INDU Committee Meeting

STANDING COMMITTEE ON INDUSTRY

COMITÉ PERMANENT DE L'INDUSTRIE

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, March 21, 2000

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[English]

The Chair (Ms. Susan Whelan (Essex, Lib.)): We are meeting pursuant to the subject matter of Bill C-229, an act to amend the Canada Post Corporation Act (letter that cannot be transmitted by post). This has been referred to the committee by a motion in the House.

We're very pleased to have with us Karen Redman, the member of Parliament for Kitchener Centre. And from the Department of Industry Canada, we have Nicole Ladouceur, the assistant deputy commissioner of competition, fair business practices branch, Competition Bureau; and Brendan Ross, commerce officer, fair business practices branch, Competition Bureau.

I would propose that the witnesses provide an opening statement and then we'll move to questions together. I would propose we begin with Karen Redman.

Ms. Redman, please.

Mrs. Karen Redman, M.P. (Kitchener Centre, Lib.): Thank you, Madam Chair. It's a real pleasure to be here today.

Basically the issue we're talking about is a consumer-related matter. It's about the delivery of games of chance, lotteries, or contests that require the recipient to pay out before they receive a prize. It's a deceptive practice that I believe the government needs to address in concrete terms.

I'm bringing this issue to the table because I believe we have a responsibility to protect consumers from the harm that can be caused by the scratch-and-win cards. I have examples of them, and I don't know if you've seen them. Many of you have probably received them in the mail. We can pass around the facsimiles; I actually do have the real ones in my office.

If you note the very fine print on the back of it—and it's not easy to spot unless you're looking for it—it says that you have to dial a 1-900 number. For cards such as Bingo, all the cards are winners, and when the recipients phone the 1-900 number their calls can cost in the range of $3.99 to $19.99 per minute, and the callers must work their way through numerous voice-recorded instructions that are designed to keep the callers on the line for as long as possible.

LRJ Promotions from Waterloo, Ontario, send winners authentic colour prints that they claim are worth $45. The print is a copy of a photo that was taken by the father-in-law of the owner of this company. I've included for you a copy of an interview with the owner of this company that appeared in a local newspaper last summer. The printer who produced the colour prints told the Kitchener-Waterloo Record: “They actually cost about three cents to produce, slightly less than the tickets themselves. I wouldn't put them on my bathroom wall. They are just disgusting.” And that's a direct quote.

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In the same article, the president of LRJ Promotions was asked about the money he made from the scratch-and-win game cards, and his response was, “It seems so easy that it should be illegal, but it's not.” He goes on to say that the individuals who respond to the cards, at most, get hurt for $24 and they get a little lesson. I would encourage all members to read the full text of this article.

An independent lawyer from Kitchener provided me with her written opinion on Bill C-229, and I would like to share her comments with you. She wrote:

It is reasonable to infer that a number of consumers would accept the letter at face value as a game of chance in which they had won a prize, neglect to realize that a fee would be charged for the claiming of such a prize, and neglect to realize that the fee might be substantially higher than the value of the prize. [—] There is clearly a harm that can result to society in consequence of these types of mail-scams.

That is what is happening daily across this country.

Statistics from PhoneBusters indicate that 81% of telemarketing victims are over the age of 60 and between 1996 and 1999 they lost a total of over $25 million. PhoneBusters also reports that the third most common method used to bilk Canadians out of their money is the use of the 1-900 number. You may be interested to know that PhoneBusters has told me that people who are taken in by the 1-900 numbers are less likely to report it, so the number of victims who pay through the 1-900 numbers is probably much higher than is suggested by the statistics.

I would like to stress to the members of this committee that the majority of Canadians affected by this issue are senior citizens. For seniors, being able to shop by phone and mail is a necessity. Unethical telemarketing practices affect the confidence of seniors who rely on using mail and phone to do their business.

Bill C-229 was first introduced in the House of Commons by our colleague from Burlington, Ms. Paddy Torsney. Ms. Torsney would tell you that she was concerned about Canada Post delivery of scratch-and-win game cards and the fact that this would somehow legitimize the contest. This perception was verified by SCAMBLOCK when they wrote:

Seniors often remark at our presentations that “opportunities” to win can't be fraudulent if they are delivered by Canada Post. They truly believe that our government would never allow a Crown Corporation like Canada Post to put income above the needs and best interests of its citizens.

Since taking on Bill C-229, I have had the opportunity to meet with members of the community, industry, stakeholders, ministers, and Canada Post officials. When I reviewed the bill, it became clear to me that Bill C-229 did not go far enough and that amending the Canada Post act would not resolve all of the issues that arise from these cards. As a result, I've consulted with officials from the Competition Bureau of Industry Canada to discuss alternatives. From their suggestions, I have developed and introduced a new bill in the House of Commons, Bill C-438. It addresses the same issues, but in a more comprehensive manner.

Bill C-438, an act to amend the Competition Act, prohibits the delivery, by mail or through any other system of delivery, of “printed material that conveys the general impression that the recipient... has won a prize... conditional on the prior payment of a sum of money or specific telephone charges. The Competition Act was amended during the last Parliament to address deceptive telemarketing practices; Bill C-438 mirrors the telemarketing amendments and applies these amendments to printed lottery and contest schemes. Section 52 of the act contains provisions regarding misleading representations, and section 74 deals with promotional contests. The Competition Act allows us to respond to a deceptive practice in a complete and direct way.

It is important to recognize that neither Bill C-229 nor Bill C-438 would hinder the practices of legitimate telemarketers. In fact the due diligence clause in Bill C-438 ensures this. As well, under Bill C-438, the courts are asked to consider factors such as the use of lists of persons previously victimized, characteristics of the persons to whom the material is directed, the amount of proceeds realized, and previous convictions for this offence.

It is important to make clear that current Competition Act provisions are applicable only when there is a live voice communication between two or more persons. The most common phone system used by companies who send out these cards is pre-recorded messages. The caller does not end up speaking to a live person. Bill C-438 will close this loophole.

