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A Blackberry smartphone on the Rogers wireless network is seen in Montreal, October 26, 2010. BCE?s Bell Canada, Rogers Communications and Telus Corp -- Canada?s ?Big Three? telecoms -- command profit margins that are the envy of the industry.


In the hotly competitive domestic wireless industry, where five national players fight every day to be No. 1, Rogers Communications Inc. has taken first place in an unfortunate category.

The country's competition watchdog is asking an Ontario court to levy a record $10-million penalty for "misleading advertising" that criticized new competitors Wind Mobile, Mobilicity and Public Mobile.

The Competition Bureau of Canada is seeking the highest possible penalty from the country's largest wireless player after a two-month investigation into claims that Rogers had been making since late July, which the bureau said were torpedoing the prospects of new companies licensed by the government to inject competition into the wireless sector.

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The increasing frequency of insults, aggression and boastful marketing have characterized the industry over the past year, as new competitors crowd the marketplace. Lawsuits and legal challenges have ricocheted through the sector as the differences between competing networks grows smaller and the battle for stray subscribers gets more intense.

When Rogers launched a new discount brand called Chatr Wireless, it began bragging in its marketing material and advertising that the service had "fewer dropped calls than new wireless carriers." In interviews and on investor conference calls, Rogers executives frequently insulted the size and quality of the new competitors' networks.

The bureau said that based on "an extensive review of technical data, obtained from a number of sources," there was "no discernible difference in dropped call rates between Rogers/Chatr and new entrants."

"We won't hesitate to seek the maximum penalty against companies that are engaged in misleading behaviour," Melanie Aitken, the commissioner of competition, said on Friday. "It distorts competition and hurts consumers."

Ken Engelhart, senior vice-president of regulatory affairs at Rogers, said the company is surprised by the actions of the Competition Bureau. "We have extensive, independent third-party testing to validate our claims and we stand by our advertising. We will vigorously defend this action in court."

An amendment to the federal Competition Act passed last year increased the maximum penalty for a corporation from $250,000 to $10-million.

"We take that as a very strong signal that Parliament and Canadians expect us to use the tools they've given us, and when there are cases of clear misleading advertising, those penalties are there for a reason," Ms. Aitken said. She added the penalty, if upheld, would help deter similar behaviour and "send a signal to others who might be considering engaging in misrepresentations in the marketplace."

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The penalty, a civil matter, is different than a fine, a term reserved for punishments levied in criminal cases. The bureau attempted to negotiate a settlement between Wind Mobile, which filed the complaint, and Rogers, as it usually does in cases like this, but said Rogers had refused to address their concerns, leading them to seek action through the courts.

The Competition Bureau has asked the Ontario Superior Court of Justice to order Rogers to pay the penalty, to stop making the claims, and to "issue a corrective notice to inform the general public about the nature and provisions of the order issued against them." The bureau also recommended Rogers pay restitution to customers who chose the Chatr service over that of another because of the ad campaign. None of this will take place until the court issues a decision.

Amid competition for entrenched providers such as Rogers and BCE Inc. 's Bell Mobility, the bureau's decision comes as a strong criticism of what the new wireless players have characterized as bully tactics. BCE uses network quality claims similar to Rogers' for Bell's discount service, Solo Mobile, though it was not part of the dispute.

The Competition Bureau's move comes after Wind Mobile filed a complaint about Rogers' advertising, which stated there was no way Rogers would have access to its technical network data. "We've been fighting a whole lot of games the big guys have been playing since we launched a year ago," said Anthony Lacavera, chairman of Wind Mobile. "And we're very happy that the Competition Bureau is going to step in and stop one of these games.

The decision comes almost exactly a year after a dispute with Telus Corp. led to the courts telling Rogers to ditch its claim of running the "most reliable" wireless network.

Sheridan Scott, a partner at Bennett Jones who was Canada's competition commissioner between 2004 and 2009, noted the $10-million penalty is not a slam dunk. "These provisions and how they work have not been tested before the court," Ms. Scott said, noting that the new legislation was developed during her tenure at the agency. "I think it's excellent, where appropriate, for the bureau to test the provisions before the courts to help businesses understand the legal framework."

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