[Translation]
Your committee will be undertaking a study on e-commerce in Canada. I would like to take this opportunity to provide your members with Industry Canada's perspective on e-commerce and related issues.
First, I will briefly explain e-commerce and where Canada ranks in relation to other countries.
Second, I will give you an overview of the main activities underway at Industry Canada to stimulate e-commerce, that are a part of the digital economy strategy.
[English]
The OECD's internationally accepted definition of e-commerce states that
An e-commerce transaction is the sale or purchase of goods or services, conducted over computer networks by methods specifically designed for the purpose of receiving or placing of orders. The goods or services are ordered by those methods, but the payment and the ultimate delivery of the goods or services do not have to be conducted online. An e-commerce transaction can be between enterprises, households, individuals, governments, and other public or private organisations.
While this definition is useful for guiding international comparisons and data collection efforts, from a more practical perspective, payments, online banking, and bill payments are often considered key elements of electronic commerce.
[Translation]
In this definition, one thing is clear: the first prerequisite for e-commerce is that it must be online. More and more Canadians are online.
According to the CRTC's Communications Monitoring Report 2011, 96% of Canadian households currently have access to broadband services at a speed of at least 1.5 megabytes per second. It is estimated that that percentage will reach 98% by 2012.
A transmission speed of 1.5 megabytes per second encourages e-commerce by increasing the number of households able to buy and sell goods and services online.
[English]
In 2010, 70% of Canadian households subscribed to broadband Internet services. Statistics Canada's 2009 Canadian Internet use survey found that nearly 22 million Canadians, or 80% of people over 16 years of age, used the Internet for personal reasons--from home, the office, or some other setting.
Once online, Canadians used the Internet for a variety of activities, such as electronic banking and bill payment, searching for information, and communicating with Canadian municipal, provincial, and federal governments. They undertake education and training online, and also access information on weather, travel, health, and investments.
Canadians are also increasingly purchasing online. About 39% of Internet users indicated they engaged in e-commerce in 2009, and the total value of these online purchases was $15 billion. To give you a sense of the magnitude, total retail sales by Canadian firms were $415 billion in that year.
From the perspective of Canadian firms selling online, total online sales, both retail and commercial, were almost $63 billion in 2007--and this unfortunately is the last year in which data was collected. Of these sales, 59% were commercial, business-to-business transactions. The remaining 41%, or $25.5 billion, were retail sales, business-to-consumer transactions. And despite the relatively large value of online sales, only 8% of firms reported selling online in 2007.
[Translation]
The difficulty of encouraging more Canadian businesses to make the transition to e-commerce and the low overall take-up rate of digital technologies by Canadian businesses are closely linked. Investment per worker by Canadian businesses in information and communications technologies is 60% of investment per worker by American businesses.
Digital technologies play an important role by supporting innovation and productivity. Digital technologies greatly contribute to online transaction processing, electronic funds transfers, supply chain management, computerized data exchanges and automatic data collection.
Increasing the take-up rate of all digital technologies—not only those that support e-commerce—is critically important to ensure the vitality and competitiveness of the economy.
[English]
Last fall articulated the government's vision for a digital economy in his interim report. This is a quote:
By 2020, the Harper government sees a Canada that boasts a globally competitive digital economy, characterized by innovation, enhanced productivity, and enduring prosperity—a nation where businesses, communities and individuals have the skills they need to use digital technologies to their advantage and where a globally competitive ICT sector supplies more markets with more innovative products and more new services.
For greater adoption of digital technologies or for e-commerce to be successful, the legal framework governing it must be clear. Industry and consumers alike must understand what is expected of them and what the rules of engagement are. For consumers to engage in the online marketplace, they need to be confident that it is a safe place to shop, that consumer protections are in place, and that personal information is secure.
confirmed in his speech this May to the 2011 Canadian Telecom Summit that the government is committed to ensuring there is a robust legal framework to increase confidence in and security of online transactions.
Canada's anti-spam law received royal assent in 2010 and is expected to come into force in early 2012. This law will protect Canadian businesses and consumers from the most damaging and deceptive forms of online threats and will deter spammers from operating in Canada. The anti-spam regulations were published last July, and the official consultation period ended on September 7. The department is currently analyzing the input received.
[Translation]
Bill the Copyright Modernization Act, was tabled in Parliament last week. The phenomenal popularity of social media and new technologies, such as tablet computers, mobile devices and e-readers, has dramatically changed the way Canadians create and use copyrighted materials.
Copyright modernization allows creators and rights holders to have the tools they need to protect their work and ensure the growth of their companies, especially as Canadians consume and buy more copyrighted material online.
Furthermore, amendments will be made to the Personal Information Protection and Electronic Documents Act under Bill , also tabled last week. One of the main amendments relates to the notification requirement for data breaches. It is an important tool for increasing the security of online markets.