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There are significant fines and punishments associated with Bill C-438. Penalties would be at the discretion of the court, and a maximum imprisonment term of five years can be imposed. If the crown prosecutes according to a summary conviction, the maximum fine would be $200,000, or there would be a jail term of one year. Bill C-229 places responsibility or the onus on the Canada Post Corporation not to deliver scratch-and-win game cards. I am pleased that Bill C-438 moves the responsibility on to the companies and individuals who create and circulate these games.

I'd also like to touch briefly on logos. Bill C-229 also looks at the misuse of government logos. This is another important issue that deserves the consideration of this committee. I would like to pass around a sample of what is circulated and what can arrive in your mailbox. These logos, like the cards, are deceptive in nature and have the potential to cause harm within our society. Bill C-229 would require Canada Post to register any logo that has to be distributed through the mail.

Federal logos are registered with the Canadian Intellectual Property Service Office, and the Trade-marks Act is responsible for protecting them. However, it is my understanding that there is no active enforcement to ensure that logos are being used correctly. There is only a complaint-driven process that has the potential to lead to charges and court proceedings. With today's modern technology, it does not take much effort to create knock-offs of government logos. This is a problem that could grow and leave many Canadians vulnerable. Therefore, a review of the legislation and enforcement practices is required.

At this time, I do not believe that responding to this problem through the Canada Post act or the Competition Act is appropriate. I would suggest that officials from the Canadian Intellectual Property Office may wish to comment on this subject and on how the Trade-marks Act does in fact protect registered federal logos.

In conclusion, I bring this issue to you because it is clear that as legislators we must respond to it. Bill C-229 was an important first step, and I'm confident that Bill C-438 is an appropriate next step in responding to these games that require Canadians to pay out before they receive a prize. As legislators, we have the responsibility to address this issue.

I would like to thank the members of all parties who have supported my efforts and recognized the seriousness of this matter. I would also like to extend my thanks to the Minister of Industry Canada and the parliamentary secretary for their support in moving this issue forward.

Thank you.

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

I'm now going to turn to Ms. Ladouceur.

Ms. Nicole Ladouceur (Assistant Deputy Commissioner of Competition, Fair Business Practices Branch, Competition Bureau, Department of Industry Canada): Thank you, Madam Chair.

Madam Chair, members of the committee, I am very pleased to be here before you today in consideration of Bill C-229, an act to amend the Canada Post Corporation Act, as well Bill C-438.

Bill C-229 deals with the delivery by Canada Post of letters that are not in an envelope and that are an invitation to a contest, lottery, or prize, such as scratch-and-win cards, in which the delivery of a prize is conditional on prior payment of an amount by the recipient of the printed material.

As you know, Bill C-229 would also amend the Canada Post Corporation Act to prohibit any person from sending a letter bearing a registered government logo under a registration system to be administered by Canada Post Corporation.

[Translation]

Bill C-20, an Act to amend the Competition Act, which your committee studied in the spring of 1998, came into effect in March 1999. Its effect was to include in the Competition Act a provision on deceptive telemarketing under which the practice of interactive telephone communication becomes a criminal offence when it is used to make a representation that is false or misleading for the purpose of promoting the supply or use of a product or any business interests. Under this provision, telephone salespeople are prohibited from holding or from claiming to hold a contest, lottery or game if the delivery of a prize to a participant is conditional on the prior payment of any amount by the participant. This provision provides better protection for Canadian businesses and consumers against telemarketing scams.

The new provisions of the act on deceptive telemarketing deals with a problem very similar to the one Ms. Redman's Bill C-229 seeks to correct, namely misleading representations and contests.

[English]

The Competition Bureau supports the work of Mrs. Redman to combat deceptive mail. The bureau has no objection to moving the subject matter of Bill C-229 into the Competition Act.

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However, we would have the following comments:

Such a bill should include a specific prohibition relating to deceptive contests conducted by mail.

It should also ensure that legitimate marketing activities are not significantly impaired.

The bill should address all mailings, not only unsealed materials as currently covered in Bill C-229.

The bill should also provide that an interim injunction similar to the one available presently in the Competition Act with regard to deceptive telemarketing be available for use against the deceptive mail operators themselves or third-party service providers such as Canada Post Corporation when providing a service for repeat offenders.

Finally, it should not include a registration system for government logos to be administered by Canada Post Corporation. The Trade-marks Office, which is part of the Canadian Intellectual Property Office at Industry Canada, already maintains a registry of trademarks, including those of the Government of Canada.

The new bill introduced by Mrs. Redman takes the issue out of the realm of the Canada Post Corporation Act and instead purports to amend the Competition Act. It creates a specific criminal offence relating to deceptive contests conducted by mail. Bill C-438 addresses all of the bureau's five concerns, which I have just mentioned. The bureau therefore fully supports the objectives of this bill.

In light of this shared objective with regard to combating deceptive mail, the bureau has assisted Mrs. Redman in the drafting of Bill C-438 in order to ensure its technical and legal feasibility. However, this bill is a private member's bill, and therefore it did not have the benefit of a formal and broad consultative process.

Given that the Competition Act is a law of general application, it is important to avoid any unintended effects in the marketplace. Therefore, while the bureau supports the thrust of the bill, consultation may well identify issues that require further amendments to Bill C-438. We look forward to comments from stakeholders and interested parties.

I'd like to thank the members of the committee and the chair for the opportunity to present the bureau's views. I'd be pleased to answer any questions. Merci.

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

Now we'll turn to questions. Mr. Schmidt.

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

Thank you, Mrs. Redman, for doing this. Madam Chairman, as you and Mrs. Redman know, I was very much in favour of what she was trying to do, and I certainly commend her for the intent of what she's trying to do. But I really couldn't support the earlier bill for the very reasons that she decided to bring the subject matter here. So I really want to commend her for that. I also want to commend the comments that have just been made by the representative from the Competition Bureau. It looks as if we're going to have clear sailing here in one sense.

