Great. Thanks very much.
First, Mr. Chair, thank you for inviting us to appear before the committee. As you said, my name is Chris Padfield, and I am the director general for the small business branch within the small business, tourism, and marketplace services sector at Innovation, Science and Economic Development Canada. I am joined here today by Mélanie Raymond, who works in my branch as the director for the office of consumer affairs.
You have heard from my colleagues Mark Schaan and those at the CRTC and the Office of the Privacy Commissioner, and will hear during the next hour from the Competition Bureau, about their responsibilities for the policy, oversight, and enforcement of CASL. The office of consumer affairs works with all of them to build awareness about the legislation among Canadian small businesses and consumers.
Together, we help inform consumers to make safer electronic transactions and engage with confidence online. Being better informed, for both consumers and businesses, means being in better control of their activities online and minimizing their risks of unsuspected problems.
As you may know, one of the vehicles to raise consumer and business awareness is the website “fightspam.gc.ca”. From the beginning, fightspam.gc.ca has aimed to provide information to consumers, businesses, and organizations on how to protect themselves from threats, as well as provide tips for contacting clients electronically. In a dedicated section on the site, individuals can educate themselves about spam and the risks associated with it. They will find information on how to protect their computers and devices from malware, ransomware, and viruses when downloading software or accessing free Wi-Fi Internet networks.
Consumers can also learn the steps to take to recognize spam and how to contact the Spam Reporting Centre to report it. They are also alerted of recent spam warnings and notices from the CRTC, the Office of the Privacy Commissioner, and the Competition Bureau.
The website uses a variety of means—including a mobile protection toolbox, a quiz, FAQs, and infographics—to convey CASL-related information. Canadian consumers thus learn to make more informed decisions about what type of e-marketing they wish to receive and what they allow to be installed on their electronic devices.
There is also a dedicated section on fightspam.gc.ca for businesses and organizations to protect their information and understand their responsibilities to comply with CASL. Through a video, webinar, quiz, and infographics, businesses learn the importance of getting consent, providing information, and offering the option to unsubscribe when sending commercial electronic messages. Businesses and organizations can also find tips on how to protect their information and how to report spam. They are also alerted to recent enforcement actions taken by the agencies responsible for enforcing CASL. This information is complemented by links to the three enforcement agencies' websites and other resources, such as a glossary and information bullets.
Finally, fightspam.gc.ca is the gateway for reporting suspicious emails and activities to the spam reporting centre for the attention of the three agencies responsible for enforcing the legislation. With more than 1.5 million visitors since its launch in August 2011, fightspam.gc.ca can be deemed as having been an effective means of reaching out to Canadians.
In the first two and a half years, the site received almost 4,000 visitors monthly, until January 2014. At that point, consumers and businesses started consulting fightspam.gc.ca in ever-growing numbers to understand what CASL meant for them. The first five months of 2014 saw close to 120,000 visitors, or the same number of visitors as in the last 27 months or since the site's launch. Not surprisingly, Canadians became really interested in finding out more about the law closer to its implementation. In the following two months, including July when the law came into effect, some 415,000 visitors consulted the site.
Since then, fightspam.gc.ca has been an important source of trusted information for about 25,000 Canadians every month, individuals and businesses alike. So far this year, close to 270,000 visitors have already consulted the site, which is consistent with the previous two years. This tells us that the tool remains pertinent and useful.
Thanks to the law and more sophisticated protection technologies, such as virus detection software and spam filters, consumers receive less spam today. And as the number of visitors to the fightspam.gc.ca website suggests, Canadians are seeking information and taking action.
We are encouraged and motivated by these numbers. We continue our awareness efforts and media monitoring to get insight on how awareness efforts impact the dissemination of CASL-related information, all with the goal to improve our activities and broaden our reach.
To maximize our impact, our communications approach is, and has always been, positioned within the greater efforts of informing Canadians about the benefits and opportunities of the electronic marketplace. Activities related to spam and CASL are an important part of our broader efforts. These efforts aim for consumers to have the information and tools they need to safely and confidently participate in the online marketplace, which also benefits Canadian businesses and the economy. They include raising consumer awareness around cybersecurity and fraud, which includes ID theft prevention. This awareness messaging is complementary and amplifies the messaging for CASL.
We leverage our other communication channels, in particular “Your Money Matters”, the social media channels for the Government of Canada's money and finances theme. We have regular Facebook and Twitter posts specific to CASL, explaining how to protect electronic devices from malicious software, how to give or refuse consent to receive marketing emails, and how to report spam.
We also have weekly posts about cybersecurity or fraud focusing on fraud protection, privacy protection, and scam alerts such as phishing scams. Since our Twitter channel went live in January of this year, we have shared more than 350 English and French tweets from partners—the Office of the Privacy Commissioner, the Competition Bureau, and Public Safety Canada—on CASL and issues related to cybersecurity awareness. We also actively support and promote every year Public Safety's cybersecurity month in October, and the Competition Bureau's fraud prevention month in March.
