Canada set a worldwide precedent against spamming with its new anti-spam law going into effect on July 1, 2014.

The law, known as “Canada’s Anti-Spam Legislation,” or “CASL,” is an aggressive attempt by Canada to stop the flow of unsolicited emails clogging up its nation’s inboxes.

CASL is broader in scope and carries stiffer penalties than any legislation of its kind. Under CASL, the sender of a commercial electronic message, which is defined as any electronic message that has as one of its purposes the encouragement of participation in a commercial activity, must first obtain the consent of the recipient. Consent comes in two forms: implied or express. Implied consent is met only when a consumer has purchased goods or services from the sender within two years of the commercial message being sent (the existing business relationship exception), or if the consumer places an inquiry or application to the business. In all other cases, before an individual or company sends a commercial electronic message, they must obtain the recipient’s express consent. In addition, beyond consent, the individual or company sending a commercial electronic message must also provide their specific contact and identification information and provide a mechanism by which the recipient may withdraw their consent to future commercial communication.

Not only is the scope of the statute broad and the consent requirements onerous to the sender, but the potential penalties for non-compliance are substantial. A single violation of CASL provides for a maximum financial penalty of one million dollars for individuals and ten million dollars for companies. The statute allows for personal liability of corporate officers and directors and employers may be held vicariously liable for the actions of their employees. The statute also provides a vehicle for private causes of action by non-consenting recipients, which will most likely create opportunities for class action law suits. Finally, under CASL it is also an offense to aid, induce, procure, or cause to be procured the doing of any acts contrary to CASL.

There are many differences between CASL and its U.S. counterpart, which is known as the U.S. CAN-SPAM Act (Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003). The main difference is that CAN-SPAM presumes consent, and a commercial message is only prohibited where the recipient provides an express “opt-out” to the sender. The Canadian law is just the opposite, rendering all commercial emails prohibited until consent is given. In addition, the U.S. law is limited to email, whereas CASL more broadly applies to other types of messages in addition to email, such as text message, voicemail and social media messaging. Finally, the financial penalties are far less for violating CAN-SPAM as compared to CASL, with violations of the U.S. law topping out at fourteen thousand dollars.

While consumer advocates have championed this ground breaking Canadian law, CASL has also received substantial criticism. In the weeks leading up to the effective date of the statute, Canadians have been inundated with emails from retailers, manufactures and non-profits rushing to obtain consent, which seems an ironic consequence of a law attempting to reduce electronic spam. Furthermore, critics argue that the scope of the statute is unreasonably broad and complex and therefore will have a greater impact on small businesses because compliance costs may be high. Critics also argue that it will have a detrimental effect on many non-exempt charities that rely on email communication for event participation and fundraising.

What is most important to U.S. lawyers is the extra-territorial reach of the statute. The law applies any time a computer system located in Canada is used to send or access an electronic message. Therefore, it would apply where a U.S. company sends a commercial electronic message to a recipient located in Canada. How the Canadian regulators will actually enforce those powers at this time is unclear. However, Betsy Broder, counsel for international consumer protection at the Federal Trade Commission, said that the agency will help Canada obtain subpoenas and court orders for investigations, but at this time will not enforce Canadian judgments against U.S. spammers.

U.S. lawyers and their clients should assess whether they are subject to CASL and, if so, determine the steps they will take to avoid financial penalties and other legal consequences. Marketing and advertising departments of businesses that will be sending electronic messages to Canada will most likely need to update their practices to ensure compliance. Companies that rely on email marketing may thrive or fail based on opt-in rates from their email lists. To address this concern, some companies have thought of creative strategies to entice consumer consent. For example, Ford Motor Company is offering every Canadian opt-in customer a chance to win a 2015 Ford Mustang.

The effects of the law will not just be felt in Canada but will radiate to any company doing business across our northern border. Accordingly, many American companies and their lawyers have a bit of work to do to ensure that they do not run afoul of this new far-reaching and severe spamming law.

Jeffrey Kowalski is an Associate at Boylan Code LLP, concentrating his practice on general corporate, real estate and municipal matters. For more information, please contact Jeff at (585) 232-5300 or jkowalski@boylancode.com.

 

Download Article PDF