There is a question I would like to ask, though, and that has to do with the prosecution of offenders. There seems to me to be some difficulty in the Competition Act itself in that many of these offences are treated as criminal offences rather than as civil offences. Part of the difficulty in getting convictions of people who have offended and who admit they have offended is that because it's covered under the criminal system, it in fact makes it physically difficult, if not impossible, to get a conviction. So I'm wondering what the thinking is of the Competition Bureau and of Mrs. Redman as well toward moving this kind of offence to a civil court rather than making it a criminal offence.

Ms. Nicole Ladouceur: The issue you raised was also dealt with when we were before this very committee with regard to Bill C-20.

Mr. Werner Schmidt: That's right.

Ms. Nicole Ladouceur: Previously, all of the offences under the misleading advertising provisions of the Competition Act were criminal, and you're quite right in indicating that it was difficult to get successful prosecutions. Legislation was enacted to provide what we call a dual-track approach.

With regard to deceptive mail, Mrs. Redman referred to marrying the provisions with regard to deceptive telemarketing. What we're saying is that certain conduct is more egregious than other conduct and therefore would justify taking a criminal approach. In this particular situation, where certain elements of the offence are in fact reunited, then it would justify a criminal approach.

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There will always be, of course, the broader general provisions under section 74 of the new act that will cover broad general misrepresentations, and that will still allow us to take the civil route. Cave-Promotions was a case of deceptive mail where we did take the civil route. It has pros and cons. There is a very strong, significant deterrence when you do lay criminal charges as opposed to taking someone before the tribunal where the procedures are civil. We do have guidelines in deciding whether or not we pursue a specific offence civilly or criminally, but certainly, again, where we do have evidence of any egregious conduct—in this case, it's a very outright, clear offence of requesting prior payment before the delivery of a prize. We think we can't be any more clear there. So if someone in fact does choose to conduct himself or herself that way, then we will pursue it criminally.

Mrs. Karen Redman: If I could just add, my intent was to mirror what was in C-20. It was to mirror what is currently in the legislation having to do with telemarketing and move it into covering these kinds of contests, which are delivered by mail. It's been partially covered already, but looking at other aspects of it, if it's targeted, if they are repeat offenders, the kind of damage that was done—I think all of those things need to figure into which route is taken.

Mr. Werner Schmidt: I'd like to follow that up, if I could, Madam Chair, and the follow-up is really in making this thing work. I'm very concerned about the possibility of having a dual track, either the criminal or the civil route. There's a very big problem, I suppose, or a potential problem, in making that initial decision, whether you're going to proceed by the criminal route or the civil route, because a whole host of things happen that are very different, having made the choice to go one way or the other.

I'm concerned that if that dual possibility exists, on a technical basis somebody could argue that actually this should have been taken up under the Criminal Code rather than the civil side, or if something is under the Criminal Code they could say this is actually in the wrong place; it should be over here. So on the basis of that decision, the issue really doesn't become the issue at all. It's the process that becomes the issue. That's my concern here.

Could the legislation be written in such a way that it becomes abundantly clear that these kinds of offences are going to go on this side and these kinds of offences are going to go over here? I'm very suspicious that some really smart lawyers and other people will say, well, we'll just play this one against the other, and the consequence is that the people who are the victims are actually lost in the process, and the people who are the contenders spend an awful lot of money and really get nothing done.

Ms. Nicole Ladouceur: I think I'd repeat what I said with respect to certain elements of the offence. Bill C-438 sets out some very specific elements of the offence, as we have done in deceptive telemarketing, for instance. Where we have those specific elements, where the investigation has revealed in fact that those specific elements do exist, then the criminal route will be taken. Of course, as you know, an awful lot of mail is distributed by Canada Post; an awful lot of representations are made in the mail, and not all of them have to do with contests. So where there are other perhaps misleading representations that are being conducted by mail, those misleading misrepresentations will be captured by the civil provisions of the Competition Act. They're very broad.

Again, as I say, where we do have evidence that there is someone who is purporting to conduct a contest, for instance, where there must be prior payment before the delivery of a prize, I think we have narrowed—and I share your concerns about criminal offences—the application of that provision with respect to contest prior delivery. Any other representations in the mail then would be dealt with civilly.

Mr. Werner Schmidt: I appreciate that, and I believe it's very useful that you've done that. But I'm really concerned when I think about the possibility of this happening under epost, for example, which is electronic post, which is a very different issue. This bill really is very clear when it comes to the traditional way of doing mail, but when you get into the epost situation, we have a very different set of circumstances. There's a whole different technology involved here, and a lot of different control questions come into consideration as well.

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So that's one area. And then closely related to that, of course, is the Internet and e-commerce, which is very much involved in this whole thing. I'm really wondering whether the legislation is in fact broad enough to cover all of those eventualities, so it doesn't create the kinds of difficulties I've just tried to address.

Ms. Nicole Ladouceur: With respect to the Internet, this same question was put to us, of course, when we came before the committee with respect to Bill C-20. While the bureau and the department are of the view that presently we do not want to regulate the Internet—

Mr. Werner Schmidt: Well, you can't.

Ms. Nicole Ladouceur: —there is specific conduct that may be carried out through the Internet that our act presently covers and captures and that Bill C-438 could, with a very minor change, capture as well.

Presently the bureau has already prosecuted some offences over the Internet. The Competition Act is a framework law, with a very broad application, that applies to all forms of media, be it radio, television, print, or of course the new electronic media, and so we have been able to prosecute some cases.

In the case of Bill C-438, I think that where we refer to printed material, the bureau wants to ensure that whatever legislation or amendments are made to the act, they be very forward in their thinking, and therefore our suggestion that “printed material” be changed to “a written representation”. Now, “written” can be electronically over the Internet or in fact a written representation that is then reproduced in hard-print copy.

