INDY Committee Meeting

STANDING COMMITTEE ON INDUSTRY

COMITÉ PERMANENT DE L'INDUSTRIE

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, April 30, 1998

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[English]

The Chair (Ms. Susan Whelan (Essex, Lib.)): I call the meeting to order, pursuant to an order of reference of the House dated Tuesday, March 17, 1998, consideration of Bill C-20, an act to amend the Competition Act and to make consequential and related amendments to other acts.

Today we have before us two witnesses. We will begin with the Canadian Bar Association and its four witnesses: Tamra Thomson, director of legislation and law reform; John Lowman, chair of the competition law section; Tim Kennish, member of the competition law section; and Barry Zalmanowitz, member of the competition law section.

I understand Tamra Thomson will begin the presentation.

Ms Tamra L. Thomson (Director, Legislation and Law Reform, Canadian Bar Association): Thank you, Madam Chair. The Canadian Bar Association is very pleased to appear before this committee today on its reference with respect to Bill C-20.

The Canadian Bar Association is a national association representing over 34,000 jurists across Canada, including lawyers, notaries, law students, law teachers, and judges. The association's primary objectives include the improvement in the law and improvement in the administration of justice, and it is in that rubric that we make our comments to the committee today.

I understand the committee members have received a copy of our submission. It was prepared primarily by members of the competition law section of the Canadian Bar Association. The matters relating to misleading advertising and telemarketing were prepared jointly by the media and communications law section, and the competition law section.

I am going to ask my colleague, Mr. Lowman, to say a few words about the involvement of the section in the Competition Act amendments. Then my other colleagues will comment on the substance of the matters in the brief.

Mr. John Lowman (Chair, Competition Law Section, Canadian Bar Association): Thank you, Tamra.

Madam Chair, honourable members, the competition law section of the Canadian Bar Association appreciates the opportunity this morning to present our submission on Bill C-20 to the Standing Committee on Industry.

Our section was established in 1992 primarily through the efforts of Russell Lusk, current past president of the Canadian Bar Association, who at the time recognized the need for a CBA section dedicated to those practitioners interested in competition law. Since then, our section has become one of the most active sections of the Canadian Bar Association, with over 800 members.

While this is our section's first appearance before a legislative committee, our section has in the past contributed to the dialogue on proposed reforms to the Competition Act. In November 1995 our section submitted a lengthy response to the proposed changes to the Competition Act, as raised by the discussion paper dated June 1995 that had been issued by the Director of Investigation and Research and the Minister of Industry.

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Subsequently, three members of our section executive participated as members of the consultative panel that issued a report on amendments to the Competition Act on March 6, 1996. A few months later in June 1996, our section provided comments to the Minister of Industry on the report of the consultative panel, but without the participation of those three members of our executive who were on such consultative panel.

In February of this year, our section provided a letter to the Minister of Industry indicating strong support for the adoption of measures to reform and improve the Competition Act and support of the general thrust of the amendments to the act, as reflected in Bill C-20. At that time, we also stated we anticipated presenting comments on a number of the provisions of the bill at the committee stage, with a view toward effecting improvements in the bill.

Today Tim Kennish, secretary-treasurer of our section executive, and Barry Zalmanowitz, chair of our legislation and competition policy committee, will address those provisions where we believe improvements are required, as reflected in our formal submission.

I should mention again that the media and communication law section of the Canadian Bar Association jointly participated in that part of our submission dealing with the misleading advertising and telemarketing provisions.

Mr. Kennish will initially address our comments in the area of merger pre-notification and wire taps. Thank you.

Mr. Tim Kennish (Member, Competition Law Section, Canadian Bar Association): Thank you.

Madam Chair, honourable members, I will be commenting, as mentioned, on the proposed revisions of the merger pre-notification rules now in the act and the regulations and the proposed new authority through amendment of section 183 of the Criminal Code to intercept private communications without the consent of the parties in three situations under the act, one dealing with deceptive telemarketing offences in support of that, another with regard to agreement and arrangements contrary to section 45 of the act, and another in regard to bid-rigging.

First, dealing with merger pre-notification, the bill includes a number of useful reforms that help with the administration of the law in this area. There's clarification in regard to the application of the act to the acquisition of interests in partnerships and other unincorporated entities.

The director is given power to waive compliance with pre-notification requirements in certain situations. There is better explanation of who has the obligation to file under the act, and there are some other useful measures.

However, in proposing these amendments, the government has failed to deal with an important issue that is widely recognized to be a problem, namely that the requirements of the act to pre-notify are overly broad in their application. It's acknowledged that in the vast majority of mergers required to be pre-notified to the government, there are no significant competition issues.

The fact that there is now a $25,000 filing fee payable in regard to these notifiable transactions aggravates the situation in two ways. First, it significantly increases the costs of compliance for parties involved, and secondly there is disinclination, as we expect, because of the revenue-generating aspect of this measure, to reduce the act's coverage in the future.

In terms of over-broad coverage, it unnecessarily imposes a compliance burden on parties in many transactions. It's acknowledged that in less than 5% of the cases, serious issues are raised under the act. It has the effect of taxing the limited resources of the bureau to review these cases to the point where merger review is perceived to be, and probably is, the dominant activity of the bureau. Bill C-20 missed the opportunity to reduce the coverage of the act in this area by not raising the financial thresholds that determine whether a merger is required to be reviewed.

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Just by virtue of inflation, since the passage of the merger pre-notification requirements in 1987, there has already been an enlargement of the jurisdiction, if you like, by some 20% to 30% simply because the thresholds have been left where they were. By contrast, the Investment Canada Act has a set of thresholds that are indexed to 1992 levels. Those have already operated through inflation to raise the minimum thresholds by 20%.

Our suggestion is that the transaction size threshold should be increased to $50,000 and that the party size threshold be increased to $500,000 from the present $400,000, which is approximately a 20% increase, less than the rate of inflation. We think it should be the inflation index going forward.

We also think there should be some significant expansion of the exemptions in the statute for situations such as purely financial transactions, which don't raise competition issues. Our submissions in those regards are quite technical, and they're included in our brief.

Some increased reporting obligations are contemplated in regard to long-form transactions, which we have commented on because we think in some respects they're unnecessary expansions. In addition, the waiting period in long-form filing cases is being increased—it's being doubled—from 21 days to 42 days, which we feel is overlong and certainly exceeds the minimum waiting periods in other jurisdictions. In addition, the provisions of the act that permit the director to get additional time through an interim order give him some considerable scope to further review a matter before a transaction may be completed.

We also have comments in our submission on the merger pre-notification regulations. I appreciate that this is not part of your responsibility, but they are materially relevant to the regime as a whole. We note that a recently reissued draft of the merger pre-notification regulations does not address many of the issues that we've raised in our brief. We would therefore ask that the bureau and the minister consider what we have commented on before those regulations are finalized.

Second, with regard to the interception of private communications, or the wire-tap provisions, our main point here is that unlike most of the provisions of Bill C-20, which have grown out of an extensive and useful consultative process—John Lowman outlined that—this particular aspect appeared first in the bill, having been preceded by a highly limited discussion with elements of the public. So there was not the same broad consultative process. We think it's unfortunate, because it's quite an extreme, intrusive enforcement mechanism, and we think a dialogue with the public would be helpful in substantiating the need for this.

The other sort of controversial elements of the proposed legislation have been removed to a further stage, such as the issue of private access to the tribunal and the matter of exchanges of information with other law enforcement authorities, foreign ones, and we feel this is in a similar category.

We also do not see that the case has been properly made for the need for this authority. The principal application proposed is in aid of the new deceptive telemarketing provision. There has been no experience with that provision, because it is new.

Secondly—Mr. Zalmanowitz is going to mention this shortly—the telemarketing provision as presently drafted is extremely broad. This is exemplified by the director's guidelines that he's proposing to issue clarifying the application of the telemarketing rules. It seems that the scope of the authority would be similarly broad.

