A ‘sweet deal’ for Thames? Settling the coffee and donut privacy breach is a marketing win, says expert

Tim Hortons Matrix Project 7_720

Tim Hortons has easily started his plan to distribute free drinks and cake to customers who were tracked through the coffee chain’s mobile app, according to an expert in group actions.

Tim Hortons, owned by Restaurant Brands International Inc. Toronto-based app users on July 29 said they could soon get a “free hot drink and free baked goods” as part of a settlement in a series of class-action lawsuits over privacy violations on the app. The deal is subject to a judge’s approval at a hearing in Quebec next month.

These types of “voucher settlements” make some academics, judges and lawyers uncomfortable, said Yasminka Kalajdyk, an assistant professor who leads the teamwork clinic at the University of Windsor in southwestern Ontario, because they end up directing customers to stores.

“That’s what companies want from a marketing perspective. They want people out their door,” she said. “In this case, compensation is really just a guarantee of more business for the defendant.”

The settlement agreement offers a retail value of $8.58 per customer – up to $6.19 for the most expensive drink, and $2.39 for the most expensive baked good. With about 1.9 million customers eligible to settle, that’s about $16 million in retail value, if everyone used their coupons to purchase the most expensive items. But the real cost to Tim Hortons of those drinks and baked goods is certainly much lower. There is also a $1.5 million fee to be paid to attorneys who represent chapter members.

“It doesn’t seem to me that a cup of coffee and a muffin is fair compensation for a blatant disregard for our private information,” said Kalajic. “Forgive the manipulation, but it’s a very nice deal for Tim Hortons and it should raise red flags for the judge looking into this settlement.”

The challenge in this case was to prove the damages

Joey Zuckran, attorney at LPC Avocat Inc. in Montreal

But Kalajic and others also noted that Canadian courts have been reluctant to impose heavy penalties in privacy cases when there is no evidence that victims have suffered any financial loss. So there was no guarantee that the lawsuits would have done something better than coffee and cake if they went to trial. In fact, one of the class action attorneys in this case said it wasn’t certain the judge would ratify the case to allow it to move forward.

Joey Zuckran, an attorney at LPC Avocat Inc. In Montreal: “The challenge in this case was to prove the damages.” “If someone suffers damages, or financial loss, as a result of that, I mean, they can write to us. We’ll listen.

The case arose from a story in the Financial Post in 2020 by journalist James MacLeod, who found that Tim Hortons’ app was tracking his movements so closely that he knew where he lived, where he worked and where he vacationed. Analysis of months’ data obtained through federal privacy law indicates that the app was tracking it even when it was closed.

It’s clear that companies value this type of personal data, Kalajic said. “My lifestyle, my goings and comings, my purchases, what I do in my spare time in my social life — it all has value, and I don’t know our courts have really dealt with how they handle it in a litigation situation,” she said.

McLeod’s story prompted a group of federal and provincial privacy watchdogs to investigate the app. In June, watchdogs said Tim Hortons had violated federal and provincial privacy laws by using its mobile app to collect “highly personal” information about its customers without their consent.

Federal Privacy Commissioner Daniel Terrain said Tims committed a “mass invasion” of privacy and complained that “private companies don’t think so much about our privacy and our freedom that they can initiate these activities without giving them more than a thought.”

In response to the IAEA’s report, Tim Hortons said it is no longer using geolocation technology and is deleting data. On Wednesday, company spokesman Michael Oliveira declined to answer questions about the settlement deal, or how much the drinks and pastries would actually cost the company.

“All parties agree that this is a fair settlement,” Oliveira said in an email. “It is important to stress that the allegations raised in the class action have not been proven in court and that the settlement is not an admission of wrongdoing.”

Markus Kramer, who heads the Toronto collective at Borden Ladner Gervais LLP, said payments tend to be modest when the privacy policy doesn’t result in a financial loss, such as “identity theft or fraud or anything like that.” The settlement in this case is that it avoids the third-party administrative fee for distributing settlement payments, as the vouchers will be sent via the Tim Hortons app.

“Ultimately, there is more settlement money available to class members,” Kramer said.

Zuckran, the Montreal attorney who led one of the class actions against Tim Hortons, said administrative fees can sometimes cost hundreds of thousands of dollars. “The notice was sent to 1.9 million class members,” he said.

He said getting a free drink and treatment for each of these members was the best option available.

“The truth is, Tim Hortons … given the state of the law, they didn’t want to pay the money,” Zuckran said. “So we could either risk going ahead and not getting anything, or agreeing to what we agreed on and getting something.”

• E-mail: jedmiston@postmedia.com | Twitter: Jekidmiston

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