Mr. Werner Schmidt: Could you address epost in particular? That's quite different from Internet. It uses similar technology, but it's a very specific area.

Ms. Nicole Ladouceur: Sure.

With respect to epost, though, the representation is still being made.

Mr. Werner Schmidt: Oh, I agree.

Ms. Nicole Ladouceur: So we're saying the general application will still apply with respect to epost in terms of a misleading representation. However, when you conduct a contest for which you request prior payment, be it through telemarketing—we have a special section—or be it through the mail, be it electronic or in fact the actual printed hard copy that you receive in your mailbox, we believe Bill C-438 would capture both.

Mr. Werner Schmidt: I hope you're right.

I think this is probably part of that broader consultation that has to take place. I think there's a very real question here, and I'm just a little bit skeptical that all of the i's have been dotted and the t's have been crossed here, because that's a huge area that we really don't know that much about yet and we really have to anticipate what could happen here.

Thank you, Madam Chair.

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

Mr. Lastewka, did you have any questions?

Mr. Walt Lastewka (St. Catharines, Lib.): The area I was concerned with is that if we work to stop Canada Post from delivering, it then gets into other delivery systems. What needs to be done in order for these scams not to be able to be delivered?

For example, I live in an area with a very high percentage of seniors. We have seniors' complexes. The biggest one has 1,700 people. It's very easy for ad delivery people to come and deliver that mail. So whether the senior gets it by Canada Post or by ad mail or by other means really doesn't matter; we're just shifting the problem from one area to another area to another area.

The objective I would see is that we don't want to have these scams being delivered. In other words, we want them stopped from reaching the senior citizen who is so vulnerable. Is there not a way we could make that happen? I don't like shifting a problem; I like fixing a problem.

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Ms. Nicole Ladouceur: Absolutely. I think that is also one of the reasons Bill C-229, for instance, was not supported by the bureau as it was drafted. I think we did foresee that problem with respect to simply shifting a problem through Canada Post.

What we're saying here, though, is there is going to be a specific criminal interdiction to conduct a contest by which, in order to get your prize, there will have to be prior payment. Whether it be, as I indicated, through telemarketing—there's an offence to that effect that exists already—or whether it be through any type of delivery per se, there will be an offence. So I think what we're doing is taking a much broader approach and suggesting outright a total ban on contests that have a condition set out that in order to get your prize you have to make a prior payment.

The Chair: Ms. Redman, do you wish to add to that?

Mrs. Karen Redman: The difference between the initial bill and Bill C-438 is the fact that the onus is now placed on the person who is manufacturing the card as opposed to Canada Post. So I think in part that answers your concern.

Ms. Nicole Ladouceur: If I could just add to this for the benefit of the committee, of course under proposed section 52.2, as the proposal for amendment reads, we do refer to “cause to be delivered, by mail or through any other system of delivery”. That would also include couriers—for instance, FedEx, UPS, etc.—who would be delivering these things. It would include the Internet. It would include any system of delivery—the flyers, for instance, that people get at their homes.

Mr. Walt Lastewka: Any means of delivery. So if I print the scam cards in one community and I hire people to go over and deliver into another community, does it catch that?

Ms. Nicole Ladouceur: Yes, I believe it would, because there's a system of delivery there that has been put in place and it is being delivered that way.

Mr. Walt Lastewka: Okay. I have an energetic family. I go and print the cards and I and my family deliver them ourselves. Is that still...

Ms. Nicole Ladouceur: Yes, I believe so. Again, I think the thrust of the bill is the act of promoting or in fact having a contest where there's prior payment for delivery of the prize. So regardless of the system of delivery...

Mr. Walt Lastewka: Is it clear that any prior payment means picking up the phone and calling the 1-900 number?

Ms. Nicole Ladouceur: Yes.

Mr. Walt Lastewka: Any prior payment?

Ms. Nicole Ladouceur: Any amount, we have indicated. Yes, that's correct, any amount.

Mr. Walt Lastewka: Okay.

The Chair: Ms. Redman.

Mrs. Karen Redman: Thank you.

If I could just add something, another aspect to this is the fact that it seems to be an international growth industry. In 1994 the United States brought forward the unlawful mail matter act, and they have dealt with it in a much more heavy-handed way than Canada has. I know as recently as last spring, I believe it was, Canadian companies were sending materials both to the U.S. and to the U.K. It seemed to be an international problem, which is another reason we should deal with it.

The Chair: Thank you.

Mr. Brien.

[Translation]

Mr. Pierre Brien (Témiscamingue, BQ): I would like our witnesses, both Ms. Redman and the officials from the Competition Bureau, to tell us whether they have looked at what some Canadian provinces may have done to combat practices of this type. Have some provinces tried to limit or control these practices under the powers they have been given?

[English]

Mrs. Karen Redman: Clearly it's at this committee because it's a federal responsibility, and I think the questions that were just asked indicate that it is not geographically specific. So my understanding is that it is a federal issue that should be regulated federally as opposed to provincially.

[Translation]

Mr. Pierre Brien: There are a number of provinces whose legislation may have a different title, but whose objective is to protect consumers. For example, there is the Consumer Protection Act in Quebec. Although it does not cover criminal offences for which it is often very difficult to get indictments in any case, there are civil provisions in consumer protection legislation that can achieve the same objectives.

Don't you think that such provisions are simpler and easier to manage than provisions on criminal offences, in light of the cumbersome procedure involved in getting a conviction?

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Ms. Nicole Ladouceur: We are working very closely with all the provinces. In fact, I was in Quebec City last week at the International Symposium on Consumer Protection, which I'm sure you heard about. We also held a federal-provincial meeting of deputy ministers on consumer affairs. The department and the Competition Bureau work very closely with the provinces in this regard.

