May 2019 Charity & NFP Law Update
On April 23, 2019, the Canadian Radio-television and Telecommunications Commission released its Compliance and Enforcement Decision CRTC 2019-111, which held that: 1) a business and its subsidiaries, nCrowd, had violated paragraphs 6(1)(a) and 6(2)(c) of Canada’s Anti-Spam Legislation (“CASL”); 2) its President and CEO at that time, Mr. Brian Conley, was liable for such violations under section 31; and 3) the administrative monetary penalty (“AMP”) of $100,000 issued against Mr. Conley was justified. Paragraph 6(1)(a) of CASL prohibits a business from “sending or causing or permitting to be sent to an electronic address a commercial electronic message” unless the recipient has given consent to receive such commercial electronic messages (“CEMs”), while paragraph 6(2)(c) requires a CEM to “set out an unsubscribe mechanism” pursuant to the requirements set out in section 11 of CASL.
In finding that nCrowd had violated paragraph 6(1)(a), the Commission found that nCrowd had failed to demonstrate that proper consent had been obtained with respect to an email list containing 1,928,015 addresses as: it did not provide a valid date on which consent was allegedly obtained; there were generic addresses on the list where it was unlikely that those address users would have consented to a “daily deals company such as nCrowd”; and it did not provide the steps it had taken to obtain consent to send CEMs to the emails on its list. Further, the Commission found that nCrowd violated paragraph 6(2)(c), as the CEMs lacked a proper unsubscribe mechanism, and noted that there were some complaints indicating that nCrowd had not complied with some of the requirements set out in CASL: the unsubscribe links in the CEMs did not function, the unsubscribe requests were not given effect within 10 days of the request being made, and the complainants needed to take further action to effect their requests. nCrowd also did not demonstrate that it had policies or procedures in place with respect to the unsubscribe process.
The Commission found that Mr. Conley, who was the President and CEO of the corporation at the time of the violations, “acquiesced” to the commission of the violations committed by nCrowd and was therefore personally liable as per section 31 of CASL. Since CASL does not provide a definition of “acquiesce”, the Commission defined it “as agreeing to something tacitly, silently, passively, or without protest” based on its ordinary meaning and Canadian jurisprudence. The Commission held that it was not reasonable to believe that Mr. Conley had no knowledge of the violations given that: Mr. Conley had “experience with email distribution platforms (having invented one)”; such platform was an important marketing tool for nCrowd; Mr. Conley was involved in acquiring the email list as a part of nCrowd’s “major acquisition” of another company; and that evidence indicated that Mr. Conley had knowledge of CASL generally.
Lastly, the Commission found that the AMP of $100,000 issued against Mr. Conley was reasonable, taking into consideration factors that are set out in subsection 20(3) of CASL, which include: the purpose of the penalty; nature and scope of the violation; the person’s ability to pay the penalty; and more. Some of the factors cited by the Commission as justification for the amount of AMP included, amongst others: the AMP could promote compliance by Mr. Conley with CASL in future endeavors; the violations were serious; Mr. Conley, who had a net worth exceeding $1 million, was able to pay the amount; and the fact that Mr. Conley had not provided any evidence to support his claim that he was unable to pay the penalty.
This decision serves as a reminder to charities and not-for-profits that emails to donors and supporters should be sent with care, as communications that are CEMs will generally trigger obligations under CASL. Even registered charities, which are generally exempt from the CEM requirements provided that the CEMs are sent with the primary purpose of fundraising, may be caught under CASL if the nature of its communications do not fall within the scope of the CASL exemption. Violations under CASL can trigger not only corporate liability, but directors and officers could also be held personally liable for such violations.