INDY Committee Meeting

STANDING COMMITTEE ON INDUSTRY

COMITÉ PERMANENT DE L'INDUSTRIE

• 0900

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, March 16, 1999

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[English]

The Chair (Ms. Susan Whelan (Essex, Lib.)): Pursuant to an Order of Reference of the House dated Tuesday, November 3, 1998, this is consideration of Bill C-54, an act to support and promote electronic commerce by protecting personal information that is collected, used or disclosed in certain circumstances, by providing for the use of electronic means to communicate or record information or transactions and by amending the Canada Evidence Act, the Statutory Instruments Act and the Statute Revision Act.

I'm very pleased to welcome our witnesses here this morning. With us are, from Reader's Digest Magazines (Canada) Limited, Ms. Barbara Robbins, the vice-president and senior legal counsel; from Xentel DM Incorporated, we have Mr. Len Wolstenholme, the director of corporate development; and from the Canadian Marketing Association we have Mr. John Gustavson, the president and chief executive officer, and Ms. Mona Goldstein, chair, ethics and privacy committee.

My understanding is that Mr. Gustavson is going to begin, and then others are going to add to what he says.

In front of you, hopefully you'll find that you have two briefs. One is from the Canadian Marketing Association, and one is from Xentel.

Mr. Gustavson.

Mr. John Gustavson (President and Chief Executive Officer, Canadian Marketing Association): Thank you, Madam Chair. I thank you and the committee for seeing us this morning.

I should perhaps begin with an apology. Our brief was only distributed this morning, not in advance. As some members of the committee are aware, we have been spending a considerable amount of time preparing for a change in our rules that govern our members with respect to marketing to children. That was announced last week, but did take a considerable amount of resources of the association; therefore, there was some delay in the brief, and I do apologize for that. I believe, however, that our position on the bill is fairly well known.

For those members of the committee who are not familiar with the association, we represent some 750 companies engaged in marketing in this country. Canadians bought some $13.5 billion in goods and services from information-based marketers last year, and our members represent about 80% of that total. This economic activity has generated employment for some 236,000 Canadians in all regions of the country, and we have experienced a rapid growth rate that has been averaging 9% per year over the last five years.

What I hope to do this morning is highlight for you some of the reasons we are supporting Bill C-54, and a couple of the concerns that have been raised about it. When I'm through giving you the national perspective on behalf of the association, two of our members have requested to speak to the committee independently of the association.

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Mr. Wolstenholme, of Xentel, will deal specifically with the issue of access to public domain information. Ms. Robbins, of Reader's Digest, will give you some of her background and experience in dealing with the Quebec bill, but also some of Reader's Digest's international experience in terms of what's happening around the world with development of privacy regulations and legislation.

The national association has had considerable experience in this privacy debate. We participated as members of the CSA technical committee. As a result of that four-year process, we believe the bill that has resulted represents an excellent balance between protecting personal information of consumers and individuals, and the ability of businesses to use new technologies both to grow their businesses and to serve their consumers well. That four-year process in developing the CSA code resulted in a lot of learning, I believe, by business representatives as well as by consumer representatives around that table. The length of time it took for us to reach some consensus, a unanimous vote in favour of the CSA code, is some evidence of the care that the representatives around that table took in arriving at that proposal.

The association itself has considerable experience in this, as I've indicated. In 1993, it became one of the very first national associations to impose upon our members a compulsory code of privacy. That compulsory code provides consumers with the right to consent before their name or personal information is transferred to a third party; the right of access to their personal information; the right to correct erroneous information; and the right, among other things, to obtain the source of their name used in any marketing campaign.

When we participated in the CSA model code, which we believe is a delicate compromise between competing interests, one of the interesting parts of that process was that each group had a veto. The consumers' groups collectively had to vote with a majority to approve the code, business groups had to, as did the government officials participating in it. Because of that veto power that each group had, I can tell you those negotiations were good negotiations but were very intense. In the fall of 1995, when the code was unanimously approved by the group that had been working on it for so long, we felt it was time for the federal government to step into the arena. In 1995, we were the first national association—I believe we were probably the only major national association so far—representing business interests, to call upon the government to introduce a bill imposing national privacy legislation on the private sector under the terms of the CSA code.

It may seem somewhat unusual for a business group to promote legislation on the marketplace, but we felt it was important to do so. First of all, while our members were complying with our compulsory code, that's only 750 out of over a million businesses in this country. Secondly, our belief is that consumers were becoming increasingly nervous about sharing their personal information without some assurances as to how it would be treated. And we also thought it was best to introduce this legislation on the basis of this national consensus that had been reached in the CSA process, rather than at a time of great turmoil, in the face of some privacy horror stories, and we felt we should proceed in a careful and thoughtful manner to develop the legislation.

The CSA has established a set of principles rather than a detailed code about how all operations will conduct themselves in the handling of personal information. Our experience in this is somewhat relevant.

When we developed our code in 1991 and 1992—the one that became the code imposed in 1993—we first of all tried to develop a very technical code to govern our members in terms of exactly how they will treat personal information, what they will do. What we discovered was that every time we did so, someone would come along and say he knew of some new technology that existed, or knew of some new technology that would exist shortly, and that technology was going to get around our detailed code. What we reverted to was a set of principles based on the OECD treaty that Canada signed in 1984. Those principles have the great advantage of being flexible, of covering virtually all situations, and giving guidance to members in new situations. The disadvantage, of course, is that it does not provide the absolute detailed code for every step of the way of what you will do, so we have supplemented it with some practice guidelines.

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We shared this experience during the CSA process, and indeed the CSA code is a set of principles. As some have said before this committee, this may not look like the usual legislation you deal with. It may in fact seem less precise than the usual legislation you deal with, but we believe it is a fundamentally new approach to a new situation of information technologies, rapidly changing technologies, and rapidly changing application of those technologies. There is a huge advantage of doing something a bit unusual here, in implementing a law that, although clear in its framework, adopts the CSA principles as a schedule.

As I've indicated, information-based marketing is the major economic force in this country, with 236,000 employees. It has grown, and grown rapidly, because of consumer demand.

There are two aspects to that. The first is demographic changes. With two parents working, single-parent families, and an aging population, home shopping has become more and more convenient: specifically, offers presented to you at home. Secondly, more and more, consumers are expecting tailored offers, offers specific to their interests, and combinations of offers that meet their needs. In response to consumer demand, business has come to use personal information more and more to design those offers and present them at home. That has meant the requirement for proper handling of personal information and its security.

To give you the basis of this, Madam Chair—and I'm not going to take time to explore it—there's a whole concept of how a marketing campaign proceeds. We don't sell information, it's only rented for one-time use. Information remains in its resident databases. We don't profile individual customers or consumers, only groups. That detailed explanation perhaps I'll leave for questioning, because I know time is limited. If the committee wishes to explore it, I can always respond to a question.

I think what's fundamental, however, is an understanding that we are committed to privacy guidelines and transparent information practices because they're the foundation of our continued success. Without consumer confidence, we can have no long-term relationship with our customers, and no repeat buyers. In fact that will destroy the growth of our industry.

The bill before you provides—

The Chair: Mr. Gustavson, could I just ask you to kind of move things along. We'd like to get to questions as quickly as possible.

Mr. John Gustavson: I have two points, and I'll be done.

The Chair: Thank you.

Mr. John Gustavson: The bill provides for consent before collection, use or disclosure of personal information. We believe these are workable requirements. However, in the context of the carefully negotiated provisions of the CSA code—which are our amendment to the bill—we do believe there should be some access to public domain information. We understand why that should be carefully circumscribed and should not involve sensitive information, but we believe an amendment proposed to the bill would in fact be workable in providing appropriate access to certain forms of non-sensitive public domain information.

Finally, several witnesses before you have suggested that this bill goes too far or does not go far enough. It may be that both of those positions are correct. We may find in its operation that in some cases we haven't covered everything. In some cases, perhaps it's too restrictive and limiting on the economic growth of this country. But three things make me optimistic about the bill: one, it does have a five-year review; two, they are flexible principles; and three, it is based on a consensus reached in the CSA process.

Madam Chair, in conclusion, I'd simply say that we think the bill strikes an appropriate compromise, and would encourage its passage.

The Chair: Thank you.

Mr. Wolstenholme.

Mr. P.L. (Len) Wolstenholme (Director, Corporate Development, Xentel DM Incorporated): Thank you, Madam Chair.

As a member of the Canadian Marketing Association, of course, I'd like to echo our support for John's comments and our support of the bill. But I think it would be helpful if you had a sense of what our company does and who it serves, and then I'd like to move on to the outstanding concern that we and our clients have with part 1 of Bill C-54.

Our company was founded in Alberta twenty years ago by two people who believed that the not-for-profit service sector and the organizations that make it up were going to need to develop their own diversified sources of funding in order to survive over the long term. Certainly, events have suggested that vision had merit.

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They also believed they could build a successful Canadian company by helping those not-for-profit organizations do just that, and indeed they have. Today we're the largest service provider of our kind in Canada, and yesterday we announced our expansion into the United States through the acquisition of two well-established U.S. companies that together are more than twice our size.

So where I sit today is representing a company that is one of the top 10 benefit events and donor development companies in North America. More than 85% of the company is owned by Canadians, principally management and employees. In Canada our company serves over 300 not-for-profit organizations and currently employs approximately 3,000 Canadians, full- and part-time, in offices from Halifax to Vancouver.

Our employees work in a unique environment. You can appreciate that if your business is to help not-for-profit organizations spread their story and support their activities, it's somewhat different from most service sector jobs one could operate in. We provide maximum job flexibility for those who must work as well as raise a family or go to school or deal with disabilities or chronic medical challenges. Moreover, we have never laid off employees due to economic recession or foreign competition. Few Canadian employers, and I would include government or the private sector in that, can make a similar claim.

Let me tell you a little bit about our clients. They are all dedicated community service, voluntary-based organizations. They are local women's shelters and palliative care centres, regional and national health charities, disabled sports organizations, firefighter and law enforcement groups, and service clubs and fraternal organizations. Some of these, of course, provide direct services. Others fund services delivered by others. These include hospital burn units, specialized pediatric care, and so on.

Our clients depend on the campaigns we manage for them for some, or indeed most, of their financial resources to cover their annual budgets. They employ collectively just short of 20,000 Canadians, and those employees are assisted by at least twice as many volunteers in every province and territory.

So together they are making a tremendous positive impact upon the social, medical, and educational landscape of Canada, and we are a critical part of making that possible.

Over the last decade most of our clients have experienced major cutbacks in funding from all three levels of government. By working with us they're learning how to develop and nurture relationships with individual and small business supporters and donors across Canada and how to effectively promote who they are and what they do.

Now I would like to move to part 1 of Bill C-54, specifically protection of personal information. I'd like to use the example of the white pages telephone listings. Several years ago the white pages phone listings were determined by a Canadian court to be public domain information. Using the latest in high-speed scanning technology, we scan new phone books into digital data as soon as they are published. We then append full postal information, that is, address correction and postal codes. The result is a complete mailable record for virtually every listed telephone subscriber in Canada. This is the primary source of our marketing lists and the lists our clients use. They do not contain any sensitive personal information about anyone.

To give you a sense of how involved we are in the marketplace, our employees speak to over 100,000 Canadians a day, and that includes Saturdays. We reach about 10,000 each day with mail fulfilment packages. Last year 2 million Canadians donated to a campaign or purchased tickets to an event managed by our company for not-for-profit organizations. You can appreciate that being this active in the marketplace and speaking to this many consumers every business day, we know they will tell us if they have a problem with our contacting them, and they'll tell us specifically what that problem is in no uncertain terms, and we listen.

We were one of the first direct marketing service providers in Canada to create a computerized marketing database so that we could manage what we do more effectively and consistently and reduce the cost to our clients. This computerization enabled us in 1988 to develop our in-house computerized do-not-call and do-not-mail files. We remove from our clients' campaigns the information of any consumer who tells us she or he does not want to be contacted. As of yesterday, approximately 450,000, or 4%, of Canadian households were registered on our do-not-call file. We also subscribe to the CMA's don't-call and do-not-mail files and have done so since their inception.

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So clearly we believe every Canadian has the right to be left alone by direct marketers if that is what they wish, and we understand there is nothing to be gained for any of us by contacting people who have made it clear they don't wish to be contacted. There are so many more who are interested in being contacted that we're not going to waste the time and money if we can avoid doing so.

We also believe sensitive personal information—financial and medical, for example—should be kept private and confidential.

The Chair: I'm sorry, Mr. Wolstenholme, but I'll ask you to wrap up. Everyone was supposed to take only five minutes, so we're kind of going overtime here.

Mr. Len Wolstenholme: Am I over the time?

The Chair: Yes.

Mr. Len Wolstenholme: Okay.

The bill in its current form restricts the use of information found in phone books. It is suggested through an amendment that should be covered off in the regulations and that an allowance would be provided for in the regulations to do that. We don't believe that's sufficient. We believe it's a fundamental problem to restrict information that has no need to be restricted. Bill C-54 in its current form embraces and would limit the use of telephone directory information. There isn't any justification for doing that. We believe information that consumers intentionally make public or that is public given the nature of the publication and the instruments for which it's published should not be a matter of regulation at all. It should be specifically exempted in the body of Bill C-54 and subsequent legislation.

Thank you.

The Chair: Thank you.

Ms. Robbins.

[Translation]

Ms. Barbara Robbins (Vice-President and Senior Legal Counsel, Reader's Digest Magazines (Canada) Ltd.): Thank you, Madam Chair.

On behalf of the president of Reader's Digest, Mr. Bernard Poirier, as well as our some 350 employees, I would like to thank the committee for this opportunity to be heard today.

We are here to support this bill, but we will restrict our remarks to Part 1 and Schedule 1 of the bill.

The basis for our support is found in the corporate profile and background of Reader's Digest. First of all, I would like to stress that even though we operate throughout all of Canada, the company's headquarters are in Montreal, in the jurisdiction where, for the first time in North America, a legislative assembly passed privacy- protection legislation covering the non-government sector. So, we do have experience in this area.

After Bill 68 was adopted, the company had to make changes to its policies and procedures. These changes took time and entailed costs, but we are still here today and we are strong. The Quebec legislation did not totally disrupt the company.

The important lesson to be learned is that the legislation is fair and equitable in its approach, and it strikes the right balance between the interests of consumers, workers and ordinary citizens, and the interests of other sectors within society.

I'm not here to make a value judgment about Bill C-54 and how it compares to Bill 68. I would just like to stress that I can see the same kind of balance, justice and fairness in the federal bill as we find in the Quebec legislation. We can support the bill, because we are not afraid that it will disrupt our operations, despite the requirements, costs and changes that we will have to deal with once this bill is adopted, as well as similar provincial legislation. In short, this is a fair, equitable bill.

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Secondly, as Mr. Gustavson pointed out, we are part of an international company. We have had, and we still have, a window on the world, be it in Italy, China or Poland. What is going on in the world of privacy protection? Once again, I would like to stress that this bill is generally in keeping with what is going on elsewhere in the world, since it is based on the principles established by the OECD. But there is something very original about the bill, namely the inclusion of the Canadian Standards Association Code. So the bill harmonizes our legislation with the rest of the world, but also includes something very original. We can support that.

Finally, I would like to stress this original approach of placing the principles in Schedule 1, which gives industry the necessary flexibility. As a member of the Canadian Marketing Association, we follow their privacy and ethics code on a day-to-day basis. This code gives us the necessary flexibility for the industry. Consequently, for these three reasons, Reader's Digest Ltd. supports passage of this bill. Thank you.

[English]

The Chair: Thank you very much, Ms. Robbins.

We're going to start with the questions. Mr. Lowther.

Mr. Eric Lowther (Calgary Centre, Ref.): Thank you, Madam Chair.

I'm going to take the easy way out today and use some of the questions prepared by the research staff. I don't always do that, but I thought some of the questions they prepared here were good and I wanted to draw on some of their expertise.

We've heard different testimony here, different positions, some quite favourable and some less favourable, sort of a mixed bag of commentary here this morning. Yet each of you have different experiences with consumers who maybe have been frustrated with the whole privacy question, different concerns that come back to you. I can think of some that I used to experience in my business life.

Maybe we should go to you, Mr. Gustavson, and then the other witnesses may want to add to what you say.

We've heard about phone book information now becoming possibly subject to privacy.... But for you and your members and what you've heard, what kind of complaints do you receive on this whole question and how do you resolve them? This piece of legislation is trying to address a situation and trying to open up some greater freedoms and yet still protect privacy of individual information. You're facing the real world out there and your members are. What are you hearing? What are you seeing there?

Then maybe we can compare that with the legislation we're trying to do.

Mr. John Gustavson: Perhaps I could respond to an initial point you made, where you indicated you'd heard different views. There are slightly different approaches to this from witnesses before you today, but I hope the overall thrust of support for the bill is clear on behalf of our testimony. If we want any changes, they are small or fine-tuning, the public domain being of course one aspect of that.

I can basically point to the statistics: 9% per year growth rate and $13.5 billion in sales. That means consumers are reacting very favourably to the approaches they are getting from marketers, I suspect more and more because we're refining what we do to present to them more tailored packages, things of interest to them, things that aren't irrelevant. So the complaints are not widespread. We don't get them. What we get are complaints such as “It didn't arrive on time”, “It didn't look like what I thought I was going to get”, and “Can you help me get a refund?” It seems for the most part, people are not....

Of course, in our situation the worst that's going to happen is you're going to get too much advertising. There are some very fundamental public policy issues here around privacy, and they're very serious issues for us. We're offering goods and services for sale. So when we do get a complaint—“I get too many phone calls”, “I get too much mail”—it's more irritation than invasion of privacy.

But let me acknowledge that we hold a great deal of personal information and we need to handle it very carefully.

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Mr. Eric Lowther: I wasn't meaning complaints in the broad scope of complaints in everything you do. I mean people expressing concerns specifically related to privacy-type concerns. Do you get those? When you do, what do they look like?

Mr. John Gustavson: Basically the answer has to be no, we don't. We get some. “How did you get my name?” is the most frequently asked question we get, and under our rules that must be revealed, because transparency is a fundamental tenet of our privacy code. But the most complaints we get are “How did you get my name; where did it come from?” And once we tell them, then....

Mr. Eric Lowther: Then what?

Mr. John Gustavson: They can deal with that company, and that company must remove their name from their own marketing lists.