The problem with respect to deceptive direct mailing is that, more and more, it is becoming a transborder problem, as was mentioned. This problem crosses not only provincial boundaries, but increasingly, the Canada-US border. The companies we are dealing with have unfortunately become much more sophisticated in their organization. A number of operations are run on both sides of the border, and their objective is quite clear: to get around enforcement organizations.

It is undeniable that in Canada the Canada Post Corporation Act covers deceptive direct mailing, for the reasons mentioned by the Bureau. We do not support any amendments to this Act.

Section 206 of the Criminal Code prohibits the holding of a contest which is conditional on prior payment for the delivery of a prize. I repeat that the provinces do not have the jurisdiction to amend the Criminal Code.

The Competition Act has the advantage of being a law of general application whose provisions easily transcend provincial boundaries and international borders. In my view, the Competition Act is an appropriate vehicle for covering this type of practice. The problem was exactly the same in the case of telemarketing. I know that your colleague raised exactly the same concerns about provincial consumer protection legislation. Unfortunately, the practices are not confined to one province or territory, hence it is very important that the federal government have the tools required to investigate and take action in cases of this type.

Mr. Pierre Brien: Although you talked about the mail, that is only a small part of the problem. In any case, I am not sure that the use of ordinary mail is likely to grow in the future. The Canada Post Corporation is the first to turn to electronic commerce, because it knows that that is where new post boxes will gradually be located in the future. Canada Post is no longer doing door-to-door mail delivery in some areas. The mail targets only a small part of undesirable solicitation. What do we do about the rest?

Ms. Nicole Ladouceur: As I was trying to say in my answer, the rest is governed by the Competition Act, which is a law of general application that covers all these practices. As I was saying earlier, the Act covers all types of media. In my answer to Mr. Lastewka's question, I referred to the ways of delivering these documents, papers or cards. I think that our federal act, which applies throughout the country, is very easy to enforce.

I don't think any province has passed specific legislation on contests. We said that if there were a very broad consultation, there might probably be a province that would want to do that. I do work quite closely with the provinces, and I am not familiar with any initiative or bill of this type at this time. Once again, if there were a provincial law, we would have to recognize that the problem also goes beyond provincial and other borders.

Mr. Pierre Brien: The value of this argument is based on the fact that the same problem exists between Canada and the United States. An American law would not be used because there is a problem at the Canada-US border.

Ms. Nicole Ladouceur: I agree, but I must point out that Canada and the US have signed treaties on mutual assistance in criminal matters, and they work together. In fact, I will be leaving Ottawa later today to discuss a number of issues with our American counterparts. Our two countries have signed treaties of mutual assistance in the case of investigations and prosecutions on unfair practices, one of which is deceptive direct mail. We are conducting joint investigations in a number of areas with the American authorities.

Mr. Pierre Brien: Thank you.

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[English]

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

Mr. Cannis, please.

Mr. John Cannis (Scarborough Centre, Lib.): Thank you, Madam Chair.

First of all, let me congratulate my colleague Karen Redman for pursuing this as aggressively as she has, and for all the right intentions.

I just wanted to pick up from my colleague Walt Lastewka in referring to different forms of delivery. One example I'd like to address—and I don't know if there are provisions for this, because there's a shift. For every action there's always a reaction, and people will always find some other deceptive method of getting what I've just noticed.

One area I've noticed—Walt said an energetic family. I see young people delivering local papers in local communities, and I see these pouches now. I open one and see one of these examples. It happened to my son. He said “Dad, I've just won this big prize”, until I put on my reading glasses and started reading some of the fine print. Had I not seen it, maybe he would have taken the initiative to do what is described here, call for x amount of dollars.

We keep using the word “delivery”, and there are so many different methods of delivery, as mentioned by Mr. Schmidt earlier. As much as he's gone forward to the future, and I commend him for thinking in that direction, we also have to take a look at what has been happening. Are there any provisions to address that intent of delivery?

Last is jurisdictions. We see organizations, maybe somewhere in Tucson, Arizona, or in Chattanooga, Tennessee, unfolding to provide this type of deceptive representation of games of chance, etc. Do we have any ability as a government with this legislation... You refer to it as an international growth industry, and it is. But crossing these borders, and we see what's happening with e-commerce, e-mail, etc., would we have any ability of protecting our seniors, of course, our youth, as I mentioned, my children, and everybody in between through this legislation? Where do we go with this?

The Chair: Mrs. Redman, go ahead.

Mrs. Karen Redman: I'm sure there will be an additional response from the Competition Bureau representatives, but I can briefly say something.

In 1997 it was something Prime Minister Chrétien and President Clinton discussed, so clearly it is an international matter. I mentioned earlier the legislation that was brought forward in 1994, the unlawful mail act in the United States. They continue to refine that. So I think it's a work in progress. They are ahead of us in how they've dealt fairly aggressively with this matter. We have been seen to be less aggressive, and I don't think that has particularly served Canadians well.

I'd also like to point out that the suggestions in Bill C-438 move the onus from the delivery mechanism, or Canada Post or whoever is delivering it, to the people who create and distribute it. I think that's a significant step that answers some of your concerns.

The Chair: Ms. Ladouceur.

Ms. Nicole Ladouceur: Just on the issue of delivery, of course I'm not an expert in the English language, but I can't think of another word but “delivery”, and in fact as you spoke I tried to visualize again what my computer screen says at my office when I send something and want to absolutely make sure the recipient has read it. What does come back is “delivered”, with the date and the time, of course, when it was read.

I think, again, proposed section 52.2 talks about “delivered, by mail or through any other system of delivery”. I really think the word “delivery” is going to capture... be it the newspaper boy, who is of course distributing these pouches of material, be it e-mail, be it any mechanism to deliver, to actually take something from one place and bring it to another place.

