INDY Committee Meeting

STANDING COMMITTEE ON INDUSTRY

COMITÉ PERMANENT DE L'INDUSTRIE

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, March 31, 1998

• 1532

[English]

The Chair (Ms. Susan Whelan (Essex, Lib.): I'm calling the meeting to order. First up is future business. We have the minister joining us at 4 o'clock and before he gets here we want to talk about where we're at and where we're going.

You should have a list before you of groups and individuals with an interest in Bill C-20. I want to discuss that briefly.

Before we get to Bill C-20, let me note that we've been doing the year 2000 issue and dealing with it in committee. It was suggested by several of the committee members that there are a number of key sectors we would like to hear from, and we'd like to have a report out at the beginning of May. To do that, we need to speed up our hearings.

What's been suggested is that we have a day-long session where we would hear from the energy sector, broken down into two different groups; the transportation sector, broken down into two different groups, air traffic and navigation and trains and ships; and utilities. There are also a couple of other groups we said we would meet with. We thought we would look at the automotive sector as an industry example. We have also suggested that we should hear from the Canadian Bar Association and the Insurance Bureau of Canada. We're still waiting for our report from the Canadian Bar Association. That's not complete yet. However, the Canadian Federation of Independent Business, the CFIB, has finished its survey and its representatives will be available to meet with us after the break as well.

The day we're proposing for this is Tuesday, April 21. We'd have hearings from 9 a.m. on, with a break for Question Period, a working lunch, and resumption of hearings after Question Period, around 3.30 p.m., depending on the number of witnesses. We're proposing that we go to 6.30 p.m. We'd have two sessions in the afternoon, one from 3.30 to 5 and another from 5 to 6.30. All the sessions would be about an hour and fifteen minutes to an hour and a half in length. That way we could cover about eight different key sectors on the year 2000 issue.

• 1535

That would still leave about three or four sectors to hear from, and I'm suggesting that we may want to consider doing that in a half-day meeting, because we have a number of issues before us as a committee. We have Bill C-20, with a substantial list of potential witnesses, and we also have other things on our plate.

There is one other thing with regard to this. Part of the goal of the committee is to try to bring awareness to the community out there, and I am proposing that to get the media to attend the one-day session and the half-day session we consider hiring a public relations/media consultant who can deal with the media and bring them to the meeting. One of the members will move a motion today that we can consider today if there's unanimous consent. If there isn't, we'll consider it on Thursday.

Mr. Werner Schmidt (Kelowna, Ref.): Any idea how much it will cost?

The Chair: What I'm proposing is that...I think the clerk has distributed it. It's in front of you, actually on the very top page, Mr. Schmidt.

What we're proposing is a maximum of ten days. I don't anticipate right now that we will need the ten days, but knowing that we have April 21, we're looking at a day or two for preparation, the day itself, and then it would depend on the half-day. That might take us through the coverage of the report as well, hopefully, and the release of the report. So that's the proposal. I guess I should have—

Mr. Werner Schmidt: So this will begin as of April 21.

The Chair: Actually, it would begin as of Monday in order to get ready for April 21.

Mr. Werner Schmidt: From April 6 to May 29?

The Chair: It'll go from April 6 until the end of May. That, hopefully, will give us the time to have the report done and get it out. Hopefully that will help bring awareness to the issue, because we've been hit and miss so far on that.

Are there any comments?

Mr. Lastewka.

Mr. Walt Lastewka (St. Catharines, Lib.): Madam Chair, you covered the names of the various witnesses. I didn't hear you come back and say anything about the people from the Insurance Bureau of Canada. We've seen some publicity in the paper about them. They were hesitant to come to our meeting. What's the status?

The Chair: No, they were not hesitant. They wanted to wait until the Canadian Bar Association had completed their study on what the legal liability issue would be for the year 2000 and we agreed to wait for that. We've put in another call to them based on the media report that was out last week—because that was their own type of report—to see if they've changed their minds, because they did want to see what the Canadian Bar Association had to say.

Mr. Walt Lastewka: So will the bar association be appearing on April 21?

The Chair: No. There will still be, as I said, three or four groups left to hear from after April 21. The Canadian Bar Association and the Insurance Bureau of Canada...we've always considered those two to be one meeting, with both of them at once or one after the other. And we're not sure if the Canadian Federation of Independent Business can make it on April 21.

The way it works out is that there are about 11 or 12 potential groups that we identified, and I know that Madame Lalonde has some consumers as well, possibly. So we'll schedule as many as are available for April 21, with the key sectors that we've identified for energy, transportation, and utilities, and then we'll go back over the list of what's still remaining for the half-day, which we are proposing will be a week or two later.

Mr. Walt Lastewka: It would be beneficial if we could get the bar association and the insurance people within the window where we have this publicity.

The Chair: No. The idea—if the committee agrees—is that the PR firm would be on contract from April 6 until the end of May, for up to 10 days. To get ready for April 21...you're not looking at 10 days. The idea is, yes, definitely, we want to see that through to the end of the report.

Mr. Walt Lastewka: Okay.

The Chair: Now I need agreement from the committee in a motion that we sit all day April 21. Is there agreement?

Mr. Werner Schmidt: I think we should. I don't want to, but I think we should.

The Chair: Madam Jennings, do you want to move that?

Ms. Marlene Jennings (Notre-Dame-de-Grâce—Lachine, Lib.): I move that this committee sit the entire day of April 21 within the time limits that you described.

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The Chair: Is there any discussion?

Ms. Francine Lalonde (Mercier, BQ): I just wanted to say that I will not be able to be there because I will be in Strasbourg. But I will have somebody here. I regret that I will not be here. I wanted to tell you that.

Mr. Werner Schmidt: You'll think of us especially, won't you?

The Chair: Madam Lalonde, I appreciate that. We'll try to schedule another half day and make sure you're available for that.

(Motion agreed to)

The Chair: We also would require, as I suggested, a working lunch. We would have possibly muffins for breakfast, depending on the start time. This is whether it's 8 a.m. or 8.30 a.m. We're looking at 8.30 a.m.

Here's what I propose. If we have witnesses who could take us into the evening, we also need a motion such that we would have up to three working meals for the all-day sitting on April 21. The idea is that we would actually work right through. We would take a few breaks.

Madame Lalonde.

[Translation]

Ms. Francine Lalonde: How many groups could we hear that day?

[English]

The Chair: During that day we would have eight sessions, and each session would have approximately four witnesses, four different groups. Some would be a little bit more, and some may be only three.

[Translation]

Ms. Francine Lalonde: How long would last each session?

[English]

The Chair: An hour and a half.

[Translation]

Ms. Francine Lalonde: We would have a very tight schedule if we were to hear four groups in an hour and a half. Do we really have enough time to listen to witnesses and ask questions? As you know, this is a rather complex bill. I have put in lot of work on that legislation, as you have, I'm sure. The telemarketing aspect is fairly straightforward but the amendments to the Competition Act are much more complex. Are you saying we are only talking about the year 2000 issue?

[English]

The Chair: I'm talking about the year 2000. I apologize.

Ms. Francine Lalonde: Okay.

The Chair: This is for the year 2000.

[Translation]

Ms. Francine Lalonde: Forget what I just said.

[English]

The Chair: Actually, the reason we want to do the year 2000 on one day is to allow for more time and regular committee meetings for the Competition Act and telemarketing.

Are there any other comments?

Actually, I need a motion if we're going to have the possibility of a working breakfast, lunch, and dinner on April 21.

Ms. Marlene Jennings: I so move.

(Motion agreed to [See Minutes of Proceedings])

The Chair: Does anyone have any specific groups or any questions about April 21?

Mr. Jones.

Mr. Jim Jones (Markham, PC): Are we interested in looking at the readiness of provincial governments and hearing from them?

The Chair: Well, we could. We have gone a bit into provincial areas with some of the groups that have come before us.

I have a suggestion that after April 21, or if you look at what's proposed for April 21, if there's a fit in there, you could recommend it to the researchers or the clerk.

We may want to have a steering committee meeting shortly thereafter to assess where we've been and what witnesses we've had.

The proposal is that the researchers will start during the two-week recess from the House to look at who has been before us. They'll start to draft information.

After April 21, we would have a preliminary type of report from the witnesses we've heard. That being said, we still have a number of groups.

It may be better to make a recommendation to the different provinces that they look at their own provincial areas and sectors.

Madame Lalonde.

Ms. Francine Lalonde: Maybe it would be interesting to know what has been done in the provinces.

For instance, I know that in Quebec, the minister of trade and industry, with the Canadian Federation of Independent Business and the chamber of commerce, had a series of breakfasts with the entrepreneurs in each region. Somebody I know went there. It had great success.

They have a kit that's very simple. It explains what it's all about. So it would be interesting. I asked for their kit. Maybe it would be interesting for you to have it. What has been done in other provinces would be interesting to know too.

The Chair: That's a great idea. If you could get a copy of that—

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The other thing I should let Mr. Jones and the other committee members know is that when you take a look at a sector per se, such as hydro, you're looking at it from a federal, provincial, municipal aspect anyhow. That's what we're anticipating we would have before us that day.

Ontario Hydro sells to smaller units and then they distribute, so we have to ensure that every chain in the link is continuous. If there's a break somewhere, if somebody is not preparing, then the top's ready but the bottom's not. It's the same idea as what we talked about with the different sectors. For example, there was the automotive sector.

Mr. Schmidt.

Mr. Werner Schmidt: Just a short question.

When the researchers are drafting the report, will they be drafting this report up to April 21? It has something to do with the format of the report. Will the report essentially be a review on a chronological or subject basis? What sort of a format will there be?

The Chair: Maybe I should correct what I said. I didn't mean to say that they would have a draft report ready.

They're going through the hearings we've had. They're looking at them to try to bring out the different issues and narrow down what those issues are.

After April 21, I don't think you can do it chronologically.

Mr. Werner Schmidt: I didn't think so. That's why I was asking.

The Chair: I think you have to look at it by the different sectors—

Mr. Werner Schmidt: Yes, I think so.

The Chair: —and the different issues. There's the IT system and the embedded chip, and then you've got that in any number of sectors as well.

Daniel is actually the expert on it. Tony, maybe you can add to that if you wish?

Mr. Antony Jackson (Committee Researcher): No, you covered all the points. It was written on a word processor, so you can always move the material around to make it make sense at the end.

The Chair: The final thing about the all-day session is that if there's unanimous consent—

Could Mr. Murray move the motion about the PR firm?

Mr. Ian Murray (Lanark—Carleton, Lib.): I move, Madam Chairman, that the committee retain the services of Delta Media Incorporated for the period from April 6, 1998 to May 29, 1998 for an amount not to exceed $5,200.

The Chair: Is there unanimous consent to consider that motion today?

[Translation]

Ms. Francine Lalonde: What would be its mandate? We have only seen the budget.

[English]

The Chair: The mandate would be for the promotion and awareness of hearings on the year 2000 that we're going to be holding. It's for the promotion and awareness of the issues that we believe will be part of our report.

Mr. Werner Schmidt: Will their function be to liaise with the press and to issue press releases?

The Chair: It's to deal with and encourage the media to attend the one-day session on April 21, and whatever sessions we have after that, until the report. As well, it's to bring awareness to the report this committee tables.

Mr. Werner Schmidt: Will this person actually bring let's say you as chairperson or members of the committee to the press table? Just what will this person actually do?

The Chair: Well, I would anticipate that a number of stages would be involved with inviting or trying to ensure that the media is aware of when we're holding the hearings. This would be by issuing press releases, having personal contact—this is as well as the day of this—with whatever media is in attendance, and making sure they have access to whichever members of the committee, as well as the witnesses, may wish to discuss it.

Madame Lalonde.

[Translation]

Ms. Francine Lalonde: I suggest we should specify what will be in the mandate and present that to the members of the committee at our next meeting. This way everybody will know what they will be doing.

[English]

The Chair: Madame Lalonde, are you saying that we can pass the motion today for the dollars and then do the mandate? We have to take this before the budget subcommittee, so I need unanimous consent today to ask for the dollars.

[Translation]

Ms. Francine Lalonde: Right.

[English]

The Chair: So is it agreed?

Now with regard to Bill C-20, we have a list before us—

Mr. Walt Lastewka: Do we have to vote on it?

The Chair: I'm sorry. I thought it was all agreed.

(Motion agreed to)

The Chair: You have this list concerning Bill C-20 in front of you. It's in both official languages.

I'm not sure if everyone understands how it's broken down, so I was just going to review briefly that there are a number of witnesses listed between pages 2 and 4 called consultative panel members. From pages 4 to 9, there are telemarketing forum members. Seniors' organizations are on pages 9 to 10, and then there are other organizations from 11 to 18. Then there are individuals affected by deceptive telemarketers.

• 1550

What I have proposed to the clerk—and I haven't had much feedback so far and I know everyone's been meeting with different groups—is that from the consultative panel members she contact the chair and discuss with them how many would like to attend, if they'd like to attend as a panel or if it would be on an individual basis. It's the same with the telemarketing forum members. There have been some individual groups that have contacted my office and some of the other offices so far.

With regard to the seniors' organizations, I am proposing that we have a round table with the seniors. There are five different groups, and it's possible or feasible to have as many of those five at the same meeting.

Then there are the other organizations, and from there I'm looking for input and suggestions from the committee. If there are groups you have, if you don't have it today, please let the clerk know hopefully by the end of the week, before everyone leaves, because we're trying to see how many meetings we have to schedule and what our timeframe will be. There are quite a few groups that have a number of concerns.

Mr. Werner Schmidt: I have a practical question, Madam Chair. How many of these witnesses should we hear? Do we want to hear everybody who makes an appeal to us?

The Chair: What I would hope is that from the consultative panel members we're looking at having two or three as one round table—

Mr. Werner Schmidt: I'm thinking of the other organizations.

The Chair: At the end? From page 11 to 18?

Mr. Werner Schmidt: Yes.

The Chair: So far, what was going to be suggested is that we send out a release letting people know we're considering this and see who gets back to us, who wishes to appear as a witness. From there we'll schedule a couple of round tables. We wouldn't hear these necessarily on an individual basis. If possible, we try to put together as many witnesses who are talking about the same issue as we can at a round table session.

