CHER Committee Meeting

STANDING COMMITTEE ON CANADIAN HERITAGE

COMITÉ PERMANENT DU PATRIMOINE CANADIEN

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, November 3, 1998

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[English]

The Chairman (Mr. Clifford Lincoln (Lac-Saint-Louis, Lib.)): I'd like to call to order the meeting of

[Translation]

the Standing Committee on Canadian Heritage, which is meeting today in accordance with subsection 108(2) of the Standing Orders.

[English]

This is a technical briefing session on Bill C-55,

[Translation]

an Act respecting advertising services supplied by foreign periodical publishers. This is a technical briefing session on Bill C-55.

[English]

I would like to make clear to the members of the committee that the second reading of the bill has not been voted as yet. But the committee, by unanimous consent at the last meeting, agreed to hear a technical briefing by the officials today. So this is in order under Standing Order 108(2).

I'm pleased to introduce Mr. Michael Wernick,

[Translation]

Assistant Deputy Minister, Cultural Development; Mr. Allan Clarke, Publishing Policy and Programs Director;

[English]

and Mr. Jeff Richstone, whom a lot of us have met several times here,

[Translation]

the Attorney for the Justice Department

[English]

who is involved with this bill.

I wonder how the members would like to proceed. Would you like Mr. Wernick to just give us a general comment on the bill maybe, and then open it up to the questions of the members?

Mr. Michael Wernick (Assistant Deputy Minister, Cultural Development, Department of Canadian Heritage): Mr. Chairman, obviously we're in your hands; whatever makes sense to you. What I propose is that I make a very brief opening statement.

The Chairman: Yes, that's what I thought.

Mr. Michael Wernick: And I promise it will be brief. Then there are two ways we might go. One would be simply to go around and take your questions and try to deal with them.

The Chairman: Yes.

Mr. Michael Wernick: Alternatively—and we've found it quite effective—I could invite my colleagues to just march through the clauses of the bill, since there are only 21 of them, in a once-over-lightly sort of pass. That might actually assist the committee in seeing how it's put together.

The Chairman: Why don't you start off and then we'll go from there?

Mr. Michael Wernick: Okay.

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[Translation]

Thank you, Mr. Chairman, for your invitation. We last appeared before this Committee a year ago.

[English]

I've been following your study of Canada's cultural policy with great interest. It's a very important piece of work, and I'm sure you're anxious to get back to it. It's a pleasure to be here today to help the committee on this piece of legislation.

I promised members I'd be very brief. I'll just take a couple of minutes. I know you're familiar with the bill from second reading, so I'd like just to make a few statements and then we can proceed.

As you've learned during your cultural policy study, for many years Canada has maintained a variety of policy measures designed to provide Canadians with vehicles for their cultural expression. The measures generally try to balance the need to maintain a place for access to Canadian stories in our own marketplace while at the same time welcoming the best of foreign cultural products.

We're here today to provide a briefing to and answer questions from the committee on the newest instrument, a brand-new instrument in our cultural policy tool kit, which is Bill C-55, the Foreign Publishers Advertising Services Act. Bill C-55, as you know, is designed to prohibit foreign periodical publishers from supplying advertising services aimed primarily at the Canadian market to Canadian advertisers.

Revenues from the sale of advertising services are crucial to the ability of Canadian publishers to produce original content for the Canadian market. Advertising services account for over 60% of their total revenues, and it's the relationship between content and advertising revenues that is the heart of this measure. Foreign publishers, by entry into the Canadian advertising market, would redirect significant revenues from the sale of advertising services away from the production of Canadian content periodicals.

However, I'd like to be clear about a number of issues related to this instrument. It is not a tax. It is not a subsidy. It is not a content quota.

Bill C-55 will not affect the importation of foreign magazines into Canada. Canada will remain one of the most open magazine markets in the world, and foreign editions of magazines will continue to have unimpeded access to the Canadian market and Canadian readers.

Bill C-55 does not affect the content of magazines. All publishers will continue to produce whatever editorial content they consider attractive to readers, without interference from government.

Bill C-55 will not limit consumers' choices. Canadians will continue to have unimpeded access to Canadian magazines and to foreign magazines.

Bill C-55 will not affect the price of magazines. Canadians will continue to purchase both Canadian and foreign magazines at very competitive prices.

Bill C-55 only affects foreign publishers' ability to sell advertising services. This new measure will ensure that only Canadian publishers will be able to sell advertising services aimed primarily at the Canadian market. Bill C-55 will limit the sale of advertising services directed primarily at this Canadian market to Canadian publishers, and it will only apply to the transaction of selling advertising services. In so doing, Bill C-55 will ensure that Canadian publishers continue to have access to the advertising revenues in the Canadian market. These revenues are critical to the production of original Canadian stories.

The details of the measure are fairly straightforward. I'll just move quickly through them. Subclause 3(1) is the key, the operative part, of the bill. It's the prohibition that no foreign publisher shall supply advertising services directed primarily at the Canadian market to a Canadian advertiser or a person acting on their behalf. Therefore, only Canadian publishers will be permitted to sell advertising services directed primarily at the Canadian market.

The rest of the bill is essentially a set of definitions and enforcement provisions to make the bill operative. Tacked on at the end are a regulation-making authority and a grandfathering provision. That's the architecture of the bill.

