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Anti-Spam law survives Charter challenge in the Federal Court of Appeal

June 19, 2020

Appeal court determines that CASL is intra vires federal jurisdiction and impact on expression is justified under the Charter

A unanimous panel of the Federal Court of Appeal has upheld the constitutionality of Canada’s Anti-Spam Law (CASL), which was attacked on a number of fronts by CompuFinder. CompuFinder had been found to be in violation of CASL in 2017, and unsuccessfully challenged the legislation before the CRTC. On appeal to the Federal Court of Appeal, that challenge failed.

The decision in 3510395 Canada Inc. v. Canada (Attorney General) addresses division of power objections and a range of Charter questions.

With respect to constitutional division of powers, CompuFinder argued that CASL was ultra vires the parliament of Canada as an unlawful intrusion into provincial jurisdiction. The government countered that it was a legitimate exercise of the general trade and commerce power in the Constitution.

CompuFinder’s attack was focused on the regulation of commercial electronic messages, which is one part of the regulated activity within CASL. The Federal Court of Appeal referred to the more general objects of CASL:

[93]  There is, of course, no purpose clause for CASL’s CEM scheme in particular. However, the purpose clause for CASL as a whole, found at section 3 of the Act, is useful in discerning the purpose of the impugned scheme. Section 3 states that CASL’s purpose is “to promote the efficiency and adaptability of the Canadian economy by regulating commercial conduct that discourages reliance on electronic means of carrying out commercial activities”. The Act’s title echoes this purpose. The reasons why Parliament sought to regulate commercial conduct of this description through CASL are enumerated in paragraphs 3(a) to (d), which speak to the evils the legislation aims to address. More specifically, the commercial conduct regulated by CASL is targeted because that conduct:

(a)   impairs the availability, reliability, efficiency and optimal use of electronic means to carry out commercial activities;

(b)  imposes additional costs on businesses and consumers;

(c)  compromises privacy and the security of confidential information; and

(d)  undermines the confidence of Canadians in the use of electronic means of communication to carry out their commercial activities in Canada and abroad.

It is because certain commercial activities can give rise to these undesirable consequences that impact the economy that Parliament undertook to regulate those activities through CASL.

To determine its validity under this head of jurisdiction, the Court referred to the five indicia from the General Motors case, the first two of which were admitted by CompuFinder:

[113]  The five indicia of valid general trade and commerce legislation were set out by the Supreme Court in General Motors. They are as follows: (i) the impugned legislation must be part of a regulatory scheme; (ii) the scheme must be monitored by the continuing oversight of a regulatory agency; (iii) the legislation must be concerned with trade as a whole rather than with a particular industry; (iv) the legislation should be of a nature that provinces jointly or severally would be constitutionally incapable of enacting; and (v) the failure to include one or more provinces or localities in a legislative scheme would jeopardize the successful operation of the scheme in other parts of the country (Kirkbi at para. 17 citing General Motors at 662).

The Court distinguished the regulation of commercial electronic messages from the trade in securities, as was the focus of the Securities Act reference:

[122]  The appellant’s analogy between the Securities Act and CASL’s CEM scheme is ill suited in this regard. In the first place, the impugned CEM scheme does not regulate all messaging, but only one specific type—commercial messaging. It furthermore targets only a narrow aspect of this type of messaging, leaving ample room for provincial regulation of CEMs, including in the areas of consumer protection, privacy and marketing mentioned by the appellant. Further still, “messaging”, or, more properly, “commercial messaging”, is not a discrete economic industry in the same way as the trade in securities. E-commerce transcends industries and permeates the economy, meaning that CASL’s CEM scheme regulates a specific aspect of many industries, rather than all aspects of a specific industry, as with the Securities Act. The current inquiry centers on whether that specific aspect falls within the federal domain. The appellant’s strained analogy with the scuttled Securities Act does not support, let alone compel, a negative finding on this question.

The Court then found that the provinces can still regulate in this area (pointing to privacy and consumer protection), the other General Motors indicia were made out. The court particularly highlighted that a single province that failed to regulate in this area could become a haven for spammers, undermining the regulation in other provinces. As a result, the Court determined that CASL is intra vires the general trade and commerce power.

CompuFinder also attacked the legislation as violating freedom of expression under section 2(b) of the Charter. The respondent conceded that section 2(b) was infringed, so the analysis focused on whether it could be upheld under section 1 as a reasonable limitation.

CompuFinder’s first section 1 argument was that the law was too vague to be “prescribed by law”, particularly focusing on the definition of “commercial electronic message” and the other defined terms that are imported into its meaning. The Court dismissed this argument, holding that the “zone of risk” was sufficiently defined. At paragraph 151: “CASL is sufficiently precise to delineate an area or zone of risk, which is all that can be realistically expected and all that is constitutionally required of legislation.”

The Court then found that the objectives of CASL are sufficiently pressing and substantial, noting that – at this stage of the analysis – one should not confuse the objectives with the means chosen to address those objectives.

With respect to the rational connection branch of the analysis, CompuFinder argued that CASL went well beyond truly “harmful spam” and regulated a much larger universe of communications. As a result, there was no longer a rational connection between the objectives of the Act and the Act’s scheme. The Court rejected this argument:

[168]  If the Act’s objective were to prevent only “the most damaging and deceptive forms of spam”, it would be possible to argue that CASL’s central prohibition, even though partial and accompanied by numerous exceptions, is nevertheless overbroad and must fail the rational connection test. However, the Act’s objective is not so narrow. The Act’s objective is to promote the efficiency and adaptability of the Canadian economy by regulating commercial conduct that, inter alia, impairs the efficiency and optimal use of, or undermines Canadians’ confidence in, electronic means of carrying out commercial activities. A wide range of commercial messages, far beyond what could be considered “the most damaging and deceptive forms of spam”, could controvert these objectives and therefore be rationally and not arbitrarily captured by the prohibition in subsection 6(1).

On the minimal impairment argument, much of the analysis involved a comparison between CASL and the Australian anti-spam law. Canada’s law is “opt-in” while Australia’s is “opt-out”. The Court determined that both statutes address essentially the same categories of messages and was ultimately persuaded that opt-out would permit harmful messages to land in inboxes. Ultimately, the Court found that the Canadian model was one of a reasonable range of options for Parliament to adopt.

The final branch of the section 1 analysis was also found in favour of upholding the legislation. The Court rejected CompuFinder’s argument that CASL has substantial deleterious effects on forms of expression other than commercial expression and that the impact on commercial expression is mitigated by numerous exceptions and prescribed method of compliance. Expression was regulated, not prohibited. The Court noted, citing Irwin Toy that commercial expression “is not as jealously guarded” as other forms of expression. Regulation and restriction of commercial expression can be more easily justified than with other types of expression, such as political expression, which lies closer to the core of s. 2(b) values. In conclusion, the Court found that the benefits outweighed the deleterious effects on freedom of expression.

CompuFinder also argued that CASL violates section 7 of the Charter which provides particular rights when one is “charged with an offence”. The Court dismissed this and concluded that CASL is regulatory and not penal in nature. Similarly, the scheme of “administrative monetary penalties” is regulatory and does not engage section 7. Arguments put forward by CompuFinder related to sections 8 and 11 of the Charter were dismissed.

It is not known whether CompuFinder intends to appeal to the Supreme Court of Canada.

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