The effort by various countries to enact effective spam laws is proving to be a bit of a joke. To be blunt, many of these laws are so full of loopholes that they have little bite. Canada is about to change this situation with a law loosely referred to as 
the Canada Anti-Spam Law. There are a number of aspects of this new law that are brutal. The one we are going to focus on today is the Canada Anti-Spam Law and personal liability – a vicarious liability provision that makes you personally liable for any debts or judgments rendered under the law even if you incorporate or form a limited liability company.
I’m Not In Canada
Many online businesses are blowing off the threats associated with the new law for a simple reason – they believe their location outside of Canada exempts them from the law. This interpretation is a huge mistake. The “CASL” derives jurisdiction not by focusing on the location of the online business sending messages, but by looking at the location of the individuals receiving the communications.
Given this, ask yourself a few simple questions – How many…
- People on my newsletter mailing list are located in Canada?
- Customers who purchased products or services from me are located in Canada?
- Individuals registering for my site are in Canada?
- People who downloaded my app or software are in Canada?
In most cases, you simply will not know. Sites rarely collect this information. Even when collected, the information is not always accurate since people can sign up through smartphones that give an incorrect geolocation signal. For most sites, the inability to accurately identify the location of individuals on mailing lists means sites should acquire consent prior to sending out communications.
CASL Penalties
The “CASL” provides for administrative monetary penalties, known as “AMPs”. The fines can be as much as a $1,000,000 for infractions by individuals and $10,000,000 for companies.
Per day.
The exact amount is determined by looking at a number of factors including the types and numbers of violations, as well as the revenues of the business. Before you start to feel as though the fines may not be too bad, keep in mind the enforcement agencies have taken the position that the penalty should be sufficient to significantly punish the parties violating the CASL. It is unlikely you will get off with a slap on the wrist.
CASL Vicarious Liability
Now we address an area where the CASL has real teeth. Feel safe behind your LLC or corporate entity? Don’t. The new law contains a vicarious liability provision in which officers and directors of a company can be held personally liable for violations of the CASL including violations by employees. In that many owners of online businesses are actively involved in the running of the company; this vicarious liability will most likely extend to the owner.
How can Canada enforce this law against companies located in other countries? There are numerous methods. The first will involve blocking your site in Canada so that nobody can view it. The court will then issue an injunction to Google, Yahoo, Bing, Facebook, Twitter, etc., to block your site in Canada as well. Depending on the technical situation, this injunction may result in the loss of visibility throughout North America.
At the same time, the enforcement agencies will be working with the FTC and other U.S. agencies to seek redress. The primary enforcement agency, the “CRTC”, has not yet indicated exactly how the process will work. However, the CRTC clearly intends to pursue parties across borders.
a. Private Party Actions
On top of all this, the new anti-spam law allows private parties to start suing online businesses that violate the law in 2017. Most attorneys expect a tsunami of class action lawsuits to be filed against companies with tens of millions in damages awarded. The attorneys in those cases will seek to enforce the judgments in the United States using the Uniform Money Judgments Recognition Act and any other legislation that lends itself to such enforcement.
Can enforcement efforts be fought? Of course. The probability of prevailing is currently unclear, but you should expect to spend hundreds of thousands of dollars in legal fees contesting any award. If successful, you will not recover this money. If the defense is unsuccessful, then you will have paid the attorneys’ fees AND face monetary awards in the millions. A creditor can seize your personal assets to satisfy the judgment.
Painful Bite
The Canada Anti-Spam Law is the first spam law with real teeth. The fact it also applies to social media messages and software downloads makes it a legislative act most online businesses must address in one form or another. Given the personal liability that can arise under the law, one would be taking an enormous risk if doing anything other than complying with CASL. Contact me to get your site or software in order today.
Richard A. Chapo, Esq.
Other CASL Articles of Interest: