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CONSUMER LAW

Sector-Specific Consumer Law
(01 July 2013)

Internet Gambling

  1. Overview
  2. Defining Illegal Gaming under the CPA
    (a) 'Gaming' and Gamblingg
    (b) Illegal and Legal Gaming and Betting
    . Overview
    . Legal Gambling
  3. Advertising of Illegal Gaming (Gambling) Internet Sites Prohibited
    (a) Prohibition on Internet Advertising of Illegal Gaming (Gambling) Websites
    (b) Prohibition on Arranging or Facilitating Internet Advertising of Illegal Gaming Website; Exception
  4. Remedies
    (a) Overview
    (b) Common Law
    (c) CPA Rescission and Restitution
    . Overview
    . Non-Compliance with 'Internet Agreement' Requirements
    . Violation of the Advertising Prohibitions
    (d) Unfair Practices
    (e) Other Remedies
------------------------------

1. Overview

This brief chapter sets out how Ontario's Consumer Protection Act (CPA), which has no other direct involvement with gambling, prohibits internet advertising of 'gaming' activities which are illegal under Canada's federal Criminal Code. As such these provisions are ancillary to those criminal provisions, which I describe only briefly here but which may be the subject of more complete Isthatlegal.ca treatment sometimes in the future.


2. Defining Illegal Gaming under the CPA

(a) 'Gaming' and Gambling

While the CPA uses the term 'gaming' in relation to it's prohibitions [set out in s.3 below], it is apparent that it's range extends beyond what is normally considered to be 'gaming' (ie. mixed games of chance and skill in which one is a participant) and into 'betting' as well (ie. wagering on the outcome of external events over which one has no influence). Because of this I will tend to use the broader term 'gambling'.

While there is no CPA definition of 'gaming' as such it may be inferred from the CPA definition of an 'internet gaming site', which is consistent with the Criminal Code definitions discussed below [CPA s.1]:
CPA s.1
"internet gaming site" means an internet site that accepts or offers to accept wagers or bets over the internet,

(a) as part of the playing of or participation in any game of chance or mixed chance and skill that is to take place inside or outside of Canada, or

(b) on any contingency or on any event that may or is to take place inside or outside of Canada, including, without restricting the generality of the foregoing, a casino game, card game, horse race, fight, match, sporting event or contest;
The first of these two categories generally corresponds to what is more generally known as 'gaming', and the second to 'betting'.

(b) Illegal and Legal Gaming and Betting

. Overview

The Criminal Code, subject to some exceptions noted below, indirectly prohibits a range of gambling activities, classed generally either as 'betting' or 'gaming'.

A "common gaming house", for our purposes, means a "place ... kept or used for the purpose of playing games" in which gaming activities are conducted, and is one of a class of prohibited 'places' known collectively as "disorderly houses". There are offences for 'keeping' a disorderly house and being a 'found-in' a disorderly house [CCC 201].

As well, a broad general offence [CCC 206] prohibits a range of betting, lottery and other 'game-of-chance'-related activities.

. Legal Gambling

Some of the exceptions to being a "common gaming house" or illegal gambling are:
  • Social Clubs

    Gaming conducted in facilities of a social club where the 'keeper' of the facility gets no 'cut' from the gaming and where no entry or participation fee is charged, unless it has been authorized by the province. A 'bingo hall', rented by a local business to a church or charity and running games the proceeds of which are paid to the charity, would be an example. In that example the hall owner (the 'keeper') is not paid a percentage of the proceeds, but is paid a fixed and pre-agreed rent.

  • Direct Sports Participants Receiving Winnings

    Owners and jockeys receiving awards or bonuses for winning a lawful horse race are exempt from the criminal gambling provisions. So are team players who win a championship and get a bonus.

  • Fairs and Exhibitions

    With some exceptions (eg. dice and three-card monte), games conducted at exhibitions and fairs are not criminal gambling.

  • Provincially-Licensed, Charitable or Religious and Other Lotteries

    Most lotteries are excepted from the Criminal Code by virtue of their being provincially regulated, or being run by charitable or religious groups.

  • Native-run Casinos

    Native-run gaming casinos come under federal 'Indian' jurisdiction and are allowed under federal law.
3. Advertising of Illegal Gaming (Gambling) Internet Sites Prohibited

(a) Prohibition on Internet Advertising of Illegal Gaming (Gambling) Websites

The CPA prohibits internet advertising of internet gaming and betting sites that are operated contrary to the Criminal Code "if the advertising originates in Ontario or is primarily intended for Ontario residents" [CPA 2(1), 13.1(1,3,5)].

Prohibited advertising activities include (but are not limited to) any of the following done for the "purpose of promoting the use of an internet gaming site" [CPA 13.1(4)]:
  • providing information by print, publication, broadcast, telecommunication or distribution by any other means;

  • providing a link in a website, but does not include a link generated as the result of a search carried out by means of an internet search engine; and

  • entering into a sponsorship relationship.
(b) Prohibition on Arranging or Facilitating Internet Advertising of Illegal Gaming Website; Exception

Further, 'arranging or otherwise facilitating' internet advertising of illegal gaming (gambling) websites is also prohibited, except when done by internet service providers (ISPs) [CPA 13.1(2)].

The ISP exception is added to relieve them of the duty of policing the data content that is being funnelled through their facilities, and reflects the view that ISPs provide a service akin to 'common carriers' such as telephone companies [a view recently confirmed in Ref Re Broadcasting Act and CRTC) (Fed CA, 2010)].


4. Remedies

(a) Overview

CPA treatment of internet 'gaming', when contrasted with CPA regulation of the numerous other economic sectors that it addresses, is - while not unique - certainly narrow. It is restricted entirely to prohibiting advertising of the primary target activity, not the activity itself. This is no doubt due to active and pre-existing federal involvement in the field ('occupying the field') under its criminal law jurisdiction.