Mr. Werner Schmidt: If it's the same issue, because we could have some embarrassing situations if the—

The Chair: Right. Hopefully it will be the same issue that we put together.

Madame Lalonde.

[Translation]

Ms. Francine Lalonde: As I had started to say a bit earlier, at the wrong time, this legislation contains two parts which are very different. First, it deals with misleading telemarketing. We will hear some witnesses on that and I think it should be fairly easy to reach a consensus on this question. There may be some divergent opinions about wire-tapping.

Second, the other part seems to be much less detailed. We'll probably have to hear a lot of witnesses because what is before us will introduce major changes to the present Competition Act, all in the name of modernization. I'm not quite convinced that this is about modernization, even though I'm convinced that this is a very substantial change. I think it should first be established that the present act is inefficient to justify such a substantial change. May I add that by changing this act, we will be duplicating the provisions of the Quebec statute, and no doubt, of other provinces, too. We have to study the whole area and not only misleading telemarketing.

I should be able to give you the name of some witnesses before the end of the week. Thank you.

[English]

The Chair: I think we're going to try to cover the act as thoroughly as we can. Today we will have before us the minister and then the director of the Competition Bureau and a number of individuals with them. As well, on Thursday we will be going through a similar process to give members the opportunity to discuss the act, to look at the different sections that are changing, and to determine hopefully by the end of the week how many witnesses we'd like to hear from on the different sections.

It's very complex, and as chair I leave it up to the committee members, when you believe there's been enough or not enough or how many we'd like to hear from. But there are different sections and there are very different areas we're looking at. Some have been through the consultative panel and others have not been investigated as fully. That's where we have to look at it as a committee. That's where we have to look at it as a committee.

• 1555

Did everyone's office receive the black binder on the Competition Act? Okay.

If no one else has any comments on other business, we could just suspend the meeting until the minister arrives. He's scheduled to be here at 4 p.m.

[Translation]

Ms. Lalonde.

Ms. Francine Lalonde: I have a technical question. Could we write our name on our own notebook and ask you to bring it back at the following meeting instead of us doing that?

The Clerk of the committee: Yes, it's possible.

[English]

Ms. Marlene Jennings: I second the motion.

[Translation]

Ms. Francine Lalonde: We already have so many documents.

[English]

The Chair: The clerk has agreed that it is possible, if you'd like to do that.

[Translation]

Ms. Francine Lalonde: Thank you very much.

[English]

The Chair: Mr. Lastewka.

Mr. Walt Lastewka: Since we have a bit of time here, I wasn't very clear on Madame Lalonde's concern. I wonder if she could explain her second point a little bit better. What was her concern?

The Chair: Madame Lalonde, you were talking about the problems with the act right now and about the number of witnesses we may need to hear from.

[Translation]

Ms. Francine Lalonde: As I was saying, Bill C-20 contains a part that deals with misleading telemarketing and another one that would completely modify the present act. The aim is to go from an act based on criminal sanctions to an act based on civil sanctions, and moreover, based on orders and administrative financial sanctions. I think we should look very closely at the second part.

[English]

Mr. Walt Lastewka: Okay, thank you.

The Chair: Are there any other comments or any other business that we need to discuss? If not, I will propose that we suspend until the minister arrives shortly after 4 p.m.

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• 1617

The Chair: We will reconvene.

I would like to welcome the Minister of Industry to the committee today. I'd also like to welcome the director, Konrad von Finckenstein, of the Competition Bureau.

Mr. Minister, we would welcome your presentation as soon as you're ready to begin.

Hon. John Manley (Minister of Industry, Lib.): Thank you very much, Madam Chair.

I was just informed as I came in the door that my schedule said 4.15 p.m. and yours said 4 p.m. So I apologize for any confusion; however, now that we're all here together, we can start.

I'm very happy to have this occasion to discuss Bill C-20 with you, because I think your consideration of these amendments to the Competition Act is both timely and appropriate.

The act was passed by Parliament in 1986. At that time, the process of updating and substantially revising its predecessor, the Combines Investigation Act, was lengthy and difficult.

The amendment procedure that the government has followed in this process is based upon partnership among stakeholders, often stakeholders whose positions may differ quite a bit from one another's. Bill C-20 reflects a consensus that emerged during this process. The proposed bill is a focused package of amendments that will promote a healthier marketplace by providing more effective tools for competition law and enforcement.

[Translation]

Broadly speaking, amendments to the Act fall into two general categories. First, there are specific targeted measures to help Canadians in very concrete ways, such as the new deceptive telemarketing provisions.

Second, there are changes to the Act which are designed to make it a more effective piece of marketplace framework legislation. These changes will improve the overall functioning of the Act. They also give the Director—or the Commissioner of Competition, as the position is soon to be known—a better and wider range of instruments to obtain compliance.

These amendments are not intended to be an in-depth reform of the Act, which is already serving Canadians and the Canadian marketplace very well. They will, however, clarify the law in certain areas, and allow the Competition Bureau to function more effectively.

[English]

By passing Bill C-20, the House of Commons will strengthen the enforcement action that can be taken against deceptive telemarketing, the so-called telephone scams; create a far more flexible, non-criminal mechanism to deal with misleading advertising and deceptive marketing, with an improved range of remedies; permit wire-taps for the serious crimes of conspiracy, bid-rigging, and deceptive telemarketing; and modify and improve the administration of the merger pre-notification process.

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These amendments will provide particular benefits, we believe, to consumers. They will deliver these benefits through a variety of measures aimed at deceptive telemarketing, misleading advertising, and deceptive marketing practices.

Let me stress that I'm using the term “consumer” here in a very broad sense. Whenever a business purchases goods or services from another firm, it too becomes a consumer. Small and medium-sized businesses—consumers—are also frequent targets of deceptive telemarketing, and they will benefit accordingly.

The attention we are giving telemarketing fraud, I believe, is totally justified.

[Translation]

In Canada's new economy, tens of thousands of people are employed in the legitimate telemarketing industry. Increasingly, they live in rural areas, to which new developments in telecommunications are bringing new employment and new prosperity. Some of our most prominent corporations—in financial services, merchandising, manufacturing, and the high-tech sector—depend on telemarketing. And many of our most important legitimate charitable organizations would find it difficult to do their fund raising without telemarketing.

[English]

Increasingly, however, legitimate telemarketing is put at risk because of the damage being inflicted by those notorious telemarketing scam artists.

Madam Chair, these scams can take many shapes. Some deceptive telemarketers seek out people with bad credit and offer them loans or credit cards in exchange for fees. Others guarantee that the victims have won prizes or gifts—these are fictitious—like vacations or cars, but then demand ridiculous payments for shipping, taxes, or whatever the offender can get away with.

For example, an Alberta senior was contacted by a Montreal-based telemarketing company. She was told that she had won $186,000, but she had to pay some fees to get the prize. She literally drained her savings and borrowed money, $38,000 in total, to pay the telemarketers. Needless to say, the prize never arrived. Even after she had exhausted her financial resources, the scam artists continued to harass her for more money.

Seniors are frequent victims of telemarketing scams. But many demographic groups are targeted.

