INDU Committee Meeting

STANDING COMMITTEE ON INDUSTRY

COMITÉ PERMANENT DE L'INDUSTRIE

EVIDENCE

[Recorded by Electronic Apparatus]

Monday, December 13, 1999

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[English]

The Chair (Ms. Susan Whelan (Essex, Lib.): I call this meeting to order.

The order of the day is Bill C-276, an act to amend the Competition Act, 1998, on negative-option marketing.

I'm very pleased to welcome our witnesses here this afternoon.

Our first witnesses this afternoon are from the Canadian Bankers Association. We have Mr. Alan Young, vice-president of policy; Mr. David McVay, vice-president, everyday banking, Bank of Montreal; and Ms. Wendy Hannam, senior vice-president, retail deposits and services, Bank of Nova Scotia.

Just to let committee members know, we actually have this room until 6:15 p.m., I believe, until the bells begin, so we'll probably go for about an hour and 15 minutes for the first group and an hour and 15 minutes for the second group, or thereabouts.

That being said, everyone should have a copy of the presentation from the Canadian Bankers Association in front of them, and I'm going to turn things over to Mr. Young.

Mr. Alan Young (Vice-President, Policy, Canadian Bankers Association): Thank you very much, Madam Chair.

Madam Chair, members of the committee, we're pleased to have this opportunity to meet with you today to discuss Bill C-276, an act to amend the Competition Act addressing the issue of negative-option marketing.

In our presentation this afternoon we will briefly describe the statutory regime under the Bank Act that sets out the rules banks must follow whenever they propose to increase charges to customers. We believe this regime is working well, serving our customers well, and we'll tell you why. We'll also raise some concerns regarding the potentially harmful competitive impact this bill would have, and this will explain why we believe banks should be exempted from the bill and we ask for an amendment to the bill to that effect.

In conclusion, we suggest for the committee's consideration a process for dealing with concerns that you may have.

For the past seven years Canada's banks have been subject to a notice disclosure regime set out by the Bank Act and its regulations. Bank customers who receive regular statements must receive written notices at least 30 days in advance of changes to a variety of service fees. In addition, banks must post in each of their branches and at each of their ABMs notice of service changes at least 60 days in advance. Customers are given all of the information necessary for them to decide whether to continue with the service or to switch their business to a different financial institution.

A similar disclosure regime is in place under the Bank Act regarding changes to the cost of borrowing whereby consumers get at least 30 days written notice of changes. In fact these cost-of-borrowing regulations have been the subject of federal-provincial negotiation over the last few years arising from the interprovincial trade agreement. The Department of Industry acts as co-chair of these negotiations and we expect them to be published soon. The basic disclosure regime in these regulations is not being changed.

We believe that the disclosure regime the banks have complied with since 1992 is working well. Why do we say that?

I cannot imagine an industry in Canada that has attracted more public attention, review, study and debate over the past three years than the financial services sector. In fact, the financial sector was the subject of the most intensive study conducted on the industry since the Porter commission of 1964, with the establishment in 1996 of the Task Force on the Future of the Canadian Financial Services Sector. This is known as the MacKay task force.

Madam Chair, I have sitting in front of me here an impressive collection of documents. You'll be grateful to know I'm not submitting these to committee members for your review. These documents include the report of the 1998 MacKay task force and all of the research papers that were commissioned by the task force during its two years of intensive deliberations, which included public hearings in communities across the country and the receipt of over 225 submissions from interested parties. Also included in this collection is the report of the House of Commons Standing Committee on Finance, which held public hearings in the fall of 1998. In addition, we have the report of the Senate Standing Senate Committee on Banking, Trade and Commerce and the report of the National Liberal Caucus Task Force on the Future of the Financial Services Sector, both of which held public hearings regarding our industry in 1998.

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Finally, Madam Chair, we have the response of the Government of Canada to all of the reports and hearings conducted by the aforementioned task forces and committees. This is a document released on June 25, 1999, called Reforming Canada's Financial Services Sector: A Framework for the Future. Consumer protection issues and recommendations figure prominently in all of these reports. After all, they are the product of three years of extensive consultation with consumers, advocacy groups, and industry watchers of all kinds.

But the interesting thing is that in this entire mountain of ideas and insight into how to strengthen the financial services sector and ensure that it meets the needs of Canadians, there is not a single recommendation dealing with negative-option marketing of financial products or services. We believe this is clear and compelling evidence that the rules that have been in place for the past seven years have served bank customers well and that Bill C-276 is not required to prevent the banks from engaging in negative-option marketing.

We are concerned that the bill would have a negative and distorting impact on competition in the financial services sector. This is due to amendments that were tabled with the committee two weeks ago that would leave banks as the sole financial institutions to be covered by the bill. As the government said in its June 25 policy paper, “Canada's financial services sector is already quite competitive”. Canadian consumers have an abundance of choice when it comes to having their financial needs met. As the appendix to our submission clearly demonstrates, many of these choices are non-banks. Even so, the government's policy paper sets out new policies intended to increase competition even further.

One of these policies is to open up direct access to the payment system to life insurance companies, securities dealers, and money market mutual funds. This means that all of these non-bank companies could directly offer deposit accounts, including chequing accounts, debit card services and bill payment services, among other things. In other words, these non-banks will soon be providing even more banking products and services to consumers than they already do today. However, banks and only banks will be required to comply with the requirements of this bill as amended.

None of their existing competitors, or new competitors that will take advantage of the new policies, would face the requirements of the bill. We believe this is fundamentally the wrong direction to take in a marketplace where the distinction between a bank, a trust company, a life insurance company, and other financial services providers is increasingly irrelevant. We also believe there are a number of operational concerns with the implementation of the bill for our customers and for our members.

By and large, our customers do not go to a bank for just one service. Many customers obtain a broad array of services from their bank, such as one or more chequing and savings accounts, credit cards, lines of credit, a mortgage, credit insurance, safety deposit box, GICs, RESPs, and so on. With the vast number of services provided by banks and the fast-changing financial marketplace, the number of notices that could be required by this bill could be overwhelming to many customers, and we believe it would lead to substantial customer dissatisfaction and aggravation.

The Competition Act is supposed to ensure that all Canadians enjoy the benefits of a competitive marketplace, low prices, product choice, and quality of service. These proposed amendments to the Competition Act run the serious risk of creating a diametrically opposite effect. As the members of the committee will know, the government intends to introduce new financial institution legislation early next year. This legislation will put into law the policy framework set out in the June 25 policy document. All members of Parliament will have the opportunity to participate in the debate on the future of Canada's financial services sector. Of course there will be public hearings before parliamentary committees on this new legislative package. Accordingly, we submit that concerns regarding the activities of financial institutions can be dealt with appropriately in the broader context of that legislation, where the complete scope of regulation for our sector will be debated and ultimately determined.

This new legislation will contain a significant number of new consumer protection measures. One of these measures is the creation of a new federal regulatory body to be called the financial consumer agency. One of the functions of this agency will be to monitor the activities of all banks, federal insurance companies, trust companies, and credit union associations. Thus, should concerns arise in the future regarding negative-option marketing by any federal financial institutions, this agency would have the authority to deal with it.

We trust that the committee members will carefully consider the issues we've raised today concerning Bill C-276. We have given to you a more fulsome submission in both official languages. We thank you very much for listening to us today, and we would be pleased to respond to any questions.

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

We're now going to turn to Mr. Schmidt for questions.

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

I'd also like to thank you, Mr. Young, for appearing before the committee. You've made a very strong case, a case that sounds somewhat familiar to the case that was presented by the telecommunications people this morning. They said they didn't need the provisions of Bill C-276, because they don't do negative-option billing. Do you do negative-option billing?

Mr. Alan Young: The Bank Act and regulations permit banks.... With respect to service fees or service packages, to the extent that there's going to be a change in the cost of those service fees, or packages or other items, there's a mandatory disclosure regime in place, as I indicated in my remarks, and that regime has been in place for the past seven years.

Mr. Werner Schmidt: But that's not exactly negative billing. Negative billing means that a service is given, and the only way you don't have that service is if you tell them you don't want it. In other words, they automatically bill you for that service. Do you do that?

Mr. David P. McVay (Vice-President, Everyday Banking, Bank of Montreal; Canadian Bankers Association): I can't think of any example where we have done that. It's not something that consumers think is a good practice. Almost all of our marketing is positive-option marketing.

Mr. Werner Schmidt: That's exactly why the bill is before us, because consumers don't like negative-option billing. They detest it.

One of the criticisms that I've heard over and over again from small-business people in particular is about the level of service charges they have to pay to financial institutions. And the question I've asked them is “Why is it that you have to pay so very many service charges?” They say “We never really know for sure why we have to pay all these charges, and in fact we're not even sure sometimes when those charges were initiated.”

Why is it that some businessmen can come to us and say they don't even know? You're telling us here now that you give them adequate notice ahead of time. They apparently don't seem to recognize this. Why would they make a statement like that?

Mr. David McVay: It's hard to say why they would make that statement.

I think the issue with service charges is a fairly complex subject within banking, and frankly, in my area, as a consumer area, it's not one that is a high-interest subject in terms of consumers asking how much they are paying in banking service charges.

We do a tremendous amount of marketing when we change service charges, and we have disclosure. We have a booklet called “The Better Banking Guide”, which discloses every fee we have. We have a website where the consumer can go and calculate their service charges. Industry Canada does the same thing. But despite all of that, I think you'd find that there are few consumers who could tell you how much they pay in service charges. It's just because the amount they pay I believe is a fairly low-interest subject.

Mr. Werner Schmidt: Maybe for some consumers, but it certainly is not for certain business people. That's why they keep raising the issue. It is very much a concern, and I think what you have just expressed is exactly one of the reasons they're so upset. They seem to think that if the banks don't care, we obviously can't make any major contest with that, and besides we have other bigger fish to fry with the banks. We may want to have a $10,000 loan, or a $20,000 loan. If we make an issue of the service charges, we're not going to get the loan. And so they really have a difficulty with this sort of thing.

