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Private Right of Action under CASL coming July 2017

Canada’s Anti-Spam Law came into force on July 1, 2014.  Since then, all eyes have been on the Canadian Radio-television and Telecommunications Commission (CRTC) for decisions concerning CASL violations.  In the cases made public to date, monetary penalties or settlement payments have ranged from $48,000 to $1.1 million.  Canadian and foreign companies have learned some things in the past two years about how CASL applies to their business, and many have taken steps to put in place policies and procedures to avoid violations.

Whatever steps you have taken to date, 2017 will be the time to revisit CASL compliance

On July 1, 2017, the private right of action (PRA) comes into force under CASL.  An individual or organization who is affected by a contravention may litigate to enforce the new private rights directly.  While CASL does not expressly provide for class actions, it is broadly expected that such actions will be launched to permit large numbers of applicants (for example, the recipients of alleged spam) to pursue compensation as a group.

Where the court finds a violation, it may order not only compensation for the applicant’s damages, but also monetary payments up to the following amounts:

  • for sending commercial electronic messages contrary to CASL – $200 per contravention, to a maximum of $1 million for each day that the conduct occurred
  • for altering the transmission data of a commercial electronic message – a maximum of $1 million for each day that the conduct occurred
  • for installing apps or other computer programs contrary to CASL – a maximum of $1 million for each day that the conduct occurred
  • for scraping, generating or otherwise accessing electronic addresses contrary to PIPEDA – a maximum of $1 million for each day that the conduct occurred
  • for sending commercial electronic messages with false or misleading information, including sender, locator or subject matter information, contrary to the Competition Act – $200 per contravention, to a maximum of $1 million for each day that the conduct occurred

When the court sets the amount to be paid, it must consider the purpose of the payment order – which “is to promote compliance…and not to punish”, the nature and scope of the violation, the history of compliance, any financial benefit or compensation from the conduct, ability to pay, and “any other relevant factor”.

CASL also provides for extended liability.  Directors, officers, agents or mandataries of a corporation may be liable if they directed, authorized, assented to or participated in the contravention.  Where an employee’s conduct in the course of his or her employment breaches CASL, the employer may be vicariously liable.

Revisiting CASL

CASL provides that where a person establishes that they exercised due diligence to prevent a violation, they cannot be found to have contravened CASL.  Despite this provision, a number of well-meaning businesses have been found offside CASL’s provisions, have made significant penalty or settlement payments, and in some cases have received negative media coverage for their failure to meet CASL requirements.

In July 2017, the risk exposure will increase.  Now is the time to revisit your CASL compliance.

  1. Discuss with your Board and Senior Management team why you need to revisit CASL in 2017.
  2. Make sure that you have a CASL Compliance Policy and Procedure that covers your operations, and that is easy for employees to understand and use.
  3. Ensure that existing and new employees have access to – and receive appropriate training in – the Policy and Procedure.
  4. Conduct an audit under the Compliance Policy and Procedure, including how consent is obtained and documented; whether unsubscribe requests are fulfilled quickly; whether CASL-compliant message templates are consistently used; how complaints are addressed (etc.).
  5. Consider whether you need to check in with service providers (to send messages or install apps or other computer programs) about their CASL compliance.
  6. Consider whether service provider contracts include the appropriate clauses to address CASL compliance, liability, and indemnification.

See also:

Lessons Learned: E-Learning Company Faces $50K Spam Fine

CRTC Enforcement Advisory – Records to Show Consent

Privacy Law and Anti-Spam – Guidance from the Office of the Privacy Commissioner

Canada’s Anti-Spam Law: Not just for Canadians

CASL Applies to Software January 15 2015

New CASL Compliance and Enforcement Guidelines

 

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Private Right of Action under CASL coming July 2017

Lessons Learned: E-Learning Company Faces $50,000 Spam Fine

The Canadian Radio-television and Telecommunications Commission (CRTC) has issued its first Compliance and Enforcement Decision* under Canada’s Anti-Spam Law (CASL).  The Commission confirmed the staff finding that Blackstone Learning Corp. had committed 9 violations of CASL by sending almost 400,000 emails in 2014 without proper consent.  However, the Commission reduced the administrative monetary penalty originally set in the notice of violation from $640,000 to $50,000.  While it is open to Blackstone to appeal the decision, meaning that we may not have heard the last of this case, the Commission’s decision provides useful commentary on its approach to CASL compliance and enforcement.  The following are lessons learned under two headings: implied consent, and what we will refer to as “sender conduct”.