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Second, in the potential application of the wiretap as an aid in enforcement to cases under section 45 of the act, this could potentially apply to inter-competitor communications of a pro-competitive nature that lead to useful strategic alliances being established.

Typically the issue in enforcement has not been whether there is an agreement, but rather whether the effect of the agreement is anti-competitive. The wiretap would be of assistance in the second area, and it hasn't proven to be a problem in the first.

Similarly in bid-rigging, the legality of the arrangement that may be entered into really depends on whether the collaboration between the parties has been disclosed to the person who is calling for bids. It isn't, again, it seems to us, so much a matter of a need for further ability to identify agreements between parties, but rather whether there has been this communication.

Thank you.

Mr. Barry Zalmanowitz (Member, Competition Law Section, Canadian Bar Association): I would like to use the brief time I have to draw to the committee's attention our concerns concerning the following provisions in Bill C-20.

There are the misleading advertising provisions—the changes to those. There is the creation of the telemarketing offence, which is part of the misleading advertising provision amendments, and perhaps the most substantive change in the bill. There are some changes to the prohibition or directive order remedy the court can grant on conviction. Finally, I'm going to make a brief comment about the necessity to change the name of the director to the commissioner. It's perhaps not the weightiest point, but I will still give you some comments.

I am not going to repeat the technical detail that's in the written submission. Rather, I'm going to try to highlight the major concerns and the policy considerations that underlie our submission.

Dealing first with misleading advertising, there is a very good provision that creates a parallel remedy or adjudication route that is an alternative to criminal prosecution. There are provisions that create a parallel civil review provision. Those are a positive development.

However, one of the suggestions we have addresses potential unfairness that can arise in a situation where an enforcement body has a choice of either proceeding by way of criminal prosecution or by a civil proceeding, where there can be a remedial order saying stop doing that or the award of some monetary penalty that does not have the same stigma as a criminal prosecution. We suggest that the bureau be required to elect and notify a target of an investigation, within a reasonable time after being notified that there is an investigation, as to whether it is a criminal or civil track that the director is on.

The reason for that relates to the fundamental fairness to a person who is a target of an investigation. The issues that arise there are protection against self-incrimination. A person who knows that he or she is the subject of a criminal investigation may want to take legal advice and consider certain factors that would not be as essential if it were merely a civil penalty that was under consideration.

Requiring that kind of notification to a target also prevents the potential for abuse by enforcement officers, in that it takes away the opportunity to use the threat or fear of a criminal prosecution to get some kind of consent to a remedy in a civil route. We think this is an important policy consideration that relates to due process and fairness in the administration of justice.

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There is another point that has been a persistent problem. It relates to clearance events, which retailers commonly use at the end of the season. They move out merchandise that is either no longer in season or that they want to move out for some reason. Those events are considered legitimate in the industry, but there still is some uncertainty that arises in the proposed civil misleading advertising provisions as to whether they are going to be caught by that provision. The brief we have submitted provides a two-sentence amendment that we think would basically remedy that problem. We ask the committee to consider that.

Moving to the telemarketing offence, this is a new offence that is brought within the misleading advertising provisions. It's very important for this committee to look at the definition of telemarketing. The definition is:

the practice of using interactive telephone communications for the purpose of promoting, directly or indirectly, the supply or use of a product or for the purpose of promoting, directly or indirectly, any business interest.

I read that definition to you to demonstrate how potentially broad it is. In our submission, it has the potential to include any telephone conversation that is used for a business purpose. Certainly that was not the intent of those who put forward this bill.

One clarification would be to specify first of all that it is live voice telecommunications and not fax or Internet as being the subject of it. Additionally, we suggest a number of clarifications. For example, make it clear that it doesn't include a situation where a customer on an unsolicited basis phones a business and a conversation about the business arises after that.

I think one of the solutions or remedies the director proposes for this is that he will issue enforcement guidelines that will clarify when in his view this provision is applicable. In our submission, that is not appropriate. It should be Parliament that makes these laws clear, and it should not be left to the discretion of the director.

The mere fact that such guidelines are proposed initially I think highlights the problem with this provision. While we welcome the provision, while we think it is important to include telemarketing within these misleading advertising provisions, we see this as a serious problem—the breadth of it.

There are required disclosure provisions. For example, one of the consequences of being caught by the telemarketing definition is that there are certain offences for making misleading statements, but there is also an obligation to provide certain information at the outset of the conversation. That can pose quite a burden on persons who engage in this form of marketing, which also is a legitimate form of marketing.

I'll draw your attention to one particular provision in this, the proposed paragraph 52.1(2)(c), which permits any other information to be required to be disclosed as may be prescribed by the regulation. We think it is simply too broad a requirement to be left to regulation.

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In addition, there are no restrictions in or guidelines on the type of information that is required to be disclosed, limiting how far the regulation can go.

Again, leaving more of these to regulation complicates the law and makes it more difficult for individuals to know what the law is.

Finally—well, almost finally—in terms of prohibition orders and remedies, we support these amendments generally. There is one comment that the section wants to make. It is not being introduced by virtue of these amendments, but these amendments in some respects enforce, or I suppose support, the argument we're going to make.

In section 33 of the act, it is possible for the crown to apply for an interlocutory injunction pending criminal prosecution. This is extremely prejudicial to anyone facing a criminal prosecution. It forces an individual to make this decision: I'm facing a criminal prosecution. There are court proceedings in which my guilt is not to be finally determined, but it's going to affect rights and obligations. Do I get involved? Do I oppose this application? Do I give evidence?

Well, if you do give evidence, you may be forced to provide evidence that is against your interests. That is contrary to the notion we have in our system of protecting parties from incriminating themselves.

Second, it is also extremely prejudicial in this way. If you take the position, well, I'd better not oppose this, because it may prejudice some criminal proceedings down the road, and the court has made an interim ruling that gives the spectre of the case having been decided against you—because a judge has to make certain findings—that may be perceived to be contrary to the notions of fundamental justice as well.

Given that there now are more flexible remedial orders that can be given after conviction, we think it lessens any argument that you need a right to seek an interlocutory injunction before there has been a prosecution.

Finally—and this is a fairly minor note—there is a 10-year expiry provision being introduced for prohibition orders. Very good idea. Simply clarify that it should also apply to prohibition orders made prior to the coming into force of Bill C-20. Remove that uncertainty.

That's not a major point. We think that's the intention, so simply clarify it.

Finally, you will note that the bill changes the name of “director” to “commissioner”. This was something that didn't come up in the prior consultation process. While it is not the weightiest issue, it is going to create a certain amount of awkwardness and expense. The director is well known by that name in Canada by the people enforcing the act. That name is known internationally. Switching the name to commissioner, in our view, doesn't more accurately describe his job. It seems to be a change for some reason of which we're not aware.

Precedents will have to be changed. Every time somebody is arguing a case in court or making a submission, they're going to have to say, well, in this act, the person who now is the commissioner used to be the director who's referred to in this case.

His job is the same. There was no change in the job. It's just a change in title. We think those kinds of changes are sometimes symptomatic of legislation. They're wasteful, probably to a minor degree, and it simply shouldn't be done unless there's a very good reason for doing something like that.

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That's the conclusion of my submission. Thank you for hearing me.

The Chair: Thank you very much.

If I can remind committee members, we're scheduled until 11 a.m. We have another witness, so we'll have questions for approximately half an hour or so. If the members would be brief in their questions and if the responses could be just as brief, that would be helpful.

Mr. Schmidt.

Mr. Werner Schmidt (Kelowna, Ref.): Thank you, Madam Chair.

First of all, witnesses, thank you for appearing this morning and giving us your opinion on the issue.

There are two questions I have with regard to some of the points that have been made. One has to do with the identification of whether an offence should be criminal or civil, the target being to immediately identify which route is being taken. My question is why?

Mr. Barry Zalmanowitz: First of all, I'd like to clarify. We didn't say immediately; we said within a reasonable time after being notified that the person is a target, they should be notified that they're being investigated either for the criminal or the civil.