Consider the story of a university student in Halifax.

These are all true cases in which I omit to use the names of the individuals involved because it could be embarrassing to them.

A university student in Halifax received a letter informing him that he had won three major prizes from a group. They included a Ford Explorer, a television satellite dish, two weeks in Hawaii, a motorized sports boat, and a hot tub spa. All he had to do was pay $1,605 to purchase some promotional items. The sports boat turned out to be a rubber dinghy. The satellite dish turned out to be a cheap interior antenna.

There are scams where telemarketers pretend to be travel agencies that sell cheap travel packages. For the victim, it seems like a steal. Usually, it is. Victims often end up stuck with exorbitant fees and restrictions on where and when they can travel.

There are even criminals who prey on the charity of Canadians. The pitch may simply ask for donations. Often the victim is offered valuable prizes, for a price, that never materialize. When giving to charity, Canadians don't usually expect something in return. However, they do have a right to see their donations used for good causes, rather than to simply line the pockets of scam artists. When one scam works on a victim, others are sure to follow.

Some victims' understandable desire to recover their original losses make them even more vulnerable. This leads to a widely used scam known as the “recovery room”. This is truly infuriating. For example, a victim of a telemarketing scam in which criminal charges were laid was contacted by a telemarketer claiming to represent the Royal Canadian Mounted Police. The victim was told that his money had been recovered and was in the possession of the courts. He was told that he could get his money back by paying a $2,000 legal fee.

• 1625

[Translation]

Estimated total costs to Canadians from telemarketing scams is in the order of $4 billion annually. That figure takes into account consumer and business losses as well as lost sales to legitimate business.

Let us remember that when older Canadians get scammed for $10,000 they have not only lost their capital—the annual stream of income that capital would have produced is gone for the rest of their lifetime.

Deceptive telemarketers use the anonymity of the telephone and their skills of deception to sound plausible. They persuade their victims to trust what are purported to be reputable businesses or charities. Sometimes, high pressure and abusive sales tactics are used to convince consumers to give up their money or credit card numbers.

[English]

All sorts of ingenious tactics and schemes are used. Some of the worst targets are those who have already been victimized by other scam artists. Fraudulent telemarketers deliberately target other jurisdictions in order to make enforcement particularly difficult, and although deceptive telemarketers target all groups in society, they tend to focus on those who are most vulnerable, such as senior citizens.

Bill C-20 will put these deceptive telemarketers on notice of our intention to protect consumers and the legitimate telemarketing industry.

The Competition Act as it now stands contains general provisions that can and have been applied to deter deceptive telemarketing. The existing competition law does not specifically forbid certain practices that have come to be associated with deceptive telemarketing, nor is it specific enough to put liability on those who operate their scams while not actually making any misrepresentations over the telephone. These inadequacies need to be addressed and the amendments before us do that.

The government proposes to create a new, specific criminal offence provision to deal with deceptive telemarketing practices.

[Translation]

Persons engaged in telemarketing will be required to disclose certain types of information at the beginning of the call. Under the new provisions before us today, they will have to identify on whose behalf the call is being made. They will have to describe the nature of the product supplied or the business interest promoted. And they will have to state the express purpose of the telephone call. In these amendments, other information—such as the price of the product—will have to be disclosed in a fair, reasonable and timely manner.

It will be an offence to conduct a promotional contest, where the delivery of a prize is conditional on prior payment. Special provisions will be enacted to make officers and directors of corporations responsible for the actions of their employees. It will become easier for the Bureau to seek and obtain interim injunctions to halt the activities of alleged fraudulent operators.

[English]

In egregious cases law enforcement officials will be able to use wire-taps to gain evidence of deceptive telemarketing. This provision will also apply to the serious crimes of conspiracy and bid-rigging.

The amendments before us today will go a long way towards addressing the scourge of deceptive telemarketing. They will give our law enforcement personnel some much needed tools to address unscrupulous behaviour that until now has not been covered by the act.

In addition to the specific telemarketing measures, Bill C-20 does other things as well. In fact, it does much more. It will greatly improve our approach to misleading advertising and deceptive marketing practices in general. At present, misleading advertising and deceptive marketing practices are criminal offences under the Competition Act. They can have serious economic consequences, consequences that can merit a criminal sanction. They hurt consumers and they hurt competitors who are engaged in honest promotional efforts.

But our present use of the criminal law to deal with misleading advertising and deceptive marketing has a number of drawbacks. In particular, it is not an effective way to stop misleading advertising quickly.

• 1630

Bill C-20 retains the criminal provisions for flagrant cases of deceptive marketing practices. It introduces a range of civil remedies that can be applied promptly. As a result, the alleged misleading advertising does not continue while a lengthy criminal prosecution winds its way through the courts.

[Translation]

The courts and the Competition Tribunal would be able to issue orders requiring parties to stop misleading advertising. The amendments will also facilitate voluntary measures to correct a deception that has occurred, and will allow such a resolution to be registered and enforceable as a court or Tribunal order.

The area of regular price claims is another area where we are updating the Act. The retail industry has changed dramatically in recent years. Just look at the growth of warehouse and "Big Box" stores. More than ever, comparative price advertising has become a critical means whereby retailers compete. Both consumers and retailers have commented that the current law does not reflect today's marketplace reality. Provisions in the new Bill will clarify a critical area of advertising law for business, and give consumers clearer price comparison guidance.

[English]

Two straightforward tests will provide simple criteria for defining a genuine regular price: one will be based on sales volume, the other on pricing over time.

I've briefly sketched out for you how Bill C-20 will improve the way Canada's marketplace functions. The director of the Competition Bureau will expand upon additional changes we're proposing. I'm sure we all realize that today's economic world is greatly different from that of 1986 when the Competition Act was drafted. These changes that the government has put forward will modernize the Competition Act. Consumer representatives, the business and legal communities, and academia and law enforcement agencies have all told us that the measures we are proposing are necessary ones. They will help protect Canadian consumers from telemarketing fraud, and they will help the competition bureau maintain a fair, efficient, and competitive marketplace for the benefit of all in our society.

Thank you very much. I'll be happy to take questions.

The Chair: Thank you very much, Minister. As we know your time with us is limited, we will open the floor to questions for the minister at this time.

Mr. Schmidt.

Mr. Werner Schmidt: Thank you very much, Madam Chair.

Mr. Minister and the director of the tribunal, thank you very much for appearing. It's good to have you here.

At the outset, I should say in regard to the fact that telemarketing is being looked at—especially deceptive marketing, the scams—if they can be dealt with, it's a desirable move at this time.

I'd like to ask you, Mr. Minister, if you could explain perhaps a little further one of the comments you made in the remarks you gave to us. Other than conspiracy and bid-rigging, I believe you indicated that wire-tapping could be used for certain other telemarketing scams, if you will. Could you perhaps detail what some of those other things might be?

Mr. John Manley: Mr. Schmidt, conspiracy and bid-rigging are the other offences. Telemarketing, the new offence, is the third offence with respect to which a request can be made to a judge for authorization for a wire-tap.

Mr. Werner Schmidt: That's my point. What are those things in telemarketing that might trigger the demand for and the actual exercising of the wire-tap?

