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As the clock to Canada’s new anti-spam law counts down, businesses are scrambling to avoid hefty fines for improper contact with prospective customers.Zoonar RF

Canada's new anti-spam law has, ironically, created quite a bit of spam.

Approaching July 1 when the first aspects of the law come into effect, companies have been taking advantage of their last days in which unsolicited e-mails are permitted to ask customers, prospective customers, recipients of newsletters, and others for consent to contact them in the future.

But it's more than just a last-minute administrative headache. Marketers big and small facing this legislative change are criticizing it as costly to implement, penalizing to small businesses, and not targeted enough at the spammers who are the real problem in the world of e-mail advertising.

"This is the biggest change affecting marketing communications since PIPEDA [the Personal Information Protection and Electronic Documents Act] came into force starting in 2001," said Wally Hill, senior vice-president of government and consumer affairs for the Canadian Marketing Association. "… Not everyone's going to be ready."

Penalties for failing to comply will be up to $1-million for individuals and up to $10-million for businesses operating in the country. Registered charities doing fundraising and political fundraisers are exempt.

The cost of preparing for the law has run anywhere from hundreds of thousands to over a million dollars for businesses, according to lawyers and industry associations. Those figures include lost employee time, as teams in larger organizations have been asked to shift their focus to CASL preparation – such as ensuring companies identify themselves correctly and that "unsubscribe" notices are worded correctly. They also include lawyer fees, and fees for IT consultants who are redesigning entire databases of business and customer contacts. That's because companies must now keep records proving that they have permission to contact people with electronic messages. (If they can demonstrate that they have existing business relationships with recipients, that counts as "implied consent" for a grace period of three years after the law goes into effect.)

That's a massive cost for bigger corporations that have multiple databases. But those just starting out say they will now be operating at a disadvantage.

"As a startup, you have no existing business relationships. Survival depends on a lot of cold-calling, a lot of e-mails," said Dan Kelly, president, CEO and chair of the Canadian Federation of Independent Businesses, which has roughly 109,000 members.

While the costs to established businesses to update their databases are significant, small businesses are concerned that they won't have the chance to build up those lists at all.

Those that do have databases of contacts are having to spend $30,000 to $50,000 to become compliant, Mr. Kelly said.

"We've got loads of members that make almost no money. … This bill can be the difference between profit and loss," he said. "As an individual who continually fields telemarketing calls despite being on the Do Not Call List, I wouldn't be in the camp of individuals who believe that this is going to amount to anything – other than putting limitations on small businesses who have restricted ways of doing marketing."

Lawyers consulting with businesses have raised the same concerns. Barry Sookman, a senior partner with McCarthy Tétrault in Toronto, says he recently heard from one small business owner who can't afford to comply, and has chosen the undesirable option of simply hoping not to get caught. Mr. Sookman argues that the law hampers competition, for both big and small businesses.

"You have a law that makes it illegal to reach out to customers with whom you haven't done business," he said. "...Clients just can't believe in a market economy that you have a law that makes it impossible to compete in a normal way."

The Canadian Radio-television and Telecommunications Commission has said it will take a "proportionate approach" to enforcement.

"We will focus on the most serious cases where the harm to Canadians is highest. It doesn't mean that we won't look at minor cases, but that will be our focus," said Manon Bombardier, chief compliance and enforcement officer with the CRTC.

The Canadian law was widely expected to look similar to the U.S. CAN-SPAM Act, which is less onerous: Businesses are still allowed to e-mail people as long as they identify themselves clearly and provide contact information, identify the message as an ad, and offer an opt-out or unsubscribe feature for all future communications.

All industry associations say they are in favour of legislation curtailing spam. But Canada's more strenuous conditions for proving "consent" have spooked some businesses. McCarthy Tétrault acts for a major U.S. company that was planning to launch a service in Canada, Mr. Sookman said, and as a result of CASL's complications, the company decided to shelve that launch.

"This will cost Canada in foreign investment," said Scott Smith, director of intellectual property and innovation policy at the Canadian Chamber of Commerce.

Industry Canada estimates that "electronic threats" such as attempts to solicit people's personal information and other spam cost the Canadian economy roughly $3-billion per year.

"Our government believes Canadians should not receive e-mails that they do not want or did not ask to receive," said Jake Enwright, press secretary for Industry Minister James Moore.

But Mr. Smith argues that while he supports spam controls, "this is a 10-years-ago problem." Most spam filters are efficient, legitimate businesses have their own best practices to ensure they are not harassing consumers, and those that are a problem, are often largely out of reach in regions such as Eastern Europe and Asia.

What about consumers, tired of spam, who support any law, even an imperfect one?

"My response to a consumer who says businesses should just suck it up, is, that's just what businesses will do," Mr. Smith said. "But the reality is, if the cost of doing business increases, so does the cost to consumers."