There is an overlap in the two, except the criminal is intended for the serious cases where it is intentionally misleading or recklessly misleading. We think the director should be able to determine at the outset which track he is on. Typically at some point a target is notified that he or she is under investigation. We're not saying immediately but within a reasonable time.

The reason for that is, as the bill provides, you can't be faced with both at the same time. The director or the prosecutor has to eventually elect one or the other, but at some reasonable time we say the person should be told which one he or she is on, and it's for two reasons. The first reason is that if it's criminal, obviously considerations as to whether you should incriminate yourself are different. You should be able to know at a reasonably early stage whether you are going to do that or not. If it's civil—

Mr. Werner Schmidt: I thought so, but by the same token it seems to me that an investigation in itself contains within it the information that's going to come forward as to whether it's going to proceed on a civil or criminal basis. It seems to me that the word “reasonable” in your case would have to be defined rather carefully, because certain evidence at one stage of the investigation might say we'd better proceed on a civil basis. Further evidence a little later might show, wait a minute, we did that wrong, this should have gone the criminal route.

So I don't think you'd want to prejudice yourself ahead of time and cut yourself off from a certain procedure. You might say you're going too far going the criminal route. You'd say, we shouldn't have gone that route; we should have gone this route. So you'd want to be pretty sure before you made that decision as to whether the facts, as the investigation is revealing them, would clearly indicate one or the other course.

Mr. Barry Zalmanowitz: We suggest a 60-day time period after being notified. That is, the obligation to elect a track would not occur until 60 days after the target has been notified officially by the bureau that he or she is under investigation.

I don't think there's a problem if initially the bureau rationally comes to the conclusion this is a criminal investigation we're on. You know that. I don't think anybody is going to complain afterwards if there's more evidence and the bureau elects down. The problem arises if somebody thinks they're only facing a civil investigation and they begin to give information under that impression, which could prejudice them if it ultimately turns into a criminal investigation.

Mr. Werner Schmidt: I really think the issue here is justice. The issue here isn't the fine distinction between one or the other. We want to protect the consumer. That's what this whole act is about.

I'd like to move on into another area, which has to do with live voice. I notice you want to change the definition for telemarketing and you want to include the words “live voice” as being more distinctive.

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What is live voice?

Mr. Barry Zalmanowitz: Live voice is in distinction to using telephone lines for Internet or for fax.

Mr. Werner Schmidt: But what about a recorded voice?

Mr. Barry Zalmanowitz: Perhaps that's another good point. Perhaps the act should address that situation.

Mr. Werner Schmidt: I think the definition here is quite broad. You're quite right. I think perhaps rather than suggest live voice, maybe what we ought to have in the definition what is not included in telemarketing. That might be a better way of putting it, rather than saying it's like this, this, or this.

There are all kinds of new technologies developing that would digitize a lot of information and would clearly simulate a live voice. I think it's far too restrictive to suggest that live voice is covering telemarketing. Telemarketing is becoming very sophisticated and is certainly not limited to live voice—and it is as seductive and misleading as if it were a live voice at the other end.

Mr. Barry Zalmanowitz: I don't think we disagree with you on that.

Mr. Werner Schmidt: Good.

The other question I have is about the point that was made with regard to wire-tapping and whether this is perhaps too broad a definition.

Do you actually believe that there should not be the provision for wire-tapping in the business of checking into whether telemarketing is being abused?

Mr. Tim Kennish: Our contention here is not so much that it may be not be appropriate, but that there hasn't been an adequate review or discussion. The case hasn't been made for the need for this enforcement tool. It's quite an extreme measure.

As I understand it, wire-tapping is not widely available as an enforcement aid in the enforcement of the U.S. anti-trust laws, for example, and while there is some logic to it in support of telemarketing activity, as we mentioned before, this telemarketing provision is totally new and it's very broad in its scope. We're concerned that just on the face of it there doesn't appear to be an immediate need for it, at least until there's been some experience with its enforcement and a shortcoming has been found.

The other two areas I've mentioned as well, where we think the use would be greatest.... Confirming that there's an agreement between parties usually isn't the problem in those proceedings. Usually the problem is whether it is anti-competitive, and that is what its effect on the market is or whether the arrangement between competitors in a bid-rigging situation is something that is actually communicated to the party calling for tenders. In the latter case, if it is being communicated to the party calling for tenders, then it's not a bid-rigging offence. It may be an offence under another provision, but it's not that.

Mr. Werner Schmidt: So actually what you're saying is that the definition is too broad. It's not that wire-tapping itself is wrong; it's that it's too broad in scope. It should be focused a little more narrowly.

Mr. Tim Kennish: We don't think the case has been made for its need in this context. One reason why we think that is that there was no public consultation about it—as there was with virtually all the other elements of the bill.

The Chair: Thank you very much, Mr. Schmidt.

Mr. Shepherd.

Mr. Alex Shepherd (Durham, Lib.): I'm very interested in this issue of wire-tapping, and you've sort of focused on that. The director or the commissioner, or whatever, wasn't really able, to my mind, to answer a basic, fundamental question, and that is, if we're going to expand this to include conspiracy and bid-rigging, what is the test and how do we measure the offences that we were unable to get convictions on because we didn't have this in the past? I don't know if you people can help me in that area or not. You're drawing the conclusion that we need a public airing of this issue, but is there any evidential material that would support the need at this time?

Mr. Tim Kennish: The need for the provision?

Mr. Alex Shepherd: Yes.

Mr. Tim Kennish: I guess I would say that to the extent the government's been unsuccessful in prosecutions under section 45, for example—it hasn't been because it can't prove an agreement between the parties. As in the sugar case or the Nova Scotia pharmacies case, the effect on the marketplace of the agreement that was entered into was really the issue. So I would say in that area there really isn't any evidence necessary.

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In the case of bid-rigging, I made my comments earlier. It's less frequent that cases in that area get into the court system. In telemarketing, it's a new provision, and we're unaware of the need for it.

Mr. Alex Shepherd: I guess we're trying to define something that's possibly undefined. The question I'm asking is how many cases possibly would we take to trial if we had the provision, as opposed to ones we simply wouldn't undertake because we didn't have evidential material? In other words, how do we assess the need to apply this to conspiracy, for instance?

Mr. Tim Kennish: I'm unaware. I think enforcement officials who may be confronted with the difficulty of being suspicious of collusive arrangements between parties but are unable to come forward with good evidence of them would have a better sense of this. There aren't a lot of cases where the issue of agreement has been the part where the case has failed. It's been more that the agreement they entered into didn't qualitatively violate the law, because it was not undue, lasting competition.

Mr. Alex Shepherd: It didn't meet the test.

In your brief you've touched on a number of areas. You talk about the definition of telemarketing. As a legislator, I look at the fact that we have this big book full of guidelines, and just standing back from the processes, does that tell you it's poorly written law, that we have to actually have a book to interpret what the law says?

Are there better ways to draft this legislation so it's more meaningful and the definitions are clearer within the law, rather than having this guideline, which is left to somebody's discretion?

Mr. Tim Kennish: I would agree with what you're saying, because the draft guidelines that have been issued in respect of telemarketing, for example—to make the point that my colleague, Mr. Zalmanowitz, made before—purports to state the director's enforcement approach to telemarketing and more narrowly defines what he means by telemarketing to exclude fax and Internet communication, but it's not obvious from looking at the legislation that that's the case. While the director is probably the person most parties would be concerned about taking action, there are private actions that can be brought on the basis of the legislation, independent of the director, because it's a criminal provision.

Mr. Alex Shepherd: So the issue becomes one of restraining the powers of the director. Clearly we're empowering the director with wide-sweeping powers, and we're heavily dependent on his good nature. Isn't that the essence of what we're doing here?

Mr. Tim Kennish: We could have more precision and a definition of “telemarketing” for this purpose. I agree with that.