Mr. John Manley: Mr. von Finckenstein may wish to comment on this, but I think basically what we're trying to do here is ensure we have the evidence in order to ensure a conviction. This may arise where we have detected a number of complaints arising from particular callers, which would then enable us—

As you can imagine, in many of these cases, particularly where the victim is elderly, it may be difficult for them to recall with a lot of precision what was said to them in the context of the conversation. All they know is that somehow or other at the end of the transaction they're out money.

• 1635

Where we can identify the source of these calls, the wire-tap provision will enable the bureau, with the assistance of the police, to gather the evidence that will ensure a conviction against the scam artist. In addition, the other important factor to remember is that many of these scams are perpetrated across borders, so this enables the evidence to be gathered in a jurisdiction in which the scam artist is actually situated.

Mr. Werner Schmidt: I think it's a very useful sort of power to have, but the question I have is really in two parts. Number one, what would initiate or what would trigger the actual application of the wire-tap? Something has to get this thing going. Is it a person who calls you or calls the director of the tribunal? What gets it started?

Mr. Konrad von Finckenstein (Director of Investigation and Research, Competition Bureau, Department of Industry): The bureau essentially works on a complaint basis. We have a 1-800 line, which is where most of our complaints come in. Somebody will complain to the bureau, claiming that they have been a victim of illicit telemarketing. We will then investigate. Our powers are fairly vast. They include the powers to start a formal investigation, to do search and seizure, to put witnesses under oath, to require them to deliver documents, etc. If we find through the investigation that there has indeed been illegal activity but the powers that we have under the act are not sufficient to get the necessary evidence, we will make an application to the court to ask for permission to intercept so that we can record the actual fraudulent spiel that's being made to victims.

Mr. Werner Schmidt: Thank you very much.

Madam Chair, I wonder if I could now move into a different subject area, that being mergers. There is one whole set of mergers here, and there are two parts to those mergers. I'd also like to refer to financial institutions.

When it comes to the evaluation or the analysis of a proposed merger, is the proposition primarily evaluated on the basis of the concentration of shareholders in the new venture that is now amalgamated from several ventures before? Or is it dealt with on the basis of the substance of the business that is being conducted as now amalgamated and thereby discouraging or perhaps even doing away with competition?

Mr. Konrad von Finckenstein: When you look at a merger, you're trying to find out what is the effect of the merger on the markets. A business may be in several markets, and a bank is a perfect example. It sells a lot of products and the markets for those products are different. For instance, the market for credit cards is different from the market for mortgages or the market for personal loans. You identify what the markets are and you look at the merger in terms of each market to try to determine whether or not there will be a substantial lessening of competition if it goes ahead, such that there will be an ability to raise prices and consumers will be disbenefited. That's the ultimate test. You want to make sure consumers get the full benefit of competition. If there's a substantial lessening of competition, then that benefit of course is potentially in jeopardy.

Mr. Werner Schmidt: Ownership is not an issue here.

Mr. Konrad von Finckenstein: No, it's the effect of the merger that you're looking at. Does the merger create a substantial lessening of competition in one or more markets?

Mr. Werner Schmidt: Do the—

The Chair: Last question, please.

Mr. Werner Schmidt: Okay, Madam Chair.

Do the provisions of the current Competition Act allow you as a tribunal to rule on the merger of banks?

Mr. Konrad von Finckenstein: Just as a clarification on the tribunal, there is a competition tribunal. It is a court that has to sanction whatever, whenever I bring something before it.

Yes, the provisions of the act right now apply to banks and allow us to examine banks. We actually are looking at the one proposed bank merger right now, but we have never done this before. We have issued a discussion paper stating that the provisions of the Competition Act and the policy we have developed to examine mergers work in this way. We think that's how we should apply them to banks as well, but given the key place the banks occupy now in our economy, we want to be absolutely sure that this is the right procedure, or our policy should be slightly changed in light of the leverage effect that banks have and the key part they play in the economy. While we are gathering the data right now, we are also having consultations on this paper in order to, if necessary, redefine the approach we take to bank mergers. But the act as it is right now applies to bank mergers in the same way it does to any other merger.

The Chair: Thank you, Mr. Schmidt.

Mr. Bellemare.

• 1640

[Translation]

Mr. Eugène Bellemare (Carleton—Gloucester, Lib.): Thank you, Madam Chair.

[English]

Mr. Minister, I find telemarketers a public nuisance. I'm happy that you're looking at the fraudulent ones so that we can at least sleep at night knowing that seniors and people who are not able to converse with these types are not taken in. Would it be possible to have licensing of telemarketers?

Mr. John Manley: I suppose you could conceive of a licensing regime if you thought it would be beneficial. I hasten to make the point that we are trying to target illicit telemarketers here—those who are engaged in a fraud or a scam activity.

Much of what you'd call the nuisance of telemarketing is legitimate activity, either by businesses or by charitable organizations. The majority of the ones that are legitimate, that are anxious to see that the business is conducted in an appropriate manner, will accept your request that you be deleted from their lists so that you minimize the amount of nuisance that occurs.

If this works, I think it's much preferable to creating another government department to set up the system of registration and surveillance that would be required to go with it.

Mr. Eugène Bellemare: Could automatic dialling be controlled? By automatic dialling you get these organizations where everything is on a computer and they just keep on dialling. The resident answers the phone and is talking to a machine—well, talking to a machine that keeps on talking and wants an answer at the end, like “leave a message, leave your name, and especially your Visa number”. How can we control that?

Mr. John Manley: Again, assuming that this is something that requires government action, I suppose we could come up with a variety of ways to interfere with it. The question is whether the amount that would be gained by that would be worthy of the expenditure of resources that would be required in order to enforce it.

Mr. Eugène Bellemare: Actually, now, we're only looking at the bad guys, and trying to catch the bad guys, but we're catching the bad guys only on a complaint. Can we take proactive measures?

Elections Canada, for example—there are some fictitious names and phone numbers on the electoral list. If someone who has access to it were to sell it to a private company, they would end up by calling Elections Canada and immediately Elections Canada would know that there was an illegal act. Could we do this?

Mr. John Manley: Which “we” are you referring to? Could we do what?

Mr. Eugène Bellemare: Well, Mr. Finckenstein's office, for example. Could they do that? Could they set up, for example, in their office, in their business, a fictitious telephone that would seem to belong to an individual in the community or the communities? Then they could record the phone calls coming in, and they would know before the act that someone is using some really nasty measures to try to collect funds from people.

Mr. John Manley: I suppose it's a possibility. I think the Elections Canada example is an example of an attempt to try to suppress improper use of lists of information that are gathered for a particular purpose—that is, for the election campaign. However, as you know, telephone directories are readily available.

What you've suggested might be useful, but it would be somewhat random whether or not that particular number was used by a scam artist. I think we can gain some experience, though, with the measures that we're bringing in. Our hope of course is that this will effectively deter much of this behaviour.

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

Mr. Eugène Bellemare: My last question is on jurisdiction and cross-border— When I talk about cross-border, it could be messages coming from any continent, and not just the United States. Can we really control that, and how?