Mr. David McVay: In my experience, I haven't seen those two issues negotiated together on a lending, and frankly in my experience it's a lot harder to build the business in the commercial area. There is a tremendous amount of choice for the commercial customer to go with. There are some concerns that they may not be at a level of financial stability where they can move around, but I can assure you that's not reflected in the service charges they pay.

Mr. Werner Schmidt: It may not be. It may be part of a bigger issue, and I'm quite prepared to concede that this is maybe part of a bigger issue. But the fact remains that you may not hear this, but I'm not manufacturing it. This is something that has appeared more than once. In fact, as recently as last week, a business person came up with exactly this kind of observation.

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I'd like to move into another area, if I could, and that has to do with the bundling of services and the ways in which you provide certain kinds of financial services. These are not necessarily service charges. These are lines of credit, long-term loans, mortgages, insurance packages, and things of that sort, and the ways things are bundled together and the ways the costs of providing these services are in fact not disclosed. One is levered against another one, one is offered perhaps even at a discount or maybe even as a loss leader, while this one is added. I think these are the kinds of things people are a little bit confused about.

Ms. Wendy Hannam (Senior Vice-President, Retail Deposits and Services, Bank of Nova Scotia; Canadian Bankers Association): Whenever we introduce a new product or service, obviously we've done a lot of research on customer preferences. One of the things we've found out consistently from customers is that they prefer to have services bundled together for a flat fee as opposed to single, individual charges for every single service that we have. The bundling or the packaging of products together has been popular among our customers in terms of knowing what they're getting, or knowing that they're getting it for a flat fee and that it includes XYZ. Our research has led us to do that, and customer comments have indicated that this is something they like.

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

Mr. Werner Schmidt: The question is not so much that they may not like this. I think the issue becomes one of an either/or proposition. You can have this mortgage here at this rate if you also buy insurance from us, or you can have this loan from us if you also take your home mortgage from us. They are technically bundled together, but what is in fact happening here is really a cross-selling that's taking place. It's not bundling at all. It's called bundling, but it isn't bundling.

Mr. Alan Young: If I may, I think what you're referring to is the practice of tied selling. Coercive tied selling is illegal under the Bank Act. Amendments were made to the act about a year and a half ago so that it is illegal for a bank to say you can't get this loan unless you also get this product. The law has been in place for the past year and a half to prevent that.

The Chair: Thank you.

Mr. Werner Schmidt: How does one prosecute a breaking of that law? This is a different question, but that practice is there.

The Chair: Thank you, Mr. Schmidt.

Mr. Gallaway, please.

Mr. Roger Gallaway (Sarnia—Lambton, Lib.): Thank you, Madam Chair.

Mr. Young, I think I have just one question for you. As you know, we have other witnesses coming at 4:30 p.m. today. Osler Hoskin & Harcourt are coming. Are you the same R. Alan Young who appears on their website? Did you work for them in the past?

Mr. Alan Young: Yes, I worked with Osler Hoskin & Harcourt for many years, but I'm surprised I'm still on their website, quite frankly.

Mr. Roger Gallaway: Well, let me quote your words that I just printed from their website about half an hour ago. In speaking about Mr. Manley, you gave an analysis of the industry minister, and it is on their website. You say “Mr. Manley's balanced and reasoned approach to policy issues affecting his main areas of responsibility”—and you go on to list them, including the Bureau of Competition Policy—“will provide helpful consistency on a number of files to be dealt with by the newly-minted Cabinet.”

That was R. Alan Young speaking as an associate at Osler, Hoskin & Harcourt.

Mr. Alan Young: When was that?

Mr. Roger Gallaway: Today, about half an hour ago.

Mr. Alan Young: I have not been associated with—

Mr. Roger Gallaway: All right, but let me just ask a question, since it's on their website. Has your position changed, knowing full well that the Bureau of Competition Policy is supporting this bill? Now that you're with the Canadian Bankers Association, what has made you undergo this transformation?

Mr. Alan Young: Let me approach that from a couple of different pursuits. First of all, I am surprised that I'm still showing up as an associate of Osler Hoskin & Harcourt on their website. I haven't been associated with the firm for over three years, the length of time I've been with the Canadian Bankers Association. In terms of the reference or the document that you're referring to, I don't know whether that is an Osler Hoskin & Harcourt document or whether it's a piece of paper that I signed my name to. I'm not sure which document it is.

Mr. Roger Gallaway: Well, this appeared on the website, and it still appears at this very moment. It says “R. Alan Young”. I don't know if you signed it when it first appeared. Did you sign it when it first appeared, Mr. Young?

Mr. Alan Young: I'll have to—

Mr. Roger Gallaway: Did you sign it when it first appeared, Mr. Young?

Mr. Alan Young: If I can, I'll have to have a read through it to see.

Mr. Roger Gallaway: Let me leave it with you, and then maybe you can advise the committee as to whether those were your words or not.

Mr. Alan Young: Sure, I'd be happy to do that.

Mr. Roger Gallaway: Okay, thank you.

Now, Ms. Hannam, I've heard Mr. Young say the banks never engaged in negative-option marketing. Would you agree?

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Ms. Wendy Hannam: To my knowledge, we haven't engaged in it.

Mr. Roger Gallaway: You're from the Bank of Nova Scotia, right?

Ms. Wendy Hannam: Yes.

Mr. Roger Gallaway: Well, I'll read to you from a letter I received on March 12 of this year from a Mr. Michael Major, of Victoria, British Columbia. He says:

My most recent negative option marketing experience took place in September [of 1998] when the ScotiaBank converted my no-charge “Basic Banking Account” to a $24.00 per year same name “Basic Banking Account”.

He goes on to add:

If you wanted to keep the old no-charge basic banking account you had to wade through confusion, select an option, change the account name and write the bank a letter. According to one Scotiabank insider, this sophomoric name switch resulted in more than 50,000 no-charge accounts (created to facilitate scotia-mortgage payments...) being charged $24.00 per year for unused services.

In other words, they added a service, socked it to you with a $2-a-month charge, and then you were paying them when previously you had no charge. This was in a market area in British Columbia. Do you think your bank did that?

Ms. Wendy Hannam: We changed from the basic banking account that had, I believe, six free transactions to a basic banking package account—

Mr. Roger Gallaway: Okay, so you don't know—

Ms. Wendy Hannam: —that was a $2-a-month package account.

Mr. Roger Gallaway: You don't know about Mr. Major, for whom they added services, then?

Ms. Wendy Hannam: I'm sorry?

Mr. Roger Gallaway: You don't know about this case in which they've added a particular service to a no-charge basic account and put on a $2 fee?

Ms. Wendy Hannam: I know about our basic banking package, obviously.

Mr. Roger Gallaway: No, I'm asking you more than that. This is a case in which people had one purpose for their banking account, and that was to pay their mortgage. What the Bank of Nova Scotia did in this market area was add an additional service to that, knowing full well that those people only had one transaction a month running through it, putting a $2 fee on it.

Ms. Wendy Hannam: I know that when we introduced the basic banking package, we also sent with it our guide to banking services, in which you can do a calculation that asks what kinds of transactions you do, how many you do each month, and what kind of customer you are. It then let's you use this tool to select the account that's best for you. If this customer only has one transaction per month, that wouldn't have been the best choice for that customer, obviously.

Mr. Roger Gallaway: It may have been 1984 when the customer opened the account. His principal account may be at the Royal Bank.

Ms. Wendy Hannam: But certainly from the offerings that we would have shown in the guide to banking services, going through the calculation with only one charge, it wouldn't have been the best account.

Mr. Roger Gallaway: Finally, let me show you this, Mr. Young. This is from one of your members, the Toronto-Dominion Bank.

Mr. Alan Young: Yes, I'm familiar with them.

Mr. Roger Gallaway: The Toronto-Dominion Bank used a negative option in terms of privacy. It had nothing to do with money, it had to do with information. This little eight-pager says:

For your convenience, if we don't hear from you by October 31, 1997, we will proceed with sharing your information with the TD Group and may contact you occasionally with offers of products and services we believe will be of interest to you.

As you know, Bill C-6, which deals with privacy, is now before the Senate. I would suggest that one of your member companies jumped the queue and downloaded the information to their subsidiaries in anticipation of that. What sort of comment do you have on that?

Mr. Alan Young: Sure, the legislation that you're referring to, Bill C-6, has as an appendix to it, that being the privacy code that was developed by the Canadian Standards Association after four or five years of tripartite discussions and negotiations with government, industry, and consumer groups. The CSA code was approved through that lengthy process. What you're describing there is activity that is acceptable pursuant to the Canadian Standards Association privacy code. It also is acceptable pursuant to Bill C-6, which passed through this committee and through Parliament.

Mr. Roger Gallaway: Okay, thank you.

Those are all my questions.

The Chair: Thank you, Mr. Gallaway.

Mr. Lastewka.

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

I guess I want to get down to the problem at hand and what we need to do about it. We have many customers who find themselves in situations where, if they don't react to something, as Mr. Gallaway has pointed out, or when all of a sudden they're confronted with something that says “Effective a certain date, the following items will come into play”.... More and more Canadians are saying they're being bombarded with this type of continuous communication. I received some on Friday along the same line.

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We as a committee and Mr. Gallaway as a member of Parliament are trying to resolve that problem, where all of a sudden a constituent receives an envelope saying, “This is what you're getting now, but here's how we're changing it, and it's effective October 25 or January 1.” Although I did hear you mention that there have been no complaints, we as members of Parliament have been receiving complaints. Maybe they haven't gone up the formal ladder.

The question becomes, what do we have to do to make sure we're more customer-focused rather than company-focused? This is what it gets down to, whether it's financial, communications, or whatever. It seems everything is company-focused: “I want to get into this type of banking, so therefore I'm going to raise the rates here and I'm going to lower the rates here, and then I'm going to send that out to the customer and say effective October 25, here's what's going to happen.” That's the reality.