The other complaint we get—

Mr. Eric Lowther: Can you give the committee any sense of how frequent that is? Is that 1 in 1,000, 1 in 10,000, 1 in 100,000? Just to try to quantify it somehow, is it very rare? Give me some sort of quantification.

Mr. John Gustavson: When a call comes in, there are usually two aspects to it. One is “Where did they get my name?” I'm going to try to answer it; I'm not trying to avoid your question.

Mr. Eric Lowther: Yes, I appreciate that.

Mr. John Gustavson: One is “Where did you get my name?” and the other is “How do I get off the marketing lists?”

We operate a free consumer service. They can register with us. Once every three months we send our computer tape to our members. Our members must delete consumer names from their marketing lists on request. It's a three-year registration, and there is no charge for it other than putting the stamp on the envelope.

So most of the calls we get of any volume would be “How do I get off the marketing list?”

Mr. Eric Lowther: Right.

Mr. John Gustavson: We can respond to that. Often there are subsequent questions: “By the way, how did they get my name in the first place?” And we tell them. So I would say the vast majority of calls we get are in that.... The second question often flows under the first one.

The Chair: Thank you, Mr. Lowther.

Mr. Keyes.

Mr. Stan Keyes (Hamilton West, Lib.): Thank you very much for your contribution to the committee this morning.

Mr. Wolstenholme, you gave us a very eloquent statement on how it is that your company helps out all these different firms—and you listed them all off, etc.—most worthy in receiving the benefits of what you do as a marketer. But I get it back from my constituents. No matter how worthy the end result, it's how you got to the end result that concerns constituents who, as has been stated by Mr. Gustavson, ask the question, “How did you get my number?” or “Why did you call me?” You said you could get in touch with 100,000 people a day, and I dare say that probably happens over the dinner hour in most cases.

You mention in your opening statement that our problem is the all-embracing definitions of personal information. I've spoken to the chair, as an aside, just to learn that these apparently will be covered off in the regulations themselves, through amendment. You mention there's an undesirable and unintended consequence of capturing the ordinary telephone directory data.

When a person gives their name and phone number to the telephone company, it's usually for the reason of making sure their friends and family know where they can contact them. That's usually the full intention of anyone who doesn't or can't afford to make their number or name unlisted; it's because they want to be contacted by friends and family. I don't think it's the intention of the person who puts their name and telephone number in the telephone book to have it end up on your telemarketing list, so that you can call them and say “This charity is most deserving of your money. Will you give?” or “We have this thingamabob that we want you to purchase”, or whatever.

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Are you saying to me, well, it's in the public domain, so we have the right to pick these names and phone numbers out of a phone book, load them into our computer, and go to work?

Mr. Len Wolstenholme: You've raised a couple of points. One, I'm sure, was just an aside, and that was that these calls normally come at the dinner hour. Our call centres work from 9 a.m. to 9 p.m. I have kids in hockey, swimming, music, cubs, and guides—dinner hour is anywhere from 4 p.m. to 8 p.m. That's a very tough one to pin down in a category.

Mr. Stan Keyes: That was more of an aside.

Mr. Len Wolstenholme: But I take your point.

We've had phone books in Canada for almost as long as we've had telephones. Canadians' experience with phone books has been, by and large, that they are going to be used by people who are looking for their phone number to call them. And while the first level of contacts that you expect to receive by having your number listed may indeed be your friends and family, I would suggest your friends and family probably don't need the phone book to know what your phone number is; they have it in their own little book and they're going to use it for that purpose.

The information is public domain. By virtue of it being public domain and by virtue of the court decision regarding competing telephone directories several years ago, it was recognized that this information has value as a source of information, and that it was a value that was available for all, if you like, to use. Now, your constituents—and I would suggest it would be a relatively small number of them, but necessarily the vocal ones that you would hear about—may wonder about the source of the calls and why they're being targeted. The fact is that information originates in the phone book.

They have the option to, at any time, say: (a) I'm not interested in this cause; (b) I'm not interested in this methodology; or (c) take me off your list and don't call me again. The mechanisms are there to do that. It's very straightforward.

If consumers wish to stay on lists but be selective about those things they respond to, the phone companies provide them with a variety of means of doing so. Caller ID is the most popular one that's being promoted, and that ranges anywhere from $5 to $7 per month.

Mr. Stan Keyes: Do you show up on caller ID?

Mr. Len Wolstenholme: Yes, we do.

An unlisted number is still $2 per month, which is the least costly way to be invisible, if you like, from the perspective of the phone books.

Mr. Stan Keyes: I'd like to know what happens when your company calls someone, and the person says, “Look, I'm not interested. I don't know how you got my name. Take me off your list.”

Mr. Len Wolstenholme: Right.

Mr. Stan Keyes: So you take them off the list. What happens to the information that may have been accumulated through the conversation?

Mr. Len Wolstenholme: Do you mean the name, address, and phone number?

Mr. Stan Keyes: The name, address, phone number, and any other additional information that was weaned from the person before they said, “You know what? I'm not interested. Take me off your list.”

Mr. Len Wolstenholme: The only operative information we're interested in is that they don't want to be called, or they don't wish to be mailed, whichever the case is.

Mr. Stan Keyes: What happens to the information you have on them?

Mr. Len Wolstenholme: We maintain their name, address, and phone number—

Mr. Stan Keyes: You maintain it anyway?

Mr. Len Wolstenholme: —on a do-not-call file. If we just take it out of the file, and it's gone, it doesn't exist anywhere, it wouldn't matter whether—

Mr. Stan Keyes: I'm thinking more of the personal information that may have been gleaned from the conversation. For example, the caller says, “Hi, I'm Dorothy and I'm calling on behalf of the Cancer Society. How many children do you have in your family?” The person says four, they give a few answers to personal questions, and then they decide.

Mr. Len Wolstenholme: We don't ask for that kind of information.

Mr. Stan Keyes: You don't have any personal information that's gathered?

Mr. Len Wolstenholme: No. We have the name, address, phone number, postal code, and whether or not they supported the client in the past. That's it.

Mr. Stan Keyes: Fair enough.

Mr. Len Wolstenholme: You see, in order for the do-not-call methodology to work, you have to keep the name and address so you can purge your subsequent files against that so you know not to call.

Mr. Stan Keyes: Yes, I understand.

In closing, Madam Chair, I'm interested because, for example, we subscribe on a three-month basis to the Hamilton Spectator in my home town, so my wife called them, or they called my home—I can't remember which one it was—and they said our subscription was running out and they'd like to know if we'd like to resubscribe for another three months. She said, “Yes, we would, thank you very much. Just a minute and I'll get you my Visa card number to pay it.” And they said, “That's all right, we already have it on file.” When she asked how they could have her Visa card on file, they said they still had it on file from the last time she called.

• 0940

I thought it was rather odd. There's almost a reverse onus on the customer, after completing a transaction on the telephone, to tell them to purge their Visa card number from their file and just leave their name. You have to instruct the other end.

This isn't so much to do with you or your organization, but I get very concerned when the onus is reversed. It's not automatic that after you've paid your bill with your card number it's deleted or taken out of the file. This accumulation of personal information mounts and mounts with every call, every organization. Life becomes an open book. That's just of a comment more than anything else.

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

Mr. Stan Keyes: Thank you.

The Chair: Madame Lalonde, s'il vous plaît.

[Translation]

Mrs. Francine Lalonde (Mercier, BQ): Thank you for coming. You have focussed on one aspect of the bill that didn't strike us quite as much. I'm addressing my remarks to Ms. Robbins. In fact, this morning we're talking about marketing lists, that is to say, lists of names that are already categorized by interest.

The Quebec bill says:

23. A person carrying on an enterprise may, without the consent of the persons concerned, use, for purposes of commercial or philanthropic prospection, a nominative list of his clients, members or employees.

But the second subsection goes on to say:

Every person using such a list for such purposes must grant the persons concerned a valid opportunity to refuse that the information concerning them be used for such purposes.

Is that what you are challenging, or do you think that a similar provision should be clearer in Bill C-64? I am trying to understand the points you are raising, but I having a hard time.

[English]

The Chair: Mr. Gustavson.

Mr. John Gustavson: Thank you, Madam Chair.

Mrs. Lalonde, the first point we need to make is that we agree with the position on the Quebec bill that individuals have a right to consent before the use of their information. Secondly, although our members had some fear of the Quebec bill when it was first introduced, they have been able to work with it quite effectively. It is clear we have good relations with the privacy commissioner in Quebec.

On the other hand, as you have pointed out, marketers and fundraisers for philanthropic and cultural purposes have separate provisions in that act that are somewhat less onerous than are found for other activities, and they're somewhat less onerous than this bill. The federal bill, in some ways, is tougher than the Quebec bill for marketers because we have no exemptions and all the same rules apply to us. I can report success with the Quebec bill in working with it, but again we have special provisions that govern our activities.

[Translation]

Mrs. Francine Lalonde: Fine, I understand. I am going to ask another question. Mr. Wolstenholme, you say that Bill C-54 will recreate the unfair monopoly that the phone companies had on information from the telephone directories. What do you mean by that?

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Mr. Len Wolstenholme: If Bill C-54 is passed with a provision saying that everyone who has a telephone is entitled to require telephone companies to place an asterisk or another symbol beside his name to indicate that he does not wish to receive calls, and so on, that's fine and we can live with that. However, if we give the telephone companies exclusive rights to this information, they certainly won't give us that information. Instead, they will sell it to us. So that will recreate a monopoly that existed before the courts ruled on the whole issue of the white pages.

The Chair: One last question, please.

Mrs. Francine Lalonde: You said elsewhere that the telephone companies also have call centres. Not only would they have a monopoly on ownership, they could also make use of data whereas you people couldn't.

Mr. Len Wolstenholme: That's right. They will have an unfair advantage.

Mrs. Francine Lalonde: I see. You are making that point without asking for a specific correction, but you are asking us to consider it. Is that right?

Mr. Len Wolstenholme: Yes, from my point of view, the problem can be corrected by saying in Bill C-54 that the Act does not apply to information that has entered the public domain after a consumer has made a decision.

Mrs. Francine Lalonde: So the information would not belong to anyone.

Mr. Len Wolstenholme: We are not talking about sensitive information, such as medical data, financial information, credit card numbers and so on. We are talking about the name, address and telephone number; it's not a lot.

Mrs. Francine Lalonde: Could I ask a complementary question, madam chair, just to bring out one particular point?

The Chair: Go ahead.

Mrs. Francine Lalonde: These lists can also be prepared by other companies. We have met several people here. In particular, we heard from a representative of the chartered accountants. He was saying that the important thing for telemarketing companies is to have the lists. So they purchase all the lists they can get their hands on. He was even saying that $20,000 was not a large fine for them, because it could be just the cost of doing business.

Mr. Len Wolstenholme: Yes, but all those lists first come from the directory. Between 20 and 25 per cent of all Canadians move every year; the telephone directory is the easiest way of finding names, addresses and current telephone numbers.

The Chair: Thank you, Mrs. Lalonde.

[English]

Mrs. Barnes, please.

Mrs. Sue Barnes (London West, Lib.): Merci, madame la présidente.

Mr. Wolstenholme, are you presently aware of any companies or organizations specifically collecting just cell phone numbers, lists of fax numbers, or lists of e-mail addresses?

Mr. Len Wolstenholme: It's something that is talked about a great deal: wouldn't it be great if...?

I think fax numbers are the subject of lists now. There are certain companies that are in the business of forwarding information by fax. The CMA, however, has provisions regarding the use of fax numbers. I don't believe, John, the code differentiates between fax numbers and phone numbers. If somebody wants to be off the list, they're off the list.

Mr. John Gustavson: That is correct.

Mr. Len Wolstenholme: As for e-mail addresses and other related information, I think one of the largest promotions lately was the one in the news about the company giving away computers. You could get a free home computer with Internet service if you simply filled in this 20-question or 50-question survey. The whole point of that was to get e-mail addresses and a whole lot more. There was, if you like, a commercial exchange there of information for computer and Internet access. But I don't know specifically of people doing that in terms of specific companies, and our company does not.

• 0950

Mrs. Sue Barnes: Mr. Gustavson, you just recently did the principles respecting children. I was just wondering whether all of those principles would apply to e-mail addresses, as well as our current phone numbers and any other form of potential new communication methods.

Mr. John Gustavson: Yes, the rules with regard to marketing to children apply to all media. I should add that last year we also passed a whole set of rules with respect to Internet marketing, including a ban on sending unsolicited commercial e-mail.

Mrs. Sue Barnes: Is that called spamming?

Mr. John Gustavson: Yes, spamming has been banned. The Internet rules apply, of course, no matter what the age of the customer or prospect, but taken together it bans spam for all ages, and the marketing to children rules apply to all media.

Mrs. Sue Barnes: I'm sure your organization was incredibly active at the time the CSA model was out there. I wonder why no one put their mind to abuses that could be directed at children at that time. Now you have put your mind to that.

First of all, I would find it interesting to see what you have developed. I don't have a copy of it and I don't think any of the members have a copy of your children's code. I'd like to know the process of why it wasn't dealt with in the CSA model in the first place, the process and how long you've been working at it, and how you actually intend to discipline members who do not comply. I think what I read in the newspaper would be very difficult to actually do.

Maybe you could cover those areas. I'll leave this time for you.

Mr. John Gustavson: All right, thank you.

Development of the CSA code began in 1991. When we came to do our Internet code, which was developed in 1996 and 1997 and became effective in 1998, we started to realize that things had changed to the extent that children were more and more interactive directly with marketers, partly driven by the Internet—primarily driven by the Internet. This face-to-face dealing with children was becoming increasingly prevalent.

That's why we did not simply apply rules in the Internet code but took a step back and said let's take a little more time to develop a whole code around marketing to children. So it was originally intended to be in the Internet provisions because that's where the primary concern lay, but as it turned out, we decided these rules should apply to all media and we did it separately.

So the issue of marketing to children arose when we began the development of our Internet code in 1996. The Internet code took a year and a half. The part on children was then split off and continued, until we made our announcement last week.

With respect to discipline, we have a policy. There are stages to this, beginning with helping the marketer understand what they might be doing wrong, because it's sometimes more a matter of ignorance. We send a committee of members out to chat with them. But we have a policy that we will throw somebody out of the association if they continue any misconduct or there's a single egregious violation of the code, and we'll make that widely known publicly by issuing a media release.

For a marketer, to have the largest marketing association in the country publicly throw you out for misconduct would be a disaster to your marketing efforts. So we believe it will be a very effective disciplinary action and one we'll always have in reserve.

Mrs. Sue Barnes: The way you've written your code—I haven't seen the exact wording and that's why I'd like to see it—will it cover situations that prohibit people from accessing information from children directly not only about themselves, but about the home they live in, the car their parents drive, or how much money Daddy or Mommy makes? Is it wide enough to cover access to any detailed information, or is it just specific to the child and how old they may or may not be?

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Mr. John Gustavson: By the way, I apologize, I understood that the code had been distributed to committee members on an earlier date, but if not, we'll make sure that's done promptly following this hearing.

It deals with obtaining any information from the child requiring express parental consent. It's not our experience that anyone would use a child to obtain this other information, but in any event, it should be covered by the code saying that you must have your parents' consent. The problem, quite frankly, is how can you guarantee the age of the person you're talking to.

So at the same time as we issue this code...there's never going to be any substitution, no matter how many rules we pass or how many bits of legislation are out there, for parents educating their children—parental guidance, parental monitoring. We've also issued a package for parents. It has ten tips to help your child understand that they should be cautious about handing out information. They should talk to the parent. The parent should sit down and go through web sites with their child, helping them understand where the dangers may lie, simply helping the child understand different ways at different ages and helping them understand the dangers of giving out their personal information.

We've imposed these rules on our members, but we still think fundamentally it's the parent who has to get in there and help the child understand how to appropriately use some of these interactive technologies.

The Chair: Thank you very much, Ms. Barnes.

Mr. Jones.

Mr. Jim Jones (Markham, PC): John, I think you mentioned that if I wanted to be removed from a list it took three months to ultimately get to the organization to remove it. How come it takes so long?

Mr. John Gustavson: There are two things. First of all, if it's a particular corporation or company whose list you want to be removed from, you can contact them and they must, if they're a members of ours—and any smart, savvy marketer would—agree to immediately remove you from their marketing list. There may be a campaign in process, but they would do it as quickly as possible. They don't want to waste their time and money talking to somebody who doesn't want to hear from them and possibly irritating somebody who might respond to another form of advertising. This isn't all altruistic. This is in everybody's commercial self-interest to do so.

If, however, you want a blanket or complete exemption from our members contacting you, then we gather up the names and send them out by tape every three months. That's about the fastest we can practically gather up the names, get them processed, get them finished, get them on a computer tape and get them out to our members. So the blanket exemption is a three-month distribution. It's more immediate if it's a specific company.

Mr. Jim Jones: Thank you.

Len, where in the bill does it say that you can't use phone books for telemarketing?

Mr. Len Wolstenholme: It doesn't.

Mr. Jim Jones: Why are you assuming that?

Mr. Len Wolstenholme: It leaves that door open. The bill is purposely structured to be a fairly general document in this regard, to embrace all potential areas of problem and to give the appropriate authorities the opportunity to act. Of course, their ability to act will be further defined in the regulations.

Currently, in clause 7, there are three references to the information being specified by the regulations as to exemptions. Our suggestion would be that these three points would say that the information is publicly available or is specified by the regulations and is as a result of a deliberate decision by the individual. This is the operative issue here. If you make a deliberate decision to make innocuous personal information—your name, address and phone number—exempt, then we shouldn't be creating a whole methodology for trying to claw that back.

Mr. Jim Jones: I notice in your privacy code here you say: “All CMA members must use the Association's Do Not Mail/Do Not Call Service when conducting an information-based marketing...” . Why do telemarketers block their numbers so that people who have call display cannot see their number? Wouldn't it be nice if you made all the people in your organization show their numbers or their company organization names? I know if they phoned me and I saw that, it would be the quickest way of...I wouldn't remove you from the list, but I wouldn't answer the phone. That's what you should be doing.

Mr. John Gustavson: Some years ago when we concluded that there would not be widespread self-regulation in the telemarketing industry, because so many are small businesses and we're not amenable to the big national organizations' rules, we cooperated with Bell Canada in an application before the CRTC to import our code of ethics into the regulations that govern telemarketing, and the CRTC agreed to that. So in fact the CRTC has a rule that if you're using a phone for business purposes you must allow your name or phone number, which the consumer can call, to be displayed on the telephone. It is illegal and contrary to the CRTC regulations to block your information, and your lines can be pulled.

