(1)(b) was not in the Competition Act, the respondents would still be in court because the Competition Bureau considers the fewer dropped calls claim to be both false and misleading.

[537] Professor Moorthy noted that due to the Internet, modern day consumers have much more product information available at their fingertips. He pointed out that there are many websites where consumers comment on products, and that there are review sites for products that are very easily accessible. Professor Moorthy expressed the opinion that the Internet has increased market efficiency because consumers have better information when making decisions. It was also his opinion that competitors could use the Internet to dispute comparative performance claims.

[538] Professor Corts was of the opinion that a substantiation requirement was necessary despite the advent of the Internet. He referred to a paper entitled: “Market Transparency via the Internet, A New Challenge for Consumer Policy.” Professor Corts expressed the opinion that the Internet has provided much more information for consumers, but not necessarily better information. Professor Corts noted that the same problems concerning the source of information arise whether the information is disseminated on the Internet or traditionally. He pointed out that consumer sites on the Internet can be quite extreme, and can be manipulated by firms who have people posing as consumers and posting comments.

[539] It is undoubtedly correct that modern consumers have access to more information, and I am satisfied that this means that fewer people will be deceived by false ads because the false claims will be discovered sooner. I am not satisfied, however, that this addresses the loss of confidence in advertising that results when people realize that they have been duped by or exposed to false advertising claims.

[540] As noted earlier, Professor Moorthy suggested that one effect of s. 74.01(1)(b) and the related sections dealing with administrative monetary penalties might be to cause companies to avoid any risk of contravention of the Competition Act by not making even truthful claims, thereby depriving consumers of helpful information.

[541] It was Dr. Corts’ opinion that imposing a penalty for an unsubstantiated claim would not suppress the communication of true information.

[542] Dr. Corts also expressed the opinion that monetary penalties reduce false, misleading and unsubstantiated representations because they raise the cost of making those representations, making such behavior less attractive. It was his opinion that this would also have the effect of making sure that market prices provide appropriate incentives for firms to invest in innovation and new products, and otherwise remain in the market.

[543] When I consider the conflicting social science evidence, as well as the other evidence tendered in this Application, I am satisfied that the benefit from protecting consumers, competitive firms and competition from the harmful effects of false or misleading performance claims outweighs the deleterious effects of preventing a true claim that cannot be tested in advance from entering the marketplace.

[544] Accordingly, I am satisfied by the evidence that s. 74.01(1)(b) of the Competition Act is a demonstrably justified reasonable limit prescribed by law, to which the fundamental freedom described in paragraph 2(b) of the Charter is subject.

Does the $10 million administrative monetary penalty provided for in the Competition Act engage s. 11 of the Charter?

[545] Section 11 of the Charter provides certain enumerated rights for any person “charged with an offence.” The respondents have not received the benefit of all of these rights. Accordingly the question is whether the respondents are “charged with an offence”.

[546] In Regina v. Wigglesworth 1987 CanLII 41 (SCC), [1987] 2 S.C.R. 541, at pp. 558-559, the Supreme Court of Canada decided that matters which fell within the ambit of s. 11 were “criminal and penal matters.” The court also stated more specifically that “criminal and penal matters” meant proceedings that were by their very nature criminal, or when a conviction in respect of the matter could lead to a “true penal consequence.” In that same decision, the court stated in part at p. 561, that a “true penal consequence” attracting protection under s. 11 of the Charter could be a fine that, “by its magnitude would appear to be imposed for the purpose of redressing the wrong done to society at large rather than to the maintenance of internal discipline within the limited sphere of activity.”

[547] This Application does not carry with it the possibility that the respondents would be imprisoned. It was commenced as an Application pursuant to the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, in the Province of Ontario. These proceedings were regulatory in nature. This Application was initiated to further and encourage public confidence in advertising in the context of the Competition Act’s purpose, as set out in s. 1.1 of the Act.

[548] The Competition Act has repeatedly been described as a regulatory statute: see R. v. Wholesale Travel Group, 1991 CanLII 39 (SCC), [1991] 3 S.C.R 154, at pp. 222-223. The legislative history of s. 74.01 makes it clear that the 1999 amendments to the Competition Act, which created the provisions in issue, were designed to remove the regulation of deceptive marketing practices from the realm of criminal law.