So how do we become more customer-focused? Maybe that's my question.

Mr. Alan Young: Perhaps I can start, and my colleagues can feel free to jump in.

As we indicated, there have been over the past three years four sets of hearings, task forces with hundreds and hundreds of submissions, three years of opportunities for consumer groups and other advocacy groups as well as industry to participate in the review of our sector. That's all reflected here.

Throughout that process, which was remarkably open and in which the subject matter was open to debate, there was not a single reference in any of the representations from consumer groups regarding negative-option marketing with our industry. Over the past three years, there have been many opportunities to raise these concerns. That's why I have said in our submission that as far as we're aware and as far as all of these various parliamentary studies and reports are concerned, the system in place today is working very well for customers.

The finance policy paper released by the Minister of Finance on June 25 of this year contains many new policies directed at increasing competition in the financial services marketplace and enhancing consumer power. Those recommendations come forward through these various studies and reports the minister had at his hand when preparing the framework policy document.

We believe that through the combination of the existing rules in the Bank Act and the consumer protection measures included in the policy paper we're told will be before Parliament, tabled in legislation, early next year—including an agency of government that's devoted strictly to financial consumers—through that, definitely the customer interest is being taken into account.

Mr. David McVay: I'd like to add to that thought, because that's a question asked within the banks every day: how can we become more customer-focused? The basis of how you win competitively is to be more customer-focused.

We have a pretty good track record in many aspects of our operations. All five major Canadian banks were voted among the leading Internet banking companies in the world in the last week. Look at the stability of our system, our pricing, and so forth.

But you've heard all that before, so let me go more specifically to the issue of service charges, because that I think is more of interest to the people around the table here. We just put through a change in our plan structure this summer. To implement that change, we spent over $2 million in marketing dollars to make sure the communication got through.

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It involved all of the things Alan talked about that are required under the Bank Act: posting in branches and at the ABM, statement inserts. It also included over 1 million letters that we sent directly to the customers, it included a fair amount of staff training, it included the Internet—however we could communicate those changes.

But when all is said and done, if a customer comes in and says “I didn't know about those changes”, we apologize for not having reached that customer and reverse the service charge back. That's just good business practice.

So I would argue that we are, though not always.... We can always do better, but on that issue, we put in a tremendous amount of effort to try to get that message through.

Mr. Walt Lastewka: Thank you.

The Chair: Thank you, Mr. Lastewka.

Mr. Penson, please.

Mr. Charlie Penson (Peace River, Ref.): Thank you.

Mr. Young, notwithstanding that pile of paper you're hiding behind there, we still have Bill C-276, which you're here to talk about today. And notwithstanding everything you've said about having to jump through a lot of hoops, I still hear a lot from constituents that they're not happy with the idea of having banks, when they are going to be providing service, dip into their bank accounts without getting consent. It seems to me the onus for all of this should be on the banks to do that.

Mr. McVay, you talked about the Internet and the new technologies. We had the telecommunications group before us—the phone companies, if you like—just this morning, telling us they are happy with this legislation, essentially. They say with the new technologies available for obtaining consent through electronic means, this is not as onerous as a lot of people would like to make out.

I just want your reaction. Just as a matter of principle, shouldn't the onus be on the business to obtain that consent? You're in a slightly different position from a lot of other groups too. You have somebody's bank account there that you can pull out of if they don't reply within a certain amount of time, or whatever method you use.

You started down the road, Mr. McVay, of talking about Internet banking. Well, that's a pretty fast process. If that's a growing technological area, which everybody believes it will be, how heavy is this problem for you to obtain consent?

Mr. David McVay: It is a huge challenge, and the huge challenge is that we serve just about every Canadian. It's not just the technologically literate, those who are on the Internet. We have a significant portion who just use the branch. Only half of our customers receive statements, so even with a statement insert, we can't be sure they'll get the statement. About 60% use ATMs, so we can't be sure they'll get the message there.

It's because we're serving all of those Canadians that the challenge of reaching them with a message, getting them to hear the message, want to hear the message, and then respond to the message is a huge challenge, particularly if you look at how many services we offer. If we had to do that on every individual service, our concern is that the consumer would say “Wait! I don't want to hear about a minor change in prices. I want to hear about it, but I don't want to have to write you a note or to express consent on that, because it is the normal course of business.”

When it comes to marketing our services—personal loans, mortgages, new accounts, or indeed if you want to use telephone banking, PC banking, or any of those services that are distinctly new—we market them hard, because we want to gain competitive advantage and we want our customers to have access to the most convenient services. Those all have positive-option responses to them.

Mr. Charlie Penson: Every business has a set of challenges in order to conduct business. It seems to me if this bill were to go through and you had to comply, your banks would not be out of business. You'd find a way of adapting.

I represent a riding that's over 100,000 square miles, with 115,000 people in it. I get around to that riding. That's my job. You have a business to run. It seems to me you'll be able to find a way to do this. You might have to be fairly innovative in doing that.

You say some of your clients don't even get a statement. Well, maybe they need to. Maybe you need to make that phone call and talk to them. Maybe it wouldn't hurt to have slightly more personal relationships with your clients anyway.

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Mr. David McVay: I quite agree with you. The real concern is not creating a bigger problem with the solution. That's what we're worried about.

The current regulations within the Bank Act seem to be working very well in terms of defining the amount of notice. We are all complying with that and making extraordinary effort to make sure the message gets through. What we're concerned about is if you had to give three consecutive monthly notices and get express consent around each change, the consumer would be bombarded with messages, and we would be forced, by the regulations, to not put the change through.

The Chair: Mr. McVay, you should be aware there is an amendment before this committee to make that change, that when express consent is received, you do not have to send a second or third notice.

Mr. David McVay: Okay. That's a very good enhancement.

The challenge is, if you look at normal direct marketing programs, a 5% response rate is an excellent response when you're marketing something that will be a really positive change for the consumer. So even though the express consent would cut down the number of notifications once you have the express consent, it's questionable how often you would have to communicate to get that express consent for so many customers with so many products.

Mr. Charlie Penson: Could you contact them by phone, for example?

Mr. David McVay: We would have to contact.... We use almost every technique available to us when we do the pricing changes, through statement inserts, direct mail, telephone, Internet, and so forth. But I can tell you, if you ask Canadians what they pay for their banking package or when the last change was and that kind of thing, you would get—I don't want to deny this—a significant group saying “I don't like what I'm paying.” But to reach the vast majority of Canadians at the effort we're making now, it is a phenomenal effort, and one that seems to be working well.

Mr. Charlie Penson: So I guess the net result of all this is you're saying it's unworkable from your point of view?

Mr. David McVay: No. The net result is we think it's working very well now. The regulations within the Bank Act regulate that communication for our industry. We do not engage in negative-option marketing when it is a distinctly new service. When there's a change in the service, we comply not only within the letter but within the spirit of the regulations, to make sure consumers—

Mr. Charlie Penson: Let's just go down that road for a second. When you offer a new service—and I'm sure you do fairly regularly, as technology changes—how do you find out if the customer wants that service?

Mr. David McVay: The normal approach would be a combination of in-branch promotional material. We would try to identify within our client base which clients would most likely be interested in that service, and we would send them a direct letter. We would quite often follow that direct letter up with a telephone call to find out whether they'd want that service.

Mr. Charlie Penson: But you don't ask each individual customer for their consent, whether they want that service and therefore want the resulting cost to come out of their account?

Mr. David McVay: No. We would target it to the customers we thought were appropriate to it, and we'd only charge those customers who said “Yes, I want that service.”

Mr. Charlie Penson: Okay.

The Chair: Thank you, Mr. Penson.

We are finding out why the bells are ringing. We'll let you know in a minute.

Mr. Pickard, please.

Mr. Jerry Pickard (Chatham—Kent Essex, Lib.): Thank you very much, Madam Chairman.

I heard you don't do negative-option billing, and that raised the question first in my mind, why are they so opposed to this piece of legislation, then? Certainly I understand it's going to create some encumbrances in communication, but also, every time I talk to anyone from the banking institutions across this country, they pride themselves on consumer contacts. So I do see a conflict in what you're saying and the practices you say do exist.

How many times do you alter your services in banks—

The Chair: I have to interrupt, Mr. Pickard. I apologize. We're going to suspend for the vote, and then we'll be back and you can continue on that train of thought. I apologize.

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The Chair: We will resume our hearing. I apologize again to the witnesses for that disruption. That's life on the Hill.

Mr. Pickard.

Mr. Jerry Pickard: Thank you very much.

You are suggesting there is no negative-option billing done by the banks. If that were the case, there might not be a really strong objection by the banks saying “This legislation is going to affect us and affect our customers very drastically.” Before I go further with a question, am I missing something when you say you're not negative-option billing?

Mr. David McVay: As the legislation is worded, it could apply to a much broader range of activities than what you intended on negative option—the whole range of price change and price management activities, which we feel are well covered by the Bank Act regulations. In fact the legislation has served to keep the banks out of negative-option marketing, because the disclosure regime is there and seems to be managing it quite well.

Mr. Jerry Pickard: It appears to me, though, that when services change in a bank and they notify customers, normally that notice comes with a cost increase to the customer. What I have heard from people, and actually what I have seen, is that charges for service in the banking industry have dramatically increased over a period of time. I have, quite frankly, had questions come to me about that, and I think a lot of us are concerned about where this will lead.

You're suggesting, well, we mail things out to customers, and only 5% of people respond first to whatever mailings we have. That's kind of nice, because if only 5% respond, that means 95% of people don't respond to what you've sent out, so you can go ahead and do whatever you wish and you will have very little opposition.

As people looking at protecting those consumers, we're not anti-bank or anti-consumer. We're looking at means by which we can protect those consumers from increased service and cost, and operate in a society that will have added service, but added service that may be reasonable to them.