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Mr. Jim Jones: So who would I call if people call?

Mr. John Gustavson: There is a CRTC complaints number, and we would be pleased to give it to you.

Mr. Jim Jones: It wouldn't be your organization if they're doing telemarketing?

Mr. John Gustavson: If it's one of our 750 companies. But there are probably 100,000 companies in this country engaged in that, so the CRTC complaint number would be the one to phone.

Mr. Jim Jones: Thank you.

The Chair: Mr. Wolstenholme, is there something you wish to add to that?

Mr. Len Wolstenholme: Yes, just an observation. The phone companies provide for number replacement. Very often you can't call the telemarketers back at the phone line they've called you on because it's constantly busy, so there's no point in displaying that number, and what is displayed is a replacement number where you can in fact reach somebody to get further information.

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

I'm going to go last to Mr. Bellemare, but just before I do, I want to clarify that there is a proposed amendment to clause 7, which would be paragraph 7(1)(d). The information is probably available and is specified by the regulations. That's a proposed amendment that is now before the committee. It was tabled two weeks ago.

Mr. Bellemare, please.

Mr. Eugène Bellemare (Carleton—Gloucester, Lib.): Madame la présidente, the CMA brief talks about a code of ethics on page 4. On page 5 it defines a child as being under the age of 13. Why is it that it's different from the Young Offenders Act, that we have a definition for a child as being under a certain age and then you bring the age down to 12? Under 13 is 12, so you're talking about 12 years old. Why is that?

Mr. John Gustavson: The broadcast code defines it as not having reached their 12th birthday. This subject caused a great deal of debate amongst our members, and has in various associations and organizations that deal with this, such as Concerned Children's Advertisers of Canada. There is no magic to the number. Whether it's 14 or 12 or 13, somewhere in there is a break and we had to decide where the rules would actually be imposed and over which the rules would be guidelines.

Mr. Eugène Bellemare: You made the decision in your own favour and not in favour of the consumer.

Mr. John Gustavson: No, I would suggest this is a very progressive move, to impose these regulations for children. You can always discuss and argue whether it should be 12 months older or younger, but I would suggest that there are some very mature 15-year olds out there and some very mature 11-year olds.

Mr. Eugène Bellemare: We're back at dealing with e-commerce, and e-commerce is done over the Internet, sight unseen, by the client and vice versa. Do you mean to say that you would encourage data mining family information through a 12-year old?

Mr. John Gustavson: Mr. Bellemare, I have absolutely no idea where you would get that impression from what we have done.

Mr. Eugène Bellemare: A 12-year-old wanting to communicate with you, firstly, could say anything he or she wants—that they're 25 years old, if they feel like it.

Mr. John Gustavson: Yes.

Mr. Eugène Bellemare: Then you'd start asking questions.

Mr. John Gustavson: We don't ask questions of a 12-year-old; we have to have express parental consent. But as I indicated in my earlier remarks, you would always face the problem of the child lying about their age. There is no cure for that unless you want to shut down all electronic commerce over the Internet, because you never can have an absolute guarantee. That's where we think it's fundamental that parents understand the role they need to play in educating the child about the dangers of handing out personal information without the parent's consent, without the parent's knowledge—

Mr. Eugène Bellemare: So the onus is on—-

Mr. John Gustavson: —and that's the only solution.

The Chair: Mr. Bellemare, last question, please.

Mr. Eugène Bellemare: In regard to the direct marketers' lists of targeted persons, I'd like to know from Mr. Wolstenholme if you can answer these four quick questions. Do you sell lists—

The Chair: No. Mr. Bellemare—

Mr. Eugène Bellemare: —rent lists, exchange lists or belong to an exchange group?

The Chair: Mr. Bellemare, one question, please.

Mr. Eugène Bellemare: In one single question.

Some hon. members: Hear, hear!

The Chair: Mr. Bellemare.

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Mr. Eugène Bellemare: Which of the above do you belong to: selling lists, renting lists, exchanging lists or belonging to an exchange group?

The Chair: Mr. Wolstenholme, do you have any comment, a brief comment?

Mr. Len Wolstenholme: I do. If a client provides a list of mailing addresses and wants phone numbers appended, we will do that for them. We do that for charities. We do that for political parties of all stripes. We do it for a lot of different people. That is the type of, if you like, distribution of information that we do outside our own company. We make certain information available for mailing always on the basis of the consumer opt-out. Every single fulfilment piece we send out to a consumer says, check here and tell us if you don't want us to exchange your information. That's already covered.

The Chair: Thank you.

Thank you very much, Mr. Bellemare.

I want to thank our witnesses for being with us this morning. If you do have any further comments on the proposed amendments, we would appreciate them by the end of this week. We thank you very much for your time.

We're going to suspend for two minutes while we change witnesses. Our second group of witnesses is now here.

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The Chair: I would ask that the members take their seats.

We're very pleased to welcome our next group of witnesses here today. We have with us now the Insurance Bureau of Canada and the Association of Canadian Insurers. As part of that group, we have Mr. George Anderson, the president and chief executive officer; Mr. Randy Bundus, the vice-president, general counsel, and corporate secretary; and Mr. Mark Yakabuski, the vice-president of government relations.

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We're very pleased to welcome the three of you here today. We have in front of us a detailed brief and subsequent letter to our clerk, Ms. Kingston. I'm very pleased to welcome everyone here.

Mr. Anderson is going to begin the presentation.

Mr. George D. Anderson (President and Chief Executive Officer, Insurance Bureau of Canada and Association of Canadian Insurers): Thank you very much. It's a pleasure to be here this morning to talk about this bill. I know you've been in deliberation for a long time, so I'm not going to give expansive remarks today. I want to focus on what are the key features of the bill as we see it and some changes we would like to see made that, in our opinion, would advance the bill.

I'm speaking on behalf of property and casualty insurers in Canada. They are the people who provide your auto, home, and business insurance. There are 230 companies in this marketplace. It's a very competitive market. We employ about 100,000 people across the country in cities, towns, and rural areas.

I want to say at the outset that our industry supports the government's efforts to promote electronic commerce, and we certainly understand the need to ensure that reliable guidelines exist to protect Canadians' personal information in this new world we're entering into.

We're heartened to see that a recent amendment to the bill has broadened the purpose of the bill to recognize business needs with regard to reasonable collection of information. In our minds this goes a long way toward balancing the intent of the bill.

P and C insurers are responsible users of personal information. In one respect you could say that confidentiality of information is the currency of the business we're in. If our customers lose confidence in us because we've not handled personal files in a proper way, we will lose their business, and with so much competition, the sanction of the marketplace is immediate and very swift.

The brief we submitted to you earlier does not include commentary on a couple of amendments that were introduced subsequently to the committee, but as the chair has said, we have submitted today some suggestions for amendments, and Mr. Bundus will speak to those in more detail, as he drafted them.

We really have two main concerns: The first is that we are asking that the bill be extended to allow sectoral or industry-specific codes that incorporate the 10 principles of the CSA code, and secondly, we urge the committee to consider what further amendments might be made to allow for the effective prevention and detection of fraudulent activity. Such activity in Canada costs our customers about $1.3 billion a year. It's very important that we have the ability to deal with this problem, and our surveys show very strongly that Canadians want the government and our industry to deal with the problem of insurance fraud.

Since 1992 property and casualty insurers have had a model privacy code. In 1992 we adopted a code for the individual insurance customer, and we have updated that in the context of many years of discussion and deliberations as the CSA code and 10 principles developed. We were very active participants all the way through that entire process. Our code is a more detailed or what you could call tailored version of the CSA code.

Tailoring involves adding industry-specific details to the code. I'd like to emphasize that it does not include altering in any way the 10 principles of that code. But the bill, as far as we can see, is somewhat general on this point and does not yet take into account what specific industries collect, use, or disclose personal information and how they do that in different ways, and I'm going to give you a couple of examples in our industry of how we do this a little differently from most others. The CSA model code allows for this kind of tailoring. In our view it recognizes the realities of commerce without sacrificing the principles of privacy protection, and we all agree that is fundamentally important.

Our code was approved by a quality management registrar of the Standards Council of Canada as complying in every respect with the CSA code. Our code, in fact, has the distinction of being the first one of these codes approved as fully complying, and we think this means a lot, or should mean a lot.

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Stopping where it does, this bill is unclear to us as to how it will apply to our industry. There are some ambiguities that we believe need to be clarified, and I'll give you an example.

In schedule 1, where you deal with the commentary on principle 3, consent, there is clear recognition that in certain circumstances consent may be implied. Yet when one reads clause 7, it seems to say otherwise. There's considerable confusion in our minds around what the committee's intent is with regard to the issue of express versus implied consent. We're asking that there be clear recognition in the bill that consent may be implied in certain defined circumstances.

We're encouraged to see that in this bill consent is not limited to written consent. We read that it can be both oral and written consent. However, unlike the bill, our code sets out specific circumstances where oral or written consent is permitted and others where consent may be implied.

Why is this so important to us? I think the answer lies in the way in which we do business. When a customer telephones a broker from a car lot to obtain auto insurance for the new family car, they're often not just obtaining that insurance for themselves; they may be obtaining it for a son or a daughter who may or may not be living at home or who may be away at university. The customer may be applying over the telephone at the same time for the spouse as well.

Under this bill, can one spouse give consent on the other spouse's behalf and on behalf of the child at university? Is it the case that kids have consented because they are listed by the parents as drivers on the policy, or do we have to wait until everyone is in the same room at the same time before we can acquire this consent?

This would go against the way automobile insurance has been underwritten in Canada since the telephone was invented. In fact, it's contrary to what we call in our business the principle of utmost good faith, which we have employed from the beginning, and it would be, I suggest, a considerable upset to our customers if we could not provide coverage on the spot when they want it.

The issue has important consequences for us. There are 7.2 million drivers in Ontario. There are only 5.4 million insured vehicles. This means that if we are unable to imply consent in the circumstances I've described, we'll have to pursue nearly 2 million drivers in Ontario alone who are not the direct party to auto insurance contracts in order to get their consent. Our customers will bear the burden of that inconvenience and increased costs, and I suspect we will incur their considerable anger.

Ontario is not the only province affected by this, since automobile insurance, as you know, is mandatory right across the country. Practically and administratively, I fear—indeed I know—that despite our best efforts, express consent will be impossible for us to obtain in all of these circumstances.

Continuing to use Ontario auto policies as an example, P and C insurers are prohibited by provincial regulation from considering the occupation, employment circumstances, or income level of any person in making a decision to issue, renew, or terminate an auto policy. In collecting this information we must also use the form that is prescribed by the regulator. The personal information we collect and use is limited to the information that is strictly relevant to underwriting that insurance contract. As far as most of the product offerings of the P and C industry are concerned, there is already a very heavy regulatory oversight at the provincial level.

The distinct nature of our business has been noted in a number of reviews that have been done lately. The Senate committee on banking said our industry was different from other financial industries. We're not an intermediary financial industry. We don't seek to sell products outside of insurance. The MacKay report made the same reference. Richard Owens, the privacy expert hired by the MacKay task force to do a report on our industry's privacy concerns, had the following to say:

...given the low level of privacy complaints and the nature of existing privacy measures relating to the financial services sector.... A system which permits rules to be developed and tailored at the industry level is likely to be the most appropriate and effective.

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Ontario's Superintendent of Insurance from 1991 to 1995, and also the federal regulator in OSFI—the same person—for 19 years, also said this about our industry:

...member companies of virtually every insurance association subscribe to voluntary codes of ethics and conduct with regard to the protection of personal information. These codes closely follow the CSA model.... Insurers have long been sensitive to the need for careful handling of personal information. In a long regulatory career we don't recall a single case of abuse coming to light....

The numbers from our own consumer centre, which receives about 116,000 calls a year from consumers, would tend to bear this out, as would the findings of the annual report of the commission on Bill 68 in Quebec, which found that while over a five-year period there were 477 formal complaints to the commission that resulted in a report or a decision of some kind, only 13 of those involved our industry. Five of those thirteen were about the wording of the consent form itself—something that our industry didn't design, that the government designed. Two were about people wanting to withhold what their driver's licence number was when they were applying for automobile insurance. So while I don't make light of the process, I would say that substantively we've had very few cases here.

Private property and casualty insurers do not sell customer lists. Under our code, if they want to, they have to get written consent of the customers to do so. P and C insurers do not use personal information to target market products outside of insurance, nor do they use it for purposes outside the insurance contract. If they do, our code requires the insurer to get express consent from the customer for that to happen.

We believe Bill C-54 should allow for binding sectoral codes. We undertook this job in good faith many years ago to work out a code that made sense to our industry and respected the 10 principles of the CSA, and we think we have one now. Included in the material handed out to you today is the wording of a suggested amendment to the bill that would enable this. We think it's the right thing to do.

We are also asking for some amendments having to do with the issue of fighting fraud. I mentioned that's a big problem in the insurance industry. We're asking for enabling provisions in clause 7 of the bill so that we can continue with this fight against fraud, to prevent and detect fraudulent activity where it occurs.

Neither the current wording of clause 7 nor the amendments tabled with the committee on March 2 would enable insurers to collect and use personal information without consent in order to prevent fraudulent activity. In addition, under the current wording of the bill, we are unable to share information with each other and with appropriate bodies for the purpose of preventing and detecting fraudulent activity and crime.

Bill 68 in Quebec does have wording that allows our industry to do this. It is our view that it is neither reasonable nor really intended by the government that P and C insurers should be prevented, in this bill, from fighting insurance crime, and in the material handed out to you we have recommended a set of amendments to the bill that we think would greatly help in that respect.

We also have introduced amendments that do not require us, when we're investigating a person for fraudulent activity, to advise them that we're so doing and to hand over the file that we have. Currently the bill would require that we do that, I'm told. We want to be able to keep that information confidential while an investigation is going on. We've added a new paragraph 9(3)(c.1), I think it is, included in the March amendments, that would accomplish this in part, but again it does not go far enough to prevent fraudulent activity and crime, and we believe this needs to be done.

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Those are really our only two issues. We'd like to see in the bill an amendment with respect to allowing sectoral codes that are authorized and approved by independent third bodies as compliant with the CSA code, and we'd like some tougher wording on the question of fraud prevention and detection.

Thank you very much.

The Chair: Thank you, Mr. Anderson.

Mr. Bundus, did you wish to speak at all about the draft amendments that you put forward?

Mr. Randy Bundus (Vice-President, General Counsel and Corporate Secretary, Insurance Bureau of Canada and Association of Canadian Insurers): I'd be glad to.

We believe the amendments that were put forward to the committee on March 2 with respect to paragraph 7(1)(b) recognized the problem, and we are pleased to see that the problem has been recognized. We're suggesting that we might want to go a little further, though. The wordings that have been handed out to the committee with the letter to the clerk have a proposed paragraph 7(1)(b), and in that wording I have underlined the additional words that we suggest would be quite useful for this purpose. We suggest that prevention is as important as detection, and to that end we've added the words “prevention or” in the piece.

In addition, we propose and suggest that fraudulent activity of an insured is as important for us to detect and prevent as an offence under the laws of Canada. One can have a fraudulent activity that, on the civil side, would not meet the standards of criminal law for a criminal prosecution. Our recommendation is that a reference to fraudulent activity would allow us, as an industry, to address civil fraud, namely the fraud on an insurance policy or a breach of contract. It's that sort of fraud that may not be meet the requirements of a criminal prosecution; however, it would meet the requirements for a denial on a civil trial for breach of contract.

The Chair: Thank you very much.

Mr. Lowther, do you have any questions?

Mr. Eric Lowther: Yes, I have several questions. I may not have time to ask them all, so I'll rely on the colleagues to pick up on some of these.

I'm a little bit confused. I guess what I'm digging for here is whether or not, with the amendment that you're proposing, your industry could fully support the bill. Insurance companies have lists of information, and I assume they share them to determine whether or not they'll grant coverage per se to an individual or refuse that individual, even though he or she may not have been insured with that particular company in the past. This probably crosses provincial boundaries as a national thing too, so there is a lot of sharing going on.

Mr. Anderson, I think you said you can't share this kind of information under the bill. I would think that would be almost a showstopper to you if you couldn't proceed with that.

Maybe I'll stop there for now and just say that getting past all of your presentation, boiling it down, with these amendments you're putting forward, are you confident that you're free to operate?

Mr. George Anderson: Yes, we think we would be.

Our original brief had a lot more issues, but these are the two that matter to us. If we got the amendments that we've suggested, I think it's fair to say we could be fully supportive of this bill.

Mr. Eric Lowther: Okay, let's flip the coin over. What if you didn't?

Mr. George Anderson: It would be very tough on our industry. I think it would add to cost. It would be disruptive for customers in a major way. Just imagine phoning up a broker and asking for insurance and being told that the broker can't give it to your wife because someone's not giving consent. If you wanted to drive the car that weekend, you'd have to come down to the office or find some other way. And, by the way, if you want to bind one of your children, the same thing has to happen. This is a completely foreign way of doing business for our companies.

Mr. Eric Lowther: You say today that you haven't had many complaints.

Mr. George Anderson: Correct.

Mr. Eric Lowther: How would I ever know that you were using information about me inappropriately? Is the fact that you haven't had many complaints the only measure in and of itself? I'd never know. For the complaints that you do have, how do people find out?

Mr. George Anderson: We have a code that requires us to disclose to customers who want the information that we have in their files. Usually these come to light in the course of a claim, when people ask us how we got a piece of information. We often end up reminding them that they told us years ago.

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I think the character of the difference between what we do and what many others do is that we only collect information for the purposes of underwriting the insurance contract. We're not out there selling GICs and other products, so cross-mining that information is not something that our companies do outside of insurance products.

Mr. Eric Lowther: Thank you, Madam Chair.

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

Mr. Peric.

Mr. Janko Peric (Cambridge, Lib.): I have some concerns with today's statements. First of all, within your organization, you have a crime investigation through something like a bureau or department. Besides that, does anybody in industry hire private investigators for any purpose?

Mr. George Anderson: Yes.

Mr. Janko Peric: You do. What do you do with the information you get from the private investigators? Do you use that information against your clients in court? Why are you gathering that information?

Mr. George Anderson: Most typically, it's to verify whether the claim is valid or not in the case of, for example, someone who has been in an automobile accident and is supposed to be unable to work.

Randy can speak on this, but in jurisprudence I believe you have to hand over the evidence that you have on the third party to the action at trial date. In these circumstances, we're not allowed to collect, hoard and not share that kind of information. Am I right?