On the international scene, to touch on your second question, of course there's a lot of concern on that scene. I think that just as we are concerned about moving forward in the 21st century with the Internet, a lot of countries are also having to shift gears in terms of a globalized environment. These scams are not growing within your own jurisdiction and perpetrating their crimes within your own jurisdiction. They are very, very sophisticated. They have a web of enterprises in many countries. The financial one, of course, is always in the Caribbean, and often the actual schemes are thought up, unfortunately, in the U.S. They've had time to test the ground in the U.S., and of course by the time it gets into Canada they pretty well have a good idea of how much money they're going to make from Canadians.

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This has caused governments to cooperate much more closely. We have task forces with the Americans, and our Prime Minister and the U.S. President meet. There's an annual meeting we attend to discuss cross-border crime. It is causing governments to cooperate a lot more and to share information with regard to these scams. There are attempts to perhaps harmonize our legislation to a certain degree to make sure that along with whatever legislation the Americans come up with, as they did in telemarketing and just recently with their amendments to their postal act, which I think the President signed in December 1999, in Canada we're taking a very consistent approach, and we're not leaving open any loopholes. So there are lots of discussions with our American counterparts on those issues.

Mr. John Cannis: I noticed a logo on one of them. I was looking at the Canadian coat of arms, and there's a lot of similarity, but it's quite distinct. It's quite different. Of course the average citizen, whether it be a Canadian knowing their Canadian coat of arms or other nations... When I first looked at it, I said, oh, yes, but then all of a sudden I had to look up and say, no, here's what I'm comparing, and indeed it was very different.

Seriously, how do you prevent a company, such as this foreign currency provider, from coming up with their own logo, as a family comes up with their own crest, that could be similar to the crest we see there on the wall? How do you prevent that?

Ms. Nicole Ladouceur: There is a specific provision in the Trade-marks Act that says that no one can use a coat of arms, logos, etc., to mislead. In the Trade-marks Act there's a provision that prohibits misleading representation. There's also a provision in the Competition Act that prohibits misleading representation.

In 1997 the bureau did receive complaints with regard to the use of a government logo as well as a government acronym. The company in question called itself SBBC, Small Business Consumer Centre. Industry Canada has a program with regard to small business information centres, I believe they're called, so the acronym was very close. They were advertising information and books about government grants and loans assistance, and individuals had to pay to get the binders of material. All of the complaints the bureau received were from people who truly believed this was a government product that was being sold and that the money in fact was going to the Receiver General of Canada, etc.

When we investigated, we realized that this wasn't at all the case and that this was a very carefully planned scheme to deceive Canadian consumers into believing this was a government product. So using its broad misleading representation powers, the bureau launched a formal inquiry, and eventually the company did contact us. The case was settled before laying criminal charges. Corrective notices were posted in all of the newspapers across Canada where the ads had originally appeared on government grants and loans assistance. A $100,000 restitution fund was set up, and consumers who had fallen prey to the scheme were allowed to get their money back.

It's an example of dealing with the deceptive use of logos, coats of arms, and acronyms. In this case it was a logo and also a government acronym that were being used.

Mr. John Cannis: Thank you, Madam Chair.

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

Mr. Bernier.

Mr. Gilles Bernier (Tobique—Mactaquac, PC): Thank you.

Mrs. Redman, I want to thank you for coming to the committee. You know that I'm a big supporter of your private member's bill. I want to thank you for all the hard work you've done on this issue. As you know, tomorrow I will probably be tabling my own private member's bill, which coincides with yours.

I have one question in particular that I would like to ask you about your bill. If I heard right about the Competition Act, if your bill passes, it would be totally against the law to promote and distribute that kind of material, or is it just for the promotion but not the distribution?

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Let's say your bill would make it against the law for Canada Post, for example, to distribute all kinds of ad mail—games of chance and stuff like that. If Canada Post were to give it to me and I personally distributed it—I don't work for Canada Post—would that mean I would not be breaking the law, whereas Canada Post would be?

Mrs. Karen Redman: Again, I would like to acknowledge, Madam Chair, through you, the interest and the support Mr. Bernier has given to this whole issue. He certainly has expressed a great deal of interest.

I think Bill C-229 dealt with Canada Post, and because the subject matter is here... Bill C-438 deals with the fact that the onus is on the person who creates and profits from the actual contest, and it relieves the onus being put on whoever the delivery agent is, whether it's Canada Post or some local high school students who have been hired to deliver something. The fact that it is delivered by any means is significant, but the onus will now be on the person who creates the cards. It requires a payment, whether that's a 1-900 number or some kind of prepayment, in order to collect a prize. The onus is now on the creator of the contest as opposed to the delivery agent. But obviously it has to be delivered by some means; it has to be distributed by some means.

Ms. Nicole Ladouceur: If I may add to the member's response, proposed section 52.2 introduces the concept of directly or indirectly, and therefore you can't directly or indirectly promote, or you can't directly or indirectly cause to be delivered by mail or any other system... So certainly whether you are directly involved or whether you're a third-party service provider, for instance, you would be caught by that. Anyone involved would be caught by proposed section 52.2.

Mr. Gilles Bernier: At this time—this bill has not been adopted yet—is it hard to prosecute any kind of mail fraud?

Ms. Nicole Ladouceur: I would say it's challenging. It's very resource-intensive. I'll go back again to my experience in telemarketing, because this mirrors telemarketing.

I did indicate to you that we did get a conviction for Cave-Promotions. I erroneously led you to believe that it was civil, but in fact my colleague here who was responsible for Cave reminded me again that it was criminal. It is a criminal conviction. I'd like the record set straight on that.

It's very challenging. It's very resource-intensive, because we're taking a very broad provision of the act, which is “a misleading representation”, coupled with the fact that we also have to prove to the court that not only was it misleading representation but it has to be on a material fact and there also has to be a general impression test that we have to meet.

So the investigation that the officers put together is resource-intensive. It can be long. Certainly, with respect to Cave, I guess one of the unfortunate things was that by the time we were able to put the case together and make it solid enough to actually take it to court, Cave of course had time to reap the benefits of what we truly believed was a scam.