If we look at what's happened in communications—and you folks have to be looking at that very carefully—in my mail box I get 200 pieces of information on a weekly basis now, and that's increasing. And that's only one source. I might get it from every other source coming in. The banks are not neutral on this. If you talk about the customers getting angry over material they receive from banks, I get enough mailings from banks now to fill a vault. If they were mailing more important information to customers, I happen to think the customers would look at it very carefully and have decisions to make.

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But how do we protect that consumer? You say it's okay the way it is, but I guess many of us don't feel it is. How do we protect that consumer who needs some protection, who may not be as literate and may not read all of the information coming through their system? How are they protected if we don't bring in some type of legislation, such as negative-option billing, to protect them?

Mr. David McVay: I think one of the best protections is a competitive environment and a competitive marketplace, which I would argue we have among the banks. The regulations within the Bank Act, which are unique to our industry, provide a great deal of direction over the kinds of communication. I would argue that the consumers are being protected within our industry through that kind of progressive legislation. We're not complaining about the Bank Act; it's working very well.

We would go on to say that if there is a need, which we haven't seen demonstrated within the feedback systems and the reviews we've seen, it would be more appropriately handled within the Bank Act for our industry.

Mr. Jerry Pickard: It's very difficult for you to come to this committee and suggest, “Look, we don't want this committee to deal with it, we want another committee to deal with it, so it would be more appropriate if you didn't deal with this information in front of you right now.” That's what I'm hearing. I'm not sure I accept that argument.

Right now there's also some public concern about what's happening with bank profits. They read quarterly, at least, about the soaring bank profits. That's not for a single bank; every bank is soaring in profits quarter after quarter. In such a competitive environment, it looks as if it's a pretty fruitful one, at least for the banking industry. I'm not sure the public views that as fair. There is the other side to that, I certainly understand.

The public doesn't necessarily feel they're being well served by what's happening in general. Certainly as another service is introduced, there's a huge soaring of profits in the banking industry in Canada. Do you have a comment about that?

Mr. Alan Young: I'll address a couple of points you've made. I will refer to profit secondly. With respect to consumer concerns being heard by government and our industry and being dealt with, that was done in this process through four different sets of studies over the past three years.

In the government's policy paper that was published last June, there are many consumer protection provisions built into the policy framework that all parliamentarians will be debating early next year, we're told, when the Bank Act revisions are tabled. These things include a financial consumer agency. This is the first time I'm aware of that there's a specific government agency devoted to a specific industry to deal with the consumers of that industry. It includes legislation on access to basic banking services; it creates a legislated ombudsman process.

There are many consumer measures that, through the consultation process it has been engaged in for the past three years, have come to the surface. We're saying there haven't been concerns raised, through that entire process, on negative-option practices by our industry. Therefore, if there are concerns, we think they're best dealt with in the context of financial sector reform. Because of the competitive nature of the industry and the competitive impact of legislative changes, our suggestion is to have them dealt with in that broader package.

If I can just go to the issue of profits, yes, the industry in recent years has been very profitable. But I would also say that most Canadians benefit from those profits because one out of two working Canadians actually owns bank shares through their pension plan, mutual funds, or directly. I just learned this week, through some research, that the new Canada Pension Plan Investment Board that was created two years ago to invest Canada Pension Plan funds has invested in a significant equity fund. Five of the top ten equities in that fund are bank shares.

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So indeed, I think we can say that all Canadians have an interest in a strong, healthy, and profitable banking industry through the Canada Pension Plan now.

The Chair: Mr. Pickard.

Mr. Jerry Pickard: Thank you.

All Canadians do share in that, and I have no question about the pension plans and all. Certainly some share a great deal more than others, when we're talking about the latitude of free dollars they have to spend. I think that's where a lot of people may have concerns.

If you were going to change this bill to make it palatable, if you had one issue that was of major concern, what it would be?

Mr. Alan Young: It's in our submission. We would propose an amendment to delete banks from being covered by the bill because we think—

Mr. Jerry Pickard: Not deleting the banks.... Maybe I'll be a little more specific. What change would you make if the banks were included and this bill were going forward? What request would you make for change in the bill?

Mr. Alan Young: Our view is that banks should not be covered by the bill.

Mr. Jerry Pickard: I hear you.

Mr. Alan Young: I don't have a mandate to negotiate on behalf of our membership.

Mr. Jerry Pickard: We're not trying to negotiate.

Mr. Alan Young: I understand.

Mr. Jerry Pickard: What's your major concern? That's what I'm asking.

Mr. Alan Young: I think the primary concern is not understanding precisely what is covered by a new service. Is it intended to cover 50¢ increases in service packages over the course of the year? Is that what a new service is supposed to be? How you define a new service, I think, is part of the difficulty.

Mr. Jerry Pickard: Clarification of the new services is what you're concerned about.

Mr. Alan Young: Yes, as well as a combination of notice to the customer and express consent.

Mr. Jerry Pickard: Thank you, Madam Chair.

The Chair: Madam Jennings.

Ms. Marlene Jennings (Notre-Dame-de-Grâce—Lachine, Lib.): I just want to follow up on a question from my colleague. If, for instance, in the amendment, the banks remained part of this legislation, would the inclusion of all of the other financial institutions that are not covered by the Bank Act alleviate some of your preoccupation that there wouldn't be a level playing field because the banks would be required to submit to the changes to these rules concerning notices, new services, consent, etc., but many of your competitors who didn't fall under the regulatory powers of the Bank Act would not be subject to that?

Mr. Alan Young: We're not here to suggest that those institutions be brought back into the legislation. We're here to suggest that we be treated in the same fashion as they are.

Ms. Marlene Jennings: Okay.

The other thing is, I understand legislation will be brought in some time in February or possibly March—no one seems to be able to give us a definite timeline—that will create the federal financial consumer agency, with an ombudsman, powers, etc. This may then provide protection to consumers who receive financial services. In the meantime, if this legislation goes through, nothing precludes the government from having an amendment in its legislation to remove the banks.

Mr. Alan Young: I guess that's always a possibility. But you never know, when Parliament passes something, if you can rely on an amendment ever getting through. So we wouldn't take a lot of comfort in an amendment necessarily proceeding in the future.

Ms. Marlene Jennings: Okay. That's it. Thank you.

The Chair: Thank you very much.

Mr. Schmidt, please.

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

I have a comment and a question. Right off the top, I think we should recognize that we're all very proud of our banking system in Canada. I don't think that's the issue here; it certainly isn't as far as I'm concerned. You have done a good job and you're making money, and I'm not concerned about that either. You're in the business to make money, and I think that's all right.

The question here is that for some reason or another, as far as I can tell, you want to have special treatment. That's the whole issue here. You want to be exempted from this particular bill. The bill, as I understand it, is designed to do away with negative-option billing wherever it occurs, whether it's in a utility company, a telecommunications company or a wireless company. With any kind of a company that does negative-option billing, the idea here is to stop it because consumers don't want it.

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I think, Mr. McVay, you said exactly that, that you're concerned about it. Customers don't want it.

The question I have, then, is why in the world should you not be covered by that type of provision? If all other industries are involved, why should you be treated separately? Is it just because you're banks? Is it just for that reason?

Mr. Alan Young: No, we would not put that position forward. One of the reasons is that, first of all, an existing regime in the Bank Act has been in place for seven years. The second is that with changes in the financial services sector, the distinctions between various financial service providers is becoming increasingly irrelevant, because they're allowed to offer similar products and services. If, because you call yourself a bank, you have to follow a certain set of rules and others with whom you compete don't, that would be a main concern.

That's why an amendment to this bill has been proposed to take out, at the federal level, many of our competitors. We're asking for the same treatment, actually. We're not asking for special treatment.

Mr. Werner Schmidt: Which other institutions are exempted here?

Mr. Alan Young: Any other financial institution is exempted. The only one that's covered is a bank.

Ms. Marlene Jennings: Insurance companies... [Inaudible—Editor]

Mr. Alan Young: There is federal financial legislation—

Mr. Werner Schmidt: Well, I'm sorry, I did not read the details of it. If that's the case, then I rest my case. I thought you were asking for a specific exemption by yourselves.

Mr. Alan Young: No, we're just asking to be treated the same as the others.

Mr. Werner Schmidt: I apologize for raising the question.

The Chair: Thank you, Mr. Schmidt.

I have a couple of brief points of clarification.

Mr. McVay, in one of your earlier statements you mentioned that information on service fee packages was available on the Web, and that's where consumers and Canadians could check and apply. In a later statement, you mentioned that a lot of your customers don't have access to that. Where else do they have access to this service fee information in terms of your broad package?

Mr. David McVay: It's actually required by the Bank Act that each bank have a package that's available in all branches and that outlines all of the fees we charge for all of our services. We have a package called “The Better Banking Guide”, and I have a copy here if you'd be interested.

The Chair: Is it posted in the bank? Is it posted at the ATM machines?

Mr. David McVay: It's on display. When we change fees, a full description—

The Chair: It's on display at the ATM machines?

Mr. David McVay: This particular brochure is not on display at the ATMs. When there is a change, we put up a poster at the ATMs that describes all of the changes during the disclosure period. “The Better Banking Guide” is a continuous-display item that's available all of the time in the branches. In fact, it's handed out to every client when they open up an account so that they have full disclosure. It's in paper form within the branch, it's on the Internet, and when there are changes, then there are also statement inserts and posters at the ABMs. It's not displayed continuously at the ABMs.

The Chair: But could it be?

Mr. David McVay: Anything is possible. It's not very consumer friendly. It's a very thick and complex package.

The Chair: How many different types of service fee packages would you have from your bank, for example?

Mr. David McVay: We have over 200 different services covered, so it's not—

The Chair: That wasn't my question. My question was with regard to how many different types of service fee packages you have, not how many different types of services.