Mr. Randy Bundus: If you intend to use it at the trial, there's a requirement for disclosure of documents and the discovery process. That sort of thing is checked through the judicial process, definitely.

Mr. George Anderson: So there's no case that I have a file here that nobody's ever seen—you know, something from American television.

Mr. Janko Peric: All right.

Now, suppose you received a phone call today from a new customer, you asked him questions over the phone or you asked him to come down to your office or what not, and you then got information. You asked for his age, his driving record and so on. The person might not be honest with you. He might give you the wrong information. He might have a speeding ticket or what not. But you give him a prize and he walks away. He calls from his home, and suddenly you discover that he didn't give you the truth. You disclose to him the information that, oh, by the way, he had three speeding tickets in the last two months. How do you gather that information?

Mr. George Anderson: From the motor vehicle bureau.

Mr. Janko Peric: Okay, so anybody can gather that information?

Mr. George Anderson: Yes.

Mr. Janko Peric: All right.

This is my last question, Madam Chair.

You said your industry does not sell information.

Mr. George Anderson: We don't sell customer lists, that's correct.

Mr. Janko Peric: Okay, if you're a broker and you want to sell your company, if I buy that company from you, then I buy the clients and the files.

Mr. George Anderson: Yes.

Mr. Janko Peric: So you are selling customer information.

Mr. George Anderson: When you sell the company, you sell it intact from one broker to another. The point I'm trying to make is that we don't go down these lists in the brokerage community and say we're going to sell them to a bunch of direct marketers or give them to a bank. They stay inside the corporate entity of the brokerage.

Mr. Janko Peric: With fraudulent activity, could you be a little bit more specific?

Mr. Randy Bundus: By fraudulent activity, the reference is to activities that may not meet the standards for a criminal prosecution, but that are sufficient that they would amount to fraudulent activity to allow the insurer to appropriately deny the claim within a civil court case.

Mr. Janko Peric: For instance?

Mr. Randy Bundus: An example might be that there's not proof beyond a reasonable doubt that the house was burnt down at the behest or at the request of the insured. However, on a balance of probabilities, there's evidence to show that the individual actually burnt the house down for the purpose of collecting insurance. The standard of proof for criminal conviction is much higher than the standard of proof for the civil action in which the insurer was denying the claim.

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

[Translation]

Mrs. Lalonde, you now have the floor.

Mrs. Francine Lalonde: Good morning. Thank you for your presentation. I have already read your entire brief, so I had a few surprises when I listened to your presentation this morning. I am sure you know what I am talking about.

• 1035

The brief, which was dated March 1999, said the following:

According to a constitutional expert that we consulted, the Constitution does not allow the federal government to enact Bill C-54 in its current form by invoking its jurisdiction over trade under the Constitution.

You were saying that Mr. Richard Owens shared this view point and you added:

Furthermore, even if the federal government has jurisdiction over the regulation of international and interprovincial trade, the regulation of interprovincial trade is obviously a provincial matter.

Then you recommended that the government delay passage of the bill and try again to come to an agreement with the provinces. However, I see that this recommendation is no longer found in the short version of the brief that you submitted this morning.

[English]

Mr. George Anderson: I suppose, to answer that most directly, there will be others who dispute these matters in due course, I am sure. We don't feel able constitutionally to decide this issue one way or the other definitively. I am sure at a certain point there will be court challenges. Federal and provincial legislation are often at odds, but in our country, as long as they work together, they go unchallenged.

I'm thinking, for example, of federal activity in the field of housing, which for 40 years after the war was a very robust part of the federal government's activities on the social housing side. Constitutionally and strictly speaking, it was not permitted under the British North America Act, but because it was working to the benefit of the provinces and the federal government, no challenge was ever made.

This might happen with this bill if it's properly positioned and consulted with the provinces, and I assume one of the reasons for having a three-year period is to make sure that coordination takes place.

[Translation]

Mrs. Francine Lalonde: Your answer is somewhat different from the contents of your brief. This is your brief, isn't it? I hope I'm not reading some other organization's brief. I suppose I could have said that, but I read that and I was pleasantly surprised, because other organizations that appeared said that two sets of rules or regulations could cause companies problems, particularly insurance companies.

[English]

Mr. George Anderson: Yes, I don't deny that for a minute. In fact, we have for years been talking about the 11 solitudes when it comes to regulatory behaviour in Canada, and trying very hard to get governments to work together to create a climate where you know what the rules are, irrespective of where you're operating a business in Canada. We've had some success at that. The Atlantic provinces have just drafted one insurance bill for those four provinces. It's something of a breakthrough, at our behest. And yes, we continue to support that kind of activity.

I thought you were asking me if we were going to be at the forefront of mounting a constitutional challenge to this bill. We're not going to be.

[Translation]

Mrs. Francine Lalonde: No, I wasn't expecting you to be at the forefront of a challenge. However, I did understand you to say that you wanted us to come to an agreement before the bill is passed so that we can avoid having to deal with challenges that could halt implementation of the legislation. In some cases, it's better to leave well enough alone.

Mr. Mark Yakabuski (Vice-President, Government Relations, Insurance Bureau of Canada): The Minister himself has already said that the government was planning to allow itself three years before the Act comes into effect throughout the entire country and applies to all businesses in the land. In our opinion, this period should indeed be used to come to an agreement with the provinces.

Mrs. Francine Lalonde: None of the provinces have passed legislation, except for Quebec. And yet, the federal government claims that its legislation would apply there as well. As a result, since Quebec has made the first move and done its homework, it would be penalized, as would its companies and its citizens.

Mr. Mark Yakabuski: The government has already recognized that Bill 68 in Quebec was similar to the bill that is before you today. I think this may be one way of avoiding jurisdictional conflicts. Obviously, we have to use this three-year period to ensure that things unfold this way.

• 1040

Mrs. Francine Lalonde: I'm sorry, but I don't understand the bill the same way you do when it comes to the three-year period.

[English]

The Chair: Thank you very much, Madame Lalonde.

Mr. Lastewka.

Mr. Walt Lastewka (St. Catharines, Lib.): Thank you, Madam Chair.

First of all, I thank the witnesses. I have three questions that I'm going to try to get in here.

You talked about the sectoral code. I get the impression what you're saying is Bill C-54 prevents you from having sectoral codes. Is that yes or no?

Mr. George Anderson: It prevents us from having the sectoral code that would be operational for our industry. In other words, what our code does is take the ten principles of the CSA code and turn them into an operating document for our industry; most particularly, it clarifies when implied consent may be used.

Mr. Walt Lastewka: What you just said is you want a sectoral code to be less than what Bill C-54 applies.

Mr. George Anderson: No, we would argue it's more than.

Mr. Walt Lastewka: Then how does Bill C-54 prevent you from having that central goal?

Mr. George Anderson: Because in our view it's unclear as to whether or not implied consent is appropriate in certain defined circumstances.

Mr. Walt Lastewka: Let's use the example of when you talked about buying a vehicle from the dealer. I would take it that you had gathered information on the previous owner of the vehicle, all you needed for whoever was going to be insured on that vehicle. Correct?

Mr. George Anderson: Sometimes, yes. Unless they're buying a vehicle for the first time.

Mr. Walt Lastewka: All right. If they're buying it, they're trading in their old vehicle for a new vehicle, you've collected all the information and you have consent on that. The question becomes of changing from one vehicle to the next vehicle. Or do you mean to have your example only when a new vehicle is being purchased?

Mr. George Anderson: No, what you seem to be suggesting is that when you change vehicles the consent is already there and you can carry on.

Mr. Walt Lastewka: If you received that consent in the proper way.

Mr. George Anderson: Our understanding would be that the consents we have already received would be insufficient now under this bill because they're implied.

Mr. Walt Lastewka: On your recommendation for paragraph 7(1)(b) where you've added the word “prevention” in front of “detection”, what are you trying to get across under prevention that's not covered under detection? Be specific. What are you adding in by using the word “prevention”?

Mr. Randy Bundus: Prevention will deal with situations before the fraud can even happen. Once the fraud has happened it may be too late. Once the system is in place that we can avoid even writing the policy on which the fraudulent activity would be conducted, that is how we would be able to prevent the fraud taking place in the first place. If all we can do is detect the fraud after the fact, we're concerned that it is going to be a little late in the process.

Mr. Walt Lastewka: Couldn't you also hide behind the word “prevention”, because everything in your business is prevention?

Mr. Randy Bundus: We wouldn't hide behind those words. Our purpose is to verify information that's collected, for the most part. The information is provided at the application stage. We're there merely to verify that the information is accurate to avoid the fraud happening to us in the first place, in addition to being concerned with frauds that happen on the claims front after the fact. So we're concerned on two fronts, at the application stage and at the claim stage. We'd want to prevent fraud at the application stage and detect and prevent at the claim stage as well.

Mr. Walt Lastewka: Thank you, Madam Chair.

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

Mr. Jones, please.

Mr. Jim Jones: In the event that this bill is enacted, what would you have to do differently in your business from what you do today?

• 1045

Mr. George Anderson: Again, that all goes to the question about the extent to which implied consent is in the minds of the drafters of this bill at some point in its development. If it is in the minds of the drafters that implied consent is allowed under CSA, under certain defined circumstances, we don't have an issue. If implied consent is not contemplated in this bill, we would have to change the basic nature of the way we do business. We would have to get consent from all customers who do business with us—not only the person who applies for insurance, but everybody on that car. That would expand the volume of work and the complexity of what we do to an enormous degree.

May I remind you, we are not big companies. Sure we have some big national companies. But by and large, these are small companies with reasonably high expense ratios. The cost of complying would be enormous, and I fear we would never be able to, despite our best efforts. You can only chase people so long. Our experience is that if people don't get insurance, they'll drive the car anyway.

The Chair: Mr. Yakabuski.

Mr. Mark Yakabuski: We've said for some time that we've encouraged the government to take an initiative on the privacy front. If you look at our briefs to the government on the financial sector review process—going back two and a half years, for example—we've said this consistently. That's why we participated very much in this CSA code development. We were of the expectation that the whole process was to encourage the development of industry sector-specific codes that respected the CSA guidelines, that had to be approved by a quality management authority of some sort—as our code has been—that those codes would be recognized in concert with the CSA code, and that some of that would be put into a piece of legislation. We said that was a good idea and that we would go forward with that at a hundred miles an hour. But what we're finding is that....

This is the problem we have with the Bill 68 in Quebec, for example. Remember, Bill 68 predates the development of the CSA code. What you have set in law are principles that sometimes just don't work in the practical application of a given company and a given sector. The flexibility of the CSA code is that it can be adapted. You don't depart from the code, but you adapt it. If you can get the recognition of industry-specific codes in conformity with your schedule 1, we think that's an ideal solution. That's why we think there's room to give maybe a little bit more of a push to what's already in the bill here.

Mr. Jim Jones: Okay, thank you.

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

Mrs. Barnes.

Mrs. Sue Barnes: Thank you, Madam Chair.

I'd like an answer to this from whoever is the most familiar with the everyday occurrence of dealing with either a household accident file or a car accident file, when there's an injury to a third party who is suing. In this situation, I just want to establish that it's routine to go after the medical file of the person who is coming after you.

Mr. Randy Bundus: It is routine to do that, and that is always done with the written consent of the individual. As insurers, we will not do that without written consent, because it's sensitive information.

Mrs. Sue Barnes: That's a given.

All right, with this medical file that you go through, are you just saying somebody's complaining because he has a bad back injury and that you only want medical data pertaining to the back injury? Or do you get every iota of data that's in that medical file?

Mr. Randy Bundus: Under the legislation, we're heavily regulated on that particular front at the provincial level. We are restricted to obtaining reasonable information. It has to be related to the injury. You can't be seeking things on a wild goose chase, if you will. You can't be seeking information that's unrelated to the injuries.

Mrs. Sue Barnes: Okay, then I'll pose a further follow-up. Would one of your normal questions be that you'd like all the medications a certain individual is taking?

Mr. Randy Bundus: If it was relevant to the injury, I see no reason why not. You also have the right to object as well as a claimant.

Mrs. Sue Barnes: Yes, but we have some health people coming next week, so I just want to put some contextual stuff on the table.

Would you ever go further and say the doctor has prescribed X but you don't really know if the person's taking it to ameliorate symptoms? Do you ever go on to drug stores or prescriptions? Do you ever pursue it to see whether or not somebody has actually obtained prescriptions?

Mr. Randy Bundus: We'd ask the question if it was relevant. It would depend very much on the nature of the claim. It's difficult to give you a concrete answer in a hypothetical context, because the course of conduct that the claims examiner would follow is quite fact-specific.

• 1050

Mrs. Sue Barnes: If there was information in that medical file.... Say somebody wanted to be very helpful because that person obviously wanted to get the claim paid. The medical doctor says to send the file you've asked for—the medications, tests and everything. Inside that medical file was, say, a test for AIDS, a check for HIV, or a test that proves that somebody had a debilitating illness that you may not have been aware of that is not related. What would happen to that type of information when you're exchanging the medical file?

Mr. Randy Bundus: Generally we wouldn't exchange that sort of information among insurers. It's not relevant for the property and casualty side. For the life side, perhaps it may be of more interest. But for our industries—

Mrs. Sue Barnes: But is it in the file?

Mr. Randy Bundus: If it's in the file...?

Mrs. Sue Barnes: Yes.

Mr. Randy Bundus: If your question is how we would relay that information back to the individual, we would normally do it through the individual's medical practitioner. I see no reason why we would share it with other insurers at all. It's not really relevant. I don't see why they'd even ask for it.

Mrs. Sue Barnes: I agree it's not really relevant, but it could easily become part of the file.

Mr. Randy Bundus: It could become part of the file, but the whole of the file is not necessarily shared with other insurers, and it's only with consent. We're very careful with written consent with respect to medical.

Mrs. Sue Barnes: In your organizations, is there a difference between information that relates to wealth and information that relates to health? Do you have different standards?

Mr. Randy Bundus: Again, on the wealth side, for the type of—

Mrs. Sue Barnes: Wealth just being—

Mr. Randy Bundus: I appreciate that.

For the type of insurance that we write, in terms of the wealth factor, I don't know how important the criteria become.

Mrs. Sue Barnes: No, my question is more directed at whether you create some sort of higher standard respecting information about the health of an individual over any other type of data that could be in your files. Is there any different standard?

Mr. Randy Bundus: We will not seek income tax information on an individual without that individual's written consent.

Mrs. Sue Barnes: That's not my question.

Do you want to answer?

Mr. Mark Yakabuski: First of all, under auto policies, we generally don't have the right to ask about your income. It's important to know that in the property and casualty insurance sector, first of all, we don't have very much access to income data. We have to know the value of your house, but that's it.

Mrs. Sue Barnes: That's not my question.

Mr. Mark Yakabuski: But on the medical front.... I think it's important to establish that. There's not a wealth of personal information with respect to personal wealth in our companies. That said, medical information is treated clearly on an extremely personal basis. It is not shared except under the most stringent of conditions.

Of course, that reflects a certain part of our policies, such as accident benefit policies on the automobile side. We have all kinds of other lines of business—commercial liability, house insurance—where that would not come into play, of course.

Mrs. Sue Barnes: But there are the situations in which people fraudulently claim injury or the extent of their injury. I can tell you for sure that I've had insurance investigators come around my house asking me if I watched my neighbour limp long enough or if he was picking up heavy things in the backyard. What else do you gather?

Mr. Mark Yakabuski: I think Mr. Peric asked a similar question. We do employ investigative techniques as the circumstances require. Again, though, that information is made available to prosecutors at the time, if it goes to court.

Mrs. Sue Barnes: That's fine. Thank you.

The Chair: Thank you very much, Mrs. Barnes.

We do still have a few minutes, so I'll see if there are some brief questions.

Mr. Lowther, do you have a brief question? No? Do you, Madame Lalonde?

[Translation]

Mrs. Francine Lalonde: You are asking us to add a paragraph (d)1) to subsection 27(2) so that organizations that have a code would be recognized under the Act, and at the end of the amendment, you say:

...that the provisions of division 1 apply, with the necessary modifications, to such organization or class of organizations.

I haven't read your code, but what does it say about citizens' rights? Does your code mention these rights? As you may gather, I find the recourse provided for in Bill C-54 to be totally insufficient. I don't know what your code contains.

Mr. Mark Yakabuski: Our code was approved by a CSA organization. Consequently, it fully complies with the Canadian Standards Association Code. Of course, it provides for all kinds of citizens' rights, particularly the right to check files and to ensure that they are accurate in all cases.

• 1055

Our code even contains a process that is not found in your bill, namely an arbitration process before one appeals to the final authorities. All in all, we tried to settle the case as quickly as possible, because it's usually in the person's interest for the case to be settled quickly.

So we believe that the provisions found in our code are very beneficial to citizens, and this was recognized during the process of implementing the CSA code.

Mrs. Francine Lalonde: Well, I accept your answer, but you haven't responded about citizens' rights.

Mr. Mark Yakabuski: A set of rights are found within our code, specifically on page 5 of the English version, and on pages 6 and 7 in the French version.

Mrs. Francine Lalonde: Do we have it?

Mr. Mark Yakabuski: Indeed, our code says that all policy holders have the right to review and correct all personal information held by insurers. The person himself can check all information held by the insurers.

The Chair: Thank you very much. Thank you, Mrs. Lalonde.

[English]

Mr. Shepherd.

Mr. Alex Shepherd (Durham, Lib.): I'm still trying to get my head around this problem of consent. In your proposed amendment, you use the words “substantially reflects”. Presumably you are trying to get a carve-out for the basic legislation so that it will apply for you, although “substantially” is a qualitative word.

I guess what I'm sort of missing in my head.... We use the example of a vehicle. Don't you essentially insure the driver, as opposed to the car itself? Why can't we get specific consent for an insurance policy?

Mr. Randy Bundus: Most of the policies in this country insure the owner of the vehicle, not the driver. On your particular vehicle, I suspect it's an owner's policy that is insuring your vehicle. Consequently, to determine the risk that the owner's policy presents to the insurer, a lot of information is required, such as who is going to drive the vehicle.

Mr. George Anderson: And in what circumstances.

Mr. Alex Shepherd: Let's do a real-world example. I do that and I have that all set up with my insurance agent. I go out and buy a new car today, I phone him up, and I say I added another car to the policy. He already has all my information, which I consented to at one time. Why is specific consent such a problem for you?

Mr. Randy Bundus: That assumes that the consent obtained prior to this legislation coming into effect will be effective for the purposes of this bill. We're going back in time. Prior to the bill being in force, a certain course of conduct was done where we didn't have expressed written consent, if you will, in a lot of cases.