Mr. Alex Shepherd: Okay, but you don't actually give us a lot of guidance. You sort of pick around the edges and say you don't like the way this says that, but you actually haven't given us a good definition of the word “telemarketing”. I don't even see a good definition of the word “wire-tap”. When I think of “wire-tap”, I think of phone communications, but they tell me in fact the legislation doesn't use the word “wire-tap”; it talks about the interception of communications on all communication devices.

Mr. Tim Kennish: That's an existing provision of the Criminal Code dealing with so-called wire-tap authority. It's just extending it to this area of the Competition Act.

Mr. Alex Shepherd: This may be a mute argument, but the word “wire-tap” as you are using it here.... In the legislation it talks about listening devices. It talks about bugging places, not just your telephone.

Mr. Tim Kennish: Right.

Mr. Alex Shepherd: But that is a legal definition of the word “wire-tap”. In other words, “wire-tapping” has a broader definition in the law than it would when you look at it.

Mr. Tim Kennish: The director talks regularly about the interception of private communications, which would be by other means as well.

The Chair: Thank you.

Thank you very much, Mr. Shepherd.

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[Translation]

Ms. Lalonde.

Ms. Francine Lalonde (Mercier, BQ): Thank you. My first question is of a general nature. The whole bill weakens the Competition Act as it now stands in Canada. Do you agree with that statement?

[English]

Mr. Tim Kennish: It seems to me that by and large the provisions are improvements. In some areas we have commented that it doesn't go quite far enough, particularly in merger pre-notification, for example. One of the objectives here is reducing the compliance and paper burden of government and parties. We don't think they have gone far enough doing that, but there have been other provisions that are helpful from the point of view of the administration of justice.

Our other comments, while they are suggestions for improvement, don't imply that we do not support the legislation generally. We do support the legislation overall, but we would like to have these comments taken account of.

Mr. Barry Zalmanowitz: If I may add to that, on the areas I addressed, I don't think it would be fair to characterize the amendments as weakening the competition law. In many instances it's strengthening the law.

For example, the additional remedies that are available under the prohibition order section give the courts another tool to impose another form of penalty on persons who have been convicted of offences. The alternate track of adjudication again gives the courts or the Competition Tribunal power to deal with situations in broader circumstances.

[Translation]

Ms. Francine Lalonde: As I understand it, you would like a 60 days waiting period. This is quite complicated for somebody who is not a lawyer, but it is too important to be left to lawyers alone. You are asking for a 60 days notice for a business or a corporation to know whether it will be pursued on a civil track or on a criminal track. Did I understand correctly? If so, aren't you asking us to do away with the only additional strength brought about by the bill? If there is no possibility of an agreement and if the possibility of a criminal prosecution disappears, aren't we deleting what is interesting in this bill?

[English]

Mr. Barry Zalmanowitz: I don't think that is correct. It doesn't preclude the enforcers first of all from reviewing it and saying we're on a criminal track. All it is saying is now the enforcers have two choices. Is this really a criminal situation or is it one where the misleading advertising was due to inadvertence or someone not being aware of the law and now that they know that's the case they have stopped doing that?

All we're suggesting is that within a reasonable time you tell the person whether they are being pursued on a civil track or on a criminal track. We suggest 60 days after notifying a person that they are the target of an investigation. We don't think that detracts at all from the additional tool that is being given to the bureau.

It must also be remembered that when you're the target of an investigation, you are not guilty of anything. You are simply the target of an investigation.

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[Translation]

Ms. Francine Lalonde: You just said that the change would not weaken the act. But before, if you did not file a merger pre-notification, you could be sentenced to a term of imprisonment, whereas we are now proposing to reduce the penalty to 50 000 $. I'm giving that example, but there are many others. The commissioner to be told us that he wanted to have more concrete means because in the end what is often lacking, is the ability to find evidence. It's not necessarily for him a matter of knowing whether one business or a group of businesses had a criminal intention; it is the ability to prove it that is lacking. I therefore come back to my main question: is it going to be easier for businesses to live with that bill than with the existing act? You know them pretty well, don't you?

[English]

Mr. Barry Zalmanowitz: I'm sorry, I didn't understand the last—

[Translation]

Ms. Francine Lalonde: I said that you know the big businesses well.

[English]

Mr. Barry Zalmanowitz: I'm not sure I do. We're here on behalf of the Canadian Bar Association, not on behalf of a business lobby.

The point of those submissions was simply fairness to individuals who are targets of investigation. They should know at some reasonable point, am I being investigated for something criminal or is this civil? That is going to have a determination on how they behave, and it's something that I think they're entitled to know initially. We're not really saying anything more than that.

The Chair: Thank you.

Merci, Madame Lalonde.

Mr. Lastewka, please.

Mr. Walt Lastewka (St. Catharines, Lib.): Thank you, Madam Chair. I have a number of questions.

The merger pre-notification and the doubling of the period concerned me a bit. I'm talking about the thresholds. Isn't that something that could be changed from time to time in the regulations?

Mr. Tim Kennish: It's actually in the act. The thresholds are provided for in the act, so if there is going to be a change, it has to be changed in the legislation.

Mr. Walt Lastewka: Okay. I didn't see that.

Mr. Tim Kennish: There's no change proposed in that regard. It has been the same since 1987, when those provisions first came in. Our point simply is that the act's coverage has effectively been expanded by inflation by about 25% and enlarged since that time.

Mr. Walt Lastewka: Maybe that should be in the regulations so it could be adjusted from time to time.

We'll pass. I'll get more information on that one.

On the consultative period of the merger pre-notification, what is it in other jurisdictions—in the U.S., in Europe?

Mr. Tim Kennish: The pre-notification waiting periods are typically 30 days, with many cases in the U.S., which is what I'm more familiar with, where they get early termination of these reviews where there are not substantive issues that the justice department or the FTC wishes to consider.

Mr. Walt Lastewka: It's my understanding that they have a longer period than we do.

Mr. Tim Kennish: They have a two-stage process. If a case warrants more detailed review, they will issue what's called a second request, which is usually a comprehensive demand or request for information. You then are in a waiting mode until 20 days after you have filed the additional information.

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I'm not a great authority on this, but my understanding is that only in about less than 5% of the cases do they issue those second requests. So in 95% of the cases they're dealt with within 30 days.

Mr. Walt Lastewka: Would you want the U.S. law to apply here?

Mr. Tim Kennish: What I'm saying is that it seems to me there isn't a case for a more stringent standard here in terms of requiring a longer minimum review.

Mr. Walt Lastewka: It seems to me that the U.S. has that two-stage system, which takes up to at least 50 or 60 days. Am I right?

Mr. Tim Kennish: It could be much longer than that in those cases, but there are a very limited number of cases where they actually require it.

Mr. Walt Lastewka: Let's talk about the European rules that are being established over there. It's even longer yet, isn't it?

Mr. Tim Kennish: The European regime, as I understand it, has a 30-day initial review. If it goes into a second-stage inquiry, it has to be completed within four months.

Mr. Walt Lastewka: Okay.

I want to switch over to the interception of private communications. I wasn't clear about what you were saying. I read your proposal again and I think you're saying that this section wasn't consulted on at the same level, but I understand that there was consultation on that subject. Am I right?

Mr. Tim Kennish: Yes. There were three rounds here, I guess. One was the discussion paper circulated to interested groups. There was a lot of submission consultation on that. Secondly, there was the consultative panel. They made a report. Many people, including the Canadian Bar Association, commented on that. With respect to Bill C-67, there was some comment on that before that legislation was discontinued.

It was not in any of those proposals.

There were a few people who saw proposals regarding wire-tap prior to Bill C-20 being initiated, on a limited exposure basis, but I for one didn't see it, and a lot of other people didn't see it. There was no discussion at large about it, and I think people feel discussion is appropriate because it's a very serious enforcement tool.

Mr. Walt Lastewka: Were any of the four of you a part of that early consultation?

Mr. Tim Kennish: None of us, but there were some members of the CBA among other interested—

Mr. Walt Lastewka: None of you four were involved in that?

Mr. Tim Kennish: No.