In this particular situation, the offence here is so specific that we believe that will allow us to in fact mount the evidence of the case much quicker, because we won't have those broader tests to meet and that we have to prove to the court. There are very specific elements of the offence that are being outlined: Are you promoting a contest, yes or no? Is there prior payment that must be received before delivery of your prizes?

These are very easy things to prove. It has nothing to do with whether or not the average Canadian consumer was in fact being misled. We often have to resort to focus groups, for instance, to make sure that from a statistical basis the evidence we are gathering is that in fact the representation is misleading. What may be misleading to you may not be misleading to me, or vice versa.

It makes for very cost-intensive, labour-intensive cases. I guess it's a long answer. Yes, we can prosecute, but I think in certain cases, especially the more egregious cases, it would be of benefit to take a much more specific and targeted approach in dealing with the issues.

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Mr. Gilles Bernier: I think your first private member's bill, Bill C-229, dealt with only Canada Post distributing those kinds of ad mail. You know that Canada Post distributes only about 20% of all that ad mail, and a bunch of other companies take the other 80%.

Now, if I understood right when my other colleague asked questions, that means your Bill C-438 would take 100%. All the distribution and production of that ad material would be outlawed here in Canada. Is that a fact?

Mrs. Karen Redman: Yes. It's far more comprehensive.

Mr. Gilles Bernier: Thank you.

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

Mr. Martin, please.

Mr. Pat Martin (Winnipeg Centre, NDP): Thank you, Madam Chair.

I also want to compliment the honourable member for bringing this forward and giving us the opportunity to have this important debate. I believe this bill is necessary and important. It's very timely and very practical. There are all kinds of good reasons, on a number of levels, that we should be dealing with this at this time.

First and foremost, I believe, is that as governments get more addicted to the revenue generated by gaming, there needs to be more regulation on gaming and the type of gaming that circulates. We have an obligation and a duty to intervene when we know there are clearly misleading games going on with the intention to defraud. It's so morally and ethically necessary, and it's so morally and ethically wrong for these people to be in business. But certainly any government agency over which we have any control shouldn't be taking part in that at any level, so I'm very glad that this is before us today.

I'm shocked, as we all are, at how blatant some of these examples are. I had never seen some of the examples that were circulated here today, and it's so clearly obvious that they intended to take advantage of vulnerable people, to give them some kind of false hope. While I was sitting in this room, I was looking at a picture of Tommy Douglas over there, and Tommy always used to say that any kind of gaming is a tax on poor people, because poor people are more likely to get sucked into this kind of thing. The pie charts that were circulated here today provide even more evidence that poor older people are even more vulnerable, because they're not used to this level of dishonesty, I don't think. I think they grew up in a kinder, gentler era, where this kind of fraud was... There were shysters about, but they wouldn't show up at your door with a government logo on the envelope and try to suck you into something of this nature. So I'm really pleased.

The other thing that has already been raised here is that it's so necessary that Canada not become a refuge or safe haven for these scam artists. If other countries like the United States are already taking steps to control this type of thing, we don't want to be some sanctuary for people to... It might even be an American scam artist operating out of Canada because there are fewer rules in this country. So for all kinds of international obligations too, there has to be some level of cooperation to nip this in the bud.

I know I'm not coming to any kind of question here, Madam Chair, but I just wanted to speak about it anyway.

One question I do have is... Well, one point I'll make first is that so far it has actually fallen on the employees of Canada Post to be the conscience of Canada Post, to make a judgment call. There was a well-known case recently where one women, as a matter of conscience, wouldn't deliver this material, and she was disciplined for it. She was penalized. I think she was actually taken off the job because she refused to put into the mailboxes things she knew to be wrong. So again, a bill like this would take that burden off the employees to make that kind of judgment call, and it makes it that much more necessary.

I think Canada Post wouldn't have such a problem with this kind of thing if their emphasis were to get away from profits and more toward service. It's only recently that the government has looked at Canada Post as a revenue generator, and in fact Canada Post gives the government $200 million a year above and beyond what they make in terms of providing service to Canadians. So really, if the sole mandate of Canada Post were to provide a necessary service and not to generate revenue, they probably wouldn't feel it necessary to get involved with the delivery of things like this. I'd like to make that point as well.

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As for seniors being very vulnerable, this is no different from the scam artist who knocks on their door and says “I'll put a new roof on your house for $10,000” and then takes the cheque and disappears. They're always being taken advantage of by various scam artists, and it's an obligation of government at every level to try to ensure that consumers aren't misled.

I'm not too concerned about the point that was raised that if we deal with the delivery of mail, what about the other means of communication and means of delivery? I'm satisfied that proposed section 52.2 and the other bill, Bill C-438, do contemplate that and do deal with other ways of communicating with people. So I know the people raised it with the best of intentions, but it seems as though you have all of that covered in these two bills.

I don't think I have a question. I just wanted to ramble.

The Chair: Ms. Redman wishes to respond to your comments.

Mr. Pat Martin: That would be fine.

The Chair: Ms. Redman, please.

Mrs. Karen Redman: Thank you, Madam Chair.

I would like to thank Mr. Martin for his positive support for the intent of this bill, but I need to point out that, again, Bill C-229 was a good first step. It was never the intention of that bill to put the onus on the individual carrier. And it's Ms. Pamela Cornell from the Kingston area. I've talked with her, and I know that due to a lot of personal conviction she felt compelled to do that.

It was never the intention of any of the bills that I or Ms. Torsney have put forward that this onus would ever fall on an individual postal carrier, that it would fall on staff of Canada Post, who currently do check the mail to make sure they are not sending through incendiary devices or pornography or things that clearly are unlawful. These games of chance are not unlawful, and that is where Canada Post and I had a lot of discussion.