Mr. Alex Shepherd: Is that your prime concern, the grandfathering aspect? If I set up a new policy today because I haven't been insured with this company before, clearly the company will make me fill out forms and give specific consent to certain information. That's not a problem, correct?

Mr. George Anderson: That's not in all cases. That's the thing. There's still a good amount of insurance work. In fact, I just put some builder's insurance on a house that I'm building. I did that over the telephone. No forms were exchanged or signed other than the broker saying to me that I was covered. He sent me a letter confirming that a couple of days later. I was never asked to consent to anything having to do with the information I gave him, although I clearly understood that the information I gave him would be checked. There were no forms passing back and forth in any circumstances.

Mr. Alex Shepherd: And you were never insured with that person before?

Mr. George Anderson: Never. That's the way the business is done in Canada, and it has been for a long time.

• 1100

So just to reinforce the point, it may be the case that the kind of consent you now seek in this bill was not acquired for these millions of policyholders in the past. It may have been done very much the way mine has just been done. Many of our customers have never seen their brokers' offices and wouldn't have a clue where they are.

Mr. Alex Shepherd: I can relate to that, but we do the same thing over the Internet. We require some form of consent. You're saying we could have verbal consent, and that's still a form of consent.

Mr. Mark Yakabuski: Yes, we do use oral consent on occasion as well. We think the nature of our business.... The information is not used in the broad way that I think this bill contemplates and for the purposes that it contemplates. We use the information for the purposes of underwriting the insurance contract. We're not interested in selling it. We're not interested in looking through those customer lists to try to see if there are other non-insurance products that people can buy. Our companies deal in this one product line. It doesn't have the same cast, if you like, as some of the other organizations.

The Chair: Last question, Mr. Shepherd.

Mr. Alex Shepherd: Is yours a problem with verbal consent?

Mr. Mark Yakabuski: What about the case of people making changes to an existing policy about a third party? For example, say I want to add someone to my policy or I want to take someone off. They might live a good piece away. It's very difficult to get express consent in that circumstance, isn't it? These situations will always arise in our business.

The Chair: Mr. Jones? No? Mr. Lastewka, did you have—

Mr. Walt Lastewka: I want to go back to my earlier questions, just to follow up.

The Chair: One question, please.

Mr. Walt Lastewka: In schedule 1 of the legislation, paragraphs (c) and (d) of clause 4.3.7 say:

(c) consent may be given orally when information is collected over the telephone; or

(d) consent may be given at the time that individuals use a product or service.

What you're saying today is that this is not sufficient.

Mr. George Anderson: There are circumstances in which we would not be able to get oral consent from a person who's on that policy because he or she is nowhere near the transaction at the time it takes place. I would give you the example of having a child at university. You want to put that child on your policy. Is it sufficient that the owner gives consent and gives the information of the child to the insurance company without that child's express consent?

Mr. Walt Lastewka: It's my policy.

Mr. George Anderson: Yes, but we have to check the information of the young driver, who may have in fact racked up several tickets and speeding offences or whatever. That materially bears on your risk if you're letting that person drive the car, and that affects the rate.

Mr. Walt Lastewka: I'm giving you consent about my policy.

Mr. George Anderson: But you're also giving consent for us to look at the information of a third party, your son or your spouse or your mother-in-law. Is that contemplated in this bill, or is it not? That's our question.

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

Just to clarify a couple of things, Mr. Anderson, we appreciate your brief and we appreciate your taking the time to look at the amendments. I just have a bit of a concern as I look at one of your proposed amendments with regard to having an organizational privacy code. Part of this bill talks about there being possible changes to schedule 1, or possible amendments. Are you suggesting we would be able to change your organizational code as well?

Mr. George Anderson: You'll have to ask me that question a different way. I don't understand it. Maybe one of—

Mr. Mark Yakabuski: Any changes made to our code would have to be approved by the auditing authority, whether that's the CSA, a body of the CSA, or whatever.

The Chair: That would leave us with the fact that the very premise of this whole bill is the CSA code.

Mr. Mark Yakabuski: Absolutely.

The Chair: But if we have to go to you to get your code changed before we can change the rules, that would leave us with no control over the basis of the law when it comes to your organization. That leaves us with a bit of difficulty here. As a committee, we have some difficulty with the fact that it's by Order in Council and not through this committee that we're changing schedule 1 as it is. To further impose on us a rule that would say it's up to the organization.... I'm not saying there shouldn't be some room for the ability to look at organizational codes, but to actually enshrine in legislation that your code is paramount over the CSA and that we have no control over what's in your code....

• 1105

Mr. Mark Yakabuski: It certainly would not be paramount. Any changes to our code would have to be approved. Moreover, if you made any changes to schedule 1, they would apply automatically to our code.

Mr. George Anderson: Just like tax changes apply to our corporate tax behaviour.

The Chair: I just raised it because, as you are aware, there are some concerns from this committee about the proposal right now that schedule 1 would be amended by Order in Council, versus returning to this committee in the legislative process. That's been raised a few times by a number of witnesses and by some members of this committee.

I appreciate the concerns you've outlined. I think you should be aware it's the presumption of the majority of members of this committee that once you've asked for consent to do something, such as have a policy, you have it.

On one further point of clarification from my own personal example, my auto insurer is also my life insurer, so which code does he follow?

Mr. George Anderson: When he's writing your life insurance he follows the life code, and when he's writing your car insurance—

The Chair: What does he do with my information, I guess is a better question, based on the different codes? I just throw that out because there are a lot of difficulties as we try to resolve and figure out who does what.

I appreciate your taking the time to prepare the detailed brief, put forward your own code, and take a look at the amendment. It's very appreciated by this committee, and we thank you very much for being with us.

Mr. Mark Yakabuski: Thank you, Madam Chair.

The Chair: We have another group of witnesses, so we will suspend for two minutes while we change places. I remind members not to leave, as we have more witnesses with us.

• 1106

• 1113

The Chair: If I could ask the members and witnesses to take their seats, we're going to resume the meeting.

We now have before us three individuals: Professor Jacques Frémont, a constitutionalist from the Université de Montreal; Mr. Roger Tassé, a partner from Gowling, Strathy & Henderson; and Professor Claude Masse, a professor of law from the Université du Quebec à Montreal.

I'm very pleased to welcome all three individuals. Due to the short notice about this hearing, I don't believe any of our witnesses have prepared statements, but everyone is going to be giving us an oral statement for about five minutes.

With that, I'll begin with Professor Frémont.

[Translation]

Professor Jacques Frémont (Constitutional Expert, Université de Montréal; Individual Presentation): Thank you, Madam Chair.

[English]

The Chair: Excuse me. Yes, Madame Lalonde.

[Translation]

Mrs. Francine Lalonde: I would imagine that in light of the topic, the presentation could go beyond five minutes, as it frequently happens in...

[English]

The Chair: Madame Lalonde, as the chair of this committee, and with all due respect to the numerous witnesses that we've had before us, I have been very generous in time allocation. I will try to keep them to five minutes, but I will remind them at five minutes that their time is up. I will not allow them to go on for ten or fifteen minutes, because there are many questions that people may wish to ask. I also have to be fair to all the witnesses before this committee by treating them in the same fashion. I apologize if that bothers you.

Professor Frémont.

[Translation]

Prof. Jacques Frémont: Believe me, Madam Chair, it is very difficult for a university professor to keep to five minutes.

I would like to thank the committee for inviting me. I would particularly like to tell the committee about the constitutional issues or impact of this impact of this bill.

• 1115

Last August, the Supreme Court of Canada reminded us of the importance of a number of principles that form the very basis of our Constitution and our constitutional law. This morning, I would like to submit to the committee that this bill clearly violates two of the most fundamental principles of the Canadian Constitution, namely, the principles of federalism and democracy. I will briefly discuss each one of these principles.

First of all, I would like to say that in my opinion, Bill C-54 violates the spirit and the letter of the division of powers as we must understand it in this country. It bears witness to the federal government's arrogance and is an intrusion in provincial areas of jurisdiction.

In my opinion, Bill C-54 is based on a false hypothesis, the hypothesis that electronic trade is a federal area of jurisdiction. Nothing could be further from the truth; in my opinion, this is a shared area of jurisdiction, where both the provinces and Ottawa should have a say. In terms of jurisdiction, electronic commerce is similar to inflation in 1970s, or the environment in the 1980s. A single order of government cannot claim to have full jurisdiction over such areas.

If it were recognized that the federal government has full jurisdiction over electronic commerce and it assumed this right, this could affect the constitutional balance of Canada in its entirety, as the Supreme Court once said in another context. I think you'll agree with me that this is certainly not a desirable outcome.

The problem with Bill C-54 is that its scope is far too broad. There would be no problem if it just covered the federal public sector; nor would there be any jurisdictional problem if it just covered the federal private sector. We agree on that point. On the other hand, the bill applies to the provincial private sector, and that's where it clearly extends beyond federal jurisdiction.

Consequently, from a constitutional point of view, I have two concerns about this bill. First of all, in principle the protection of privacy is basically a provincial area of jurisdiction, and I think that most constitutional experts will agree with me on that point. Indeed, privacy safeguards do not apply solely in the public sector but also in the private sector, beyond the constitutional standards that are applicable. In Quebec, for example, the Quebec Code civil applies in matters relating to property and civil rights, along with the federal and Quebec Charters.

The common law of electronic commerce cannot be federal law. I will be speaking to that issue in greater detail later on in my presentation. All transactions that will be done over the Internet or in other virtual spaces cannot be governed solely by the federal government. The common law in this country remains provincial law. Since I am from Quebec, I think that we would be quite right to be very concerned if ever the common law applicable to electronic commerce were to become a federal area of jurisdiction. If that were to happen, we would be out and out supplanting the Code civil as the basis of Quebec's legal system, a characteristic that is recognized by this Parliament.

One could retort that under paragraph 27(2)(d), Quebec would not be subject to Bill C-54. That is in no way reassuring. This exemption, because that's what it is, is almost entirely at the government's discretion. It would be granted by order. This is certainly no way of preserving Quebec's areas of jurisdiction and reassuring us.

My second concern about the division of powers is that the bill goes well beyond the tests that the Supreme Court of Canada has suggested. I can elaborate on this point if you are interested. Any attempt to justify this under the powers granted pursuant to subsection 91(2) relating to trade and commerce would in my opinion be a misinterpretation of the City National Leasing ruling. This misinterpretation, along with the new interpretation of the Supreme Court regarding preponderance, means that in business matters, if we were to keep the approach of this bill, we could out and out strip the provinces of authority to regulate in the areas of trade and commerce as soon as they include some aspects of electronic commerce. This would be a power grab, a full-fledged attack on provincial jurisdiction over economic matters.

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The Supreme Court is telling us that if the federal government legislates and the Act is upheld, provincial law should yield to a new conception of preponderance. For all practical purposes, provincial powers in the area of commerce could be supplanted in the area of privacy protection, using the excuse that the federal government is regulating electronic commerce.

Finally, I said that there was a second principle that comes into play in this particular case; namely, the principle of democracy. It's absolutely extraordinary that the substance of the bill, the entire content of the bill, is found in a schedule to the Act, and that this schedule can be amended by a mere order in council. Orders in council are perhaps the lowest way for a government to legislate. It's not even done by regulation, but merely by order in council. So we find ourselves with standards set by the industry for the industry, standards that will be incorporated in the Act and will henceforth govern the protection of privacy in Canada. It's absolutely unheard of.

If you don't mind, I would like to add that I think it's petty, since the CSA standards were an excellent idea in of themselves—one can only hope that the industry wants to self-regulate—that the government, or government regulator, is grabbing the standards and adopting them in a clumsy and heavy-handed manner. In my opinion, that's very harmful.

In conclusion, as I am sure you realize, I think that the constitutional validity of this legislation will be challenged. It's very clear. It's also very clear that this legislation will be brought to the attention of the Supreme Court of Canada. Either the Supreme Court will recognize that the legislation is not constitutionally valid, which I think will come as a shock to Canadians and will represent a step backwards for the protection of privacy, or the Supreme Court will rule that the legislation is constitutionally valid, in which case we will have an excellent example of the total lack of flexibility in the new operating mode of federalism, an arrogant and imperialistic mode. This example will be put to good use during the next referendum in Quebec. It will confirm once again that Canada is unable to escape sterile jurisdictional wars. It will demonstrate that the Parliament of Canada can do pretty much whatever it wants to provincial areas of jurisdiction under the Constitution.

Finally, I would say that the case—as an observer of the Court, I deeply believe that—because of the democratic deficit...

The Chair: Professor Frémont...

Prof. Jacques Frémont: I would like to finish my sentence, please. I was cut off right in the very middle of my sentence; at least let me finish it off.

I was saying that the Supreme Court of Canada will not look upon the case sympathically because of the shameless violation of democracy found in this bill, that is to say, the rule by decree.

Thank you, Madam Chair.

[English]

The Chair: Thank you very much for that opening statement, Professor Frémont.

I'm now going to turn to Mr. Tassé.

[Translation]

Mr. Roger Tassé (Associate, Gowling, Strathy & Henderson, Individual Presentation): Thank you, Madam Chair. First of all, I would like to tell you how pleased I am to appear before you. For me, this very committee room holds lasting memories of past debates and hearings of the Beaudoin-Dobbie committee.

I am therefore happy to share with you my views on the constitutionality of this bill. You will eventually realize, if not during the first part of my brief, that, based on a different approach, I have arrived at very different conclusions from those expressed by professor Frémont, who has just spoken.

I will first deal with the nature of Bill C-54. What it proposes essentially, is to regulate the use of personal information in commercial transactions. This would apply to electronic commerce as well as to any other type of commerce, to paper commerce, the paper society, the paper transactions. This is essentially the aim of such a regulation.

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And what is the objective of this bill? It seems to me that it is necessary to reassure Canadian consumers when they give personal information to businesses with which they are dealing. This reassurance is necessary; it is as important to businesses as it is to... When we tell Canadians that their personal information is protected, we are telling them that they are entitled to their privacy.

Therefore, both elements come into play, that is: to establish confidence in the market through protection of personal information communicated to businesses with which Canadian consumers come into contact. Both aspects are related.

However, I would say that the ultimate aim of the legislation is to give Canadians confidence in the market, especially in the era of electronic commerce. Studies have shown, not only in Canada but elsewhere, that the protection of privacy is an element that is essential to create a climate of confidence which will allow users to trade not only through electronic means, but also through other means, because, in practice, both are combined: electronic commerce and what I would call documentary or paper commerce.

I note that this is a broad issue of national importance. It is something that is of concern to all Canadians and to the economy as a whole. It does not involve one particular sector of the economy, but rather all of the Canadian market. For this reason, it would not be possible for the provinces, within the present constitutional context, even jointly, to establish rules which could properly regulate the use of personal information so as to satisfy present and future requirements.

If we want the promise of electronic commerce to apply in this country, the promise of a greater productivity, of greater competitiveness, of a greater choice for all consumers at a lower cost, then this confidence must be clearly rooted amongst Canadians.

I believe it is necessary for Parliament to intervene, in co-operation with the private sector and with others levels of government in Canada, to ensure a global framework which will meet the objectives I have just mentioned.

Therefore, this measure seems justified and constitutional pursuant to clause 91(2) of the Constitution, that is the regulation of trade or commerce for the entire country.

Contrary to what professor Frémont maintained earlier, it seems to me that the 1989 Supreme Court decision, in the case of General Motors, and the criteria stated in that decision are satisfied here. It is a regulation dealing with an aspect of trade that applies to all of Canada, a regulation that respects the criteria that were set out in that decision.

That is all I have to say for the time being. I would like to have an opportunity, Madam Chair, to return later to certain points that were put forward by Professor Frémont.

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

Mr. Masse.

Mr. Claude Masse (Law Professor, Université du Québec à Montréal; Individual Presentation): Thank you, Madam Chair.

I was asked to speak for five minutes, I will be only slightly faster than my colleague Professor Frémont. I heartedly share the opinions that he expressed in his presentation. So I will adopt his brief. I will not repeat what he said because I think that he was eloquent, and reflected the positions that we have held for some time on this subject.

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I will identify myself. I have been a university professor for 25 years, as well as a former president of the Quebec Bar Association; I participated very actively in the drafting and adoption of the Consumer Protection Act which is now almost 20 years old. I was closely associated, in the final phase, with the drafting and adoption of the Civil Code in Quebec.

Therefore, the aspect which is of concern to me here—I won't enter into the constitutional considerations—involves the protection of privacy as well as of the consumer. Having carefully read Bill C-54, this regulation, or this type of voluntary standard which will be given a legal connotation through a schedule, I can tell you it is not strong enough to protect consumers. It is chock-full of loopholes for businesses. It is largely based on a completely outdated approach to consumer protection, and any recourse is practically non existent. As far as I am concerned, this would clearly represent a step backwards for Quebec.

For all intents and purposes, consumers are used, in this case, as a pretext and as hostages for a massive intrusion by the federal government in an area of Quebec jurisdiction.

In Quebec, the clear effect of Bill C-54 would be, after five years of rather remarkable work by the Access to Information Commission, to add a considerable amount of confusion within a whole host of institutions such as banking services, insurance companies, and many others, which will no doubt prefer the federal law to the Quebec one. The latter is much more serious, much more rigorous, and much more restrictive. It has teeth, and incidentally, is based on the Civil Code.

Therefore, here is my message, Madam Chair: if it works, don't fix it. I believe that the intention announced by the federal government in October and November, which was to exclude Quebec from the application of this Act, should apply. We don't need this Act in Quebec to protect consumers. They are already, inasmuch as possible, well protected by present legislation. I would urge you, honourable members, not to interfere in Quebec's consumer protection. We certainly don't need this type of involvement to help consumers. Thank you very much.

[English]

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

I'm going to turn to questions. I'll remind everyone it's a five-minute round, so if you ask one question and it takes five minutes to answer it, that's one question, one round.

Mr. Lowther.

Mr. Eric Lowther: Mr. Tassé, I want to ask you a question. Certainly you gentlemen have expertise I do not have—perhaps I should—so my questions are going to be fairly basic.

If this piece of legislation goes ahead—

Mr. Janko Peric: When?

Mr. Eric Lowther: —and there is an issue of privacy, and Quebec or any other province has their own legislation that is also in place, which piece of legislation calls the shots? Which one predominates? As the consumer, I want my information protected. Do I go to my provincial legislation, my federal legislation or somewhere in between? Do I pick the one I like? How would that be dealt with?