Mr. David McVay: Okay. We have seven different package plan options you could choose from.

The Chair: So you could post seven different package plans quite easily on one piece of paper.

Mr. David McVay: Yes, if that was the primary concern. There are also the pay-as-you-go charges, the à la carte fees, which I suspect consumers would react.... In our experience, they prefer package plans. It's the à la carte fees—

The Chair: But as we clarified this morning with Bell, and we'll have the Competition Bureau clarify it again when they testify, this bill doesn't deal with the à la carte fees, where a consumer uses a service knowing they're going to have to pay a fee. We'll have that clarified by the Competition Bureau when they appear. Specifically, the example this morning was *71 from Bell. When you actively press *71, you know you're going to pay a fee.

When I go to another Interac banking machine, I know I will pay a fee because it's not my bank. I'm using that service as a consumer, and I'm giving my consent to use that service because I've gone to that machine. I'm taking action. So we're not talking about those à la carte fees.

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Ms. Wendy Hannam: Perhaps I can comment.

Most customers wouldn't buy their accounts at the ABM. They would make the choice of which account or account package they were going to buy by talking to a personal banking representative, or on-line if they're on-line customers. The decision, or when they give express consent, is when they actually go through the analysis of what kinds of transactions they want to do, how many they want to do, and what type of frequency. Then they'll buy that particular account.

So posting the account package fees on the ABM wouldn't be the place where people would tend to buy them. We don't encourage purchases on the ABM, because ABMs are primarily convenience, a quick place to go to get cash or make a bill payment. We don't think our customers would want to line up behind people who are choosing to purchase accounts and go through the fairly lengthy analysis of what they would do to make that choice.

The Chair: Maybe I was misunderstood. I didn't necessarily say you should post them on the ABM machines; I meant at the ABM machines, on the wall. You could easily post seven different packages to show what the options are.

I mean, I don't see that happening right now, under what's required under the Bank Act, in terms of even posting what the options are. Part of your presentation speaks to the fact that the reason you don't need to do this is that there are options and competition, but when I see the notice that the fees are going to go up, I don't see what the options are.

That's all I'm suggesting, that you have a better means of communicating what those options are if you really want your customers to feel that they do have options other than just a notice that says, for instance, “Effective so many days from now, this fee is going to increase from $8 to $8.50”, with no notice of what the options are. That's all I'm suggesting, that this is possible to do.

I also would like to clarify what I said this morning, just for the record. The Competition Bureau will probably speak to it as well. There are a couple of proposed amendments as of December 9. The proposed amendments to section 74.051 and to proposed paragraph paragraph 53.1(2)(b) refer to any means of communication, including electronic or digital means of communication, and express consent for the purchase or reception of a new service from the enterprise. I had said that these came from jurisprudence, but in fact they come from the Federal Court rules and the income tax rules.

I wanted to clarify, then, for the record, where the wording comes from. We were discussing the wording earlier this morning. I'm wondering if that change of wording to go to electronic or digital means assists the banking community in dealing with express consent.

Mr. David McVay: It certainly opens it and makes it a modern piece of legislation. That's how consumers do express consent, either by the telephone or the Internet or whatever. The problem is reaching the clients and actually getting them to take the action to say yes or no.

On the wide range of things covered within the Bank Act...and I'm not talking about true negative-option marketing, or offering a new service that is clearly indistinct from the services they have. Our practice is to get express consent. But if it went so far as a change in the package plan, the amount of communication that would be required to get the consumer to actually take action, I doubt we would get a majority of consumers taking action, even with the provisions of the notifications within this. That's just based on our experience.

The Chair: Mr. McVay, you're telling me quite clearly, then, that when a bank offers a new service, you don't negative-option bill.

Mr. David McVay: That's right.

The Chair: So how are you affected by this bill?

Mr. David McVay: Often, with a change in price of a plan, we will also change the features in the plan. The price may go up and we would add new features within the plan. Both of the—

The Chair: Do new features mean new service?

Mr. David McVay: That's where we're getting into the definitional problem. Normally, I believe, in the consumer's mind, it would not be a material change in the plan, but within this legislation, it could be considered a new service. So instead of increasing the value of the plan, we'd have to separate those two transactions the way the legislation is described right now. Then only those who want that new feature would be able to get access to it.

There are lots of minor adjustments. That's really what—

The Chair: I have just one last question. Is it fair to say that the banks encourage their customers to use electronic means?

Mr. David McVay: Certainly.

The Chair: So can you explain to us as a committee why, if the bank is encouraging that, the cost of that is going up?

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Mr. David McVay: In fact, the cost for electronic transactions has been going down.

The Chair: As an example, when I used another bank's ATM machine, it used to cost me $1. It now costs me $1.25.

Mr. David McVay: Oh, I see.

The Chair: Can you explain that to me?

Mr. David McVay: That is a convenience service; the consumer is willing to pay for for that particular transaction. They have ample opportunity to avoid that fee through using our own ATMs within all the Canadian banks.

The Chair: With all due respect, one final comment: if my bank machine is out of service, which happens from time to time, I don't have a choice if I need to get the money. I have to go across the street and I have to pay $1.25. I don't call that a convenience. I call that a nuisance.

Mr. David McVay: I certainly understand that circumstance.

The Chair: Would your bank refund that $1.25 if I explained that my bank machine was out of service?

Mr. David McVay: I can't guarantee what would happen when you go in, but I would bet that they would—because that is the customer service attitude of our folks.

The Chair: Okay.

Mr. Schmidt, you have one final comment.

Mr. Werner Schmidt: Yes, I do, thank you, Madam Chair.

I recognize now where I made my error. I was reading the original bill, and I understand now that the author of the bill made some amendments and took some of those out of there.

I still want to raise my question, though. It has to do with federally incorporated and federally regulated financial institutions that aren't banks. If there are insurance companies that are federally incorporated and federally regulated, there are others that are provincially regulated. Is your concern with insurance companies that are provincially regulated or is your concern with insurance companies that are federally incorporated and federally regulated? Because if they're all taken out of here, clearly there's no distinction made between those that are provincial and those that are federal. What is your concern?

Mr. Alan Young: It's with respect to the full gamut of competitors in the marketplace, not just life insurance industries, be they federal or provincial.

We're looking at the policy paper that the government is going to be putting into legislation in a few months. One of those policies is to open up access to the payment system, which would allow non-deposit-taking institutions direct access, so that a money market mutual fund, a securities dealer, or a life insurance company could have direct access and provide their customers with chequing accounts, savings accounts, debit cards, bill payment services, and so on.

That's why I'm saying that the distinction between what a bank does and what non-banks do is becoming increasingly muddied and blurred; there's considerable convergence in the marketplace. That's why we're wanting to make sure that decisions are made in recognition of how the marketplace is developing.

Mr. Werner Schmidt: I think, Madam Chair, what Mr. Young is saying is that they want a level playing field.

Mr. Alan Young: We try not to use that phrase because people...how level things are depends on where you stand.

Mr. Werner Schmidt: Yes, you're making too much money.

The real question is this: if all of these other financial institutions were subject, under the Competition Act, to this provision of a negative-option billing, would that satisfy you?

Mr. Alan Young: Again, we think we have a regime in place right now such that we comply with the—

Mr. Werner Schmidt: But that's not my question. I know that's your position. I understand that. Negative-option billing is there to cover the broad spectrum, and I want to know whether you would be happy with that if it covered all financing: you would compete under essentially the same conditions.

Mr. Alan Young: Well, if that were the situation, it would be preferable. But again, you know our position.

Mr. Werner Schmidt: Yes. You've said it often.

The Chair: Thank you, Mr. Schmidt.

I want to thank the members from the Canadian Bankers Association for being with us this afternoon. We appreciate your patience during the vote.

We're now going to suspend for 60 seconds while we change witnesses. We have another vote coming up this afternoon.

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The Chair: Order, please.

I'm very pleased to welcome our next group of witnesses: from the Canadian Bar Association, Mr. Warren Grover, chair of the national competition law section, and Ms. Tamra Thomson, director, legislation and law reform; and from Osler Hoskin & Harcourt, Mr. Peter Franklyn, a partner.

I propose that both witnesses provide their opening statements, and then we'll move to questions together.

Ms. Thomson or Mr. Grover.

Ms. Tamra L. Thomson (Director, Legislation and Law Reform, Canadian Bar Association): Thank you, Madam Chair. The Canadian Bar Association is very pleased to appear before you today on Bill C-276.

The Canadian Bar Association is a national association comprised of lawyers, law students, judges, and legal academics from across Canada; we are approximately 36,000 strong. Amongst our primary objectives are improvements in the law and the administration of law. It is in that optic that we appear before the committee today.

You have received a copy of a letter from the then chair of the competition law section, and I'm pleased to be here today with Mr. Grover, who is now the chair of the competition law section. He will make the substantive remarks on behalf of the section.

Mr. Warren M. Grover (Chair, National Competition Law Section, Canadian Bar Association): Thank you, Madam Chair.

Let me say that the national section of competition law is dealing with the question of competition law, and we have just three points to make, Madam Chair.

First, we have no problem with the substance of the legislation. The concept of being “anti” negative-option billing is fine. What we do have a problem with is making that substantive law effective and efficient, and we respectfully suggest that as it is now drafted it applies to three federal institutions that have very good regulators. We think that putting it under the Competition Act will be less effective than if the exact same measures were put under the acts for which those federal institutions are now regulated.

In other words, there's a regulation now, they need to have added in that they should be looking at negative options, and we don't have a problem with that. We do not think that adding a different type of regulator—and the competition commissioner is not a regulator—will be an effective or an efficient way.

In other words, the first point we make is this: negative options, fine, but get them under the right act by the right person who knows how to do it. I'm not suggesting that the commissioner isn't a broad-shouldered man, but he can only do so many things. We suggest that this is in the wrong place.