I have to tell you that Canada Post has always been looking for a solution for this. They have been very supportive and they have been more than willing to work with me on this issue, so I wouldn't want to paint them as somebody who is foot-dragging. I was looking for responsible mail delivery, and they were worried about issues of censorship. So quite clearly, they have been more than willing to work for a solution to this problem for Canadians.

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

Mr. Schmidt, please.

Mr. Werner Schmidt: Thank you, Madam Chair.

Madam Ladouceur, you have mentioned the word “egregious” quite often, and I'd like to know what that means. Some small businesses, for example, have brought to the Competition Bureau complaints about abuse of dominant position by certain publishers. That's one kind of case, and there are other cases. The Competition Bureau doesn't deal with small cases; they deal with larger cases. Here we have the most unsuspecting people who are the greatest victims—the poor, the elderly—and so I'm wondering how big an issue it is before it's egregious, and how small does the issue have to be before it's considered not egregious.

Ms. Nicole Ladouceur: I think there are two different things there. I think the term “egregious” really goes to the nature of the conduct. It goes to the intent to deceive. So although someone could have adopted very egregious conduct, it may not necessarily mean, for many reasons—and I'll get into them after my statement—that we will actually prosecute the individual. At the outset, I want to make that distinction between conduct that is egregious, that is serious, that is really the intent to deceive... and all of the actions prior and after are really to deceive, maliciously. It goes to maliciousness as well. It goes to negligence. It goes to reckless conduct on the part of an individual.

Now, I think we are faced, as many other agencies are, with the question of prioritizing. For instance, our branch receives close to 10,000 complaints a year from Canadian consumers across the country. We probably receive 2,000 or 3,000 complaints from American citizens as well. That, of course, begs the question about how we actually divide up our resources in terms of investigations. Clearly we cannot investigate 10,000 cases. So the bureau has adopted, and our branch has adopted as well, a system by which we take into account several criteria in determining in fact which case we will investigate.

In the case of deceptive mail—

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Mr. Werner Schmidt: Are those criteria available?

Ms. Nicole Ladouceur: Yes, they are.

Mr. Werner Schmidt: Could we have a copy of those?

Ms. Nicole Ladouceur: I don't have them with me, but I will make a note that you have requested them and we will make sure you receive a copy.

Mr. Werner Schmidt: Thank you.

Ms. Nicole Ladouceur: Clearly in the case of deceptive mail, one of the first criteria is the volume of complaints we have received. In the case of K, we had received quite a few complaints. We track the complaints on a statistical and trend analysis basis. You can ask me at any time of the day, for instance, for a snapshot of the deceptive mail complaints I have and I will be able to give you that.

So as cases evolve, for instance, as we settle cases or as prosecutions are in fact obtained, then investigators are freed up to take other cases. We then consult our data bank and see what are the next cases.

The number, of course, is important, the vulnerability... As I say, we have established criteria: How vulnerable are the people who are being targeted with respect to a particular scam, with respect to a particular practice? That is also a factor that is taken into consideration. Is there what we call self-correction? Is there an ability for an individual who reads something to very quickly come to the conclusion that it's an attempt to deceive? If it's very quick, very easy, it tends to be pushed back a bit, as opposed to conduct that the average Canadian senior citizen, for instance, would not be able to detect. That to us is a bit more serious.

So there are lots of criteria there that we do take into consideration. There may be particular pressure. As I indicated to a member previously, we do work closely with provincial governments, with the U.S. FTC and the U.S. postal service. Sometimes for strategic reasons we may decide to target a particular individual to send a strong message to the community with respect to conduct that will not be tolerated by Canadian authorities, for instance.

So there are lots of criteria, but I will happy to forward that to you.

Mr. Werner Schmidt: Thank you, Madam Chair.

The Chair: Thank you, Mr. Schmidt.

Ms. Ladouceur, maybe you can forward the criteria to the clerk of the committee and he'll circulate it to committee members.

I just have a couple of points of clarification. We talked about the Internet. In looking at the wording in Bill C-438, I see it talks about printed material. Does that actually exclude delivery by the Internet because it's never actually printed?

Ms. Nicole Ladouceur: We believe it would have. In fact, as I indicated in my opening statement, there hasn't been a lot of consultation on this. We did of course read with interest the document that was prepared by the researcher with the Library of Parliament. On further reflection, we thought that perhaps if further amendments were made to the bill, one of our suggestions would be the removal of “printed material”, to be replaced by “written representation”, be it electronically or in fact on a hard copy. We think that would be captured by representations being made on the Internet.

Certainly it's a good point, and we do agree. We don't think that “printed material” would in fact capture representations made over the Internet.

The Chair: Secondly, with regard to Bill C-438 again, when you look at telemarketing, Bill C-438 is dealing with contests where collections of the prizes are conditional on a prior payment or on a specific telephone charge. Are there any concerns that Bill C-438 would hinder the delivery of legitimate marketing?

Ms. Nicole Ladouceur: Our comment, of course, about there not being lots of consultation with respect to our bill... We worked quite closely with the Canadian Direct Marketing Association, for instance, when we did work on Bill C-20.

The legitimate marketers usually don't follow that route. They usually don't request prior payment before delivery of a prize, and so we didn't see that as a hindrance to the marketplace with respect to that. At this stage, we're not concerned that that would in fact hinder the marketplace.

The Chair: But there will be consultation on Bill C-438 and there will be some discussion, and this may be one of the questions you'll want to ensure doesn't affect them.

Ms. Redman.

Mrs. Karen Redman: If I could just draw your attention to proposed subsection 52.2(3), it says:

(3) No person shall be convicted of an offence under this section who establishes that the person exercised due diligence to prevent the commission of the offence.

That was an attempt to deal with the fact that if due diligence is followed, legitimate telemarketers will not fall under this.

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The Chair: Thank you.

I don't have any other questioners on my list. I want to thank the witnesses and everyone for being here this morning.

I want to remind members on the steering committee that we have a steering committee meeting this afternoon.

The meeting is now adjourned. Thank you very much.