We also reach out to vulnerable populations, such as seniors, who are the target of fraud and scams, including malicious software. For example, between 2014 and 2016, Canadian seniors were victims of fraud, including phishing and identity theft, that translated into almost $28 million in losses. To be effective, though, we must use the right communication channels. Police departments around the country, for example, regularly ask us for hard copies of our informational leaflet on ID theft so that they can hand out important safety information, particularly to seniors who may not be online.
While enforcement agencies will continue to lead on compliance and enforcement, we continue to work to make sure that Canadians feel empowered and safe online.
Thank you very much.
Great. Thank you very much, Chair
My name is Josephine Palumbo. I am the deputy commissioner of the deceptive marketing practices directorate at the Competition Bureau. I am joined by my colleague Morgan Currie, associate deputy commissioner of the deceptive marketing practices directorate.
We are pleased to appear today on the committee’s review of Canada's Anti-Spam Legislation, or CASL.
I'll begin by providing some context about the Competition Bureau and its mandate, and then move to the bureau’s role with respect to CASL, as well as the bureau’s experiences with cases related to CASL.
Please allow me to begin by noting that the Competition Bureau does not enforce CASL per se. Rather, the Competition Bureau, as an independent law enforcement agency, ensures that Canadian consumers and businesses prosper in a competitive and innovative marketplace that delivers lower prices and more product choice.
Headed by the commissioner of competition, the bureau is responsible for the administration and enforcement of the Competition Act and the three labelling statutes.
The Competition Act provides the commissioner with the authority to investigate anticompetitive behaviour. The act contains both civil and criminal provisions, and covers conduct such as bid-rigging, false or misleading representations, price-fixing, and abusing a dominant market position.
The act also grants the commissioner the authority to make representations before regulatory boards, commissions, or other tribunals to promote competition in various sectors.
The deceptive marketing practices directorate, which deals with cases related to false and misleading representations, handles the vast majority of the complaints received by the bureau. To give you a sense of the scale of this, in the last year the bureau received approximately 11,000 complaints, of which 69%, or about 7,700, were relayed to the directorate.
As noted above, when conducting investigations, the bureau uses the Competition Act's relevant criminal and civil provisions. The passage of CASL brought about specific amendments to the Competition Act that enabled the bureau to more effectively address false or misleading representations and deceptive marketing practices in the electronic marketplace, such as false or misleading sender or subject matter information, electronic messages, and website content, such as a website or an IP address. The changes address rapidly changing technologies, allowing us to better address competition offences in the digital economy.
As I noted a moment ago, the Competition Bureau does not enforce CASL, and I would stress that CASL provided the bureau with no new powers or responsibilities. It provided the bureau with more specific tools and enforcement provisions to address certain kinds of online conduct and specific digital threats.
With respect to the digital economy, the bureau's thinking has evolved over the years. Initially, we viewed the digital economy as a somewhat separate entity. This thinking took place at a time when most Canadians were not conducting a significant portion of their transactions online. Today the digital economy “is” the economy. The world has indeed changed, and therefore, we focus on the online activities of fraudsters, and prioritize our enforcement efforts in response to threats in the digital economy where those efforts can be most effective.
In recent years we have observed some concerning online trends. These practices include subscription traps, spoof websites, drip pricing, and technical support scams.
I would note that, for the most part, the bureau’s investigations are initiated by a complaint from any number of potential sources, including consumers, businesses, industry associations, the media, and stakeholders.
Subscription traps occur when consumers are offered a free trial or purchase of a product, and consumers are given to understand that they have to pay only the shipping and handling with their credit card. Consumers later find themselves signed up to an unlimited subscription service with ongoing fees and unexpected charges. Contacting the company will only result in them pointing out their online terms and conditions, which are buried somewhere in the fine print. Consumers are told that by not returning the supposed free product ordered, they have in essence agreed to a monthly subscription to that product and that they have authorized monthly charges on their credit card. Once in this situation, it is often extremely difficult to stop the ongoing charges.
Spoofed websites occur when a scammer uses a website to mislead consumers into thinking that it represents a specific business, financial institution, government, or charity. These websites generally imitate the real website to sell products or services in order to obtain sensitive financial or personal information from users. Often, they will provide enough information to appear like the real thing, including store locations, phone numbers, terms and conditions, and logos—RBC being an example.
Drip pricing is a deceptive marketing practice whereby advertisers offer an attractive price up front for a product or service, only for consumers to discover that unexpected additional mandatory costs or fees have been added by the advertiser, leading to higher prices than initially advertised. The true total cost may only be revealed after the consumer has initially responded to the advertisement.