Mr. John Manley: Again, we can't control it. As with other cross-border crime, what we're doing is engaging the cooperation of law-enforcement authorities in other jurisdictions. This is true of course in this particular sector with the United States, which is where most of the international cross-border problem has been arising from. And it goes both ways. There are scam artists who base themselves in Canada and target the United States, and vice versa.

This was an important point of discussion between the Prime Minister and President Clinton when they met in Washington last April. It led to a joint statement, and it's leading to further cooperation as we exchange information to try to improve the enforcement of our laws on both sides.

The Chair: Thank you. Thank you, Mr. Bellemare.

Madame Lalonde, s'il vous plaît.

[Translation]

Ms. Francine Lalonde: Thank you, Minister and Mr. von Finckenstein, for being here today.

Mr. Minister, I'm convinced that there won't be much debate about telemarketing and that the proposed provisions will receive the full support of everybody. However, there might be some questions about the use of wire-tapping.

My concern is that , if you go by all you hear and read, or just about, on Bill C-20, you would conclude that it is essentially about misleading telemarketing, but the more important part are, I think, the substantive amendments to the Competition Act which are proposed. By substantive amendments, I mean that the aim seems to be—and that will be my assumption—to weaken the act. You seem to say that proceedings take up too much time but you are in fact changing the relationship between the state, the law and the corporations. I understand that the bill will create a new sanction scheme and that the words "administrative financial sanctions" mean in fact "fines". In the case of the province of Quebec, at least, this would duplicate the provincial statute that contains identical prohibitions and a system of fines.

That's why I wonder if you are not giving up an area which was yours, and which had to be done and well done, to duplicate a provincial responsibility, without any guarantee that the resulting act will be more efficient.

Mr. John Manley: No, because we will still have criminal provisions. It must also be understood that the new civil sanctions will allow us to solve problems who belong to more than one province. We need an act that can deal with both sides. It is not always possible to start proceeding in Quebec to protect a Quebecker who has problems in Manitoba. One might think of an advertising which is published in a national newspapers.

Ms. Francine Lalonde: I'm in complete agreement with you on the interprovincial aspect, but this act does not only deal with those interprovincial aspects. It proposes to deal with trade in general.

You say that we will keep criminal sanctions but in fact, you weaken the act because you are adding conditions which were not there before. You propose to add in subsection 52(1) the words "knowingly or being reckless about the consequences", which changes substantially the scope of the act.

• 1650

According to the documents of the Competition Bureau, it is not necessary for the false or misleading indications to have been made knowingly and one may be fined as soon as the fact they have been made is established.

Do you want to weaken the Competition Act?

Mr. John Manley: No, we want a more efficient Competition Act. What you use is a criminal section when no court will accept the evidence and the burden of proof necessary to enforce the act? We have to be able to use another type of sanction, which will make it easier to achieve the objectives of the act, which are to protect consumers and preserve a truly competitive market.

Ms. Francine Lalonde: It is too bad you have to go; we would have liked you to stay longer.

The enforcement of the act will be more centralized because the Commissioner will not only decide whether to start an investigation after being asked to do so, but as well whether to go before the Competition Tribunal, the Federal Court or the Provincial Court. It will for him to decide. This is a substantial centralization.

There is also another aspect which seems important to me and that's why I asked you if you really wanted to weaken the act. Persons who may be subject to an order will be so advised 48 hours in advance and may reach an agreement with the office of the Commissioner. At the federal level, it will first be possible to make an arrangement with the commissioner and at the provincial level, the court will order a fine. This a point that will need to be clarified. That's why we have serious reservations with this bill.

[English]

Mr. Konrad von Finckenstein: If I may, Minister, let me say to Madame Lalonde that I think it is perhaps slightly different. We certainly don't want to weaken the law. We want to make it more efficient and better.

But we've found that proving criminal intent when it comes to misleading advertising is extremely difficult. To prove that the person who made the advertising actually had the intent to mislead...in those few cases where we feel we have the evidence, we will proceed on that basis. But the civil cases are meant to deal with the vast majority of misleading advertising, where the advertising is misleading, where it gives a wrong impression, where it misleads the consumer into believing a state of affairs that is not there.

Never mind whether that was the intent of the person who placed the advertising. That was the effect. And under the civil provisions we will be able to go to the tribunal or to civil court and get an order prohibiting that advertising, forcing the person to withdraw it and maybe even forcing them to put in a corrected advertisement.

The fines, as you call them, only come in where that person is either a repeat offender or has not taken any steps in order to avoid having subsequent orders made against him. In this way, we see the law as actually improved. For the real, true criminal cases, where there is intent to mislead, we will proceed criminally. But for the vast majority where you have advertising that misleads somebody, we can quickly step in, get a restraining order, and prohibit it or get a corrected advertisement. If it happens to be a repeat offender, we can also get fines against him.

The Chair: Thank you.

[Translation]

Thank you, Ms. Lalonde.

[English]

Madam Jennings, please.

Ms. Marlene Jennings: Thank you.

Mr. Minister, with respect to the whole issue of the criminalization, the new infraction in terms of telemarketing, and the revision, where we will now proceed in some cases civilly, which obviously involves a lower standard of proof, Mr. von Finckenstein just mentioned that there have been cases where there was a reasonable belief or a reasonable motive to believe that misleading advertising had in fact taken place or that there had been a telemarketing scam or bid-rigging, that some of these offences had in fact taken place, but you did not have enough evidence to meet the criminal standard and prove the intent, and you feel you will be able to do so successfully with the civil standard of proof.

• 1655

How many of those cases— I'll tell you why.

With respect to moving it to civil prosecution, my preoccupation is that we know our judicial system as it stands now is straining in terms of financial resources and human resources, so if we're talking about a significant increase in cases that would then be pursued, either criminally because of the new offence or civilly because of lowering the standard, how are we looking at resources for the courts and for the tribunal?

Mr. John Manley: That may be a difficult question for us to answer in terms of total resources that would be required by the courts.

Suffice it to say that what we have at the present time is not a satisfactory situation in which our experience...and bear in mind that the introduction of the civil jurisdiction is particularly for the category of the misleading advertising provisions, where significant time in certain cases has in fact been eaten up unsuccessfully. In some cases, it would be argued that the advertisers involved may have been aggressive but perhaps didn't cross the line to truly criminal behaviour.

However, had the civil remedy been available to us, we could easily and quickly have effected a solution that wouldn't have involved any court time. But where your only choice is the criminal law and if you can't get them on that they can tell you to take a hike, the consumer is not well served, nor is the court system. We think we have a more efficient and more enforceable regime this way.

As Mr. von Finckenstein points out to me, when we had only the criminal system, getting the defendant to accept responsibility essentially meant a plea of guilty or an acceptance of having taken a criminal act. With the civil burden, it's much easier for them to say, “All right. We accept we were too aggressive and we consent to an order that says we won't do that any more.”

The Chair: Madam Jennings, last question.

Ms. Marlene Jennings: My other question concerns the wire-tapping. I think most Canadians are aware of the fact that over the years there has been a certain amount of concern about abuse of wire-tapping by our police services across Canada. I'm not going to single out any particular police force, but it has been a concern. There have been public inquiries at federal, provincial, and municipal levels across Canada. I'd like to know what the major concerns were that were expressed by, for instance, the business community, precisely about the use of wire-taps and possible abuses. What was your response? First, were there any concerns, and second, if there were, what was the response?