Mr. Roger Tassé: This is a key question. The way I read this legislation, it provides for a pan-Canadian framework. Professor Frémont just said the federal legislation would exclude the application—if I understood him correctly—of all provincial legislation and would be paramount, but I don't think I'm there. From my reading of the decisions I know he is referring to—because I read a very brilliant exposé he did a year and a half ago at the University of Ottawa—we're not quite there in terms of the jurisprudence and the case law. There may be some indication that the courts might be prepared to move, but we're not quite there.

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My position is that the federal legislation could stand with the provincial legislation because the federal legislation deals with one aspect of activities, the main purpose of which is to regulate an aspect of trade and commerce. The provincial legislation can also stand because it deals with another aspect of the same situation, which is the provincial power to make laws in the case of civil rights.

So what happens if you have these two pieces of legislation and they can't stand together? There is some notion in our case law, in our constitution recognized by the courts, that they can both live, but if there is a conflict the federal law will prevail. So there is a risk that there will be some conflict, but if the Quebec law—which is quite a good law, and Quebec must be commended for what they have done in that regard in the last 10 years or so—or another provincial law imposes more stringent standards, they would prevail.

Having said that, there is flexibility in this legislation that allows for discussion to take place between the federal and provincial authorities. Quebec has in place quite a context and a very commendable scheme to enter into discussions, to ensure the legislation will be administered in a way that is consistent with the provincial law, so they would complement each another.

Mr. Eric Lowther: Mr. Tassé, with the caution of the chair that we only have a few minutes, I want to see if I can paraphrase what you're saying and get this right.

Would it be fair to say the federal legislation would be a kind of baseline, and if there were nothing there it would be the guide; but if the legislation of a particular province went beyond that baseline, it would form the new baseline in that province?

Mr. Roger Tassé: Yes. That's my view.

Mr. Eric Lowther: Okay.

The Chair: Thank you very much.

Professor Frémont.

Prof. Jacques Frémont: I disagree completely with your reading concerning the paramountcy. There are two very forceful Supreme Court of Canada cases: in 1990, the Bank of Montreal v. Hall; and in 1995, Husky Oil, where the Supreme Court very clearly said if there's a general federal scheme that sort of occupies the field, the provincial laws that are otherwise valid lose their effect. That's a very clear statement in Canadian constitutional law now. It was not 15 or 20 years ago, but for the last 10 years it has been clear and well accepted. It will be debated before the court, but from my point of view, it is very clear that the provinces' laws will not apply. They will lose all their effect.

The Chair: Thank you very much.

Mr. Roger Tassé: I'm familiar with the cases to which Mr. Frémont is referring, and I arrive at a different conclusion. There is room here for debate, and I accept that. I respect his view, but I must say mine is different. I think there are some people in Ottawa who would applaud the possibility of having that, but I think that's a misreading of the two decisions Mr. Frémont is citing.

The Chair: I'm going to move on. You'll have plenty of opportunity to answer other questions.

Mr. Lastewka.

Mr. Walt Lastewka: Professor Frémont, do you agree that Canada needs a privacy law?

Prof. Jacques Frémont: Do you want a straight answer?

Mr. Walt Lastewka: I want a yes or a no.

Prof. Jacques Frémont: Yes, Canada very clearly needs a federal privacy law for the federal private sector.

Mr. Walt Lastewka: Do you agree that it will be okay for some provinces to accept this legislation as is, and apply it to their provinces if they wish?

Prof. Jacques Frémont: I would certainly agree that those provinces that do not have privacy codes and would like to adopt, by reference, the federal statute should be able to do so.

Mr. Walt Lastewka: Do you agree that some provinces will have their own laws that will go beyond the federal legislation and be tougher?

Prof. Jacques Frémont: It is certainly a fact that the actual law in Quebec is tougher than what is proposed in the federal legislation.

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Mr. Walt Lastewka: And some other provinces across Canada might do the same.

Prof. Jacques Frémont: They might do the same, of course.

Mr. Walt Lastewka: Under paragraph 27(1)(d) it specifically says “if satisfied that legislation of a province that is substantially similar to this Part applies to an organization...”. Does this not allow the Quebec provincial law to prevail?

Prof. Jacques Frémont: That's not my point. My point is that the government may—I don't have the wording in English—want to exclude some provinces.

I'm not denying this cannot be done. It can be done; it says so in paragraph 27(1)(d). But it is according to the goodwill and judgment of the government of the day. Provinces will be able to be excluded; they will be able to be forced to stay inside. Nothing guarantees that the Quebec government, for instance, will receive an exclusion under that paragraph.

My point is that you have a federal law imposing things on provinces, and you do not let the provinces themselves make the choice to adopt the Canadian law, the federal law, or not. It should be the other way around. It should be open for the provinces to adopt the federal statute as if it were their own, but it shouldn't be imposed upon the provinces.

Mr. Walt Lastewka: Let's move outside of Quebec to other provinces that don't have privacy laws. I heard you say you want provinces to be able to opt out of the federal law.

Prof. Jacques Frémont: No, provinces have to be able to opt into the federal law. If the people in Alberta don't want to have a privacy law concerning electronic commerce, it's their choice; it's the province's choice. It will hinder the capacity of the companies there. It's their choice because it's a provincial responsibility. Commerce is essentially a shared responsibility, but it's primarily a provincial responsibility. Interprovincial commerce is a provincial responsibility.

Mr. Walt Lastewka: All the provincial commissioners that have been here before the committee have agreed in some cases their provinces will be putting in laws and in other cases no, but as privacy commissioners working with the federal commissioner they have no problem sorting out Bill C-54.

Prof. Jacques Frémont: Do you want me to comment on that?

Mr. Walt Lastewka: Yes.

Prof. Jacques Frémont: Do you think they would say they had problems? If they are concerned about privacy laws, it's perfectly normal that they are pushing in the same direction.

What I'm concerned about, over and above privacy, is what will be left of provincial jurisdiction over commercial matters once this bill is passed.

Mr. Walt Lastewka: Thank you, Madam Chair.

The Chair: Thank you, Mr. Lastewka.

Mr. Tassé.

Mr. Roger Tassé: I just want to comment on the last point Professor Frémont made. I think he is reading much more into this bill than there is to be found.

The bill talks about the regulation of the use of personal information by companies or enterprises, and provides some guidelines on how this should be done. It doesn't talk about how contracts on the Internet should be framed or who should have jurisdiction when there is a dispute over matters of jurisdiction of the provinces.

This is very clearly directed at a very specific aspect of commerce: the use by enterprises. Today, with the power of technology, we should all be frightened by its use by companies and the selling of private information. From the perspective of the province of Quebec, you can understand how they would be jealous about the very good system that has been put in place.

Parliament's perspective is pan-Canadian. What do Canadians all together need to ensure that the prospects and potential of electronic commerce will materialize for all Canadians, in Quebec and other places? There are matters the Quebec legislation cannot legislate, such as the use of information that originates in other provinces. If we are an entity, and as long as we are a country, it seems to me, based on my reading of the GM case, there is an aspect of trade here that needs regulation. Parliament has formed a judgment that is good for the country. I think it has the power to do it. It doesn't mean it would exclude the provinces.

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In this day and age, it seems to me we cannot read the Constitution of 1867 as stated in 1867. Our Constitution is flexible and recognizes the needs of today. The interdependence is very important and very key. Why can't the provinces and the federal government, within the framework of this bill, through the application of clause 27, come to some agreement as to what would make sense for everybody—for the citizens in Quebec and elsewhere, but also for the enterprises that operate within this country, and not just in Quebec?

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

[Translation]

Mrs. Lalonde, please.

Mrs. Francine Lalonde: Thanks to all three of you. It was very interesting.

My first question will be to you, Mr. Frémont, and I would like to tell you that I was extremely upset when I first read clause 27. Are there any other Canadian laws that include the same right that the Governor in Council is giving itself, that is the right to decide whether a provincial law will apply or not? That is how I interpret clause 27(2)(d). If the Governor in Council is convinced that an Act is essentially similar, he can exclude from the application of the act any organization or category of organizations, any activity or category of activities. Therefore, how do you identify, in brackets, the province?

Prof. Jacques Frémont: I will admit that I did not conduct a systematic investigation of this subject even though it might be possible. If one were to look into it, I would not be surprised to find some mechanisms of this nature in some acts.

Of course this is a provision which, at first blush, might seem generous by stating that Quebec would be entitled to exercise its jurisdiction. But that is not at all reassuring because, as I said earlier, Quebec can be edged out. A simple change in government in Ottawa, or a change of attitude with respect to Quebec legislation, is all that would be required to reject the Quebec law and deprive it of its effect. I don't think that makes any sense. If we had an opting in mechanism, the provinces wishing to apply the legislation could do so. Each party would remain within the framework of its traditional jurisdictions.

Mr. Roger Tassé: On that part of your question, I think that the difficulty with an opting in processus is that some provinces might decide not to have their law apply, but do the opposite, as Mr. Frémont said, and ask for the federal law to apply. There could therefore be provinces and communities where no legislation would exist. The federal law would not apply if a province or provinces decided to abstain. That would mean that some areas of the country might become safe havens. There would be areas where, in fact, anything could be done with the information. That would seem to be very difficult to accept. As long as we feel that there is a Canadian whole and a Canadian market, I feel it would be justified to say that these important rules can apply to everyone. But we could have arrangements, for example with Quebec, that has an Act and an administration that are quite sophisticated; we could say: "We, the federal government, will abstain because in Quebec, there is legislation that satisfies the Canadian objectives."

Prof. Jacques Frémont: If I may, I clearly said in my opening statement that nothing would prevent the federal government from regulating any company that undertakes interprovincial trade. Therefore, only the companies operating within a province might not be subjected to the federal legislation. For example, your local pizzeria that has a database on your preferences, that is whether or not you want fresh tomatoes or canned tomatoes on your pizza, would come under provincial jurisdiction and might indeed not be covered by the federal law. But any company of any consequence which undertakes interprovincial trade could quite clearly be subjected to federal legislation since the federal government is entitled to regulate this type of trade and may choose to do so.

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Mrs. Francine Lalonde: We have heard from a large number of people and I have had an opportunity to meet many of them. There are many aspects of this legislation that do not make a lot of sense.

In Quebec, there was a mobilization of various parties around the Quebec Act in 1994. I read the Owens' report on financial services. He stated that in the absence of federal legislation, the Quebec law applied to all businesses and all activities, including asking businesses to maintain data when it is transferred outside the company.

All of that was beginning to get underway, using common sense for the citizens, when, all of a sudden, the federal Act arrived on the scene. It is characterized by a type of recourse that is far from satisfactory, and that creates two sets of rules. Which law will apply? What door will the citizen go and knock on? Who will he complain to? Will he complain to one place to be told, a few days later, that his complaint cannot be accepted and that he will have to turn elsewhere? Mr. Tassé, do you have any comments on that?

Mr. Roger Tassé: If I were in Quebec—I don't have any advice to give Quebeckers or you, madam—I would focus on the arrangements that are made possible under the legislation. You have a law that goes a long way—and perhaps even further—to reach the objective of the federal bill. It's a law that satisfies the overall objectives that the Canadian government has set for the whole country. And so, if it's such an important concern, it should be given priority. It is for Ottawa, as far as I know. The Minister has talked about this and hopes there would be agreements. Why not, then, make efforts to attempt to reach an agreement that, in a renewed federalism, would meet the expectations of Canadians and Quebeckers?

This could eliminate a host of difficulties of the type you were mentioning for Quebec. But it would assume that the parties would sit down together in good faith and say: "Ok, there is a challenge here that is important to both Canadians and Quebeckers. Why don't we—within this framework that has been recognized by the OECD, that meets many of the expectations of the corporate sector and of Canadians, and that doesn't yet go far enough but is certainly a very good beginning—sit down and make an effort to reach concrete arrangements that will resolve the problems?"

Mrs. Francine Lalonde: You know the question that Quebec asked, namely, why the federal government did not draw inspiration from the Quebec law. There are many, many people in the area of consumer affairs who were surprised. The companies came before us and repeated that they did not have any problems. It's the federal government that started out, no one is sure from where, with the same principles, and created this problem in Quebec without doing anything, as far as I know, to facilitate matters because the bill is far from being clear and simple. So it could not be seen as anything other than encroachment in Quebec.

Mr. Roger Tassé: In Quebec—and I maybe repeating myself here—there is a provision in the legislation to set up a mechanism for co-operation in certain cases. It could be set up between the parties, between the federal government and Quebec.

Mrs. Francine Lalonde: What is this mechanism for co-operation?

Mr. Roger Tassé: Well...

The Chair: Mrs. Lalonde.

Mrs. Francine Lalonde: The Governor in Council is not really a mechanism for cooperation.

The Chair: Mrs. Lalonde, please.

Mrs. Francine Lalonde: Thank you, Madam Chair.

The Chair: Mr. Tassé.

Mrs. Francine Lalonde: This is called facilitating, sir.

The Chair: Mrs. Lalonde

Mr. Roger Tassé: I respect your opinion, Mrs. Lalonde. However, what I am telling you regarding this mechanism for co-operation is that, at the end of the day, when the representatives of the two governments have sat down and reached an agreement on how, in practice, the issues should be sorted out and on how to make it easier for consumers to protect their rights, the Governor in Council will step in to formalize the agreement. Nevertheless, someone has to make the decision.

If Quebec does not reach an agreement with the federal government, the Governor in Council will not act. The role of the Governor in Council is simply to approve, in a very formal way, an agreement that has been reached between the two governments.

The Chair: Mr. Frémont.

Prof. Jacques Frémont: I am not sure that clause 27 contains a mechanism for co-operation. The power that is given to the Governor in Council is the power to exempt an organization or an activity from the application of the legislation. You are assuming that there will be some co-operation beforehand, but you have to agree that there is no mechanism for co-operation built into the legislation.

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Mr. Roger Tassé: I take that for granted.

The Chair: Professor Masse.

Mr. Claude Masse: On the one hand, I think that we should discuss in detail here whether or not Schedule 1 is adequate and whether or not it is actually a tool for consumer protection. It is so full of loopholes, hedges and discretionary powers left entirely in the hands of business that it can only be considered a code of ethics that has the force of law. This is at the heart of the problem.

If, as Mr. Tassé claims, one wishes to truly protect the consumer in an area as formidable as personal information, one must adopt some strict rules and not rules written in the conditional tense that, for all useful purposes, do not obligate a company to show anything more than good faith or that efforts were made. You cannot expect this to produce result.

On the other hand, Madam Chair, Mr. Tassé told us at the outset, and I respect his opinion too, that the bill is concerned only with commercial dealings. In the private sector in Quebec, 90 per cent of information exchanges are clearly out in the commercial sector. So we cannot accept that this is a sideline to Quebec's jurisdiction or to the jurisdiction of other provinces; it's fundamental.

To conclude, paragraph 27(2)(d) does not appear, in my opinion either, to provide for a tool for co-operation, only a discretionary power on the part of the Cabinet, that will be able to impose its will on the Quebec government and on the people of Quebec. Once again, if that is a tool for consumer protection, I think that we are taking some big steps backwards.

[English]

The Chair: Thank you very much.

Mr. Peric.

Mr. Janko Peric: Thank you, Madam Chair.

Professor Masse, you mentioned that you draft legislation. At the same time you agree with Professor Frémont, who, as I understood, has some doubts.

Professor Frémont, you mentioned that this bill's going to be challenged up to the Supreme Court, and then you mentioned that if the Supreme Court decides this or that.... So you still have doubts. Let's put me in your students' shoes. In the classroom I would ask the same question, is it constitutional or not?

Prof. Jacques Frémont: Well, I think it is—

Mr. Janko Peric: Which way?

Prof. Jacques Frémont: It can go both ways, let's be frank. I think it should be declared unconstitutional. I'm not sure I have the greatest faith in the Supreme Court of Canada in that respect, though.

One thing I said at the end of my exposé was that in legislating by annex and modifying the annex by decrees, you do not make a very sympathetic case for the Supreme Court of Canada. This hurts jurists across the country. It is a provocation for judges. It is a provocation for lawyers. It's unbearable in a democracy with a rule-of-law system to legislate by decree, and that's precisely what this bill proposes.

It's on a very important matter—privacy rights for Canadians—and the norms can be changed by a simple decree of the Government of Canada. Not one judge in this country will like that.

So I'm saying this bill...and this probably can be challenged as a—

Mr. Janko Peric: Is it yes or no? You say probably. I have doubts there in your—

Prof. Jacques Frémont: Do you think the law is black or white? You make them, you should know.

Mr. Janko Peric: Zipper my mouth.

Thank you, Madam Chair.

The Chair: Thank you very much.

Mr. Jones.

Mr. Jim Jones: Mr. Frémont, don't you agree that it would be nice to have a law that is consistent right across this country for companies and individuals who want to engage in...from a privacy standpoint, but also from an e-commerce and trade standpoint?

Prof. Jacques Frémont: Well, I agree there should be a law in Canada, but applying to interprovincial and international commerce. What I'm saying is that there is lots of room in e-commerce for local jurisdiction.

The reality of e-commerce in five and ten years time will probably be that most transactions over e-commerce will be of a local nature. You will order pizza, you will order chicken, you will pay your taxes, your local taxes, and so on, through e-commerce. And this has nothing to do with any federal interest in that respect. It's a choice—the law of the land, the commercial law of the land in this country, is still provincial, whatever Parliament says.

• 1200

What I feel is behind privacy—and that's where I probably disagree with my friend Roger Tassé—is that if you accept the principle that there is a federal jurisdiction for privacy concerning private commercial matters in this country, then you agree there is a similar federal jurisdiction for all private commercial matters, which are now under provincial jurisdiction. The principle is where it hurts, where it leads.

This being said, I think it's perfectly legitimate for Canada and for Parliament to say that when you trade nationally, interprovincially, and internationally there is a federal standard that has to be met. And I think this standard is weak. I share Claude Masse's opinion that it's a weird state norm to say some people “may” do, and that the conditional is part of the norm. It's perfectly legitimate to have a federal presence in that, but it cannot be a presence across the board. That's my point.

Mr. Jim Jones: Let's take—

The Chair: Mr. Tassé wishes to respond as well.

Mr. Tassé.

Mr. Roger Tassé: I'd just like to add my perspective to what Mr. Frémont has just said.