Email addresses posted online – ripe for the picking as “implied consent”?

Not so fast, cautions the CRTC.  While addresses that have been “conspicuously published” online or otherwise may qualify for implied consent, this “does not provide persons sending commercial electronic messages [CEMs] with a broad licence to contact any electronic address they find online”.  The CASL conditions attached to “conspicuous publication” set a higher standard than that.  As a starting point, the person who receives the email message must have posted his address himself, or authorized it to be posted.  Often, an employer will post contact information including an employee’s email address, which for the purposes of CASL implies that CEMs can be sent IF there is no indication otherwise, and IF the messages are relevant to the person’s business role or function.

As the CRTC points out, if a business chooses to advertise through a third party (our example: an online service provider listing) and includes an employee’s contact information along with the ad, this can be the basis for implied consent to contact the employee in relation either to the ad or to the employee’s role, because the account holder (the employer) caused the publication.  Implied consent stops there:  if the listing service goes on to copy or sell the list of addresses on its own, new senders can no longer count on the “conspicuous publication” implied consent, because the account holder did not authorize any further publication.

Lesson learned:  Implied consent is evaluated on a case-by-case basis.  Under CASL, the onus is on the sender to prove consent.  The CRTC “stress[es] the importance of detailed and effective record-keeping for this reason.”

What is a “reasonable” monetary penalty under the CASL regime?  How important are the sender’s conduct and circumstances?

CRTC staff set out an administrative monetary penalty (AMP) of $640,000 in the notice of violation issued to Blackstone.  Having determined that Blackstone did commit the CASL violations, the Commission considered whether the AMP was reasonable.  CASL sets out a number of factors to be taken into consideration.

  • purpose of the penalty: the Commission stated that the amount must be representative of the violations, and have enough of an impact on a person to promote changes in behavior, in effect a second chance. An amount high enough to put a person out of business would mean he would no longer have that second chance.  An AMP of $640,000 would be too high.
  • nature and scope of the violations:  while almost 400,000 non-compliant messages were sent, were disruptive to the recipients, and prompted at least 60 complaints to the Spam Reporting Centre, the violations took place over only 2 months, and suggests that an AMP of $640,000 would be too high.
  • ability to pay:  based on the evidence, an AMP of $640,000 would significantly exceed Blackstone’s ability to pay.
  • other factors – cooperation and self-correction:  Blackstone’s failure to cooperate with the investigation increased the need for a penalty to ensure future compliance. However, the Commission saw some possibility of “self-correction” going forward, which suggested that a lower AMP would be appropriate.

The Commission decided on the amount of $50,000.  The Commission noted that Blackstone did not have the benefit of more recent CASL guidance which is now available to everyone online.  This should be read as a thinly-veiled direction to others:  the decision cites The Commission’s Guidance on Implied Consent for CASL and also the Department of Industry’s Fightspam information website for businesses and individuals.

Lesson learned:  the Commission expects organizations to do their homework, to cooperate with investigations, and to self-correct when they discover mistakes.

We have been assisting many organizations in Canada and other countries to adapt their practices to comply with CASL.  Let us know if we can help you.

*A number of organizations have been subject to CASL enforcement since the Act came into force in July 2014; some of these cases have not been made public, and others have been publicly available only through brief settlement summaries.  This is the first Commission decision reviewing a Compliance and Enforcement Sector notice of violation.