Mr. John Manley: In fact, the only concern that anyone raised was whether there had been adequate consultation in advance with respect to this provision.

We did have a consultation. Nobody has raised a substantive objection to the extension of wire-tap authorization to this offence. It does exist under the Criminal Code for other economic offences, so this is not an unusual extension.

However, it is clear to us that effective enforcement of those provisions—the bid-rigging and the conspiracy provisions as well as the telemarketing provisions—will be much enhanced if we have access to this source of evidence. In addition, the director will be issuing guidelines that will be open to consultation with respect to the situations in which authorization to wire-tap would be sought. I know you understand this, but I emphasize that this power can only be exercised with the expressed consent of a judge on application, so there are safeguards in our existing legal system for ensuring the protection of privacy.

• 1700

The Chair: Thank you, Madam Jennings.

Mr. Axworthy, please.

Mr. Chris Axworthy (Saskatoon—Rosetown—Biggar, NDP): Thanks, Madam Chair.

Thank you both for being here on what I think is an important piece of legislation. I have just a very brief comment on the telemarketing part, which I think, as has been mentioned, will receive unanimous support. It's a problem plaguing many of our offices because of the numbers of people who have been affected adversely by it. I think to the extent that there is a concern with wire-tapping and the civil rights around that, a much more deep concern should be about the civil right of a person to be able to stay in their home and not be plagued by these telephone scam artists, and we know that they play upon the most vulnerable in our society most often.

I think it is very effective legislation. I think we're all glad to see it, and we look forward to more effective resources being available for the enforcement of these offences.

With regard to the second part, the anti-competitive part of the bill, especially the mergers part, I do have some fairly serious concerns. With privatization and deregulation and the general globalization of our economy, I think we've seen major contributions to a trend to bigness that we have to be quite careful about. I would ask you why, since commentators in general regard American legislation as being tougher than ours at the present time, and tougher than this as changed, would we not be at least as concerned, at least as tough on competition, as the Americans are? Why would we not be at least as concerned about having competitive marketplaces as they are? That's one question out of three very brief questions.

The second is with regard to things like the concentration of the media in New Brunswick, for example, which I think we would all regard as a significant problem. Also, there is the concentration of media in the hands of Conrad Black across large chunks of the country, and then you mention banks. Maybe you can tell me this is not true, but I can't imagine that this legislation would effectively begin to break that concentration up. If not, then I'd ask why wouldn't it be tough enough to do that?

My third question revolves around what appears to be quite an ambiguous role on your part as a director. Indeed, in the speaking notes you made available for this meeting today you make this statement:

In the event a merger doesn't pass this test, the Director will work with the parties to resolve outstanding issues.

It seems as though you're keen to help them make the merger work, which wouldn't suggest a tough kind of approach to competition and to anti-competitive behaviour.

I wonder if either of you could answer those three questions. Thank you.

Mr. Konrad von Finckenstein: I don't know quite how you got the approach that we're not as tough as the U.S. We have very similar laws. We both look at mergers. We have, of course, an industry that has higher concentrations than the Americans. But when a new merger comes to us, we look at it. We look to determine whether it leads to a substantial lessening of competition, which is exactly the same way the Americans look at it. If indeed we find it does, we try to find a remedy, about which you asked why we would work for the party.

Basically, we don't see our job as interfering in the economy. We are there to protect the competitive system, to ensure there is a competitive system and that the forces within the competitive system work to provide the greatest benefit to consumers. So if a company comes forward and says, by merging with X company we become more efficient and more effective, that's fine as long as it doesn't lead to substantial lessening in competition. If it does, then we ask what causes a substantial lessening of the competition.

Very often you can find solutions through structure remedies, that is, divestiture. For instance, we've had cases where waste management firms have merged but the result was that all the dumps in the city would be owned by the same company, so we force them to lease one of those dumps at cost to their competitors, thereby they get greater efficiency through the merger, yet there is no substantial lessening of competition because their competitors have access to the same dump site they have. That's the sort of thing we refer to when we say we work with them.

• 1705

In terms of media concentration...do you want to answer that, Minister?

Mr. John Manley: Perhaps I should, in the sense that, really, the issue here becomes, in what respect is breadth of ownership an issue? The mandate of the Competition Bureau and the responsibility under competition law is to look at a market and determine whether concentrated ownership is substantially lessening competition in that market.

In the case of the acquisition of newspapers by Hollinger, what happened is that these newspapers all play in different markets, and the result is their effective competition for advertisers and for readers is often not concentrated. If you say—which is what most of the debate in the public has been—yes, but if all of the newspapers have similar editorial points of view, then isn't that a bad thing? I would say yes, it is a bad thing; however, I'm not sure we want the government to decide when all of the opinions are offensive.

At what level do we actually begin to intervene in the marketplace of ideas? When and who decides whether the ideas are too uniform for us to accept? I think it's a very treacherous ground for us to get onto in a democracy. I take comfort from the fact that every day as we go out of the House of Commons there are a lot of microphones out there, and Canadians receive their information and their opinions from a large variety of sources. Frankly, they don't form a lot of their judgments based on what they see in print, I must say, and they form their opinions on a lot of different inputs.

I think it's an important issue on which we should engage in debate in Canada, but I for one back away from the notion that there is some agency of government that could be created, or that could be used in the case of the bureau, that would be an effective guardian of competition for ideas in the intellectual marketplace.

The Chair: Thank you, Mr. Axworthy.

Mr. Jones, do you have any questions?

Mr. Jim Jones: Yes, I do.

In the telemarketing, you said there was an estimated $4 billion in fraud. Is that live-voice only?

Mr. John Manley: Yes, that's right.

Mr. Jim Jones: In this act, are we excluding the Internet and e-commerce and all of that this time around?

Mr. John Manley: We're not trying to capture written communications, however dispatched, in the telemarketing fraud provisions. To the extent there can be inducements to spend money fraudulently over the Internet, essentially those communications at this point are reduced to a written form, so that really fits within the current laws.

What we're really trying to get at here is the situations where people, using voice communications, really win somebody's confidence and induce them to do things they probably wouldn't otherwise do except through that process of kind of encouraging them and winning them over. As Konrad can attest, some of these conversations are 20, 30, or 40 minutes in length as people are gradually brought along. It's much harder to do that through a dispatched e-mail message over the Internet.

Mr. Jim Jones: You said that was a question that Mr. Axworthy asked: Is this legislation as tough or tougher than the U.S. anti-trust competitive legislation?

Mr. Konrad von Finckenstein: Our standards are absolutely the same. We both tried to deal with substantial lessening of competition. Of course, you have cultural differences. We are not as litigious as the Americans and not quite as confrontational. So the way we deal with issues is less in the newspapers and more on a negotiation basis, but the outcome is the same. In our view, it's less costly. We try very much in the bill to get voluntary compliance with the law.

• 1710

We have a whole program of compliance and we help people set up their own internal compliances and try to get them to be aware of the code the Competition Act requires, to behave in accordance with it, and only resort to litigation in court battles where it's absolutely necessary to get compliance. That's slightly different from the American approach, which is much more up-front, in-your-face litigation.