Secondly, the reviewable conduct sections of the Competition Act, which is where these will fall, are not designed for anything where it's a monopolist doing the type of thing for which negative-option billing was done—for example, in the cable television stuff. It's simply that if you look at those sections, you see they're designed to look at a competitive environment, and the Competition Tribunal—before which I've appeared on many occasions—is a three-panel group with an economist sitting there all the time. It's simply not geared for this type of information. It's a good idea, but the reviewable conduct was the wrong place to stick it, in my view.

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That's our second suggestion.

The third point I wanted to make, from a competition law point of view, is that if it were a competitive market—which I don't think is what you're addressing—normally you wouldn't want to give three months' notice of price changes. That's not competition; that's a regulated-industry concept. The whole point of competition is to have abrupt changes. It's a fighting atmosphere, not “I'll give you 15 minutes to tell you where the next punch is coming from”. It's the wrong place to do it.

Not that we're against the concept; we applaud the concept, but we suggest that it belongs in another place.

Those are my suggestions, Madam Chair.

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

Mr. Franklyn, please.

Mr. Peter Franklyn (Partner, Osler Hoskin & Harcourt): Thank you. Can you hear me all right?

The Chair: Yes.

Mr. Peter Franklyn: Before I begin, I'd like to thank the committee for the opportunity to appear and express my views on Bill C-276. I'd like to say at the outset that my comments on this bill are not being made at the request of or on behalf of any client or group of clients of our firm or on behalf of any industry group generally. The comments are my own and those of members of my firm.

We believe the proposed bill is of sufficient importance that it was appropriate we appear to express our views on the matter based on our experience as legal advisers who regularly are involved in and provide advice in connection with the Competition Act and telecom, and other regulatory matters.

We feel the issues raised by the bill affect matters of law and policy that are within the scope of our experience in our professional expertise, and it's in that capacity that we're making these comments today.

I'll try to be brief with my comments. We believe, first of all, that there are a number of fundamental problems with the bill, and accordingly, we are strongly opposed to Bill C-276. We don't believe that the amendments that have been proposed, or for that matter any amendments that I can think of, would solve these fundamental problems.

The principal concerns with the bill are as follows.

As the proposed legislation will not govern commercial activity in the marketplace generally but will only regulate activities of certain prescribed industry participants and not their competitors, in our view the subject matter of the bill doesn't properly belong in the Competition Act.

Secondly, we have a concern that the bill may interfere with and conflict with other legislation that applies to those entities that continue to be subject to the bill and are within their jurisdictions. Those are agencies that are specialized regulators that have oversight responsibility for those industries.

Thirdly, the subject matter of the bill, in our view, is properly within the purview of provincial legislatures and provincial legislation dealing with such matters as consumer protection and unfair business practices.

Fourthly, the bill will create an unlevel competitive playing field.

Finally, the bill will, we think, in a number of respects be inconsistent with the objectives and the role of Canadian competition policy, as the bill could have the effect of distorting competition, reducing innovation, and increasing consumer costs in some cases.

I'll elaborate on each of these points briefly.

First of all, as you all know, the Competition Act is a federal law of general application. With very few exceptions, the act applies across the economy to all types of commercial activity. This purpose is evident from the name of the statute itself.

The formal name of the Competition Act is an act to provide for the general regulation of trade and commerce in respect of conspiracies, trade practices, and mergers affecting competition. As the principal federal framework legislation governing the regulation of trade and commerce, the Competition Act is intended to be—and currently is, as I said, with few exceptions, and in my view should continue to be—legislation that has general application to all industries in Canada.

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In my view, the act should remain one that has general application to all types of commercial activities and should not impose special obligations upon certain types of participants, particularly in two or three industries, and in circumstances where those entities compete with others in their industry who are not subject to similar obligations.

As a law of general application, the purpose of the Competition Act is to promote economic efficiency through competition, rather than to regulate specific practices engaged in only by prescribed types of competitors in particular industries. Our concern is that by having application to only—as the bill is now amended—three industries, it will have the effect of singling out three industries while not affecting the competitors with whom they compete in the marketplace.

Secondly, the passage of the bill will risk raising a conflict between the Competition Act and other federal legislation, and between the Competition Bureau and the established jurisdictions of other specialist federal regulatory bodies. For example, as was said earlier today, I believe, the Bank Act contains provisions that regulate certain types of bank activity, restrict them from engaging in certain types of activities, and specifically govern the way in which the banks are to carry on their activities.

As it's currently conceived, the bill applies only to banks and certain other types of prescribed enterprises, and it seems to me that the more appropriate place for this provision, if one believes that there is a necessity for it at all, would be to have specific legislation governing those types of enterprises, not to have these provisions in a general framework legislation such as the Competition Act.

Thirdly, the bill essentially addresses matters of consumer protection, which in my view are properly within the jurisdiction of the provincial legislatures and ought to be dealt with under provincial statutes, such as the Consumer Protection Act in Ontario, which already deals with matters such as executory contracts, credit transactions, and disclosure of things such as cost of borrowing and similar matters; or the Business Practices Act, which deals with such things as unfair business practices and unconscionable consumer representations, and already provides consumers with remedies such as rights of rescission and damages in respect of those sorts of practices.

Fourthly, the bill also creates, as I said earlier, an unlevel playing field where only the prescribed types of entities or enterprises that are subject to the bill—that is, banks, broadcasting undertakings, and Canadian carriers under the Telecommunications Act—will be subject to the requirements of the bill, while their competitors will not be. Not only will this impose an expensive and administratively burdensome obligation on the enterprises that are subject to the bill, but it will also place them at a competitive disadvantage vis-à-vis their unregulated competitors, who aren't subject to the same requirements.

To take an example, the banks would be subject to the requirements of the bill, whereas their direct competitors, entities such as trust companies or credit card issuers or other credit providers who offer many of the same types of financial services, won't be subject to those same obligations.

Not only is that inconsistent with the purpose of the Competition Act, which is to protect and foster competition, not to give an unfair advantage to certain competitors, but it also, in a way, defeats the purpose of the bill and is likely to create a false sense of security on the part of consumers, since many of the financial service providers they deal with won't be subject to the bill. Only the banks will. So accordingly, in a perverse and, I'm sure, unintended way, these recent amendments, which limit the bill's application to the banks, broadcast undertakings, and Canadian telecommunications carriers, may exacerbate the unlevel playing field problem rather than eliminate it.

Finally, the bill, in my view, is inconsistent and incompatible with the purposes of the Competition Act because it competitively disadvantages those enterprises that are subject to the bill by subjecting them to onerous and costly disclosure, as well as costly compliance and monitoring obligations. What I'm concerned about is that the bill will reduce their incentive to innovate and introduce new services, and will thereby reduce competition. As Warren Grover said a moment ago, for example, the three-month waiting period applicable to the introduction of new services—-and I understand there may have been some amendments recently that may alleviate this concern to some extent—will reduce, and possibly eliminate entirely, important first-mover advantages that an innovative service provider might otherwise hope to achieve.

• 1745

At the same time, competitors who are not subject to the bill will be given ample opportunity to respond or even get a head start on the introduction of those new services that the regulated competitor will be forced to disclose in advance. Not only will this create a disincentive for the regulated enterprise to innovate and introduce new services, but it could also encourage the unregulated competitors to engage in free-riding, and reduce their incentive to engage in their own innovative activities.

In both these circumstances, consumers would be disadvantaged, because they would be denied the benefits of the innovation and competition that might otherwise have existed.

Lastly, the cost associated with having to inform consumers on a monthly basis for three months prior to introducing a new service and then seeking the consumers' explicit consent, as well as having to monitor and ensure compliance with those obligations, will undoubtedly be costly and burdensome.

One might reasonably expect that those enterprises that are subject to the bill will, in one way or another, pass those costs on to their customers by charging higher prices. Or they may simply decide not to introduce the services at all. In either of those circumstances, those consequences would be, in my view, inconsistent with the objectives of Canadian competition legislation.

In conclusion, in view of these concerns I've outlined above, I believe the bill has fundamental problems in its current form that I don't think can be rehabilitated through the types of amendments that have been proposed to date. In fact, I believe, as I said a moment ago, that some of these amendments, while I'm sure they were well intended, will exacerbate some of the problems rather than ameliorate them. In view of these concerns, I would urge the committee to reject the bill in its entirety in its present form.

The Chair: Thank you, Mr. Franklyn.

Now we're going to go to questions. Mr. Schmidt.

Mr. Werner Schmidt: Thank you, Madam Chair.

Thank you very much, madam and gentlemen, for appearing here today. I think you've made some very cogent observations.

I'm going to ask a very simple question to begin with. It seems to me you all agree that negative-option billing is a good, well-intentioned thing that should exist in our marketplace. Where, then, ought it to be housed?

The Chair: Mr. Grover.

Mr. Warren Grover: If I may, I'll respond to that, thank you very much. To my way of thinking, you have identified three of the key industries where it could be a problem. I have less worry about the banks being able to compete on a level playing field than others do. I would put it in the Bank Act, the Telecommunications Act, and the Broadcasting Act. It's very simple.

The point I make to you is that there is no regulator under the Competition Act; there's only the commissioner, who's designed to be more like an enforcer. He doesn't have the scope that the CRTC has.

Mr. Werner Schmidt: That's not entirely my question. I appreciate the answer, and I agree with that position as well.

There are other industries, other enterprises, that do negative-option billing. It strikes me that the intent and purpose of this bill is to do away with, or to discourage as much as possible—I don't think they'd ever eliminate it completely—negative-option billing, wherever it is done. Where would you then place it? Would you place it in each particular piece of legislation governing that enterprise?

Mr. Warren Grover: I guess the problem I have with your question, sir, is simply that it's now directed at a few industries. It used to be directed at a few more.

Mr. Werner Schmidt: That's right.

Mr. Warren Grover: There was never a suggestion that it was directed at the whole playing field, that I've understood.