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Lessons Learned: E-Learning Company Faces $50,000 Spam Fine

CASL compliance undertakings continue to mount

Another company that is well-known to consumers has agreed to enter into a compliance undertaking with the CRTC for alleged CASL violations.  Kellogg Canada Inc. has paid a monetary penalty of $60,000 and undertaken to enter into a compliance program to better address elements such as:

  • written CASL compliance policies and procedures;
  • training programs for employees;
  • tracking CASL complaints and resolution; and
  • monitoring and auditing mechanisms to assess compliance.

Notably, the compliance issues arose from messages that were sent: not only by Kellogg, but also by its third party service providers, and not long after CASL entered into force in July 2014.  This was a time when many companies were early on in the process of familiarizing themselves with the many CASL requirements, and implementing programs to make sure that databases, third party agencies (marketing companies and other service providers) and internal procedures were all in line.

The CRTC’s Notice regarding Kellogg’s 2014 compliance issues comes only a month after the CRTC issued its Enforcement Advisory to businesses and individuals on how to keep records of consent (see our recent blog post here), and less than a year before the Private Right of Action becomes available in Canada under CASL legislation, meaning that the CRTC will not be the only one taking businesses to task for CASL compliance.

CASL compliance undertakings continue to mount

The Ashley Madison Breach: Canada-Australia Report of Investigation and Takeaways for all Organizations

On August 23, 2016, the Office of the Privacy Commissioner of Canada (OPC) released its joint report with the Office of the Australian Information Commissioner (OAIC) regarding its investigation of the 2015 Ashley Madison breach.

The report articulates several takeaways for all organizations. However, if there is one key lesson to be learned, it is that the OPC considers a solid information compliance and governance program to include documented policies and procedures. Organization’s safeguards should be adopted with “due consideration of the risks faced” and with a formal framework in order to ensure its proper management.

The following summarizes the report by the OPC and OAIC including several takeaways for all organizations.

The Breach

As many recall, on June 12 2015, a group identified as ‘The Impact Team’ hacked Avid Life Media, Inc. (ALM), headquartered in Toronto, Canada and operator of Ashley Madison and several other dating websites.

It is believed the intrusion took place over several months, beginning with the compromise of an employee’s valid account credentials and used to understand ALM’s systems until ALM’s information technology team detected unusual behavior on July 12. The next day, ALM computers projected warning notices from The Impact Team stating ALM had been hacked and threatened to expose the personal information of Ashley Madison users unless ALM shut down the website. The Impact Team published its actions and threats to the internet on July 19. The OPC contacted ALM soon after, and ALM voluntarily reported the details of the breach. On August 18 and 20, 2015, after its demands were not met, The Impact Team published information allegedly hacked from ALM of approximately 36 million Ashley Madison users from around the world.

The Personal Information Exposed

The sensitive personal information exposed by The Impact Team fell into three main categories:

  1. Profile information that described the users, including names, physical descriptions, date of births, experiences sought through Ashley Madison, details relating to intimate desires, personal and sexual interests.
  2. Account information such as e-mail addresses, security questions and answers and hashed passwords.
  3. Billing information for users who made purchases on Ashley Madison, including real names, billing addresses and the last four digits of credit cards. (Note: As billing information was stored by ALM’s third party processor, it is strongly believed the third party processor was also hacked by The Impact Team).

The sophisticated and targeted hack made it a challenge to determine the extent of the access gained by The Impact Team. ALM reported to the OPC and OAIC, as well as notified affected individuals, that exposed information could also include photos and communications between users.

