On December 16, 2010, the telemarketing firm Xentel DM Inc. (“Xentel”) made national headlines when the Canadian Radio-Television and Telecommunications Commission (“CRTC”) announced that the company had agreed to pay $500,000 in penalties for telephoning individuals whose names were registered on the CRTC’s National Do Not Call List (“DNCL”). Four days later, the CRTC announced that Bell Canada had agreed to pay a $1.3 million penalty for similar violations. The two sets of penalties were the largest ever paid by Canadian companies for a contravention of the DNCL; indeed, prior to these two substantial penalties, the CRTC had imposed only 25 modest penalties. This recent expansion of enforcement by the CRTC raises obvious concerns for charities and not-for profit corporations that regularly promote their organizations through telemarketing initiatives.
The Unsolicited Telecommunication Rules
The Federal Telecommunications Act gives the CRTC the authority to create a national DNCL, which the CRTC put into force on September 30, 2008. The DNCL is enforced through the CRTC’s Unsolicited Telecommunication Rules (the “Rules”). The Rules state that no company may make a telemarketing telecommunication to a consumer whose number is listed on the national DNCL.
The Rules technically do not apply to telemarketing calls made by or on behalf of a registered charity. Nonetheless, the CRTC requires registered charities to comply with other rules it created in the Rules with similar effects. For example, an exempt charity participating in a telemarketing initiative must still register its business information with the National DNCL (www.LNNTE-DNCL.gc.ca). As part of this registration, the organization must inform the CTRC that it qualifies for an exemption under the Rules. Additionally, an exempt charity is required to maintain its own internal DNCL. The Rules provide that an exempt organization must add a consumer’s name to the organization’s DNCL within 30 days of the date of the consumer’s Do Not Call request.
Following the implementation of the National DNCL, the CRTC was initially criticized by members of Parliament for failing to impose penalties against companies that violated the Rules. Perhaps in response to this criticism, the CRTC recently significantly increased its investigations – by November 2010, there were 102 ongoing investigations of potential violations of the DNCL. Additionally, the CRTC implemented a new enforcement program to address promptly complaints from consumers on the DNCL.
On December 16, 2010, the CRTC announced that the telemarketing firm Xentel agreed to pay a record-breaking $500,000 penalty for contraventions of the DNCL. Xentel was charged with two violations of the Telecommunications Act. First, between June and November 2009, Xentel had made calls to individuals on the DNCL on behalf of organizations that were not registered charities within the meaning of the Act. Some of these companies had also failed to subscribe to the national DNCL. Second, the CRTC found that Xentel had phoned individuals registered on the national DNCL on its own behalf. Since Xentel is not a registered charity, such calls would constitute a further violation of the Telecommunications Act.
Four days later, on December 20, 2010, the CRTC announced that Bell Canada had agreed to pay $1.3 million in penalties. The CRTC found that Bell Canada had employed a third party telemarketing firm that improperly initiated communications to individuals on the DNCL. Additionally, the CRTC found that some of the individuals contacted by the telemarketing firm should have been on Bell’s internal DNCL.
These recent penalties demonstrate that the CRTC is taking an increasingly aggressive role in supervising and disciplining organizations that fail to comply with the Rules. The Xentel case shows that the CRTC will demand large penalties from corporations that the CRTC believes improperly make calls when they do not qualify for the charities exemption. Moreover, the substantial penalty imposed upon Bell Canada demonstrates that the CRTC is prepared to penalize any corporation, large or small, that employs third parties to initiate telecommunications if those third parties violate the Rules.
Based on this recent enforcement history, three key factors must be considered by charities and not-for-profits seeking to avoid liability. First, the organization should ensure that it is in fact a registered charity. Second, even such an exempt organization must register with the National DNCL, and must maintain its own DNCL. Third, the charity must carefully monitor any telemarketing companies used by the organization to make calls, as well as any employees of the organization who make telemarketing calls, to ensure compliance with the Rules.