[549] When I consider the objectives of the Competition Act and the deceptive marketing practices provisions, the provisions of s. 74.1(4) of the Competition Act describing the purpose of the administrative monetary penalties with which this Application is concerned and the civil Application process leading to the imposition in appropriate cases of administrative monetary penalties, I am satisfied that these proceedings are not by their nature “criminal.”

[550] This Application does carry with it the possibility of an administrative monetary penalty of $10 million on a first finding of reviewable conduct, and $15 million on subsequent findings.

[551] Accordingly, the question is whether such an administrative monetary penalty is a fine “which by its magnitude would appear to be imposed for the purpose of redressing the wrong done to society at large rather than to the maintenance of internal discipline within the limited sphere of activity.”

[552] Professor Corts offered the opinion that an administrative monetary penalty has to be large enough to offset the anticipated gains from making the false, misleading or unsubstantiated representations. Professor Corts was of the view that higher administrative monetary penalties are necessary when dealing with a larger market because a shift in consumer demand in a larger market leads to larger increases in profits.

[553] Professor Corts also considered that part of the incremental profit from false, misleading or unsubstantiated representations is that they induce competing firms to exit the market. This means that the firm making the representations will be more profitable in the long run. Professor Corts offered the opinion that this has to be considered when assessing the appropriate administrative monetary penalty. Professor Corts testified that this was especially true if the competitor firms had undertaken huge investments and were beginning to enter the market; such firms would be trying to pay back some of the capital that they had raised, develop a loyal customer base and establish their brand name. Dr. Corts testified that if demand was inappropriately diverted from them at such a time, they would find it much more difficult to become viable competitors of the offending firm.

[554] Finally, Professor Corts pointed out that firms with more resources will find monetary penalties less deterring because they can withstand the penalty. In this regard, the evidence established that at the time of the Advanced Wireless Spectrum auction, the wireless sector of the Canadian telecommunications industry generated approximately $12.7 billion. At that time, Rogers, Bell Canada and TELUS dominated the wireless market with 94 per cent of the subscribers and 95 per cent of the revenues.

[555] The Competition Act is quite specific concerning the purpose of the administrative monetary penalty. Section 74.1(4) provides that the terms of any order made against a person under paragraph (1)(b), (c) or (d) shall be determined with a view to promoting conduct by that person that is in conformity with the Deceptive Marketing Practices Part of the Act, and not with a view to punishment. This section of the Competition Act clearly informs any Application of the principle of proportionality at the penalty-fixing stage of proceedings under s. 74.01(1)(b). Section 74.1(4) also overrides statements made when this Application was launched which suggested that the quantum of the administrative monetary penalty should reflect the “egregious activity” engaged in by the respondents.

[556] A consideration of these factors and the balance of the evidence satisfies me that the administrative monetary penalties provided for in s. 74.1(1)(c) are not “true penal consequences.”

[557] Accordingly, I am satisfied that the $10 million administrative monetary penalty provided for in s. 74.1(1)(c) does not engage s. 11 of the Charter.

Final Conclusions

[558] I am satisfied that it is dangerous, based on the evidence in this Application, to place significant weight on switch generated dropped call rates when determining whether the Chatr fewer dropped calls comparative performance claim was false or misleading.

[559] Because the applicant’s assertion that the fewer dropped calls claim is false is based to a significant degree upon switch generated data, I am not satisfied that the applicant has proven on a balance of probabilities that the respondents’ fewer dropped calls claim was false in Ottawa with respect to Wind Mobile from July 28, 2010, to November 30, 2010. I would have come to a similar conclusion concerning Videotron in Montréal but for the fact that I have concluded elsewhere in these reasons that a credulous and technically inexperienced consumer in the Province of Québec would not have considered Videotron a new wireless carrier.

[560] I am not satisfied due to the applicant’s reliance on switch generated data that the applicant has proven on a balance of probabilities that the respondents’ fewer dropped calls claim was misleading in Calgary, Edmonton and Toronto with respect to Wind Mobile from July 28, 2010, to November 30, 2010.

[561] I am satisfied that had Mobilicity produced the data requested by the applicant, it would have demonstrated that the respondents’ network dropped fewer calls than Mobilicity’s network from July 28, 2010, to November 30, 2010.