Canadian and Australian Joint Investigation

The OPC and OAIC did not focus or report any conclusions with respect to the cause of the breach itself. The report is an assessment of the practices by ALM against its obligations under both the Personal Information Protection and Electronic Documents Act (PIPEDA) and the Australian Privacy Act. The OAIC established an “Australian link” (s.5B(1A) of the Australian Privacy Act)) with the foreign-based ALM as a result of ALM’s targeting of its services to Australians, the collection of personal information of Australian residents and advertising in Australia. The collaboration was made possible by the OPC’s and OAIC’s participation in the Asia-Pacific Economic Cooperation (APEC) Cross-border Privacy Enforcement Arrangement

Report of Findings and Takeaways for all Organizations

  1.  Safeguards

Under both PIPEDA and the Australian Privacy Act, organizations must protect personal information by safeguards appropriate to the sensitivity of the information from loss and unauthorized access, use, disclosure, etc. Both jurisdictions require a similar assessment of the risk of harm to individuals. The Commissioners agreed the key risk for users of Ashley Madison was reputational harm.

Discretion and secrecy in being a member of AshleyMadison.com was a central marketing and legal representation to its users. ALM also stated to the OPC and OAIC that protection of its customer’s confidence was a core element of its business. ALM advertised a series of trust-marks including “Trusted Security Award”, “100% Discreet Service” and “SSL Secure Site” on the front page of AshleyMadison.com. It was later discovered some trust-marks were fabricated. Further, the Terms of Service warned users that security and privacy of information could not be guaranteed, a statement many organizations include in their policies. However, the OPC and OAIC found the qualifier in the Terms of Service did not absolve ALM of its obligations.

The Commissioners found ALM lacked appropriate safeguards considering the sensitivity of the personal information. The safeguards adopted by ALM allegedly did not consider the risks individuals could face as a result of unauthorized access.

Key elements ALM’s safeguards allegedly lacked included:

  • a comprehensive information security program expected of an organization collecting and processing such sensitive personal information.
  • documented information security policies and procedures for managing network permissions including critical gaps in security coverage indicative of the absence of documented policies and practices.
  • an adequate intrusion detection system or prevention system , including a security information and event management system in place, or data loss prevention monitoring
  • adequate training for all staff and senior management

Takeaways regarding safeguards for all organizations

  • Organizations should have documented privacy and security practices as part of their compliance program
  • The sensitivity of the personal information collected must be considered when determining and developing an organization’s information and security program
  • Organizations should conduct regular and documented audits and risk assessments
  • Documenting your privacy and security practices can assist your organization identify gaps
  • Training of all employees, including senior management is part of a functional and robust compliance program.

        2. Indefinite Retention and Paid Deletion of User Accounts

Both PIPEDA and the Australian Privacy Act place require limits on the length of time that personal information may be retained and require organizations take reasonable steps to destroy or de-identify information no longer needed for any purpose.

The investigation highlighted that information of deactivated accounts as well as accounts that have not been used for a prolonged period were retained by ALM indefinitely. Further, at the time of the breach, Ashley Madison provided users with two methods to close an account; a basic de-activation that would allow users to re-activate their accounts in the future should they choose to, and a full deletion for a fee of CAD $19 that would delete all personal information within 48 hours (Note: This fee was not disclosed in ALM’s privacy policy or terms of service). However, it was alleged that ALM did not delete all personal information and retained certain financial information in the event of charge backs for a period of up to 12 months following the purchase of a full deletion. ALM presented statistics to the OPC and OAIC that if any chargebacks were to occur, they would happen within 6 months from the date of purchase. Among those affected by the breach were individuals who purchased the full deletion and likely believed their information was destroyed.

The OPC and OAIC had the following findings regarding retention and deletion:

  • ALM had data that the vast majority of users who deactivated their account reactivated it within 29 days. As such, ALM was unable to justify an indefinite retention period of users who deactivated their accounts. Further, it was not clear to users that information would be retained indefinitely.
  • Accounts that have been inactive for prolonged periods were retained indefinitely. While such account users did not provide an affirmative indication of their intent to no longer use their account, justification to retain the personal information diminishes over an extended period of time. Lack of clear retention limits and inability to justify retaining inactive profiles indefinitely contravened PIPEDA and the Australian Privacy Act.

The OPC and OAIC varied in their conclusions regarding the retention of information of users who purchased the full delete option.