Mr. John Lowman: We were advised, hon. member, that the wire-tapping provision was going to be introduced into the legislation, but we were not provided with any particular details. We were told it was confidential that it was being included in the legislation and particularly that we were not to discuss it with the public generally, so to speak.

Mr. Walt Lastewka: Okay, but none of you were a part of that full level of consultation. That's what I understand.

The Chair: Thank you, Mr. Lastewka.

Mr. Schmidt, did you have any more questions?

Mr. Werner Schmidt: Not right now, Madam Chair.

The Chair: Mr. Harb.

Mr. Mac Harb (Ottawa Centre, Lib.): Thank you very much.

I really enjoyed your presentation and the thought you have put into it. I wanted to get your opinion about prosecution when it comes to price-rigging or price-fixing, in particular with respect to section 45 of the act.

We had a recent situation in Ontario where the bureau tried to prosecute a company under section 45 of the act and the judge threw out the case, indicating that there is nothing wrong with two or three suppliers discussing the issue of a price or pricing providing there is no intent. In other words, if you don't have the intent to increase your prices, it's okay for two or three suppliers to sit down to discuss the prices in the market.

Isn't that really a little frustrating for you as lawyers? How the heck are we going to enforce a law when you have a situation where suppliers can sit down and discuss prices as long as they don't have the intent or as long as they say they don't have the intent to price-fix? It's okay for them and they can get away with it. Do you have any thoughts in terms of how we can strengthen the act so we can deal with this loophole?

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Mr. Tim Kennish: Well, it's not part of this bill, but it relates to the question of whether you have an agreement or arrangement between parties that has an anti-competitive effect. I think the way the law is interpreted today, it's whether the parties intend what are in effect the consequences of their actions. If their agreement has an anti-competitive effect, then the presumption is that they must have intended that.

I would say that the law is capable of being applied even where you may not be able to read the minds of the people who spoke, but if their agreement is anti-competitive in its result, they will be presumed to have intended that consequence.

Mr. Mac Harb: In criminal law you have to prove intent, in a sense. You can't just go on the notion that, simply put, two people talking implies intent. You have to prove intent. Wouldn't that make it impossible to prosecute under section 45 of the Competition Act?

Mr. Barry Zalmanowitz: I'll try to answer that question, and I think it was dealt with. The courts have interpreted that section for quite some time, and there are provisions that relate to intent. Recently the Supreme Court of Canada dealt with the intent situation and said really intention is an element, but in most cases you prove intent simply by showing that the average business person intends the natural consequences of what he does.

That is usually not a problem in those prosecutions. In all cases you can sometimes get an unusual result, but I don't think there is a problem with section 45. To answer your question directly, you do not need evidence of the accused saying yes, I intended that, in order to get a conviction. That is not necessary.

Mr. Mac Harb: That's what the judge said.

The Chair: Thank you very much, Mr. Harb.

Madame Lalonde, do you have a final question?

[Translation]

Ms. Francine Lalonde: Yes, I will follow-up on that. The proposal is to change section 52(1) of the act by adding "knowingly or recklessly". You seem to be saying that it is not important to add those words. But they change completely the existing act. Section 52(1) of the present act, as you well know, says: "no person shall, for the purpose of promoting, directly or indirectly..." We do not have the words "knowingly or recklessly". But the bill proposes to add those two elements, according to what I understood from the director, who would become the commissioner, just in case there is a criminal prosecution. What's your interpretation of what you just said in that regard? You just said that often there is no need to prove that it was done knowingly since when a businessperson behaves that way, such a behaviour has the consequences we know.

[English]

Mr. Barry Zalmanowitz: My comments before related to section 45.

[Translation]

Ms. Francine Lalonde: Yes, I know.

[English]

Mr. Barry Zalmanowitz: Dealing with section 52, adding “knowingly or recklessly” I think was done for two reasons. One is to distinguish between the parallel civil regime. You'll see that these provisions are reflected again in part VII.1, where they list the same offences, but they don't have “knowingly or recklessly” on the civil regime.

I think because these are criminal, as well, those words were added to make it consistent with the charter in a criminal offence. I think that may have been the intent, and also to give some guideline to when do you proceed criminally and when do you proceed under a civil regime.

[Translation]

Ms. Francine Lalonde: In the bill, we establish a monetary penalty. It is in fact a fine although we avoid calling it so and we use those words to describe it.

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Isn't there somewhere a jurisdictional problem? Wouldn't changing the title director to that of commissioner have something to do with this broadening, on the civil side, of the powers of the commissioner and, thereafter, of the Competition Tribunal?

[English]

Mr. Barry Zalmanowitz: I don't see the connection between the name and that provision. It is only the courts or the Competition Tribunal that can impose that administrative penalty.

As to whether there may be a constitutional challenge to that, we haven't addressed it. I guess anything is possible. We haven't addressed the constitutionality of that, and I'm not in a position to comment on that aspect of it because I really haven't considered it—unless someone else here has.

[Translation]

Ms. Francine Lalonde: As somebody in your organization studied that aspect of the question?

[English]

Mr. Tim Kennish: Constitutionality? No.

The Chair: Thank you, Madame Lalonde.

Just before you leave us, if you're going to follow our hearings at all or if we forward them to you, we would appreciate any comments you may have as amendments are put forward.

I do want to follow up on what Mr. Schmidt said earlier about live voice. I'm a bit concerned that there seems to be this idea that the Internet could not be used for telemarketing fraud. I see huge potential on what's called the chat lines for that very thing, some type of telemarketing fraud through the chat lines where a relationship is established, very much like what we've seen for telemarketing fraud among seniors through voice lines right now. I'm very concerned that there doesn't seem to be that fear or that thought from the Canadian Bar Association that this could happen through the Internet.

Mr. Barry Zalmanowitz: In our submission I don't think we say it should not include that. We're saying that Parliament should be deliberate and make a decision on what it includes and address that. There may be some differences between the chat lines on the Internet compared to live voice in connection with the amount of pressure that is placed on persons. That's just an extemporaneous thought.

I don't think we're saying you should not make Internet or even fax subject to misleading advertising. We're saying it should be done deliberately in the legislation. Parliament should make it clear what it applies to and not leave it to the director in guidelines, not leave that much room. Legislation always leaves some room to the courts to interpret, but when you have a situation where immediately after new legislation is passed an enforcement agency has to issue very broad enforcement guidelines, you know there's a problem with the legislation and it's leaving too much room.

The Chair: I recognize that, but you do say specifically in your brief that it should not apply to other modes of advertising that may use telephone lines, such as Internet or fax marketing. That's why I'm concerned, because you specifically say the Internet.

I know from the phone conversations I receive in my constituency office about the chat lines that there is huge potential there for fraud and for people who establish relationships very similar to what has been happening with seniors through telemarketing. I'm very concerned that you specifically say it should be excluded. That was my comment. In light of the discussion we've had, in light of Mr. Schmidt's earlier comments, maybe there should be some reconsideration of that. That was my concern.

Mr. Tim Kennish: As far as we're concerned, the basis for the distinction was the less oppressive character of the relationship between two people in a chat line situation over the Internet and live telephone communication where the person is sort of obliged to respond immediately.

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The Chair: With all due respect, Mr. Kennish, I'm not disagreeing with you. I'm just trying to explain that we've had different presentations before us with regard to the year 2000 issue. We've had different types of telecommunications presentations throughout the year, and when we look into the future as to what mode of communication you may have in your home within five years' time, your telephone may be your computer.

To start to exclude things that we don't have the potential to foresee—sometimes there's a necessity in law to leave some things a little broader than we may otherwise like to because of the fact that we can't foresee the future and because of the fact that we do know there are sometimes delays in implementation of legislation and reacting to it.

But we appreciate your comments and we definitely appreciate your very detailed brief. We look forward to comments you may have as we continue our hearings. We want to thank each one of you for being with us today and for taking time out of your schedules. We really do appreciate it.

We need to suspend the hearing for about five minutes to change witnesses.

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The Chair: We'll resume sittings. We do have a time commitment here. There's another group coming at 11 a.m. so we have to ensure that we can proceed.