[562] I am satisfied that a credulous and technically inexperienced consumer expected that dropped calls would be fewer on the Chatr network, and that he or she would have “no worries about dropped calls” on the Chatr network. I am not satisfied that a credulous and technically inexperienced consumer viewing the Chatr ads expected that the difference between the dropped call experience on the respondents’ network and the dropped call experience on the Wind Mobile or Public Mobile networks would be so pronounced that it would be discernible.

[563] Accordingly, I am not satisfied with the applicant’s assertion that the fewer dropped calls claim is misleading unless there is a discernible difference in dropped call rates among the respondents, Wind Mobile and Public Mobile.

[564] I do not accept the applicant’s contention that the fewer dropped calls claim is misleading because the dropped call rates of Wind Mobile and Chatr in Calgary were, during the relevant period, below what it termed the one per cent threshold for dropped calls.

[565] I do not accept the applicant’s contention that the fewer dropped calls claim was misleading because it gave the impression that the claim was true indoors as well as outdoors. I am satisfied that the networks of Wind Mobile and Public Mobile improved with the passage of time. I am therefore satisfied that the indoor walk test results confirmed that the fewer dropped calls claim was accurate in Toronto, Ottawa and Montréal, both indoors as well as outdoors, from July 28, 2010, to November 30, 2010.

[566] I am satisfied that the Rogers benchmark drive testing results provided an adequate and proper basis for the fewer dropped calls claim made subsequent to that drive testing.

[567] I am satisfied that the Rogers drive testing in fact adequately and properly tested the fewer dropped calls claim made subsequent to that drive testing.

[568] I do not accept the applicant’s submission that the Rogers drive testing results support a finding that the fewer dropped calls claim is either false or misleading.

[569] I am satisfied that drive tests conducted after the fewer dropped calls claim was made are helpful in deciding whether the claim was true, false or misleading when it was made.

[570] I am satisfied by the evidence that, during the time frame with which we are concerned, Videotron was an established brand in the Province of Québec.

[571] I am satisfied that a credulous and technically inexperienced consumer of unlimited talk and text wireless services in Québec would not view Videotron as captured by the references to “les nouveaux opérateurs sans-fil” in the contentious ads.

[572] I am satisfied that the general impression given by the fewer dropped calls claim is that the advantages of fewer dropped calls and a more reliable network were available to consumers in each Chatr zone (appels illimités sans souci dans ta zone chatr) (emphasis added). I am also satisfied that the literal meaning of the contentious claims is consistent with this general impression.

[573] I am satisfied by the evidence that s. 74.01(1)(b) of the Competition Act is a demonstrably justified reasonable limit prescribed by law, to which the fundamental freedom described in paragraph 2(b) of the Charter is subject.

[574] The $10 million administrative monetary penalty provided for in s. 74.1(1)(c) does not engage s. 11 of the Charter.

[575] I am satisfied that the respondents failed to conduct an adequate and proper test in Calgary and Edmonton prior to making the fewer dropped calls claim at the time of Chatr’s launch in those cities on July 28, 2010, and therefore engaged in reviewable conduct contrary to s. 74.01(1)(b) of the Competition Act.

[576] I am satisfied that the respondents failed to conduct an adequate and proper test in Toronto against Public Mobile prior making the fewer dropped calls claim at the time of Chatr’s launch in Toronto on July 28, 2010, and thereby engaged in reviewable conduct contrary to s. 74.01(1)(b) of the Competition Act.

[577] I am satisfied that the respondents failed to conduct an adequate and proper test in Montréal against Public Mobile prior to making the fewer dropped calls claim at the time of Chatr’s launch in Montréal on September 16, 2010, and thereby engaged in reviewable conduct contrary to s. 74.01(1)(b) of the Competition Act.

[578] Pursuant to s. 137(2) of the Courts of Justice Act, R.S.O. 1990 c. C. 43, information previously ruled confidential which was referred to during the hearing of the Application will remain confidential.

Marrocco J.

Released: August 19, 2013

COURT FILE NO.: CV-10-8993-00 CL

DATE: 20130819

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

THE COMMISSIONER OF COMPETITION

Applicant

– and –

CHATR WIRELESS INC. AND ROGERS COMMUNICATIONS INC.

Respondents

REASONS FOR JUDGMENT

Marrocco J

Released: August 19, 2013