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THE FEDERAL COURT OF APPEAL UPHOLDS CANADA’S ANTI-SPAM LEGISLATION AS CONSTITUTIONAL

On June 5, 2020, the Federal Court of Appeal (“FCA“) released its decision in 3510395 Canada Inc. v. Attorney General of Canada et al.2020 FCA 103, in which it upheld the constitutionality of Canada’s anti-spam legislation (“CASL“). CASL is the federal law which regulates the way in which businesses may communicate with consumers using electronic means. The decision also clarified the requirements to rely on the business-to-business exemption which allows businesses to avoid the consent and content requirements of CASL in certain circumstances.

The Canadian Radio-Television and Telecommunications Commission (“CRTC“) previously found (in two decisions) that the Appellant, a small business owner which offered professional training courses, committed multiple violations of CASL because it sent commercial electronic messages (“CEMs“) to individuals without their consent and without a functional unsubscribe mechanism. The CRTC ordered the Appellant to pay an administrative monetary penalty (“AMP“) of $200,000, reduced from $1,100,000.

On the first appeal, the Appellant challenged the constitutionality of CASL on the grounds that the legislation is ultra vires Parliament. It also argued that CASL violates sections 2(b), 7, 8, and 11 of the Charter. On the second appeal, with respect to the CRTC’s decision, the Appellant argued that, among other errors, the CRTC erred when it held that the Appellant could not rely on the business-to-business exemption.

The Constitutional Challenge

The FCA held that CASL’s CEM scheme to regulate spam is a valid exercise of Parliament’s power over general trade and commerce affecting Canada as a whole. The FCA was satisfied that the regulation of unsolicited CEMs is a matter essential in the national interest, which transcends provincial interests and is truly national in importance and scope. The scheme’s pith and substance is to regulate the dissemination of unsolicited CEMs in order to guard against threats to Canada’s e-economy.

The Charter Challenges

The FCA found that CASL violates section 2(b) of the Charter because the legislation restricts the ability of businesses to send CEMs. However, it went on to hold that the legislation was justified under section 1 of the Charter. The FCA reasoned CASL is sufficiently precise, has a sufficiently important objective being the protection of the Canadian economy by regulating CEMs, and minimally impairs the protected freedom right. Further, the FCA held that the benefits of this legislation outweigh its detrimental effects on freedom of expression. Commercial expression is not a core value of section 2(b), and CASL’s effects are mitigated by a prescribed mode of compliance and exemptions.

Subsequently, the FCA rejected the Appellant’s position that CASL violates sections 7, 8, and 11 of the Charter. The FCA did not interfere with the CRTC’s determination that the AMP awarded against the Appellant did not constitute a true penal consequence and confirmed that the sanctions imposed did not trigger section 11 protections. Correspondingly, the Appellant had no standing to make a claim under section 7 of the Charter because the Appellant did not face penal proceedings. While the FCA found that section 8 of the Charter was engaged by section 17 of CASL, which can be used to compel the production of documents, the FCA determined that the provisions allowed for reasonable seizure and dismissed the section 8 claim.

The Business-to-Business Exemption

The business-to-business exemption permits CEMs to be sent without meeting the consent and content requirements of CASL between members of organizations where those organizations have a relationship and the CEMs relate to the activities of the recipient organization. The FCA upheld the CRTC’s decision that the Appellant could not rely on this business-to-business exemption because it could not establish the required relationship between it and the other organizations to which it sent CEMs.

In addition, the FCA opined that the evidentiary requirements for establishing a relationship for the purposes of this business-to-business exemption should be more demanding than merely establishing some business dealings. In this instance, the CRTC did not err in determining that evidence of one or two previous transactions is insufficient to establish a relationship. Otherwise, the exemption may expose many more individuals to the potentially harmful conduct that CASL seeks to regulate.

The FCA held that the CRTC did not err in finding (i) the Appellant could not rely on the conspicuous publication exemption, (ii) the Appellant, by merely stating recipients’ job titles, failed to establish its CEMs were relevant to recipients’ functions or duties, and (iii) the inclusion of a second, nonfunctioning unsubscribe mechanism in a CEM violated CASL’s requirements that unsubscribe mechanisms be set out clearly and prominently, and be able to be readily performed.

A Sign to Businesses

This decision confirms the view of the courts that CASL regulates an important aspect of modern commerce and remains valid law. It reminds businesses that they must carefully consider the requirements of CASL to ensure that their organization complies with the Canadian regulatory framework to avoid the significant AMPs that can be imposed.