Chatr marketing claims cannot be justified, Crown says
Published on Wednesday August 08, 2012 Michael Lewis Business Reporter
Rogers Communications Inc. resorted to deceptive marketing as part of its response to new cellphone services in Canada, the Crown alleged Wednesday in a civil trial on charges of false advertising brought against Rogers.
Rogers’ reaction to the upstarts, who emerged after an auction of wireless spectrum, in 2008, was “swift and aggressive,” the prosecution said in opening arguments at the Ontario Superior Court of Justice proceeding in Toronto.
The Crown said it will take the court “into the Rogers boardroom where those representations were crafted,” and demonstrate the Rogers’ marketing claims about the superiority of its Chatr Wireless network cannot be justified.
The reference is to a nation-wide, multi-media Chatr campaign in 2010 that said the discount cell brand, a subsidiary of Rogers, offered a more reliable service than its rivals, including Wind Mobile and Mobilicity.
A version of the campaign said the cellphone and text service “had fewer dropped calls than new wireless carriers,” while a subsequent pitch claimed “no worries” about dropped calls.
Wind Mobile filed a formal complaint with Canada’s Competition Bureau alleging that the assertions were false and misleading. After a two month investigation the enforcement agency brought the civil action against Chatr and Rogers, with the trial expected to conclude in September.
The Competition Bureau in its complaint alleged that Rogers failed to conduct “adequate and proper testing” before making the promotional claim and thus discredited its competitors.
The Bureau demanded an end to the ad campaign, a public corrective notice, restitution to affected customers and a levy of up to $10 million against Rogers, the maximum allowed under 2009 amendments to the Competition Act in so-called administrative monetary penalties.
The ad campaign was pulled within a month of the launch of legal proceedings against Rogers, the Bureau says.
Rogers, in its opening statements to begin Thursday, is expected to argue the dropped call claims were true and accurate at the time they were published.
Rogers says the assertion of fewer dropped calls than new wireless carriers was based on well established scientific principles that relied on such information as the comparative number of cell sites and the quality of underground and indoor reception.
Rogers say its substantiation was adequate and included so-called drive testing (comparative benchmark testing of performance of different wireless networks).
It says the drive testing demonstrated that Chatr had fewer dropped calls in each market where Wind, Public, Mobilicity and Videotron operated. Rogers’ counsel will likely argue that the Bureau’s case turns on “cherry picking” the data for particular cities on particular days rather than the overall data.
Rogers has also challenged the complaint on Constitutional grounds, arguing that two sub-sections of the amended Competition Act should be struck down.
It says administrative penalties under the act for false advertising are so onerous as to amount to a criminal sanction. The Toronto-based wireless, Internet and cable service provider also maintains the act’s requirement that companies make adequate and proper tests of a product’s performance before making advertising claims violates its right to freedom of expression under the Charter.
The presiding judge in the case, Justice Frank Marrocco, is expected to rule on the Constitional arguments at the end of the proceeding.
