Ontario law clamps down on phone, Internet contracts

Ontario’s Consumer Protection Act could catch some businesses off-guard and have them scrambling to update IT systems to meet legislative requirements, according to lawyers in the know.

The act will become law on July 30 and is designed to provide consumers an extra layer of protection

for phone and Internet purchases. It will cover any consumer contract over $50 and sellers must provide consumers the opportunity to accept or decline the contract and correct any errors before agreeing to it. If a seller fails to meet its obligations, consumers automatically have the right to cancel the contract within a 30-day period and be reimbursed fully. Consumer complaints against a company will be available as a public record for a minimum of 21 months.

The act could affect any firm that conducts Internet- or phone-based business with Ontarians and for some companies it will mean changes to call centre scripts and shopping cart procedures at online checkouts.

“You have . . . to look at sales process from beginning to end and ensure that you are disclosing the right information prior to the sale . . . and subsequent to the sale,” said Daniel Shap, a partner at Gardiner Roberts in Toronto.

“It poses a challenge to get all this information forward,” added Catherine Bate, an associate at Montreal-based Heenan Blaikie. “It essentially requires that it not only be something that the consumer could have looked at before entering into the agreement, but you’re pretty sure that the consumer would have to have seen it.”

The act could potentially produce a situation not unlike the Personal Information Protection and Electronic Documents Act (PIPEDA), which went into effect on Jan. 1, 2004. Months after that deadline, companies were still getting to grips with its implications. PIPEDA was different in scope from the consumer act – and arguably more comprehensive since it referred to the data a company kept on its employees and customers – but it provided an important lesson on the value of preparedness.

Telecommunications will be one of the industries affected most by the consumer act. They’re known for selling ISP and phone services to consumers, but the Internet and telephone are also the main means through which those sales are conducted.

“Whether it’s cable or wireless phone contracts, (communications companies) have been amongst those paying more attention and talking to us more about the requirements, because they do enter into contracts online with consumers,” said Rob Harper, a senior policy advisor at the Ministry of Consumer and Business Services, the ministry responsible for the act.

A spokesperson from Bell Canada said that Bell is “still in the process of reviewing the impact of the act,” adding that “Bell has always pursued consumer protection practices.”

Another affected industry will be businesses like Dell, which sells hardware and peripherals over the phone and via Internet.

“You can imagine that if you’re selling computers every day by telephone, you’re now in a position where you have to make certain disclosure prior to that sale. You’re going to have to rework your sales process. You have to make sure that certain things go out in the box,” explained Shap.

In an e-mailed response to questions about how the act may affect Dell Canada’s sales process, senior manager corporate communications Wendy Giever said, “Dell’s policy is to meet and exceed the laws in the countries in which we do business.”

Many companies will have already built procedural and contractual obligations into their sales processes, said Bate. But, argues Shap, “a lot of companies have not complied.

“Particularly large companies with large installed user bases are working feverishly to become compliant within the requisite time frame. Many of them have indicated that they’re under great pressure to do that,” he said, adding that SMEs may be playing catch-up as well, since they don’t have the resources of a large corporation at their disposal.

Harper said that the ministry has gone to great lengths to ensure that compliance is as painless as possible. “The new law is the result of a fairly lengthy consultation process,” he said. The Canadian Marketing Association, whose members range from the Bank of Montreal to the Shopping Channel, was one of the bodies that the ministry spoke to.

“Business groups have had input throughout the consultation process,” he said. They have been “generally supportive” because the law will bring Ontario up to code with the rest of provinces as far as Internet-based contracts go. “That’s good for businesses doing business online, because it makes your life easier,” he said. Other aspects of the Ontario law are more stringent than other provinces, however, and there were “some points where businesses might have preferred wasn’t spoken to in the law.”

The compliance requirements of the law were published in February, said Harper, and the ministry has provided resources – like a Webcast currently available on its site – to help companies meet those requirements.

As the July 30 deadline approaches, the ministry will focus its attention on educating consumers about their updated rights, said Harper.

Comment: info@itbusiness.ca

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