A second prerequisite for e-commerce is access to high speed networks, that is an affordable connection. In order to participate in e-commerce, you have to be connected to the Internet. Therefore, it is clearly in the government's interest to ensure that consumers have enough choice in accessing different affordable Internet services.
In recent years, thanks to government measures to increase competition in the wireless market, Canadian consumers have seen new companies enter the market and have benefited from lower prices and a greater selection of packages.
[English]
Increasingly, wireless networks are offering high-speed Internet access and the benefits of a mobile economy. To help meet the increasing demand of Canadian businesses and consumers for access to mobile broadband, Minister Paradis has confirmed that the government will be auctioning off the 700 megahertz spectrum and the 2,500 megahertz spectrum.
The third prerequisite is to increase private sector adoption of digital technologies. Targeted efforts are needed to raise the awareness of businesses, particularly small and medium-sized businesses, of the benefits of adoption. Industry Canada's small-business internship program provides small and medium-sized enterprises with financial support to hire a post-secondary student intern to assist them in their adoption of e-commerce strategies.
The government has taken two additional steps to promote awareness and adoption. In the spring of 2011, the Business Development Bank of Canada announced an array of new efforts to support ICT adoption among small and medium-sized enterprises. The BDC helps firms with web strategies, sales, customer management, and choosing the technologies best suited to the firms' needs.
Budget 2011 also announced the creation of an $80-million pilot project over three years involving the NRC's industrial research assistance program and Canadian colleges, to promote the take-up of advanced digital technologies among small businesses. More details on the pilot will be available once it has been formally launched.
[Translation]
The growth of e-commerce also requires a workforce with the requisite digital skills. In budget 2011, Human Resources and Skills Development Canada will reallocate $60 million over three years to encourage an increase in the number of students enrolled in key disciplines linked to the digital economy.
Citizenship and Immigration Canada also plays a major role by attracting to Canada foreign workers who have the skills to ensure that digital economy and e-commerce thrive, and by encouraging them to stay in the country.
Granting councils have also played a big role over the years by creating research chairs and by financing centres of excellence to face the brand new issues and opportunities.
Promoting the acquisition of digital skills is a responsibility we share with the provinces and industry, which play a leading role. That is why Industry Canada continues to work closely with all of its partners.
[English]
Thank you very much for this opportunity to come before you today. I and my colleagues would be happy to take questions at your leisure.
:
Good afternoon, Mr. Chairman and members of the committee. On behalf of the bureau, I am pleased to be here today to take part in this study.
As the chairman mentioned, I am deputy commissioner of the Competition Bureau's fair business practices branch, one of four deputy commissioners at the bureau charged with enforcing the Competition Act. I would like to give you an overview of the bureau's mandate and responsibilities, and outline how they relate to the topic you're studying today.
As colleagues of mine from the bureau appeared before the committee in June as part of your study of gas prices, I will be brief but would, of course, be pleased to answer any questions the committee may have afterwards.
The Competition Bureau is an independent law enforcement agency headed by the Commissioner of Competition that enforces the Competition Act and three labelling statutes. Our goal is to ensure that Canadian businesses and consumers prosper in a competitive and innovative marketplace. We deliver on our mandate by taking consistent, targeted enforcement action to ensure that we have the largest impact possible to promote competition, innovation, and productivity in the Canadian economy.
The Competition Act applies, with very limited exceptions, to all sectors of the Canadian economy, and sets out criminal and civil penalties for a variety of specific anti-competitive practices. These include engaging in misleading advertising and deceptive marketing activities; entering into agreements with competitors to fix prices, allocate markets, or restrict output; and abusing a dominant market position. We are also responsible for reviewing proposed mergers to determine whether they will likely cause substantial harm to competition.
As many of the members of this committee will recall, in 2009 Parliament passed the most significant amendments to the Competition Act in 25 years. Among other things, these amendments increased the penalties for deceptive marketing practices and empowered the courts to award restitution to consumers who purchased a product as a result of false or misleading representations. What's more, we now have the power to recommend a freeze on company assets to ensure that restitution for consumers is available in the future.
Consumers need accurate information to make informed choices, and our recent enforcement actions demonstrate our commitment to enforcing the act in this area. For example, in June we announced that Bell Canada had agreed to stop making what the bureau had concluded were misleading representations about the prices offered for its home phone, Internet, satellite TV, and wireless services. We found that the advertised prices were not in fact available, as additional mandatory fees were hidden from consumers in fine-print disclaimers. Bell was also required to pay an administrative monetary penalty of $10 million, the maximum amount allowed under the Competition Act.
[Translation]
In addition, we have recently sought refunds for consumers misled by false and misleading representations in two cases in particular—one in our case against Rogers regarding inaccurate claims of "fewer dropped calls'' than new wireless entrants; the other in our consent agreement with the maker of Nivea creams.