  • Under the Australian Privacy Act, ALM is required to destroy or de-identify personal information once it no longer needs it for any primary purpose (deliver its online dating services) and can only retain data for a secondary purpose (reasonably believes is necessary for charge backs to address the risk of fraud ) for a limited time period. ALM provided sound business and legal reasons to retain the financial data to which the OAIC found ALM provided a reasonable basis to retain the financial information for 12 months.
  • The OPC also found ALM satisfied its retention of financial information to prevent chargebacks for 12 months following a full delete (Note: ALM has reduced the retention period to 6 months since the breach), however the OPC found ALM contravened PIPEDA as a result of photo’s that were retained by error following a full deletion.

The OPC found ALM’s practice of charging a CAD $19 fee for withdrawal of consent and full deletion contravened PIPEDA, as ALM did not disclose the fee at the time of sign up, as well, the OPC is not convinced ALM met the high burden to request such a fee. ALM no longer charges a fee for full deletion.

Takeaways regarding deletion and retention for all organizations

  • While PIPEDA is silent on whether organizations may charge a fee to delete their personal information, the OPC has established a high bar in demonstrating such a fee is reasonable.
  • If a fee were reasonable, it must be clearly disclosed and communicated prior to an individual providing consent.
  • Organizations should document retention policies based on a demonstrable rationale and timeline
  • Organizations must clearly disclose and communicate such retention timelines to individuals
  • Organizations should review and audit their practices to ensure information is being deleted and de-identified accordingly.

         3. Accuracy of Email Addresses

Both PIPEDA and the Australian Privacy Act require organizations to take steps to maintain the quality and accuracy of the personal information they collect and use.

ALM collects e-mail addresses in order to create accounts and send confirmation, support and marketing e-mails. ALM’s practice was not to verify e-mail addresses as manner to enhance privacy. Also, ALM feared it would discourage some individuals from signing up. A subset of e-mail addresses involved in the breach belonged to people who never used Ashley Madison. ALM admitted it was aware that some users do no provide their real e-mail addresses when they register, and as such, was in possession of e-mail addresses that belonged to non-users.

Given the sensitivity of the Ashley Madison service and the possible harm a non-user could face, the OPC and OAIC found ALM did not take reasonable steps to ensure the e-mail addresses were accurate. The Commissioners did not agree with ALM’s argument that making the e-mail address field mandatory, but not verified, is a practice of enhancing the privacy of its users. The Commissioners found such approach creates an unnecessary risk in the lives of non-users in order to provide users with a possibility of denying their association with Ashley Madison. The Commissioners highlighted other options available to ALM to address this issue and emphasized that ALM has a responsibility for all information it collects, including considering the personal information provided from a user that does not belong to them (a user providing an e-mail address that is not theirs to register) and must consider the possible harm of the non-user.

Takeaways regarding accuracy for all organizations

  • The level of accuracy required by organizations is impacted by the foreseeable consequences of inaccuracy
  • Organizations must take reasonable steps to ensure information in their possession is accurate
  • Organizations are responsible for all information in their control, including information that belongs to non-users, non-customers or other third parties who did not directly provide their information to the organization.
  • The requirement to maintain accuracy must include considering the interests of all individuals about whom the information might be collected, including non-users, non-customers and other third parties.

           4. Requirement for transparency and informed consent

PIPEDA states that consent is only valid if it is reasonable to expect the individual would understand the nature, purpose and consequences of the collection, use and disclose of the personal information to which they are consenting. PIPEDA also requires organizations to make their handling practices readily available and understandable to individuals.

The OPC analyzed two issues, first whether the privacy practices of ALM were adequate under PIPEDA, and two, whether the privacy practices at the time individuals were consenting to provide their information to ALM was adequate and not obtained through deception.