Technical support scams may take many forms, but in general they involve representations that induce consumers to believe that their computers have been infected with some form of a malicious virus or program. They appear in the form of pop-up advertisements in the user's browser, which make the false or misleading representation that the consumer's computer is infected.
The pop-up message provides instructions on how the malicious program or virus can be removed by directing the user to contact a technical support hotline to ensure the removal and cleanup. These representations are often accompanied by warnings of dire consequences to the user and the computer if they do not take corrective action immediately. Once the consumer reaches the call centre, the representative directs the consumer to grant remote access to the computer. From there, the representative may make additional representations, confirming that the computer is infected and that the user must pay—often hundreds of dollars—to remove the malicious program.
At present, we have a number of ongoing investigations examining these and other deceptive marketing practices.
In 2016 the bureau announced its first win involving the new provisions created by CASL. Following an investigation, the bureau concluded that Avis and Budget had engaged in false or misleading advertising for prices and discounts on car rentals and associated products.
Specifically, Avis and Budget had engaged in drip pricing, whereby certain prices and discounts initially advertised were not attainable because consumers were charged additional mandatory fees that were only disclosed later in the purchasing process. The prices were advertised on Avis and Budget's websites, mobile applications, and emails, as well as through other channels. As part of this settlement, Avis and Budget paid a $3-million penalty to promote compliance with the law going forward.
Similarly, as a result of an investigation into drip pricing, in April of this year Hertz Canada and Dollar Thrifty agreed to pay a total penalty of $1.25 million to ensure that their advertising complies with the law and to implement new procedures aimed at preventing advertising issues in the future.
Earlier this year, the CASL-related amendments to the Competition Act allowed the bureau to resolve false or misleading representations in all forms of electronic messages made by Amazon. In this instance, Amazon often compared its prices to a regular or list price, signalling attractive savings for Canadian consumers. Our investigation concluded that these claims created the general impression that prices for items offered on Amazon's website were lower than prevailing market prices.
We determined that Amazon relied on its suppliers to provide list prices without verifying that those prices were in fact accurate. In this case, the savings claims were advertised on amazon.ca, in Amazon mobile apps, and in other online advertisements, as well as in emails sent to customers. Amazon agreed to pay a million-dollar penalty and make a $100,000 payment toward the bureau's investigative costs, in a 10-year remedy.
In 2015 the bureau entered into 13 consent agreements, resulting in over $26 million in administrative monetary penalties, almost $25 million in consumer restitution, and over $1.5 million paid to charities and advocacy groups working in the public interest. Put another way, the bureau's enforcement activity has led to $52.6 million in combined financial penalties in the last two years alone. We believe that, on the whole, the bureau has benefited from CASL and has worked well within its existing resources to prioritize enforcement in the digital economy.
It is worth noting, however, that any shift in resources would undoubtedly impact our work and require us to re-evaluate how we prioritize our investigations and the allocation of our resources.
I would like to thank the committee for the opportunity to appear today. I would be happy to answer any questions you may have.
Let me start off by saying that administrative monetary penalties are not punitive in nature. They're not there to punish. We associate deterrence with being punitive, and this is not what administrative monetary penalties are about. They are about fostering compliance, encouraging compliance with enterprises that are on our radar for particular investigations.
How do we determine the administrative monetary penalties? There are 11 aggravating and mitigating factors that are listed within the confines of the Competition Act. Those can include things like the duration and the scope of the conduct at issue, the gross revenues generated by the conduct at issue, and the vulnerability of the groups of individuals who may be targeted by the conduct that is at issue. History of compliance with the Competition Act will also dictate where on that spectrum someone would fall in terms of the quantum of the administrative monetary penalty. We're also concerned about the financial viability of the company that is the target of our investigation. All of these factors are taken into consideration when we assess what the quantum is. There is also a catch-all provision under which the bureau can consider other factors when assessing the quantum.
I need to explain that administrative monetary penalties in the cases of Avis, Budget, Hertz, Dollar, Thrifty, and Amazon were all the result of negotiated settlements, so they were arrived at through consent agreements. Consent agreements are a form of negotiation in which the parties and the commissioner and the bureau work together to promote compliance with our act. They can be quite effective. We negotiate them, and we work with the parties in order to achieve the public interest. These consent agreements are actually registered with the courts and with the competition tribunal, and they carry the same force of law as a court order.
Also, the administrative monetary penalties can be levied in the context of the courts if there's an application to the competition tribunal, for example. Within the remedies that the tribunal would consider, administrative monetary penalties would be one of the remedies, as would corrective actions, and possibly restitution payments.
We don't just pull these numbers out of the air. We work with the targets of the investigation, and come up with the right quantum that reflects the public interest. Ultimately, if we're able to accomplish it in the context of a consent agreement, we're actually avoiding the costs associated with lengthy, costly, and sometimes uncertain litigation.