Enforcing The Canada Anti-Spam Legislation (CASL) Against U.S. Companies

CASLPerhaps the most frequent question we hear from our clients and readers is whether the Canada Anti-Spam Legislation (“CASL”) can be enforced against U.S. businesses. The short answer is that, depending upon the circumstances, CASL can be enforced not only against U.S. businesses, but their officers, directors and agents as well.

What is Canada’s Anti-Spam Legislation?

CASL was passed into law on December 15, 2010, and became effective on July 1, 2014, despite the strenuous objection of various business interests.  CASL can best be understood as a severe, Canadian hybrid of the U.S. Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 (“CAN-SPAM”) and the Telephone Consumer Protection Act of 1991 (“TCPA”).  CASL prohibits all commercial electronic messages (“CEMs”) that are sent without proper consumer consent, including e-mail, text, social media and image messages.  CASL’s strict “opt-in” framework is much more exacting than CAN-SPAM, which regulates the content and form of e-mail messages alone and does so through use of a much more liberal “opt-out” framework.

Can U.S. Companies and Individuals Be Sued Under CASL?

On its face, CASL states that any individual or business entity that sends or assists in sending a CEM to a consumer in Canada is subject to CASL.  Moreover, any CEM that is sent from, routed to or accessed from a device in Canada is subject to CASL regulations.   To reiterate, corporate officers, directors and agents may be held personally liable if they directed, authorized, acquiesced or participated in the commission of a CASL violation.

What are the Penalties for Failing to Comply with CASL?

CASL provides for either actual damages or statutory damages of $200.00 per each violation, up to a maximum of C$1 million/day for individuals and C$10 million/day for corporate entities.  In determining the final amount of statutory damages to award, courts analyze the personal/corporate history of the violator(s), the financial benefit obtained and the nature and scope of the violation(s).  Considering that marketing campaigns may involve millions of CEMs, potential damages under CASL may escalate very quickly.

What Agencies Can Enforce CASL?

The Canadian Radio-Television and Telecommunications Commission, the Canadian Competition Bureau and the Office of the Privacy Commissioner of Canada (“Enforcement Agencies”) are all empowered to enforce and issue administrative and monetary penalties for violations of CASL.  As set forth below, the Enforcement Agencies can be expected to work closely with the Federal Trade Commission (“FTC”) regarding enforcement.

My Company is Located in the U.S., Are We Subject to CASL under the Safe Web Act?

Yes. For the first three years following its effective date, enforcement will come exclusively through the efforts of the Enforcement Agencies.  Such enforcement will most likely be in the form of injunctions, seizure of assets held in or passing through Canada, as well as joint efforts between the Federal Trade Commission and the Enforcement Agencies.  Of particular note, in December 2012, President Obama signed into law an extension of the Safe Web Act of 2006 (the “Safe Web Act”).  The Safe Web Act allows the FTC to share confidential information in its files with foreign regulators, to conduct investigations and obtain evidence on behalf of its foreign counterparts. It further authorizes foreign staff exchange programs and expenditure on joint projects.  By mid-2012, the FTC had provided evidence in response to sixty-three information sharing requests to seventeen foreign law enforcement agencies in nine countries.  Since Canada is the U.S.’ most active partner in combating fraud, we can expect substantial cooperation between the FTC and the Enforcement Agencies.

Is There a Private Right of Action Under CASL?

CASL will allow individuals to file private and class action lawsuits to collect statutory damages beginning on July 1, 2017.  Because the CASL requirements are so broad, so strict and so easily violated, we expect to see a flood of CASL-specific class action lawsuits.  In theory, Canadian plaintiffs can bring class action lawsuits in the state where the U.S. business is incorporated or has a principal place of business, or even in Canada, under the theory that the U.S. business purposely availed itself of jurisdiction in Canada by sending CEMs into Canada.  Canadian judgments can (assuming proper personal and subject matter jurisdiction existed in the underlying action) generally be enforced in the U.S. pursuant to the Uniform Foreign Money Judgments Recognition Act.

How To Avoid A CASL Lawsuit?

As always, a penny of prevention is worth a pound of cure. If you or your marketing partners utilize CEMs, you are at substantial risk that such messages could be routed to or accessed from a device in Canada, which would thereby subject you to CASL.  Retaining a law firm that is knowledgeable and experienced in the nuances of CASL, Internet practices and online marketing in general, that can point out the red flags that enforcement agencies and class action law firms look for, could save you substantial time and money, as well as allow you to avoid the distraction of dealing with a regulatory inquiry or action in the first place.

This topic should be of interest to any company or individual engaging in online marketing.

If you are interested in learning more about this topic, please refer to our CASL white paper and/or feel free to e-mail us at info@kleinmoynihan.com or call us at (212) 246-0900.

The material contained herein is provided for informational purposes only and is not legal advice, nor is it a substitute for obtaining legal advice from an attorney.  Each situation is unique, and you should not act or rely on any information contained herein without seeking the advice of an experienced attorney.

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David Klein

David Klein is one of the most recognized attorneys in the technology, Internet marketing, sweepstakes, and telecommunications fields. Skilled at counseling clients on a broad range of technology-related matters, David Klein has substantial experience in negotiating and drafting complex licensing, marketing and Internet agreements.

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