Generally, the OPC found that while ALM did provide some information about its security safeguards, account closure options and retention practices, critical elements of their practices that would be material to users’ decision to join Ashley Madison were not as clear as they should be. For example:

  • The fabricated “trusted security award” trust-mark
  • Language in the privacy policy and terms and conditions were not consistent regarding retention of personal information and could confuse a user or lead them to expect that inactivity can alone lead to the deactivation or deletion of their information
  • The required fee for a full deletion was not disclosed until after creating an account
  • Users who requested a full deletion were not informed until after they paid the fee that their information would in fact be retained for an additional 12 months

The OPC found ALM did not meet its obligations under PIPEDA to be open and transparent about its policies and practices of its management of personal information. The OPC further found the lack of clarity regarding certain practices could materially impact a prospective user’s informed consent to join Ashley Madison and allow the collection, use and disclosure of their personal information.

Takeaways regarding transparency for all organizations

  • Organizations must be cautious of the representations they make in their privacy policies and terms and conditions
  • Omission or lack of clarity of material statements may also impact the validity of consent. Organizations should make effort to ensure an individual understands the nature, purpose and consequences of their consent.
  • Organizations privacy policies, terms of service and other disclosure of practices should be clear and inform individuals prior to or at the time of consenting.

The Commissioners noted that ALM was cooperative during the investigation. ALM has entered into a compliance agreement with the OPC and an enforceable undertaking with the OAIC. The events of the hack and the report by the Commissioners provide important lessons for all organizations that collect personal information.

To read details of the compliance agreement with the OPC and the steps Avid Life Media has undertaken to take, click here.

The news release released by the OPC on August 23, 2016 can be found here.

The OPC’s summary of takeaways for all organizations can be found here.

To read the full joint report of the investigation by the OPC and OAIC click here.

The Ashley Madison Breach: Canada-Australia Report of Investigation and Takeaways for all Organizations

Office of the Privacy Commissioner of Canada discusses its investigation against Compu-Finder

The Office of the Privacy Commissioner of Canada (OPC) recently hosted a knowledge session to stakeholders to discuss its recent investigation against Compu-Finder. This was the first investigation by the OPC involving the address harvesting provisions under the Personal Information and Electronic Documents Act (PIPEDA). See our post summarizing the findings and the OPC’s full report here.

While the OPC could not disclose details of its investigation, the OPC provided attendees with information about its interpretation of its investigative powers, its approach to the investigation and tips for organizations.

The Investigation

Unlike its complaint-driven investigations, this investigation was an intelligence-driven case under the address harvesting provisions that were added to PIPEDA by Canada’s Anti-Spam Legislation (CASL). After significant intelligence gathering to meet its reasonable grounds burden, a Commissioner-initiated investigation was commenced allowing the OPC to collect further intelligence from Compu-Finder, affected individuals and third parties, including by affidavits. The OPC highlighted it applied a cross-functional investigation, using numerous departments and tools, including extensive use of the OPC technology LAB.

It is important to note that unlike the Canadian Radio-television and Telecommunications Commission (CRTC), which is the regulator with main responsibility for enforcement of CASL, the OPC must have reasonable grounds to start an investigation that has not been filed by an individual. The CRTC does not have to discharge that burden before commencing an investigation.

Key Takeaways

“The truth is in your records”. The OPC stressed the importance of record keeping. This has become a consistent theme regarding PIPEDA and CASL. (See our post on the CRTC’s guidance here.) The OPC highlighted that record-keeping was a fundamental issue in its investigation. Organizations must be able to meet their due diligence obligations and prove they have consent for the personal information they collect and use, and for every e-mail they send under CASL. The OPC found that Compu-Finder’s records were inadequate or in some cases may have contradicted their position.

Other lessons offered were:

  • Exercise care when crafting responses to the OPC during investigation
  • An established privacy compliance program can greatly assist you in demonstrating accountability
  • Part of due diligence involves following up, double checking and auditing your policies and procedures

Stakeholders undoubtedly appreciated the OPC’s proactive gesture in providing this opportunity to learn more.

Office of the Privacy Commissioner of Canada discusses its investigation against Compu-Finder