While CPA advertising regulation exists in other economic sectors (eg. credit agreements, credit repair - and generally under the 'unfair practice' provisions), remedial responses to advertising-alone prohibition breaches requires some novel consideration.

The most likely scenario where remdial consideration would arise would be where an Ontario 'consumer' utilized - by virtue of prohibited advertising - an internet gaming site, ran up a debt and was then sued for it.

Below I consider what common law and CPA remedies might be brought to bear to defend such an action. Much of my comment here is speculative and cursory, and I am unaware of any case law addressing the issue directly.

(b) Common Law

Assuming for the sake of argument that a gambling 'arrangement' can qualify as a contract, there is mixed law that the courts will not enforce an illegal contract [it really turns on 'how' (by degree) illegal they are]. However, the CPA only 'outlaws' the advertising of internet gambling, not the activity itself - so even if the consumer learned of the website through prohibited advertising, there would be no CPA-based contractual defence argument. Any 'illegality' defence would have to ground
itself in the federal criminal law, which I do not consider at present except in a summary fashion.

There may be greater hope under tort law, arguing that the illegal advertising was a 'negligent misrepresentation' or something similar, however even under that argument it can be countered that the advertising 'representations' were not inaccurate (ie. not MIS-representations), just that the making of the representation was illegal. This is not something that the tort of 'negligent misrepresentation' was ever intended to address, and I can think of no other torts sued to the situation.

Perhaps the most hopeful common law defence, arguable IF the gambling debt was causally-related to the advertising (ie. if the consumer 'got to' the website as a result of the advertising), is the rarely-used judicial principle of 'public policy'. This doctrine is highly variable but amounts to little more than the principle that the courts will not lend their support to illegal or offensively immoral activities (such as debt collection brought about by illegal advertising). But again here the argument based on the criminal code, which strongly bars the more primary activity, is much stronger.

(c) CPA Rescission and Restitution

. Overview

The primary CPA statutory remedy is rescission (cancellation) of the consumer agreement and restitution by both parties of monies paid under it to date. Again use of these provisions assumes that a gambling arrangement is a contract (for it must be to be a 'consumer agreement').

On this point the CPA provides that [CPA 93(1)]:
CPA 93(1)
A consumer agreement is not binding on the consumer unless the agreement is made in accordance with this Act and the regulations.
The full rescission and restitution procedures are discussed at Part C, Ch.7: "General Civil Remedies". Pay particular attention to the consumer-issued Notice or Demand requirements set out in s.7: "Consumer-Issued Notice Procedures", and to the 'back-up' rights to claim against your credit card company where payments were made by credit card and where the gambling website refuses to refund your monies [see s.8 in that same chapter: "Cancellation and Reversal of Credit Card Charges"].

There are two candidates (considered next) for possible breach of this provision, and which might open the door for the consumer to claim the rescission and restitution remedy.

. Non-Compliance with 'Internet Agreement' Requirements

The CPA establishes particular rules for any consumer agreement that is "formed by text-based internet communications" [CPA 20(1)]. These rules are excepted where the consumer's "total potential payment obligation under the agreement, excluding the cost of borrowing", is equal to or less than $50 [CPA 37(1); CP Reg 31], but this is not likely to be the case with most gambling situations worth disputing.

As is explained in Part C, Ch.3, s.4: "CPA Forms of Consumer Agreements: Internet Agreements" in more detail, these rules establish requirements for extensive pre- and post-execution disclosure, express (not implicit) execution of the consumer agreement, and consumer cancellation rights. It is unlikely that most internet gambling websites have complied with these rules, particularly the disclosure requirements.

Using either their cancellation rights, or by claiming rescission (cancellation) on violation of any of these 'internet agreement' duties, a consumer may defend a 'debt collection' action against a gambling website. Further, even when not being sued for a debt a losing gambler may base a civil action for restitution on one or more compliance failures of the website.

On the other hand, a consumer should be aware that success in this approach may mean that ALL past transactions between the parties are subject to restutition from the beginning ('ab initio'), so that if they have a net positive balance with the website over the life of their transaction history (or at least those within the limitation period) they may wish to leave well enough alone!

. Violation of the Advertising Prohibitions

Less certain is the use of a breach of the advertising prohibition as a basis for rescission and restitution.

The sticky issue is the ambiguity contained in the CPA 93(1) phrase (quoted above) "made in accordance with". I discuss this problem at length in Part C, Ch.7, s.3: "CPA General Civil Remedies: General Rescission (Cancellation) Remedies". The specific issue is whether a contract made as the result of the consumer following-up on illegal advertising can entitle the consumer to claim recission under the argument that it was not "made in accordance with" the CPA. To my knowledge this is an untried
legal issue, albeit an interesting one.

(d) Unfair Practices

'Unfair practices' are discussed at length in Part C, Ch.6. They primarily address 'false, misleading or deceptive' and unconscionable representations. These provisions are 'stand-alone' with respect to remedies in that they are distinct and separate from the more general CPA remedies discussed in Part C, Ch.7: "CPA General Civil Remedies".

Unfortunately, and despite the similarity between 'unfair practice' representations and the illegal gaming sites advertising ('representation') prohibitions, the website advertising does not qualify as an 'unfair practice'. Therefore the situation we are considering (being sued for a gambling debt brought about by CPA-illegal advertising), is not covered by these provisions.

(e) Other Remedies

As for non-civil court remedies, the CPA provides for a range of administrative Orders [see Part C, Ch.8: "Administrative Enforcement"] and regulatory prosecutions [see Part C, Ch.9: Prosecutions], neither of which are aggressively pursued by the Ministry of Consumer Services or the Director of the Consumer Protection Branch.

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