Sep 15, 2012 / 7:21 am
The Competition Bureau is suing Canada's three biggest wireless carriers and an industry association for allegedly enabling providers of premium texting services to trick consumers into paying fees they weren't expecting.
The watchdog is seeking $10 million each from Bell, Rogers and Telus and $1 million from the Canadian Wireless Telecommunications Association.
The industry, for its part, says the bureau is going after the wrong target and that its suit could have a chilling effect on e-commerce.
The so-called short-codes enable users to do anything from make charitable donations, to pay for parking or to vote for contestants on "So You Think You Can Dance" from their phones. There are some 700 such codes in use in Canada.
The bureau says premium services, it cites trivia questions and ringtones as examples, can cost up to $10 per transaction and up to $40 for a monthly subscription over and above standard texting plans.
"Our investigation revealed that consumers were under the false impression that certain texts and apps were free," said bureau commissioner Melanie Aitken.
"Unfortunately, in far too many cases, consumers only became aware of unexpected and unauthorized charges on their mobile phone bills."
In addition to the financial penalties, the Competition Bureau also wants full refunds for customers, a stop to advertisements that don't clearly disclose the price of the premium-rate digital content and a "corrective notice" informing the public about any order issued against them.
The suit, which follows a five-month investigation, is before the Ontario Superior Court of Justice. The allegations have yet to be proven in court.
While the case currently names the three companies and the CWTA, bureau spokesman Bryan Parker said the investigation is ongoing. He said the companies named in the suit get a slice of the revenues from the services.
The CWTA said the wireless carriers don't make or control the text messaging services in question, but manage the billing on behalf of third-party creators and operators.
"It's as if any newspaper in Canada could be now sued for misrepresentation of ads that were placed in their newspapers," said Bernard Lord, CEO of the industry association.
While most developers of third-party services are above-board, the industry acknowledges some have behaved badly. The industry approached the Competition Bureau a year ago for guidance on how to crack down on the bad apples and protect consumers.
Telus Corp. at one time considered scrapping short-code services from its network altogether, but in the end decided the benefits outweighed the negatives, company spokesman Shawn Hall said.
He said the Vancouver-based company has a number of safeguards in place, including a "double opt-in" system that forces customers to click twice when signing up for a service.
It also sends out a notice after a customer racks up more than $100 in premium-text charges and forgives charges the first time someone complains about being unfairly charged for text services.
Hall said the Competition Bureau's action doesn't get to the root of the problem, which is that some third-party developers are tricking customers.
"Unfortunately the effect of this action might well be that we have no choice but to stop allowing premium text message services on our network at all," he said.
"These are valuable services that millions of Canadians enjoy."
Rogers spokeswoman Patricia Trott said the company is "disappointed" the Competition Bureau has decided to take legal action.
"We want to do the right thing for customers," she said in an emailed statement. "In 2011, we recognized that some customers might be confused about premium text services and the industry worked proactively to make changes to improve industry-wide standard."
Rogers gives customers the choice to block new premium text programs and offers an itemized list of charges on invoices, she said.
A Bell spokeswoman directed questions to the CWTA.
Carmi Levy, an independent media analyst in London, Ont., said consumers shoulder some of the responsibility.
"Most consumers click feverishly through a sequence of steps so that they can just get it over with and get on with their day," he said.
"We're in such a rush to sign up for something that we don't bother to understand what the implications are. We don't read the fine print."
He said the bureau is going after the three biggest players in order to send a message.
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