I'm very pleased to welcome our second witnesses before us. From the Public Interest Advocacy Centre, we have Michael Janigan, the executive director and general counsel, and we have Philippa Lawson, counsel.

My understanding is that you have some brief speaking notes to begin, and if you want to start with your presentation, then we'll go to questions.

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Mr. Michael Janigan (Executive Director and General Counsel, Public Interest Advocacy Centre): Thank you very much, Madam Chair. We appreciate the opportunity to attend before the committee today to address Bill C-20. The Public Interest Advocacy Centre has been involved in the process of consultation with the director of competition concerning the proposed amendments dating from 1995, and we're happy to see that a package is finally going forward.

The Public Interest Advocacy Centre is a non-profit organization that was federally incorporated in 1976. It provides legal and research services on issues that concern the delivery of important public services. These services are generally provided by PIAC in a representative capacity on behalf of the organizations representing vulnerable consumers. PIAC's traditional areas of work include telecommunications, broadcasting, energy, financial services, transportation, and privacy.

PIAC has long been aware of the importance of the Competition Act in ensuring the fair and effective delivery of consumer products and services to Canadian consumers, particularly when those products are important or essential. With funding from the Department of Industry and from its precursor, Consumer and Corporate Affairs Canada, PIAC has undertaken research reports that have made recommendations concerning many of the matters that are dealt with in this bill as well as issues arising from the consultation process for these Competition Act amendments dating from 1995.

While we have previously set out our positions with respect to the entire range of matters upon which public consultation was sought, we wish to confine our presentation today to three main areas. One is the creation of the new regime for misleading advertising and deceptive marketing practices; second is the sections dealing with deceptive marketing practice; and the third is dealing with access and enforcement issues.

First, with respect to the creation of a new civil regime for misleading advertising and deceptive marketing practices, in 1992 PIAC issued a report entitled Decriminalizing the Regulation of Misleading Advertising. At that time we recommended that misleading advertising practices should be adjudicated before an administrative tribunal. It remains our view that a civil enforcement regime exercised through an administrative tribunal with appropriate remedial powers could more quickly, efficiently, and knowledgeably deal with the public and commercial detriments associated with misleading advertising practices.

In the past, criminal law sanctions were justified in part by the uncertainty concerning the federal government's constitutional powers over trade and commerce. The decision of the Supreme Court of Canada in General Motors of Canada v. City National Leasing has, in our view, put to rest the idea that non-criminal approaches to enforcing misleading advertising prohibitions would be ultra vires the federal government.

Misleading advertising is a direct attack on fairness in the marketplace. It jeopardizes the ability of consumers to become informed and purchase wisely. In an era where consumers are bombarded with a variety of representations concerning products and services, there is an important public interest that justifies the government in ensuring there is fair conduct by merchants when they represent goods marketed to consumers. The interest in ensuring fairness in these transactions extends beyond the potential consumers of products, but also to the large majority of merchants who advertise and represent their products in a clear and honest fashion.

In most cases it is most important that misleading advertising and false representations be halted as swiftly as possible and that corrective measures be taken that are in keeping with the harm caused by the objectionable conduct. We believe it's much more likely to take place in the context of the civil regime proposed in Bill C-20 than with the criminal law process provided in the current act.

We do support the continued inclusion of a criminal offence with respect to misleading advertising where the element of knowledge or recklessness is clearly established. We would, however, reiterate our previous submissions with respect to the potential remedies available to a tribunal where a person is engaged in reviewable conduct. In our view, the tribunal should possess the power to fashion a restitutionary remedy in addition to the powers conferred in Bill C-20.

While we can well envision situations where the tribunal may find that restitution is inappropriate or not cost effective, there will be other circumstances where a cease and desist order, coupled with a monetary penalty, may be cold comfort to consumers who have been misled to their financial detriment.

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In some cases, the financial injury can be substantial to individual consumers, and it is appropriate that the tribunal possess the power to couple restitution with other remedies set out in the act. Where this is impractical, the tribunal should have the right to forbear from such an order of restitution.

We are also troubled by clause 14 of Bill C-20, which deletes section 54 of the act relating to the offence of double ticketing. The ban on double ticketing does not make its way back into reviewable conduct under the new civil regime, and there appears to be no substitute provision for this mischief elsewhere in the bill.

Section 54 of the act provides:

54.(1) No person shall supply a product at a price that exceeds the lowest of two or more prices clearly expressed by him or on his behalf, in respect of the product in the quantity in which it is so supplied and at the time at which it is so supplied

It goes on to say where those prices are listed.

We would note that this proposed amendment was not included in the consultation materials that accompanied the current amendments when they were first circulated in 1995. We understand it was discussed by the consultative panel that gave advice to the director and to the Department of Industry in 1995, but no recommendation by the panel is contained in their 1996 report.

We also note that this measure was not commented upon in the publication News from the Competition Bureau, of July-September 1997, which described Bill C-20 and the amendments contained therein.

We would also note that one other section that has been removed and that does not make its way back to the civil regime concerns referral selling. It is our opinion that this deletion is not significant, and we're certainly not opposing that at this time.

Apparently, however, the removal of this section dealing with double ticketing was prompted by a lack of prosecutorial use. While we can accept that statutory remedies dealing with out-of-date factual situations should be removed from law, we are concerned that we may be removing the prophylactic effect of having this provision on the statute books.

This offence is reasonably well known to merchants and is likely infrequently violated for that reason. Why speculate on the likely consequences of removal of this section on marketplace behaviour when the conduct prohibited is still offensive? In the absence of more conclusive evidence, our counsel of caution would be to leave it in.

Dealing now with deceptive telemarketing practices, the director's 1995 discussion paper on these proposed amendments noted the increasing prevalence of deceptive telemarketing practices. In the United States, this has caused annual losses estimated up to $40 billion. In addition, such practices impede and have an adverse effect on legitimate telephone solicitation.

Our organization has historically been concerned about the problems associated with telemarketing. In PIAC's 1989 publication Telephone Solicitation: Blessing or Curse?, authors Glenn Bell and Andrew Roman noted:

Telemarketing may be cost efficient from the seller's point of view, but it creates other costs, both tangible and intangible, which are left out of the profit equation.

The study's authors went on to comment upon the cultural aspects of telemarketing that greatly favour the seller:

Nevertheless, the normally strong inhibition against inherent rudeness of hanging up without the consent of another person cannot be erased. Telemarketing exploits this inhibition, exploits our basic politeness. The consumer's entirely decent desire to maintain a standard of civil behaviour makes him or her vulnerable. Most consumers will also feel under some stress to return to the interrupted activity that...often eating dinner. Buying the product or service, or at least agreeing to a salesman's personal follow-up call, may be a convenient way of quickly relieving this stress.

We believe the proposed amendments to Bill C-20 address important consumer concerns arising out of deceptive telemarketing. The new statutory provisions have the potential to make significant inroads into telemarketing fraud provided that the enforcement is consumer friendly, swift, and effective.

With respect to access and enforcement issues, we would note our disappointment that the bill does not contain the amendments that would have allowed private-party access to the Competition Tribunal as first proposed in the consultation process.

Our disappointment has been echoed by the former director of competition, Mr. Addy, who noted:

Given the scope of business activity that is subject to the Act, it is difficult for the Director to investigate and pursue all seemingly meritorious complaints leaving some aggrieved parties with no effective remedy.... I continue to believe that a reasonable private access regime can be crafted that would provide a valuable means of recourse without encouraging strategic litigation for competitive reasons.

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We would once again comment upon the ironic aspect of the continued existence of a monopoly approach to the enforcement of competition law. This monopoly is justified by some because of the danger of potential abuse from improperly motivated litigation. We believe it is highly speculative to suggest that business competitors would wish to invest time and resources in litigating frivolous claims where the adjudication is likely to be done by a specialized tribunal capable of swift justice.

