The Competition Bureau is seeking a penalty of $10 million against Rogers Communications Inc. for ads claiming that its discount cellphone and text service, Chatr, has fewer dropped calls than its new competitors.

The bureau announced Friday that it has begun legal proceedings against Rogers in the Ontario Superior Court of Justice under the misleading advertising provisions of the Competition Act. In addition to the penalty, the bureau is asking the court to rule that Rogers must immediately stop its advertising campaign and pay restitution to affected customers.

The move is the result of the bureau’s two-month investigation during which it concluded Rogers’ advertising campaign for Chatr is misleading. The investigation concluded there is no discernible difference in dropped call rates between Rogers’ Chatr service and new entrants.

"We take misleading advertising very seriously," Melanie Aitken, commissioner of competition, said in a news release. "Consumers deserve accurate information when making purchasing decisions and need to have confidence they are not being misled by false advertising campaigns."

Company standing by its advertising

Rogers said it will "vigorously" defend itself against the bureau's action, adding the company has "completed extensive testing in coverage areas across the country, and there is no question that the testing validates the advertising."

"We're surprised by the actions of the Competition Bureau," said Ken Engelhart, senior vice-president of regulatory affairs at Rogers.

In 2008, Ottawa opened up the domestic cellphone market with a spectrum auction that made additional frequencies available to new wireless service providers, such as Wind Mobile, Mobilicity and Public Mobile.

Wind Mobile — which launched last December — filed a complaint with the bureau in September over Rogers’s advertising campaign.

"We are obviously very pleased they moved this quickly and this aggressively," said Wind chair Anthony Lacavera. "Usually people expect these things to have an extended timeline. … It may speak to how far offside Rogers really was on this matter."

'Stop the damage'

Lacavera said he was especially pleased the bureau is asking the court to put an immediate stop to Rogers’ advertising campaign. "At least it will stop the damage," he said.

Rogers — which also owns Rogers Wireless and Fido — launched Chatr several months ago to compete in the talk-and-text market, Meanwhile, Bell relaunched it Solo brand to win these customers.

Last year, Rogers was forced to pull ads saying it had Canada's most reliable wireless network after Telus took it to court over the claims.

Rogers has Canada's largest wireless subscriber base. The other big established players are BCE Inc., which operates under the Bell Mobility, Solo and Virgin Mobile brands, and Telus, which has the Telus and Koodo brands.

New wireless carrier Mobilicity has also taken Rogers to the Competition Bureau, alleging that Chatr is too similar to its own talk-and-text services.

"We commend the Competition Bureau for taking action on the complaints that Mobilicity initiated months ago and we are committed to continuing to lead the way to ensure fair competition," Mobilicity said in a statement.

Mobilicity has accused Rogers, Bell and Telus of anti-consumer practices and wants federal legislation to protect cellphone customers.

With files from The Canadian Press