Mr. Werner Schmidt: I appreciate that. We're dealing with a problem here. We're dealing with the principle of a bill—at least I am. The concern I have is the difficulty of negative-option billing, wherever it occurs. I think that's the issue here. I don't like legislation that covers particulars and that exacerbates the problems that I think Mr. Franklyn identified so very clearly. I appreciate that.

But the problem still remains, so doing away with this bill doesn't do anything with negative-option billing. Making amendments to it, the way you've been suggesting, doesn't do it either. So the question I'm asking is a much broader one: in the big picture, where ought it to go?

• 1750

Mr. Peter Franklyn: I think there are potentially two ways to do it.

One might be, in cases where there has been a concern identified with a particular industry, to have a provision in the legislation that governs that industry specifically.

At least in some of the provinces, and Ontario is one, there is existing legislation that deals with things that affect consumers, consumer protection legislation or unfair business practice legislation, and it seems to me that would be another possibility.

Mr. Werner Schmidt: What would be your preference?

You are legal people. You understand how the law works. You also understand how the judicial system works and how these things can be administered. What we're really after is this: what kind of legislation will do what we want done? If we have a model in the Quebec consumer protection act, maybe we should look at that.

I really want to penetrate your thinking and say, okay, if you were going to create this beautiful world where there wasn't negative-option billing, what would you build? Would you build a consumer protection act, would you amend the Competition Act, or would you divide this whole business up into a bunch of little acts and then in each one have a negative-option billing clause?

Mr. Peter Franklyn: It strikes me that the approach I personally would favour is to identify the specific areas where the problem exists and fix those problems. So if that's the approach one takes, then you look at dealing with it in the legislation that governs those industries in which the problem is believed to exist.

Mr. Warren Grover: If I could add to that, I think federally what this committee has done is identify the three most important industries. In a way, they're going at this as a gradualist approach to negative-option billing and saying, those are places we've seen it as a problem. Then I think you go at those industries.

They're powerfully regulated now by OSFI. It's just that in the banks' case and the CRTC's case and the other two cases, it's not that you don't have powerful regulators; it's just that negative-option billing has never been in their scope.

Mr. Peter Franklyn: I'm sorry, if I might elaborate on the comment I made a moment ago, to target specific industries where the problem exists might be one approach. The difficulty with that, though, is that it runs the risk where you have the banks, for example.... As I said earlier, I'm not here to carry a brief for the banks, but it is an example one can use to illustrate the point.

Financial services is a very dynamic industry. The banks compete in respect of certain services with a lot of non-bank financial institutions, credit-card issuers, many of whom aren't even in this country. The difficulty is that if certain competitors are subject to rules and others aren't, then you inherently have this unlevel playing field, so it doesn't completely solve or address the problems I've expressed.

Mr. Werner Schmidt: I appreciate that. Thank you very much. I think we have the problem articulated now. The disappointment I have is that you haven't come forward with a really good solution to the problem. You are experts, and I'd like to pick your brains. You know what you're doing.

The Chair: Thank you, Mr. Schmidt.

Mr. Gallaway.

Mr. Roger Gallaway: Thank you, Madam Chair.

Mr. Franklyn, thank you for your thoughts.

You are here today representing the firm Osler Hoskin & Harcourt. Is that true?

Mr. Peter Franklyn: Yes, I am. I'm a partner.

Mr. Roger Gallaway: Are you speaking for the firm? Is that what I understood you to say?

Mr. Peter Franklyn: That's right.

Mr. Roger Gallaway: All right.

According to their website, Osler Hoskin & Harcourt has 325 lawyers, more or less.

Mr. Peter Franklyn: Thereabouts.

Mr. Roger Gallaway: Osler Hoskin & Harcourt has another feature. They're registered lobbyists, are they not?

Mr. Peter Franklyn: Some members are.

Mr. Roger Gallaway: Are you a registered lobbyist?

Mr. Peter Franklyn: I am not at the moment.

Mr. Roger Gallaway: A release today from the reported public registry shows that you are in fact a lobbyist, that you have a number, and that you're on their books and records as a lobbyist.

Mr. Peter Franklyn: In regard to this issue, I am not.

Mr. Roger Gallaway: Not in regard to this issue? That's very interesting, because it says you are in particular subject matter, all matters affecting cultural industries in Canada. Would you not agree that this touches cultural industries in Canada?

Mr. Peter Franklyn: Potentially, with the amendments to the bill that was introduced last week, of which I received notice, they may.

Mr. Roger Gallaway: Okay. Is it also not true that you're a registered lobbyist for, amongst other companies, Viacom, a rather large cable carrier?

Mr. Peter Franklyn: They're not a cable carrier in this country.

Mr. Roger Gallaway: Okay.

Is it not true that you also lobbied groups such as Finance Canada, Industry Canada, Revenue Canada, and the Privy Council Office?

Mr. Peter Franklyn: Personally, no.

• 1755

Mr. Roger Gallaway: Then why do you have them on your lobbyist's registration?

Mr. Peter Franklyn: I may have at one time, but I certainly am not at the moment.

Mr. Roger Gallaway: Are you speaking for one of the members of your firm who lobbies for the Bank of Montreal, then?

Mr. Peter Franklyn: No.

Mr. Roger Gallaway: Are you speaking for the Canadian Bankers Association?

Mr. Peter Franklyn: I certainly am not. I said that explicitly at the beginning of my remarks.

Mr. Roger Gallaway: Okay, fine.

Now, I would note that your former associate, Mr. R. Alan Young, who was just here as a witness for the Canadian Bankers Association and spoke against the bill, resigned his position on November 15, 1996. I'm assuming that he discontinued his registration as a lobbyist for Viacom on November 15, and you in fact picked up the same file on April 3 of the same year. Did you talk to Mr. Young about this file?

Mr. Peter Franklyn: Which file was that?

Mr. Roger Gallaway: It's the file about which you're appearing before us on this bill.

Mr. Peter Franklyn: Today?

Mr. Roger Gallaway: No, have you talked to Mr. Young about this bill?

Mr. Peter Franklyn: I spoke to Mr. Young, but I wasn't even aware he was appearing until I saw him sitting in this room about an hour ago.

Mr. Roger Gallaway: Okay, but you did assume his file from Viacom, then?

Mr. Peter Franklyn: No, I did not.

Mr. Roger Gallaway: Okay, that's interesting, because he discontinued it and it shows that you registered to take it over.

Mr. Peter Franklyn: I have two comments on that. First of all, matters affecting our clients are not the subject matter here. They're confidential, and I'm not really comfortable discussing them in public. Secondly, there are many matters that I may have been involved in with Mr. Young or others in our office, but they really have nothing to do with what we're talking about today, unless I'm missing something.

Mr. Roger Gallaway: Okay.

The Chair: Mr. Gallaway, try to keep it away from confidentiality.

Mr. Roger Gallaway: Okay.

Mr. Grover, you talked about whether or not this was a competitive marketplace with respect to telephones. You believed it was not. At least, that's what I understood you to be saying.

Mr. Warren Grover: I think there's an attempt to introduce competition into these markets, sir, but I think anybody who thinks the major telephone companies aren't still in a fairly strong position in the local loops would be deceived.

Mr. Roger Gallaway: One of the comments you made on point two was that reviewable conduct sections of the Competition Act are not designed for monopolistic industries. Did I get that correctly?

Mr. Warren Grover: Yes. But what I'm saying, sir, is that reviewable conduct is not meant to apply to specific industries in which there have been monopolies in the past, such as telecommunications or cable carriers. It's in those areas that this problem seems to have arisen more, based on my reading of the newspapers.

Mr. Roger Gallaway: It's interesting that you should say that, because this morning we had a number of telephone companies appearing before us and they said it's a very competitive marketplace. Do you disagree with that?

Mr. Warren Grover: I'm not saying parts of their marketplace aren't very competitive, sir. I'm here just representing what I consider.... The national competition law section is looking at this thing. The telecommunication carriers—I don't know which ones were here—are regulated by the CRTC, which understands the billing procedures, etc., much better. It seems to me it's there that you should put a thing like this negative option. They know how it fits. The Commissioner of Competition doesn't really have that expertise.

Mr. Roger Gallaway: As you know, as recently as this year, Videotron has been selling channels by negative option in Quebec, although selling is a bit of a misnomer. The CRTC, after the 1995-96 debacle, said the industry had taken a vow that it won't happen again, yet it is happening again. What do you do with the CRTC under those circumstances?

Mr. Warren Grover: I thought that was the point of putting this bill in: to say quite clearly that the Parliament of Canada is saying this is not acceptable. All I'm suggesting, sir, is that if you want to be efficient and effective with that, it has to get into that regulator that's looking at this industry every day and understands it. That is the only point I was making, sir.

Mr. Roger Gallaway: Okay, I misunderstood.

I suppose you're saying it should be put into the telecommunications legislation, if I understand you correctly, and that it should be put into the Bank Act, then.

Mr. Warren Grover: And into the Broadcasting Act.

Mr. Roger Gallaway: And into the Broadcasting Act, yes.

Mr. Warren Grover: If those are the three that you've identified, sir, then yes.

• 1800

Mr. Roger Gallaway: All right. You would then profoundly disagree with the Competition Bureau that says this is the way to go.

Mr. Warren Grover: If that's what the Competition Bureau said, sir, then I am in disagreement with it. Yes, sir.

Mr. Roger Gallaway: My final question would be: then would you not agree that it's up to the Parliament of Canada to speak as to where that should go?

Mr. Warren Grover: Of course it's up to the Parliament of Canada to make all laws, sir. But I do think that if you get an informed viewpoint from the Canadian Bar Association, we aren't out to press one thing against other; we're simply trying to make for efficient law. I'm saying the Competition Bureau has been made into a lot of things to a lot of people.

You have in these particular industries very effective regulators if you tell them which way to go. I agree you have to tell them which way to go, but it's a lot more effective than putting it with the Competition Bureau, in my view, sir.