I think it should be said that the Supreme Court has in a number of cases very specifically said that the power to regulate trade and commerce under section 91.2 does not extend only to the power to regulate interprovincial or international trade. They have said on a number of occasions that it in fact could extend to intraprovincial situations and activities. That's clear. They have done that.

I think what we have to bear in mind here is the nature of what we're talking about. What are we talking about? We're talking of a new phenomenon, the non-paper world. I don't know whether you have been briefed about what this technology can do and does now. To claim that it would be possible to start differentiating the uses that will be made on interprovincial, intraprovincial, and international bases...it's all linked together. It's one part of a phenomenon. And that's why I think the Supreme Court would recognize that GM does apply, that it has to do with regulation. It doesn't have to do with the other matters that my vieux confrère is mentioning, that if that is accepted, then the federal authorities could start relegislating all kinds of matters.

I think it must be put in context. They would have to have a regulatory scheme. The Supreme Court has declared invalid, unconstitutional, some provisions of the federal law, like section 7 of the Trade Marks Act, saying that's not part of the scheme. You cannot just start legislating in the Trade Marks Act that everybody should be honest, that you cannot engage in fraudulent activities. They said no, no, we can't do that under section 91.2. There are constraints under the section 91.2 regulatory system. There must be somebody who will supervise on a continuing basis.

There are five conditions. I don't want to bother you with them. But there is a framework for how Parliament can use this, and I think the conditions are met here. But to say that because this bill could be accepted it would mean the provinces would not have the power to legislate the matter of contracts and commerce is to me a non sequitur.

The Chair: Thank you.

Mr. Jones.

Mr. Jim Jones: Let's take an example of a Quebec company operating in Ontario. If I bring a complaint against that Quebec company, can I try that case in Quebec, even though it's in Ontario?

Prof. Jacques Frémont: Under the bill?

Mr. Jim Jones: Yes, as it is today. What I'm really driving at is isn't the ultimate goal to have a uniform privacy e-commerce law that can go right across this country—

Prof. Jacques Frémont: Yes. That's precisely my point. If it is the ultimate goal, it means the ultimate goal is far wider than just privacy. It has to do with everything that has to do with e-commerce. And if you say that, in all logic, you have to set aside provincial jurisdiction over commercial matters. And in Quebec, you are setting aside books within the Quebec Civil Code, and you're touching on a very delicate topic.

• 1205

The common law in this country—the law of the land—is still a provincial jurisdiction in commercial matters. And I would dare to say the law of the land still applies and can be applied, whether it's criminal law, commercial law, common law, or the droits civils with the Code civil. Let's try to apply these laws of the land in the field of electronic commerce to see if they work, instead of taking broad approaches that will literally set aside the provincial commercial laws.

I don't want to bother, but I'm bothered by two other conditions my friend Roger has not quoted from the General Motors case. Of course, there has to be a general regulatory scheme, which there is now; there has to be a regulatory agency, which there is now. It's concerned with trade as a whole, and this meets the criteria.

The problem is with the two last criteria in the General Motors case. It says that the federal legislation should be:

of a nature that the provinces jointly or severally would be constitutionally incapable of enacting; and...the failure to include one or more provinces or localities in a legislative scheme would jeopardize the successful operation of the scheme in other parts of the country.

It's in applying these two criteria that the debate in the Supreme Court of Canada will lie. If Alberta chooses not to have privacy legislation, does it jeopardize federal jurisdiction or the way e-commerce will be done in Canada? My answer is clearly no. It will be a choice for Alberta and Albertans, and democratically they will have a word to say in the next election.

It's contrary to competition law, where there has to be one from coast to coast; otherwise, it's impossible to have a decent competition law. It's not the same for e-commerce law because most of the commerce is under local jurisdiction and is done locally.

The Chair: This is the last question, Mr. Jones.

Mr. Jim Jones: But don't you need a law to protect the companies and organizations that operate in every jurisdiction across this country?

Prof. Jacques Frémont: I perfectly agree with you, and I would say where it hurts is that it applies to provincial private law, technically provincial commercial law. If it were not for that, if it were for federal jurisdiction.... And federal jurisdiction is all of the federal government, all the federal bodies, all the federal undertakings and companies, such as the banks, the media, transportation and so on. It could even include interprovincial and international trade. It's perfectly legitimate for Parliament to legislate in those fields.

What I'm saying is that over and above that is where it really creates problems, or might create problems.

Mr. Jim Jones: Thank you.

The Chair: Mr. Tassé, do you wish to respond?

Mr. Roger Tassé: Well, I have a slightly different reading of the principle that Mr. Frémont mentioned. What the court has asked is whether, in effect, constitutionally the provinces, singly or together, could address the issue at hand—the evil that needs to be addressed.

If it were to be found that a single province were left out, that would mean that the concerted effort of the provinces to have a regime that would regulate the matter...then that's not good enough. This would be sufficient for the federal government, on another aspect of the matter, which is the regulation of the use that is made of personal information....

Let's say all of the provinces except one or two enacted legislation like Quebec's. What would happen? Why wouldn't that province do it? Because it might just become the safe haven.

They could advertise themselves. A lot of information would congregate there and could be used without any rules, and that would defeat the purpose, to a large degree, because of the nature of what we're talking about. We're talking about a wireless, no-frontier, non-paper society. Yes, things could happen in one province, but immediately they are expanded and blown up to the rest of the world, in effect. We don't know of any boundaries when we're talking of electronic commerce.

• 1210

The Chair: Thank you, Mr. Tassé. Thank you, Mr. Jones.

Mr. Lastewka.

Mr. Walt Lastewka: Madam Chair, I just want to go back and use Professor Frémont's example about Alberta. We'll pick on Alberta now. They opted out because we allowed them to opt out. The rest of the provinces are in. The small provinces said they are going to in fact adopt the federal law, or they're looking at it anyway.

The Quebec law would not protect information on individuals who left the province and went into Alberta. Correct?

Prof. Jacques Frémont: There is no extraprovincial application of provincial laws.

Mr. Walt Lastewka: Right. So the privacy of Quebeckers is lost in that transaction. Correct?

Prof. Jacques Frémont: A transaction between a Quebecker and Alberta?

Mr. Walt Lastewka: As the information left Quebec on individuals into Alberta, for example, because they have opted out and they're going to be the safe haven, as Mr. Tassé said, Quebec law does not apply. Isn't the privacy of Quebeckers lost in that instance?

Prof. Jacques Frémont: Within Quebec, the privacy of Quebeckers is guaranteed by the Quebec Act. In your question, you presume that there's no such bill. There's no federal law.

Mr. Walt Lastewka: No.

Prof. Jacques Frémont: Because if there is a federal law, it's perfectly proper for Parliament to regulate the transfer of information between provinces.

Mr. Walt Lastewka: No, but you said earlier that provinces should be able to opt out, or it should be an opting-in process. The province of Alberta, in this scenario, has said no.

Prof. Jacques Frémont: They're not opting in. Okay.

Mr. Walt Lastewka: They're not opting in. So now with information from Quebec going into Alberta, the privacy of Quebeckers is lost. Would you agree?

Prof. Jacques Frémont: I don't think we see the scheme in the same way, I'm sorry to say. If there is circulation, if information about Quebeckers is held physically in computers in Alberta—that's probably what you're telling me—then the information will have had to circulate between Quebec and Alberta. That's where there's a handle for Parliament to legislate.

Mr. Walt Lastewka: So on the one hand you're saying provinces should opt in and now you're saying the federal act should—

Prof. Jacques Frémont: No, I'm sorry if I—

Mr. Walt Lastewka: I misunderstood you.

Prof. Jacques Frémont: I'm sorry if I'm not clear. What I'm saying, and I want to repeat it to stress it, is that there's a perfectly legitimate federal presence for interprovincial or international commerce and for interprovincial or international circulation of private information. That's crystal clear. I'm not against that. What I am against is having the means to force privacy norms upon the provinces if they don't want, for their own purposes, to apply these privacy principles.

Mr. Walt Lastewka: But in effect this bill allows the provinces time to put in place their own legislation. I'll use the example of Manitoba, who came here and explained a few things and then are doing open, transparent exchange of communication in the provinces. I think I saw seven or eight sessions that they're having around the province to discuss not only Bill C-54 but how they would want it to be applied in Manitoba and how the Manitoba bill should be. I would take it that after their consultation with Manitobans, they're going to come up with their own legislation, which will be substantially the same as Bill C-54 or even better—tougher, depending on how they view it. I see no law.

Prof. Jacques Frémont: Okay. One of the problems, you realize, is that if this is a weak law—because it will be a weak privacy law, let's face it. What Claude Masse has said is perfectly true. You are creating an information paradise for those provinces where the federal jurisdiction will apply. What is the net result of that for a company in Quebec? They might prefer being submitted to the much weaker federal law rather than submitting to the Quebec law. So you are dismantling privacy in this country and you're discouraging provinces from adopting stronger codes of conduct.

• 1215

Mr. Walt Lastewka: How could we be dismantling if we have nothing now and we're going to put something in?

Prof. Jacques Frémont: In Quebec you will be dismantling, very clearly.

Mr. Walt Lastewka: No. You see, that's where we disagree and—

The Chair: And that's fine. Thank you very much.

Mr. Walt Lastewka: That's fine if we disagree?

The Chair: Yes, you can disagree, and we can move on. I'm going to move on to Mr. Lowther and then Mr. Masse can comment after Mr. Lowther.

Mr. Eric Lowther: I have to say I've never seen two fellows disagree so fervently, but yet like each other so much, so that's good.

I want to go back to Mr. Frémont just to make sure I have this right, where he's coming from, because what you're saying feels good to me as an Albertan.

If we have the provincial legislation there that goes beyond and in your mind is better, or in the minds of the provincial people is better, than what the federal government legislation does, and we find ourselves in front of the Supreme Court, you're telling me that based on the Supreme Court's track record, they will most likely rule that this legislation overrides whatever the provinces have done. You're not supportive of that, but you're saying that is likely what will happen based on the track record. Is that correct?

Prof. Jacques Frémont: That's my reading, yes.

Mr. Eric Lowther: Okay. That was really my clarification question.

The Chair: Mr. Masse, you had a comment you wanted to make?

[Translation]

Mr. Claude Masse: Madam Chair, I would like to emphasize the fact that there is at least one aspect of information exchanges that is local, that is, the collection of information. When an Alberta, Ontario or Quebec company collects information from a Quebec consumer, then its local. I would like to draw your attention to the totally unenforceable nature of clause 4.3 of Schedule 1. I have worked in the field of consumer protection for 25 years and I can tell you that, as far as consent is concerned—and Mr. Tassé will be in a position to tell us whether he feels this provision will really offer protection to consumers—it's a general principle that is repudiated in the provision from start to finish. What will be the result?

As Mr. Frémont said earlier, companies will want to defer to clause 4.3 rather than to be subject to Quebec legislation which generally requires formal consent, with a few fairly limited exceptions. However, clause 4.3, for all practical purposes, allows companies not to obtain consent in nearly all cases. And even in cases where it is required, companies do not have to worry about serious sanctions. At least, at one end of the process, there is something that is under the jurisdiction of the province of Quebec and is considered to be at the Quebec level, which is the collection of information from the consumers in question.

I will repeat that, this morning, I have the unpleasant feeling of realizing, once again, that our national sport in Canada is the Constitution and Supreme Court decisions. In Quebec, we have sound consumer protection legislation. As Mr. Frémont remarked, it is undoubtedly useful for there to be a national law governing the international or interprovincial exchange of data, but let us apply our law using our five years of experience with it. Do not hinder us.

I come back to my initial message, Madam Chair: your bill does not control anything in a serious manner. If you really want to protect consumers, why not draw inspiration from the Quebec law? Why should we initially set it aside?

[English]

The Chair: Thank you very much, Professor Masse.

Mr. Bellemare.

[Translation]

Mr. Eugène Bellemare: Mr. Frémont, if I have understood correctly, you agree that the federal government should be involved in the case of exchanges between provinces. If there is no legislation in one province, should the federal government become involved?

Prof. Jacques Frémont: Well, that's precisely the issue before us.

• 1220

I believe that the federal government could step in—and this would be constitutionally valid—to regulate exchanges of data or privacy protection in all international and interprovincial commercial activities. But what we need to know is whether the federal government may, under subsection 91(2), interfere in local transactions, transactions between you and the owner of your corner store or the Eaton's store near your home. I fear that there could be some dangerous reasoning in this. Extending this reasoning would lead to the supplanting of provincial jurisdiction in commercial affairs, which I strenuously object to, particularly in the case of Quebec.

Mr. Eugène Bellemare: In your view, should consumer protection or protection of provincial legislation take precedence?

Prof. Jacques Frémont: In my opinion, with all due respect, I don't think that such a question should be answered because it is not a matter of protecting a provincial jurisdiction at the expense of protecting the consumer, as you very well know. Quebec consumers who have dealings in Quebec are protected by a series of provincial laws, including the Consumer Protection Act and the provisions of the Civil Code of Quebec. Furthermore, they are protected by the relevant provision of the personal information protection legislation. There is a full code for protecting—

Mr. Eugène Bellemare: That's not being challenged.

Prof. Jacques Frémont: No, but the common law exists in Quebec. If the federal government begins legislating in the field of common law, it will supplant the Quebec common law. Should that happen, forces will come into play... In Quebec, as in other provinces, the federal government does not, in my view, have the power to legislate in civil law matters. Are we going to replace the Quebec civil law and the machinery surrounding it with federal law? That would be the logical extension of Bill C-54.

Mr. Eugène Bellemare: You're still talking about Quebec.

Prof. Jacques Frémont: Yes.

Mr. Eugène Bellemare: There's no question that Quebec has sound legislation protecting consumers and information, but what is there to protect a Quebecker who wants to deal with a bank?

Prof. Jacques Frémont: I told you earlier that the federal government has a legitimate role to play. We currently have nothing but voluntary codes. I believe that Bill C-54 is a good idea and that all transactions with banks should be regulated by the federal government. It a very good idea.

Mr. Eugène Bellemare: Okay.

Prof. Jacques Frémont: But I'm telling you that it's not a good idea when doing business with the corner pizzeria.

Mr. Eugène Bellemare: Okay. We've heard that the Montreal and Toronto stock markets have made some exchanges and transferred certain types of shares. Commodities futures are traded in Montreal. A number of Montrealers or Quebeckers who used to deal with the Montreal stock market suddenly find themselves dealing with the Toronto stock market. Will the federal government not be responsible for monitoring and protecting them, or is it the province that will lay charges in Ontario, for example?

Prof. Jacques Frémont: I'm happy that you raised this question. In my view, the issue of securities in Canada fits precisely into this reasoning that we are facing here.

According to my interpretation of Supreme Court precedents, if the federal government wished to set up a national securities commission based on the General Motors decision—I think that my friend Roger would agree—it could probably do so. Still, it has been 10 years since the decision was handed down in the General Motors case, and the federal government has not done this. However, it did grumble and indicate that it wanted to see some consolidation of the securities market in Canada. And what happened? Apparently there was some voluntary consolidation. That's exactly what I'm saying. In Bill C-54, the federal government would be advised to legislate in areas for which it is constitutionally responsible and to encourage the provinces either to adopt the bill or to adopt codes that are as good as or better than the federal code.

Finally, I would invoke that old rule, “mind your own business”. By attempting to regulate interprovincial trade relations, the Canadian Parliament could actually create serious problems and create constitutional problems for itself. This entire matter would clearly end up in court.

[English]

The Chair: Last question, please, Mr. Bellemare.

• 1225

[Translation]

Mr. Eugène Bellemare: Do you think that the proposed federal legislation will conflict with Quebec's? I am always given the example of a pizzeria? with a computer and someone who sends in and order by computer. It's an exaggeration, but it could easily happen since the electronic commerce system is developing so well. I imagine that a human being will deliver the pizza, and that it will not be delivered in some other way.

A member: It will be delivered by computer.

A member: A virtual pizza.

Some members: Oh, oh!

Mr. Eugène Bellemare: Is there a contradiction with the federal legislation? Is Mr. Frémont correct when he says that the federal legislation will interfere with the pizza eater and the pizza maker on St. Catherine street in Montreal?

Mr. Roger Tassé: Pizza has been mentioned a number of times now. It's a bit of a caricature.

What's clear is that there are fewer and fewer local elements in what we are talking about, because more and more small businesses, not just big ones—Mr. Frémont agrees that businesses operating at the interprovincial or international level should be covered by the federal legislation—will be using electronic commerce and will be included in global networks. It's no longer a question of small business at the corner of Sanguinet and St. Catherine streets. That small pizzeria? will be part of a network.

A few moments ago, I had the impression that Mr. Frémont did not disagree with me when I was saying that the Supreme Court had not restricted the federal government's power to legislate solely to interprovincial or international trade; that power can extend to intraprovincial trade. For this reason, we have to look at the nature of the trade. It's not just a question of the pizza business; we are talking about all the local business done by small companies that are connected to the network. They have access to the network, their information is passed on, everyone who has access to the network can manipulate the data, and it travels throughout the world, in all the provinces, including the province of Quebec.

My colleague's remarks were quite justified; there is something for Quebeckers in this bill, bearing in mind Mr. Masse's warning. It is good for us to have a Canadian framework for these issues.

Let me go back once again to the same starting point: the legislation allows various arrangements between the federal government and the provinces, including Quebec. Ottawa is pleased with what Quebec has done in this area. It has become an example that many other provinces have not used up until now, but the federal government recognizes Quebec's provincial initiatives in this area. And if ever the bill were passed and federal authorities decided not to grant Quebec an exemption and to impose their own legislation, that would be another winning condition for Mr. Bouchard. It's almost unthinkable that would happen. Everything points to the opposite happening, that the federal government will fully accommodate the provincial legislation by recognizing provincial institutions. But that will be part of a federal group of initiatives aimed at the same objectives, despite the imperfections of the federal legislation.

The Chair: Thank you. Mr. Dubé, please go ahead.

Mr. Antoine Dubé (Lévis-et-Chutes-de-la-Chaudière, BQ): I have a somewhat different impression of things, Mr. Tassé. Instead, we have the impression that the federal government often imposes things on us. If the government does not, the Supreme Court does.

Mr. Frémont, you said that it was rather unusual for a government to decide to regulate by itself using the schedule to an Act, then to operate by order in council. My question is for the other witnesses as well. This seems to be what you think. Are you the only one who thinks so, or do our other two guests share your opinion?