In addition, we would note that while the belief that a workably competitive market can help protect consumers is widely shared, there is a great divergence of views as to how such a market is best achieved. Strongly argued and opposing good faith positions are held as to the definition of activities that are likely to harm or inhibit competition. In our experience, there are still large enterprises that seem to believe that competition merely means freedom from profit regulation or other government scrutiny, rather than a venue where there may exist potential restraints on their anti-competitive marketplace tactics.

It is thus far better that, when marketplace behaviour is subject to challenge as being anti-competitive and the director is unable or unwilling to act, there is recourse by a private complainant to an independent adjudicator such as the Competition Tribunal. The situation at present is to have...I know my notes say “a line appointment”. That really is misleading; it is a Governor in Council appointment, and the director does possess statutory powers. He does fit in the line authority and the bureaucracy of the Department of Industry, so he's not a line appointment per se. He is appointed by the Minister of Industry of the day.

The director is solely responsible for making the call and being the gatekeeper. In our view, the establishment and maintenance of competitive markets is not so straightforward a proposition that Canadians can simply rely on one cop in the presence of a director, no matter how well intentioned that cop may be.

By analogy, an attorney general is vested with discretion to prosecute pursuant to the Criminal Code. The Criminal Code sets out offences that are much more specific and narrow in focus and operation than the anti-competitive conduct under the Competition Act. However, notwithstanding the clarity of the offences in the Criminal Code, there still remains an avenue for private prosecution where the Attorney General refuses to act.

We are unable to accept the suggestion that the tribunal would be powerless to deter vexatious applications by disgruntled competitors. At a minimum, sanctions and costs could eventuate from improperly motivated initiatives. Case management techniques may also be used to deter objectionable tactics and delays. We hope the private access issue is swiftly revisited, with statutory amendments to facilitate the same, following the promised study by the Competition Bureau.

Finally, we would commend the efforts of the bureau in its attempts to consolidate consumer complaints and enforcement in the new fair business practices branch. That branch will apparently have a new centralized complaint call centre linked across Canada under a main database. This is a good start. However, any statutory scheme to correct competition problems in the workplace will require proactive enforcement techniques so that the complaint call centre is easily accessed by ordinary consumers and follow-up is seen to be swift and effective.

Deterrence is best achieved when there is a justifiable apprehension that misconduct will be quickly discovered and give rise to appropriate sanctions. The information concerning the availability of the remedies in the Competition Act and the means of enforcement must compete in the same marketplace for buyer attention with the product representations it governs. If competition is going to work to deliver choice and efficiency to consumers, the remedies for abuse must be accessible and seen to be quickly accessible. If they are not, public displeasure may mandate active government intervention, which may subvert the intention of the act.

Those are our opening remarks, Madam Chair. We'd be pleased to have questions.

The Chair: Thank you very much, Mr. Janigan. We're now going to turn to Mr. Lowther.

Mr. Eric Lowther (Calgary Centre, Ref.): Thank you, Madam Chair, and thank you for the presentation. I'm just gathering my thoughts on your presentation.

On page 3 of your presentation you say:

While we can well envision situations where the tribunal may find that restitution is inappropriate, or not cost effective....

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I was wondering if you could give us some concrete examples of what you would envision those situations to look like when restitution is inappropriate and maybe some other situations where you feel it would be appropriate. Give us some cases in point.

Mr. Michael Janigan: I'm not sure. I think a situation where restitution would likely be inappropriate would be where the misleading representation has resulted in a financial detriment to consumers that is of such a size that the entire process of attempting to reimburse the consumers may cost more than the entire process is worth. For example, say every consumer suffered a detriment of 14¢. Well, there's obviously going to be the cost of simply mailing that refund.

On the other hand, there may be circumstances where the harm that has been done to individual consumers by deceptive telemarketing is substantial. If any of you have been following U.S. television shows recently, there have been some descriptions of the harm that has been done to individual consumers from the solicitation of subscriptions to magazines, for example, with false inducements of being able to win a contest. The individual consumer has often sustained substantial amounts of damage, at least to his or her pocketbook. It would seem to me in that circumstance that the tribunal should be able to order a restitutory remedy to relieve the consequences of the misleading advertising to the individual consumer.

Mr. Eric Lowther: So you're basically saying if it's not cost-effective to try to compensate the consumer, as in the 14¢ example—just trying to process that doesn't make sense. This is as opposed to there being a large enough loss or injury that can be identified with maybe one or a few parties who were injured whereby you would then pursue it if it was administratively feasible. Is that sort of your guide?

Mr. Michael Janigan: Certainly the tribunal would likely want to evolve its own sort of evidentiary rules on that, but the way I see it, it could be where it's feasible from a cost-effective standpoint or from an ability to reach the individual consumers themselves who may have been misled.

This may also be another problem: you may have to run advertisements in newspapers, which may also be a costly exercise. But as you say, where there is an identifiable group of consumers and they have suffered a harm that's likely easily quantified and payable to them in a cost-effective way, then I think the tribunal should be able to order a restitutory remedy and have their money refunded by the seller.

Mr. Eric Lowther: That's interesting. That's going to get a little dicey for the tribunal. I would suspect that they would have to make a call whereby they would say they have some people who have been injured by this but pursuing a remedy for them just isn't practical in their assessment. This means the tribunal. Others would say they believe it would be practical and that they're going to go down that road.

It's not so much a case of whether you've been injured or not and there's compensation, but more the overriding principle in your submission here, which is whether it's administratively feasible or not. I would say that's going to be a really debatable point for a lot of these tribunals. You could get into a lot of discussion there. I just thought I'd draw that out.

Another question relates to page 6. I'm not sure who's being quoted here. The telemarketing best practices group is talking about the pressure on consumers who want to be polite and don't want to abruptly terminate a conversation that has come into their home or their place of residence—whatever. I'm trying to understand what you're implying here. Is it that this predisposes them to be open to telemarketing fraud?

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Mr. Michael Janigan: I think the culture of telemarketing makes consumers especially vulnerable, and it points out the necessity for the specific remedies that are contained within the act to deal with the telemarketing situation.

Mr. Eric Lowther: I understand that within the telemarketing industry some things are being developed. For example, a consumer could effectively program their line to say they will receive calls only from people they know, from their workplace, etc., but outside of that they don't want calls coming through to their home. Park them in an answering machine or somewhere else. This would be a way for consumers to protect themselves from uninvited calls. This is right around the corner. I'm wondering what your comments are on that as far as addressing this concern of yours. Would you support that kind of thing?

Ms. Philippa Lawson (Counsel, Public Interest Advocacy Centre): Sure. I think those kinds of technological developments are great in the market. One of the problems with telemarketing fraud is that it's preying upon seniors in particular, who tend to be the least able or willing to adopt new technologies like that. I think you have to be realistic about the extent to which technological advances and new telephone features, for example, can solve the problem.

The Chair: Thank you, Mr. Lowther.

Mr. Lastewka.

Mr. Walt Lastewka: Thank you, Madam Chair. I really appreciate your report because of the details in it and also the facts on protecting consumers. I will go just a little off topic, Madam Chair, and go further with what Mr. Lowther was saying.

So many seniors have been hit with scams. They're the targets. They're the most vulnerable group. I'm just having a hard time understanding why we can't put together better communications, better advertising, better educational methods to communicate with people.

I know I've done this with my householders and sent specific letters to seniors, but it's hard to get through to seniors. As you say, they don't want to hang up. They have a politeness. They have a way of doing business. Basically, that gets them into trouble.

Could we possibly get your policy group, others in education, and those people who can professionally better communicate with seniors than maybe myself and others to put together a program or a system to help these seniors? Mr. Lowther mentioned the technological way, and I think that's just super, but it still requires that educational component. The people who are involved in scams will go to any length. They have no ethics and will take money away from the most vulnerable. I'd appreciate any comment you have on how we should move forward on that.

I apologize if it's a little off topic, Madam Chair.

Mr. Michael Janigan: Some seniors' organizations, in particular One Voice, have been active in attempting to ensure that seniors are protected from telemarketing fraud. The director of competition is also well aware.