In addition to the 2009 amendments, in December 2010, Parliament passed Canada's first anti-spam law, as Ms. McDonald mentioned. Along with increased powers for the CRTC and the Office of the Privacy Commissioner, this new law will enable the bureau to more effectively address false or misleading representations and deceptive marketing practices in the electronic marketplace, ultimately promoting greater truth in online advertising for the benefit of consumers, legitimate businesses and the economy overall.
As a result of these changes, the bureau is now better placed to protect Canadian consumers and businesses from the harm caused by anti-competitive activity, particularly in the challenging e-commerce area where tools and technical powers must keep pace with rapidly changing technology.
[English]
To turn to the committee's study, the online world is increasingly complex as businesses and consumers take advantage of innovative technologies to work, shop, and socialize.
Whether in the traditional or online marketplace, the bureau's priority is to get high-impact results for Canadian consumers and businesses through consistent, targeted enforcement action. In so doing, we not only punish violators, but more importantly, send a message of deterrence to those considering harmful anti-competitive activity, thus increasing consumer confidence.
As online activity crosses national borders, we coordinate with our counterparts in other countries to amplify the reach of our enforcement action in the extremely challenging frontier of e-commerce. We participate in coordinated Internet sweeps to search for sites that may potentially be deceiving or defrauding consumers. These sweeps are designed to improve consumer confidence in e-commerce by demonstrating that a vigorous and effective global law enforcement presence exists online.
In addition, we co-chair the Fraud Prevention Forum, a group of over 100 private sector firms, consumer groups, government agencies, and law enforcement organizations, all of whom are concerned with fighting fraud aimed at consumers and businesses through awareness, education, and promoting reporting so as to facilitate enforcement.
To conclude, in the world of e-commerce, just as with traditional commerce, our role is to detect and take principled action against anti-competitive behaviour that violates any of the provisions of the Competition Act, with a view to cracking down and deterring would-be offenders.
The responsible enforcement of the act is the most effective way for the bureau to have a positive impact in the online economy for both consumers and businesses.
My colleague Matt Kellison and I look forward to your questions.
Thank you.
:
As I was saying before about our work on the Internet, online, we have to be where consumers and businesses are, so we've had to develop the capacity. When we, for example, execute a search to seize terabytes of data, we often seize mobile devices and have to examine the data that's on them.
Also, the characteristics of smartphones that make them so appealing as a payment system.... And by the way, that is, as you mentioned, on the rise. Many smartphones are now equipped with something called near-field communications. This simply allows people to either swipe or tap at a payment terminal and they can pay using their phone. There are 25 million mobile phone users in Canada, and the global estimate for mobile advertising revenue is expected to be $14 billion this year. It's on the rise. So it's not only financial companies but marketers who are very interested in mobile phones for one key reason: it also contains a lot of information about the consumer and also often has a geospacial device that tells marketers precisely where consumers are physically.
It's a wonderful marketing tool, if you will. You can be quite precise, if that's what consumers are interested in. There are applications like geo-fencing, where a virtual fence is set up around a certain retailer, for example, and when a consumer walks by it, they can be targeted with ads from the retailer outlets in that area. Or there is augmented reality, which works in a similar way. If you hold up your phone and look at a visual area, it can add ads on top of, for example, Parliament Hill, saying “Starbucks is nearby”.
We are very interested in this space, as are our counterparts around the world, simply because--to the point that another member made earlier--it becomes increasingly challenging for consumers to negotiate and transact on a device that is quite small, where many of the conditions of a contract are hidden in fine print disclaimers that require several screens to navigate through. It isn't impossible to make it a fair playing field, but we need to adapt with it, as do businesses, so that it is a fair playing field.
Mr. :
I think that's absolutely right, and I think your point is well made.
What our credit cards case focuses on is rules that are raising merchant acceptance fees of credit cards and making it more costly for merchants to accept credit cards. For most merchants, accepting credit cards is a necessity. And particularly for small and medium businesses, that can be a huge cost. One of the things we're hoping to do is challenge these rules and somehow mitigate the fees that merchants pay, which in a lot of instances they really have no choice but to pass on to consumers.
In answer to your question on whether mobile payments would fill the gap a bit, I think that is possible. I think there are a variety of payment methods that are competing in one form or another, whether it be cash, cheque, debit or credit cards.
As you observed, in many cases merchants pay significantly lower fees for accepting debit card transactions than for accepting credit cards. A credit card fee for a merchant may be up to 3% of the total purchase price, whereas for debit in this country, it's usually fixed at about 12¢, regardless of the size of the purchase. However, in many cases consumers aren't aware of that, and consumers aren't aware that merchants may be paying higher fees.
Because of the rules imposed by Visa and MasterCard, in our view, merchants really don't have the ability to steer consumers to different types of payments. We suspect that if they had that ability, not only might it make merchant fees that are set by the credit card companies more competitive, it might also make these other methods of payment more of an option for consumers.