• 1230

Secondly, what would be the right way of going about this? The way I understand it, there are two different mentalities in Canada. There are some people who think they are acting in good faith, who say that Quebeckers should not prevent other Canadians from obtaining what they want. People in Quebec repeat exactly the same message that Mr. Masse gave us this morning, which was "Don't keep us from doing what we want to do, don't keep us from doing what we do well with the people." What would be the right way of exempting Quebec from this legislation without relying on an order in council? There should be some such provision in the bill. Can we include some kind of opting-in mechanism in an Act?

Prof. Jacques Frémont: Having the content of legislation found in the schedule is common enough. But I have never seen a provision that allows the government to amend the schedule using an order in council. I believe this creates very serious problems since the Constitution of Canada states that standards that affect citizens must be set by law. As for amending law by means of an order in council, I must say that if I were a parliamentarian, I would be very concerned. Right now you have a say about the content of the schedule. But later you are going to lose any say you may have had. The schedule can be changed drastically. I think this is a very serious insult to the Parliament of this country.

As for mechanisms, we must accept that mechanisms cannot exclude the provinces. The provinces must be able to apply the federal legislation if they wish to do so. That is done by means of legislation, by reference. There can be a mechanism in the Act that the provinces can use of their own accord, voluntarily, to make reference to federal legislation. Nothing in the Canadian Constitution keeps them from doing that. However, there could be a flexible mechanism that would allow the provinces to use the federal legislation. In this regard, the question of principle is to encourage the provinces to make these decisions. They remain free, and no one will impose federal standards on provincial law or private law.

Mr. Roger Tassé: I believe that we must not exaggerate the scope of the issue that has been raised. This happens every day. In fact, more regulations may be developed daily by federal and provincial authorities than there are bills passed.

The mechanics of this bill are very complicated. There's the schedule, but the act itself has some very important principles that are incorporated and made explicit. The schedule has an addition that allows the Governor in Council to pass any measure relative to the application of this legislation and to amend the schedule. This is not out of the ordinary. It's the power to regulate.

Prof. Jacques Frémont: First of all, we are talking about regulations, not orders in council. Secondly, even the government restricts...

[English]

The Chair: Professor Frémont, please let Mr. Tassé finish.

Prof. Jacques Frémont: Sorry.

Mr. Roger Tassé: The Governor in Council may by order designate amendments that reflect provisions.

[Translation]

It's true that we are not talking about the regulations, but I will tell you that in the federal system that I have known for the past 40 years, and the system that I personally envisage for the future, I hope that we discover more creative and more unusual ways of doing things. We cannot be narrow-minded and just stick to what our predecessors did. We must try to find other ways of operating that provide for more flexibility in the way we organize things, both between the federal government and the provinces, as well as with the private sector. This is one of the things that emerged over the past few years. The private sector has things to say. The issues we are discussing here will not necessarily be settled by government.

• 1235

The companies must accept that it is important for them, not just for consumers, to have internal regulations, codes, that will allow Canadians to be confident when they are doing business with them. It's in their own interest to ensure that such regulations exist.

We are in a new context, and I applaud the new ways of organizing things to allow for progress on certain issues. Is it perfect? No, it's not. Are there perfect laws? I don't know of any. The Constitution is not perfect, and none of our laws are either, but it's a necessary step in the right direction.

There may be challenges. I don't deny that Mr. Frémont is raising an important issue, which I have not examined, at least not until it was raised this morning, but arguments could be developed to defend that way of proceeding if it were challenged in court.

The Chair: Thank you.

Professor Frémont.

Prof. Jacques Frémont: If you read paragraph 27(2)(b), you'll see that the government could not amend the schedule by order in council. It can only do so when the Canadian Standards Association amends its code. As a result, the government is implicitly and explicitly giving up its ability to exercise any substantive jurisdiction over this code and its inclusion in legislation.

I'm sorry to repeat myself, but as parliamentarians, you should be extremely concerned about this way of proceeding. I don't find it reassuring that my government can set standards by order in council. It can do so by means of regulations, and it often does, but it is disturbing that the government cannot even change its own standards itself unless the Canadian Standards Association has done so.

The Chair: Mr. Tassé.

Mr. Roger Tassé: Madam Chair, it seems clear to me that if Parliament saw fit to do so, it could use the Act to amend any provision found in the schedule. It doesn't have to ask anyone for permission to do so.

Mr. Antoine Dubé: By using the Act.

Mr. Roger Tassé: Of course, by means of the Act. It was said that this was an attack on the supreme sovereignty of Parliament. Parliament could amend the Act and thereby amend the schedule.

Prof. Jacques Frémont: That's far from being the flexibility that you were speaking of.

The Chair: Thank you, Mr. Dubé.

[English]

Mr. Lastewka.

Mr. Walt Lastewka: Thank you, Madam Chair. I have a few questions for Mr. Masse.

You said if it works don't fix it, but we have heard witnesses say there are some areas in the Quebec legislation that require improvement and changes. Is there an automatic review timeframe in the Quebec law?

[Translation]

Mr. Claude Masse: If I remember correctly, last year a report from the Commission d'accès à l'information suggested a number of changes to tightening up the process, particularly the data collection process and the mechanism for disclosure to third parties.

However, in many ways the Quebec legislation goes quite a bit further than Schedule 1 of the federal legislation, particularly with the experience that we've had with the Quebec legislation after five years.

Let me give you an example. I'd like to draw your attention to clause 4.9.3 of Schedule 1. My colleague, Professor Frémont, was talking about this just a few moments ago, and he claimed that the schedule could not be amended by order in council unless the private organization agreed to change its standards. Is clause 4.9.3 a measure that truly provides regulatory or legislative protection to consumers?

4.9.3 In providing an account of third parties to which it has disclosed personal information about an individual, an organization should attempt to be as specific as possible. When it is not possible to provide a list of the organizations to which it has actually disclosed information...

So the section says that if you have provided information about consumers you have to tell them,, whom the information was given to, but if that's not possible, do your very best.

When it is not possible to provide a list of the organizations to which it has actually disclosed information about an individual, the organization shall provide a list of organizations to which it may have disclosed information about the individual.

Consequently, if a consumer asks Equifax in Quebec, he will receive the list of 225 possible organizations that the company usually provides lists to. Good luck!

• 1240

It's completely unapplicable, not only in terms of making lists, but in terms of consumer protection measures. I agree that with time, there are changes, greater flexibility, additional measures to be added, but the Quebec legislation operates in a serious way. I think that everyone here must admit, and we could cite dozens of examples...

[English]

Mr. Walt Lastewka: That isn't what I asked.

The Chair: Professor Masse, it was a very specific question Mr. Lastewka asked.

[Translation]

Mr. Claude Masse: Fine. Therefore, yes...

[English]

Mr. Walt Lastewka: I got everything else except my answer.

[Translation]

Mr. Claude Masse: Could the Quebec legislation be improved, sir? Yes.

[English]

The Chair: No, that wasn't the question. The question was does it have a mandatory review in the legislation?

[Translation]

Mr. Claude Masse: To my knowledge, the answer is no.

[English]

The Chair: No.

Okay, Mr. Lastewka.

[Translation]

Mr. Claude Masse: Not that I know of, but I could be wrong.

[English]

Mr. Walt Lastewka: And I think you agree, and it's what you said, that experience has dictated that there are improvements to be made and that will happen in the Quebec law. Correct?

[Translation]

Mr. Claude Masse: I agree completely.

[English]

Mr. Walt Lastewka: And it's the same thing as what the privacy commissioner of Canada, and the various privacy commissioners who have come here to report from across Canada, have said very clearly to us, as legislators, that it's important we do have a cross-Canada legislation concerning privacy to protect the privacy of Canadians.

[Translation]

Mr. Claude Masse: Could I answer, sir?

[English]

Mr. Walt Lastewka: And we—

The Chair: Keep going.

Mr. Walt Lastewka: —have changed the legislation to make sure there's an automatic review every five years. That's now been part of the amendments. This would make it clear from experience that after four or five years there would be an automatic review to find out from all provinces across the country how the legislation can be improved.

So when you said if it works don't fix it, I wasn't quite sure what you meant there. But you are making some changes to the Quebec law? Yes?

The Chair: Professor Masse.

[Translation]

Mr. Claude Masse: What I'm saying, sir, is that this works much better than Schedule 1 could ever work. By legislating in the local business sector through clause 4(1), you'll be ensuring that Quebec businesses will prefer to opt for the federal legislation and at best, this will be an extremely significant source of confusion.

However, we all agree that the federal legislation regarding interprovincial or international transfer of personal data is quite welcome. This will fill the current void, but do not proceed with clause 4(1)(a) to force implementation of legislation at the local business level.

[English]

The Chair: Thank you, Mr. Lastewka. Mr. Tassé wishes to reply.

Mr. Roger Tassé: I'd like to come back to this question of application of the federal law and the provincial law. I think that we have a different approach to the question of the paramountcy.

Professor Frémont says that if the federal government legislates, that's it, all provincial legislation will effectively become inoperational.

Prof. Jacques Frémont: Set aside.

Mr. Roger Tassé: Inoperational. You said inoperational.

I think we're not quite there, in my reading of the Supreme Court decisions he refers to. I think I would take the position that the federal law would supersede if there is a conflict. But if the standards—I made the point earlier—of the provincial law, like on the one on consent, were higher, there wouldn't be a conflict. I think the provincial law in that regard would apply and the residents of the province could avail themselves of that position.

I'm not saying that this is without doubt, but I think a very strong argument can be made that the provincial law will continue where there is a difference and the standards are higher.

The Chair: Professor Frémont.

Prof. Jacques Frémont: I just want to say that in Bank of Montreal v. Hall that was precisely the point. There was a 60-day requirement in order for a bank to seize any movable, and there was a Saskatchewan provincial requirement of 90 days.

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Traditionally, Mr. Tassé's approach was taken, and the bank waited for 90 days before seizing the house. But in this case, the court said there was a clear conflict between the 60 days and the 90 days, because the 60-day period was in the federal Bank Act. The 60 days applied to the bank, so it actually set aside the 90-day requirement as far as banks were required. That's precisely the point, and that's precisely where this case law is new.

The Chair: Thank you very much.

Mr. Lastewka, last question, please.

Mr. Walt Lastewka: Two short ones, if I could.

The Chair: No, one last question.

Mr. Walt Lastewka: You're getting tougher all the time.

The Chair: Time is running out.

Mr. Walt Lastewka: Okay, then we'll come back.

I want to ask my question to all three of you. If the Province of Quebec's legislation has been good legislation and an example, why haven't the other provinces picked it up?

The Chair: Professor Masse looks like he wants to respond to that.

[Translation]

Mr. Claude Masse: That's their problem, sir. We don't have to answer that.

[English]

The Chair: Professor Frémont.

Prof. Jacques Frémont: If you are aware of the debates right now between the European Union and the United States on privacy protection, that's precisely the cultural difference. I'm sorry, but I have to say it's a distinct society problem again. Like Europe, Quebec chose to intervene, to say that these are fundamental values for our society and that we're going to legislate and enforce these values. The dominant American Anglo-Saxon approach says it's laissez-faire, it's laissez-aller. It's two different cultures, and that's precisely the debate around the European directive, which came into force last December, as you know.

Mr. Walt Lastewka: Is that protecting a safe haven?

The Chair: Mr. Lastewka, you said you wanted all three to answer the question. Mr. Tassé didn't answer the question.

Mr. Walt Lastewka: Okay, sorry.

The Chair: Mr. Tassé.

Mr. Roger Tassé: I'm not sure I have much to add to what was already said. I think Quebec involved itself in a very deep review of the Civil Code, and from the perspective of protection of rights, perhaps because of all the work and all the debate that took place, there was more sensitivity to these issues. But I think we're moving on from that. I think we have to keep in mind all the time that we're now talking about the use of the information and the need for regulation in order to ensure confidence, protection and so on.

There are other incentives put on the table. How do we compete in this world where there are no borders? How do we compete in this world where the documents and the papers have become less and less important—conceptually, anyway—and everything is everybody's? I think Ottawa and the rest of Canada have realized that there is an issue here that we have to address. From different perspectives, I think we're working towards the same objective, which is confidence and protection.

The Chair: Thank you.

Thank you, Mr. Lastewka.

[Translation]

Mrs. Lalonde, de you have another question?

Mrs. Francine Lalonde: With regard to the issue of electronics and the secure electronic signature, let me remind you that this bill deals with electronic commerce, but in reality, almost all the witnesses have discussed personal information.

On that issue, there are other problems that arise such as defining what is a signature. A United Nations group recently expressed an opinion saying that one could not use the word "signature" in the definition of the recognition of a document sent by someone, because that would not necessarily meet the same legal criteria. Have you examined these issues? No?

Mr. Roger Tassé: I did not examine these issues.

Prof. Jacques Frémont: I was simply going to indicate that consent in a contract and the drafting of contracts are not governed by federal law until further notice. This is still governed by provincial law and, in Quebec, the Civil Code of Quebec applies; it is not governed by the same legal system as in the rest of Canada.

Mrs. Francine Lalonde: That's very important.

The Chair: Mr. Masse.

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Mr. Claude Masse: The Chambre des notaires du Québec and the Barreau du Québec—the process is more advanced at the Chambre des notaires—are currently working on developing signature certification systems, not only for the professionals concerned in the case, for example, of international or domestic contracts, but also for the issuing of procedures. The work has begun in our province regarding the certification of signatures by professionals and by parties to a contract. As Mr. Frémont said, a signature on a contract, be it electronic or otherwise, is clearly a matter of contract law only. There is no doubt about that.

The Chair: Mrs. Lalonde, do you have one last question?

Mrs. Francine Lalonde: Some groups that appeared before us have maintained, as did the Commission d'accès à l'information, that when that organization stated that its jurisdiction extended to all companies, because of the jurisdiction in civil law, it had not been ruled out of court. When it was ruled out once, it was not on its jurisdiction but on the fact that the collective agreement was the appropriate instrument. In light of that statement, certain groups have deduced that the Quebec law must apply to all companies and all activities.

Mr. Roger Tassé: If I understand your question correctly, I would say that the fact that these businesses comply and accept the implementation of the provincial standard does not resolve the constitutional issue. If a provincial or federal commission states a position on an issue, that does not resolve the constitutional issue once and for all. As long as the issue has not been raised before the Supreme Court and clearly established, there can be a debate and some doubt. While there is no federal legislation—right now, the federal legislation applies solely to federal government departments and public agencies—provincial legislation does prevail and companies that are good corporate citizens do submit to this law; that seems appropriate to me.

The Chair: Mr. Frémont.

Prof. Jacques Frémont: A good illustration of the effect this bill would have if it was passed was the case of Bell Canada, which voluntarily complied with the provincial legislation in Quebec. Once the federal legislation is passed and is implemented, Bell Canada will be governed by that legislation and the privacy protection standards applicable to Bell Canada will be much lower than those they must comply with now under Quebec law. There will therefore be a reduction of privacy protection for Quebeckers when they deal with Bell Canada, Vidéotron, interprovincial transport companies, etc.; that's absolutely clear.

Mr. Roger Tassé: Mr. Frémont is very consistent in what he's saying. To subscribe to what he stated, one has to accept his premise to the effect that the federal legislation will take precedence and that once it's passed, all provincial legislation will no longer apply. So let's suppose we agree...

[English]

The Chair: Thank you, Madame Lalonde, everyone.

Just to clarify something for the record, I didn't practise constitutional law, I dealt with corporate law when I was in the working world. I dealt basically with the facts. Just so we're all clear on the facts, there was a press release October 1, 1998, when this bill was introduced in the House of Commons. To tell you where this government is and what this government's going to do, and not hypothetically say what some future government may do about the laws of Quebec, that press release says very clearly:

Where and whenever a province adopts legislation that is substantially similar, the organizations covered will be exempted from the application of federal law. As Quebec's existing privacy law is substantially similar to the proposed Personal Information Protection and Electronic Documents Act, Quebec will be exempted from its application.

That is a fact, so we know where this government is, we know how it's going to apply in Quebec. With all due respect to Professor Frémont and Professor Masse, those are the facts about where we are when it comes to this law.

I just want to ask for one further clarification, since you raised it with regard to the European Union, Professor Frémont. It's my understanding that the European Union directive says that if a country—not a province but a country—does not have privacy laws in place, there could possibly be a blockade of trade or dealings. That leads me to believe the Canadian government has a responsibility on behalf of all of Canada not to allow Alberta or any other province to opt in or out, but to ensure that our trade continues with European countries and other countries that are involved in the European Union.

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Prof. Jacques Frémont: I'm extremely uneasy with your proposal. I thought Canada was firmly opposed to the Helms-Burton law in the United States. I think extraterritorial application of national laws is an extremely damaging practice, and if it's the only reason the federal government is proposing the bill, it's a wrong reason.

The Chair: I didn't say that's why it's proposing the bill. Based on your premise, Quebec has its laws and the European Union has its laws. So what's going to happen to Quebec in the European Union if you have these different sets of rules and laws?

Prof. Jacques Frémont: The European Union is imposing duties on companies.

Again, I want to emphasize that there's perfectly legitimate room for Canada and the federal Parliament to have a Canada-wide law that applies to federal fields of jurisdiction. It hurts when it applies to provincial fields of jurisdiction. Very clearly, if Canada was to legislate Bill C-54 but restricted it to fields of federal jurisdiction, traditional fields of interprovincial and international trade, that would be clearly sufficient under the European directive.

The Chair: Just to make sure I understand this, you're suggesting that companies in Europe could not do trade with companies in Canada if we do not have privacy laws in Canada, according to the European Union. I'm not telling them how to run their countries or what to do, but as a country, do we not have to ensure that everyone in Canada has that ability?

Prof. Jacques Frémont: You have to ensure that under the responsibilities of the federal Parliament these responsibilities are exercised.

The Chair: By providing for privacy legislation, part of this law accomplishes that goal, does it not?

Prof. Jacques Frémont: It partly does, but it's too wide. That's my whole point.

The Chair: It's too wide.

I want to thank you, because there has been some very good discussion today from all three parties. I don't agree with necessarily everything that was said, but I do think we've had some interesting discussion and some interesting thought.

As you can see, we already have 25 tabled amendments at the committee. I anticipate that before Tuesday of next week, when we go to clause-by-clause, we'll probably see more amendments. As we try to work through all the problems, there will be a review of this legislation over time, as Mr. Lastewka and others pointed out. It's important that we move forward, and it's important that there be privacy protection. We'll have to wait to see what the Supreme Court decides in the end.

Prof. Jacques Frémont: Again.

Voices: Oh, oh!

The Chair: Thank you very much. The meeting is adjourned.