Why the Competition Bureau is after the Big 3 mobile companies

September 19, 2012  |  Russ Martin  |  Comments

The Competition Bureau of Canada announced last week that, following a five-month investigation, it is taking legal action against Canada’s three biggest mobile providers—Bell, Rogers and Telus—over claims they misled customers about the costs of premium texting services.

The bureau alleges that mobile providers led some of their subscribers to believe they were signing up for free short code programs such as daily horoscopes and weather reports through the providers’ mobile, online and in-app ads.

Bureau spokesperson Bryan Parker said consumers may have seen these ads and clicked to sign up, believing they were free when, in fact, they are not.

The bureau is seeking $10 million in penalties from each provider and $1 million from the Canadian Wireless Telecommunications Association (CWTA) in addition to full customer refunds.

According to CWTA representative Marc Choma, the two parties first met in 2011 to discuss premium texting services, including short code services like those in question. These services are technically provided by third-party companies. However, the so-called “big three” providers approve each program they offer to subscribers and take a cut of their revenues.

According to the bureau, the three providers retain between 27%-60% of the revenue collected from such programs.

Choma said the bureau and CWTA tried to work together to fix the problem, but were unable to come to an agreement on whether the provider or third-party company is accountable for premium service claims.

“It was always the CWTA’s intention to work with the Competition Bureau to find remedies,” Choma said. “We thought we had made significant progress, yet we were unprepared to accept the demand that wireless carriers accept liability for the actions of third party advertisers.”

Parker said the bureau also would have preferred to negotiate a settlement, but confirmed talks failed to reach an agreement.

Parker said the legal proceedings should not come as a surprise to the providers or the CWTA. “These companies knew the Competition Bureau was investigating them and why,” he said. “Offers to settle were presented, but there were no acceptable agreements that addressed the Commissioner’s concerns.”

Koodo Mobile, a division of Telus, faced criticism for this type of program in the spring when a mentally-disabled teen in B.C. accumulated $8,000 in charges after using a premium-texting program to send messages to someone he believed to be his girlfriend. Koodo eventually corrected the teen’s bill.

Bell and Telus both declined to comment for the article, deferring questions to the CWTA.

Rogers spokesperson Patricia Trott said it lets customers block premium text programs and offers itemized lists of premium text charges on its bills to avoid customer confusion. She also said Rogers won’t approve premium texting programs that have a contest or prize element.

Trott added that Rogers is disappointed the bureau decided to take legal action instead of working with the CWTA to find a solution.

Though the bureau’s investigation is ongoing, it is currently naming only three of Canada’s eight mobile carriers that offer premium texting programs. Smaller and local providers were not named in the proceedings. The bureau’s Parker said he believes that if the major providers make changes on such policies, the rest of the industry will follow suit.

“Given that Bell, Rogers and Telus collectively hold 93% of the Canadian wireless market, we believe that the message will get through to the remaining 7% of the industry,” he said.

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