Mr. Roger Gallaway: Thank you.

The Chair: Thank you, Mr. Gallaway.

Just to clarify, Mr. Franklyn referred to amendments as of last Thursday or Friday. There were amendments tabled at the beginning of this process, about four weeks ago. There were changes to those amendments that were presented last Thursday or Friday. They are changes that don't affect in fact the cultural industry. They affect the express consent and the ability to use digital electronic means.

Mr. Brien.

[Translation]

Mr. Pierre Brien (Témiscamingue, BQ): First, I have a comment for Mr. Gallaway. Videotron will not go ahead without the consent of the Consumer Protection Bureau. Should the recommendation be negative, there would be no negative billing. Therefore, the provincial mechanisms in place can also prevent the implementation of negative billing.

I want to ask Mr. Grover if, among the amendments before us, he looked at the one dealing with the exemption power of the Minister of Canadian Heritage regarding the distribution of television channels.

[English]

Mr. Warren Grover: As I understand it, Mr. Brien, the heritage minister can ask for a regulation to go through the Governor in Council that would put in an exemption. This is a perfect example, sir, of something the Competition Act has never seen. This is not the type of thing you put in a Competition Act. The heritage minister has nothing to do with the Competition Act. She's very important to the Broadcasting Act of this country. I'm not in any way denying that.

But the heritage minister is not the person looking at competition law. The Minister of Industry is, sir. Yes, I'm aware that the exemptions are there. I'm sure she wouldn't be looking at it from a competition law point of view, sir. Therefore, from my perspective, it's exactly what proves the point I'm trying to make. What on earth has the heritage minister got to do with the Competition Act? But she has everything in the world to do with broadcasting, and getting Canadian content.

[Translation]

Mr. Pierre Brien: It could be estimated that it would be necessary to maintain negative billing in certain cases. For example, it might be considered, for cultural reasons, to be better to group together television channels and to resort to negative billing. This would be a desirable thing from a social point of view. So, if I am not mistaken, you are saying that we could specifically include this in the act and that it could be administered by the CRTC and not governed by the provisions of the Competition Act.

[English]

Mr. Warren Grover: Exactly. Yes, sir. That's exactly what I'm saying, sir, that it just doesn't make sense to pretend in the Competition Act that you bring in this concept. It's the wrong place.

[Translation]

Mr. Pierre Brien: I have one last question for you.

There are currently provincial laws that protect consumers. In Quebec, for example, we have the Consumer Protection Act. The federal government does not have jurisdiction over this area. Do you think that federally chartered companies are required to comply with provincial laws, or can they just do it on a voluntary basis?

[English]

Mr. Warren Grover: My understanding again, and I'm not trying to pretend I'm a constitutional scholar, is that if it is valid federal legislation it would apply to federal companies, and that's what you have here. Provincial legislation may also apply to federal companies, and indeed the Province of Quebec has regulated or worked with institutions such as broadcasting institutions in an area I'm a little bit more familiar with. In the film industry, for example, sir, I think the French-language film industry is way ahead of the English-language industry, if I can be permitted to say that. So something is happening in Quebec to do that. Je ne sais pas quoi.

• 1805

The Chair: Thank you, Mr. Brien.

Mr. Lastewka, please.

Mr. Walt Lastewka: Most of my questions have been asked, but I had one for clarification. Mr. Grover, you're the chair of the national competition law section of the Canadian Bar Association. So are you representing only that section or the Canadian Bar Association?

Mr. Warren Grover: I'm only representing that section, sir.

Mr. Walt Lastewka: Sometimes we get confused a bit, when you only represent a section, as to what's the viewpoint of the Canadian Bar Association.

Mr. Warren Grover: In this particular case, sir, what you're talking about are amendments to the Competition Act. It's the national competition law section that looks at the Competition Act. There are no provincial competition law sections of which I'm aware. So there only is my section that looks at the Competition Act. And what we're worried about, sir, is the effective enforcement of the Competition Act.

Mr. Walt Lastewka: I think you made a very valid point when you said “efficient and effective” by putting something on negative-option billing in those specific acts. Then those specific acts are governed by other people specific to that industry.

Mr. Warren Grover: Thank you, sir.

Ms. Tamra Thomson: If I can add to Mr. Grover's answer on your question about who is represented here today, when the Canadian Bar Association puts forward a position we go to our experts, and on this matter our experts are the members of the competition law section. But the letter you see before you, although it has been prepared by the section, has gone through a very rigorous approval process that includes review by our national legislation and law reform committee as well as review by our executive officers, all of whom speak on behalf of the Canadian Bar Association. So although it was a statement on behalf of the national competition law section, it has also had that review on behalf of CBA.

Mr. Walt Lastewka: At one time when there was a review of the Broadcasting Act and there was some discussion of putting in a section on negative-option billing, did the law association oppose it at that time?

Mr. Warren Grover: Sir, I've never been part of the broadcast part of the CBA; I've only been part of the competition law section, so I cannot answer your question. I apologize.

Mr. Walt Lastewka: Thank you.

The Chair: Lastly, Mr. Pickard please.

Mr. Jerry Pickard: I have a simple question. I think your presentation was quite precise and I think it offers up a lot of thought. When you mention that banks don't really need to have anyone too worried about their ability to compete in society, I'm assuming that this was a step beyond the statement stating that other financial institutions aren't all that important to this process when we focus on banks. All I want to know from you is this: Other financial institutions are going to have what the banks suggest is an unfair advantage. Is that of major concern in your mind? Is it something that needs to be dealt with?

Mr. Warren Grover: Sir, you're asking me a very difficult question. In the financial services industry, the banks are still in a very preferred position with respect to the window at the Bank of Canada, etc. It has been coming down. I'm aware that the banks have more competition. But we have seen the banks take over most of the investment dealers, sir. The trust companies don't appear to me to be stronger than they were 20 years ago. The banks are doing well, and I'm not saying they shouldn't. They're good institutions. We're all proud of our financial institutions. I'm just saying that while I agree with my friend that level playing fields are the best thing you can have, I don't see the banks as being at a severe disadvantage compared to other institutions at this moment. In common parlance, I think the banks are wonderful and I think they should be powerful institutions, but they are.

• 1810

Mr. Jerry Pickard: Am I wrong to ask you to speculate beyond this moment into the future 10 years? Do you see any potential problems arising?

Mr. Warren Grover: Sure. If we get into real competition—there have been suggestions that a lot of the financial sector be opened—then you're going to want to probably put your negative-option rules into all those institutions that are directly competitive with your banks. If you were to bring the major banks of this world into the Canadian system, they could do exactly the same thing the schedule I banks or schedule—and I forget what they're called now—can do. Then sure you need to have them under the same aegis.

Mr. Jerry Pickard: Should that be dealt with at this present time or is that something that...? Your quick viewpoint, I think, is important for me at this point.

Mr. Warren Grover: To my way of thinking, sir, you've worked this bill a lot. You now have it refined, if you like, and you've decided, for reasons that I wasn't here to understand, to take out the loan and trust companies and the insurance companies. I assume you had good reasons for that, sir, and I don't want to go back on all your amendments and say, I wasn't here for them, I don't know why they're there.

Mr. Jerry Pickard: Thank you very much, Mr. Grover. Thank you, Madam Chairman.

The Chair: On a point on clarification, the amendments have not been passed yet. The amendments are here for discussion. We did invite those other groups to appear, but they decided, because the amendments didn't include them any more, that they didn't have to appear. That is very presumptuous. They're assuming those amendments will be passed.

That being said, I have two points of clarification.

You said, Mr. Grover, that it would be better off in different types of legislation. Just to clarify, do you mean in the act itself, or do you mean in the regulation? Or, in your opinion, does it make a difference in the different acts, whether it be the Bank Act or the Broadcasting Act, in the act itself or by regulatory means?

Mr. Warren Grover: Madam Chairman, to me, it's always stronger to put it in the act itself. I know the regulations are part of the law, but they can be changed by Order in Council. They don't go through Parliament. It's always stronger to put something in the act. People pay a lot more attention to it, I think.

The Chair: That is what I was looking for clarification on. I appreciate that.

I think both you, Mr. Grover, and Mr. Franklyn spoke about the fact that the notice requirement makes it anti-competitive because everyone knows what you're doing. I understand the Bank Act right now. There is a 60-day notice requirement. So I don't understand the logic behind that statement, so I'm not sure....

Mr. Warren Grover: All I was saying, Madam Chairman, for myself, anyway, is that if you were really talking about highly competitive industries—and I go back to the statement—usually you want to allow fast price changes. I agree they're slow in the bank. And in all tariff-setting industries the change is gradual and slow, and it's not like a competitive industry, Madam Chair.

The Chair: Okay.

Mr. Franklyn.

Mr. Peter Franklyn: Yes, I recognize that the Bank Act has notice provisions. I'm not sure they're as broad as perhaps this legislation would be, in effect. But the point I was making was simply that in circumstances where you have to give the world and your competitors notice of what you're doing and those competitors themselves may not be subject to that same requirement, that puts them, by definition, at a competitive advantage because if they have early warning of what you're planning to do they can go ahead and implement immediately without having to give notice.

The Chair: You should be aware that for the banking industry.... In particular, Mr. McVay, who appeared with the Canadian Bankers Association, talked about the website you can access through Industry Canada that shows all the different banking fees, services, and options. It's all pretty much posted there. So again, it goes back to what is competition and the competitive nature of it.

• 1815

Mr. Peter Franklyn: Right. I'm aware of that and I think that's a valid point.

There are examples, though, in the credit card business, for example, and in some of the lending areas. I think there are institutions in those businesses that compete with the banks that wouldn't be posted on those sites.

The Chair: That's true.

I want to thank you both for being here this afternoon. We do appreciate your patience with our voting and we do appreciate your taking the time.

We are going to voting again very shortly, so we are now going to adjourn the meeting.

Thank you very much. The meeting is now adjourned.