Mr. Jim Jones: I guess we're now looking at the Royal Bank and the Bank of Montreal merging, and let's say something like that goes through. What kind of protection do we have with this legislation from the U.S. and other banks around the world buying out our banking industry?

Mr. Konrad von Finckenstein: In terms of banking, there's a rule that nobody can own more than 10% of any one of our banks. Technically, five extremely rich Americans could each buy 10% of the Royal Bank and thus control the Royal Bank. It's never happened. It's unlikely to happen, given the size of the bank. They would have to act separately and not in concert. So, effectively, the 10% rule protects our banks at this time from foreign takeovers.

Mr. Jim Jones: Thank you.

The Chair: Thank you, Mr. Jones.

Mr. Shepherd.

Mr. Alex Shepherd (Durham, Lib.): I'm trying to get my head around some of these concepts to do with the merger aspect of the legislation. There seems to be a process of timeliness of the review process itself. Some of the amendments sort of talk to that. For instance, it says:

Conditions for obtaining interim orders will be relaxed so that the Director may, while conducting reviews, delay the closing of a merger that gives rise to serious concerns.

Is this a change to the act that allows the review process to be lengthened?

Mr. Konrad von Finckenstein: No. Right now, if you have a merger, you notify us and we look at it, but 99% of mergers will not close while we are looking at them until we have given approval. You have to justify it to your shareholders, your creditors, your business partners, etc. You don't want to buy a loss, so normally a business will come to us and ask for our approval. We look at it and give it approval either directly or conditionally, or we move before the tribunal on a consent basis or occasionally on a confrontational basis.

There are some cases where people want to move ahead for whatever reasons, either because they're taking a calculated gamble or because they believe they have an absolutely sure case. So it is very hard to undo a merger once it has proceeded, the people have integrated their operations, moved, and integrated their informatic systems. For them to come around and say undo it is very— You want to prevent people from going ahead and merging against our advice when we say there are serious problems and we want to look at them and work it out.

The act now will give us permission to apply to the court and say, “Please issue an order that this merger not go ahead.” If they go ahead, they must keep it separate and apart to give us 60 more days or 30 more days, whatever it happens to be, to come to a conclusion. Then if we come to you and ask that this merger be disallowed, it is not a fait accompli. There is not already an integrated entity that has to be pulled apart.

That's the situation we are envisaging. It has happened in some cases that people have gone ahead and merged and we were then in the position of having to decide whether to try to undo the merger and impose, in effect, a lot of economic loss and harm on these people by trying to undo the merger that had already taken place.

Mr. Alex Shepherd: So this essentially would give you the ability to block a merger.

Mr. Konrad von Finckenstein: No, we can delay it with court approval while we come to a firm conclusion as to whether it should be approved or not or what condition should be attached to the approval.

Mr. Alex Shepherd: What about some of the other provisions here? I'm talking about clarification of who must—parties required to pre-notify and so forth. Is this presumably trying to clean up some of the legislation on the issue of notification?

• 1715

Mr. Konrad von Finckenstein: Really, the essential aspect is that in order to assess a merger, you need an awful lot of information. What we get now is mountains of information—truckloads. But it's not necessarily the right information we all want. We want to make sure we get less information but relevant information. That's really what the provisions are aimed to cure. It's so that we don't get inundated with useless information and that we get relevant information on time.

Mr. Alex Shepherd: Having said all that, there must be a timeframe just the same. I mean, obviously there must be limitations. Somebody isn't going to study this for three years. Is there a six-month window or—

Mr. Konrad von Finckenstein: The act now provides that you notify us. We make a decision or we don't make a decision. Technically speaking, you can go ahead and merge if we don't go through the court and try to get a delay. Then we have three years to undo the merger.

But as I mentioned earlier, that's really an unrealistic solution. You don't want to do that. You want to do it before the merger takes place, not ex post facto.

The Chair: Thank you, Mr. Shepherd.

Mr. Schmidt.

Mr. Werner Schmidt: Thank you, Madam Chair.

I'd like to go back to the earlier question that was asked with regard to the role of the tribunal in dealing with mergers, particularly as they relate to bank mergers.

I'm referring here to a submission of the director of investigation and research of the Competition Bureau to the Task Force on the Future of the Canadian Financial Services Sector.

As for the point I wanted to get at before, I guess I didn't express it well enough, but I find it here as well. This is the relationship between the Competition Bureau, on the one hand, and the Minister of Industry—I think you report to him—and the relationship between the tribunal and the Minister of Finance when it comes to financial institutions.

So there seems to me to be something that needs to be clarified in my mind here. The Minister of Finance can block a merger, yet I got the impression from you before that you could block the merger. It seems to me, then, that one of these is not the correct statement.

Mr. Konrad von Finckenstein: The two acts provide for approval. The Bank Act says that any bank merger needs the approval of the Minister of Finance. So we can't have a bank merger without the approval of the Minister of Finance. That's absolutely clear.

In addition, the Competition Act applies to banks as it applies to other industry. Banks that merge need the approval of the Competition Bureau as well.

However, there is a provision in the Competition Act that says the Minister of Finance can effectively oust the director of the Competition Bureau. He can say that this is a merger that's in the national interest and that he wants to approve.

So he can oust us. If he doesn't oust us, then we examine the merger. We look at it to see whether it leads to a substantial lessening of competition or not. If it does, then we will have to sit down with them to see if we can work it out. If not, we will take it to the tribunal and get it blocked.

That submission you referred to says that before we do that, there should be a clarification from the Minister of Finance at that point in time in terms of whether he wants us to do this. After all, if we take a bank merger to the tribunal and have the tribunal deal with it, then it would be unfair to go through all that process if the Minister of Finance could step in and say he didn't approve.

So there has to be, at that point in time, before we go into this confrontational proceeding, a clarification of what would be the position of the Minister of Finance at the end of the day.

Mr. Werner Schmidt: In that process—

Mr. John Manley: I just want to clarify something. The Minister of Industry didn't figure in that discussion, and properly so. The relationship between the director and the Minister of Industry is not a typical bureaucrat-to-minister reporting relationship. The director is independent with respect to carrying out his responsibilities, both for enforcement and for dealing with mergers. I do not direct him, nor am I informed of his deliberations in reaching his conclusions on that.

This is as much as the Commissioner of the RCMP is independent from the Solicitor General in deciding how to conduct criminal investigations under the laws that pertain to the actions of the police force. So there is a division of responsibility there.

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Where we converge— One of the reasons we're at this table together is that in matters of policy, competition policy, which includes amendments to the Competition Act, that clearly is my ministerial responsibility. In that respect, the director advises me on his views as to changes that are necessary in the policy, and I bring them to you and Parliament for approval.

The Chair: Thank you.

Mr. Schmidt, we have bells ringing, which means we have a vote in approximately 10 minutes.

Mr. Minister, we want to thank you for being with us today. Mr. von Finckenstein, we want to thank you for being with us as well. We will appreciate you joining us again on Thursday morning, Mr. von Finckenstein, if you could, to continue this discussion and help take us through some more details of the act.

Again, Mr. Minister, thank you for your time.

The meeting is adjourned.