I think this amplifies some comments I made earlier about the necessity for proactive enforcement. In particular, if we are going to have effective enforcement of these provisions, the knowledge of the existence of these particular provisions of the telemarketing act and what they can or can't do should be made available in an appropriate way to the population of seniors in Canada, particularly when there are aggregations of seniors that may be swiftly apprised of this, for example, seniors' residences and homes, or members of seniors' organizations, through which the information may be percolated.

That's the only suggestion I have at the moment, but I certainly think it's a matter worthy of study.

Ms. Philippa Lawson: I would just add, without wanting to diminish the importance of the need to educate consumers—elderly consumers as well as all consumers—that there will always be people out there who you don't capture through the media or whatever educational tools you have. As Mr. Janigan just stated, that's why you need the legislation there as a backup.

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Mr. Walt Lastewka: I know this is not part of the changes that are in this proposal, but you did make a reference to the private-party access to the Competition Tribunal. Could you give me an example of where it could have helped? What are you trying to overcome? Could you give me an example so I can understand that better?

Mr. Michael Janigan: A frequent source of complaint is the idea of abusive dominant position, where there is an enterprise in the marketplace that, by virtue of its market power, is able to effectively enforce any price increases without effective competition. The competitor complains that it's because of a whole variety of different tactics that the competitor is engaging in.

The director may or may not be able to have the time to get the evidence or have the priority or the enforcement staff, or perhaps may disagree in fact that the practice is common with good business standards or good competitor practices. However, for the individual business that is competing with them, this may be something that is of pressing concern.

It seems to me that they should be able to take this complaint to an independent tribunal on the basis of the evidence they wish to present and see whether the particular practice they have alleged is anti-competitive and whether the tribunal should take steps to sanction it.

In the United States, for example, there is a fairly active regime through the courts and through the commerce commission to deal with situations like this through access by independent businesses. There's comment both pro and against the particular system that exists in the United States at the moment. Assuming that we have crafted the Canadian solution, we're urging that they at least have a venue where an individual complainant who believes a competitor or a business is engaged in anti-competitive practice should be able to have access to an independent tribunal.

Mr. Walt Lastewka: I guess I was looking for examples for future business. Thank you.

The Chair: Thank you very much, Mr. Lastewka.

Madame Lalonde.

[Translation]

Ms. Francine Lalonde: Thank you very much for your brief and submission. You gained valuable insights by helping consumers and we do appreciate that.

I would like to talk about the issues with you in two different perspectives. There is first the extraordinary power of the director who becomes the commissioner. You rightly noted that, whoever holds the commissioner's position—and I am not saying that he is not extraordinarily dedicated to competition—, according to the new provisions, he would be the only one to decide whether the behaviour of a business or a person is reviewable. Does it not limit in a major way the real efficiency of the bill which might seem interesting in some regards?

[English]

Ms. Philippa Lawson: I think your point underlines the point Mr. Janigan was making earlier about how important it is to provide private access to the tribunal so that we aren't just relying on one person to make these decisions and so that groups like ours can bring problem cases to the tribunal. I think this would be a particularly useful provision now that we have this new civil regime in place with a number of consumer-type problems that used to be criminal remedies.

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[Translation]

Ms. Francine Lalonde: I would now like to deal with the issue of a possible splitting of powers. I come from Quebec and I consulted with people who wrote the Quebec legislation and who monitor its enforcement. Article 219 of the Consumer Protection Act says:

219. No merchant, manufacturer or advertiser can, through whatever means, make a false or misleading representation to consumers.

In other words, it is more or less what section 52 of the bill proposes to amend. The civil regime in Quebec and the Consumer Protection Bureau are two separate entities now. And instead of fines, we are talking of monetary penalty. I think that this splitting of powers could be somewhat confusing for the Quebec consumer, especially because you are hoping to see a coast to coast complaint call centre. We would therefore have two ombudsmen and two civil remedies available. Which one would be overriding? It seems to me that this could be very confusing.

[English]

Mr. Michael Janigan: In the last part of your comments I think you have highlighted what the problem is in terms of what the federal government needs to address, that in many of these enterprises there are situations where there are cross-border or cross-province solicitations.

The federal government requires the power both to criminally sanction and to control in a civil fashion the misleading representations. To the extent that there are other circumstances within the province dealing with their power to regulate the power of contract, certainly the provinces may see fit to set standards involving contracts made within the province and to enforce it in a similar kind of sense. But we see the need for this kind of legislation across the country to protect consumers.

Ms. Philippa Lawson: If I could add a point there, the existing consumer protection laws across Canada are a total mess. It is completely confusing for consumers. Each province has their own mix of statutes, with different provisions. There are a number of similarities, and there are efforts to harmonize now, but it is interesting that Quebec has the strongest and, in our view, the best consumer protection laws in the country.

I don't think these amendments to the competition law really change that situation. I think the federal government and the provincial governments need to continue to work together. Maybe they need to accelerate their efforts to try to harmonize better and bring the standards of consumer protection laws across the country up to the standards, for example, in Quebec, and work together on enforcement issues.

The Chair: This will be your last question, Madame Lalonde.

[Translation]

Ms. Francine Lalonde: Yes, unfortunately. I was told that in the United States—and I hope to study that soon—, each state is totally responsible for the enforcement of the act in its jurisdiction, whereas all the provision dealing with interstate matters come under the national bureau.

Do you think that Microsoft would have had as many problems in Canada as it has in the United States, given the legislation, even with the revisions?

[English]

Mr. Michael Janigan: It's difficult to speculate.

I think it is clear, and I think the director of competition has acknowledged, that the approach in the United States has been primarily confrontational and enforcement-oriented with respect to the competition laws, whereas here we tend to be more compliance-oriented and more oriented towards attempting to make a deal.

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I don't know whether or not the difference in those two approaches and the legislation itself would have necessarily given rise to that.

It's also difficult to say whether or not the constitutional differences would rule. As you well know, the interstate commerce clause in the United States has had a sort of interesting history of interpretation. That and the so-called use of the dormant commerce power of the federal government has led to, I guess, the United States federal government being able to regulate in such matters as civil rights, for example, whereas our government would not by powers of the Constitution.

It's very difficult to analogize between our situation with respect to the trade and commerce powers that are possessed by the federal government and the powers over property and civil rights that are possessed by the provincial governments.

The Chair: Thank you very much, Madame Lalonde.

Mr. Murray, very briefly, please.

Mr. Ian Murray (Lanark—Carleton, Lib.): Thanks. I'll be very brief.

First, regarding the question of double ticketing and the removal of section 54 of the act, I've never been faced with this problem myself and I don't know if it's because it was in the act, as you say. But my question is, if it hadn't been in the act, is this something you would be proposing that we put in the act now? As I say, it's something that never occurred to me, because I can't imagine a retailer having two prices on a ticket and insisting on charging the higher price. Again, maybe it's because the law was there. I understand that, but—

Mr. Michael Janigan: That's the problem we had in addressing this. It is something that's relatively well known, I think, among merchants. It's also difficult to speculate that in fact the removal of this section is suddenly going to give rise to a host of double-ticketing practices. But if this particular provision has some sort of remedial effect or has a cautionary effect—and it's certainly a practice that is offensive to consumers—then leave it in or provide some other alternative.

Mr. Ian Murray: I accept your point on that.

I'm not sure if I missed something earlier on, if Mr. Lowther had asked you about wire-tapping.

Ms. Philippa Lawson: No.

Mr. Ian Murray: I just wanted to ask quickly, because I know we're out of time, if you have a position on the wire-tapping provisions. How do you feel about that?

Mr. Michael Janigan: I believe we're in accord with the director of competition with respect to giving the appropriate powers to intercept communications where warranted.

The Chair: Thank you very much, Mr. Murray.

I want to thank you both for joining us and for being part of our consultation on Bill C-20. If you have any further comments as amendments come forward or as other witnesses come forward, you're welcome to send them to us. We appreciate your input.

The meeting is now adjourned.