Foreign publishers will be determined on the basis of nationality of ownership. The definition of “Canadian” used in this bill is based on the definition already used in the Income Tax Act, section 19. Canadian advertisers will be entities in Canada that pay, directly or indirectly, for advertising services related to their products and services. This will include agents or representatives operating at arm's length from a Canadian advertiser. “Advertising services directed at the Canadian market” will mean that the target market related to those services consists primarily of Canadian consumers.

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The administrative provisions of the legislation are intended to be sufficient to enforce the measure. They include both civil and criminal procedures. Offending publishers, should there be any, would be required to stop supplying advertising services. Monetary penalties are provided for in the event that publishers do not respect the law. Foreign commercial operations currently in the Canadian market will not be affected.

In order to administer the legislation, the bill incorporates standard investigative powers and procedures. The procedures are similar to those in many other federal statutes that regulate business.

Under the proposed legislation, the designated minister may initiate an investigation, and the legislation provides both civil and criminal remedies. The minister may, for example, require the foreign publisher to stop supplying advertising services. The minister may recommend civil or criminal proceedings to be undertaken by the Attorney General. The civil proceeding would be an application for an injunction; the criminal prosecution could be a summary proceeding or by way of indictment. And the monetary penalties contained in the bill are consistent with the penalties in other federal statutes of similar regulatory intent, such as the Competition Act, the Broadcasting Act, and the tobacco legislation.

In order to carry out the investigations, the minister is given the ability to employ investigators. These investigators will be required to obtain warrants from a justice of the peace; these warrants should only be obtained upon showing reasonable and probable grounds that there's evidence relevant to an offence. This type of provision is in conformity with the Canadian Charter of Rights and Freedoms.

Investigators would be required to make an application upon oath, they may be cross-examined on their statements, and decisions of the justice of the peace are subject to strict and careful review by the courts. Once again, these are very similar procedures to those found in many other federal statutes.

The measure is necessary if we desire to maintain a Canadian magazine publishing industry. Its intent is to permit Canada to maintain a critical balance between our trade obligations and our cultural objectives.

We'd be very pleased to assist the committee in its deliberations. Merci.

So Mr. Chairman, if you wish, I don't think it would take much time to simply work through the clauses.

The Chairman: Would the members like to be walked through the bill clause by clause?

Some hon. members: Yes.

Mr. Michael Wernick: I think the most efficient way would be to let Mr. Clarke and Mr. Richstone move through it. They've done these briefings a few times.

The Chairman: Sure, yes.

Mr. Michael Wernick: We'll just go over it lightly, and then I'm sure you'll have questions afterwards.

Allan, I believe you wanted to start.

Mr. Allan Clarke (Director, Publishing Policy and Programs, Department of Canadian Heritage): Thank you.

There are basically four different parts to the bill: the definitions, the prohibition itself, clauses relating to the enforcement and procedures of the bill, and provisions relating to grandfathering and regulation-making power.

We can go through the definitions in the interpretation part.

Most of these definitions are pretty straightforward. “Advertising services” relates to the supply by a foreign publisher, for payment, of certain services related to advertising, advertising space, placement services, and access to a target market of consumers.

We can also take questions as we go through, if some clarification is required in this.

The Chairman: Yes, by all means. Just go ahead.

Mr. Allan Clarke: “Canadian” is rather straightforward. It's consistent with definitions found in many other pieces of legislation. The level of Canadian ownership for the purpose of this legislation is 75%, and as Mr. Wernick said, that's consistent with the definition of “Canadian” in section 19 of the Income Tax Act.

“Canadian advertiser” is the person or entity that pays directly or indirectly for the advertising services, and of course they have to have a place of business in Canada, employees in Canada, and assets in Canada. That's pretty well consistent with the definition of “place of business” under the Investment Canada Act.

And the definition of “Canadian corporation” helps us define in more detail the definition of “Canadian”.

“Directed at the Canadian market, in relation to advertising services” means that the target market related to the advertising services consists primarily of Canadian consumers.

Foreign publishers are non-Canadians, basically.

“Minister”, for the purposes of administering the act, will be the minister appointed by the Governor in Council.

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“Periodical” means printed material. It's defined to include what we would consider mainly magazines, in terms of the frequency. It doesn't include things such as catalogues, directories, newsletters, or newspapers.

The definition of “voting share” helps us define the level of Canadian ownership in a company.

Subclause 3(1) once again is the prohibition itself, and it's fairly straightforward:

No foreign publisher shall supply advertising services directed at the Canadian market to a Canadian advertiser or a person acting on their behalf.

The other subclauses of clause 3 are basic anti-avoidance measures and definitions that help us apply the prohibition.

A publisher would be deemed foreign under subclause 3(2) if they were producing a periodical under licence from a foreign publisher.

We also included in subclause 3(3) a “control in fact” test, to ensure that decisions being made by publishers are in fact being made by Canadians. That's consistent with measures found in the Investment Canada Act and the Income Tax Act as well.

We've included definitions for non-Canadian partnerships and non-profit organizations. The rest are arm's-length provisions, just to make sure we have the proper definition of foreign publishers and advertisers.

The Chairman: Mr. Richstone, do you want to add something?

Mr. Jeff Richstone (Lawyer, Department of Justice): I was going to go along to the enforcement machinery of the act, if you wish, Mr. Chair.

The Chairman: Would members like to question the first witness on the work so far, or do you want to wait until the end?

Some hon. members: We'll wait.

The Chairman: Okay.

Mr. Richstone.

Mr. Jeff Richstone: I'll begin with clause 4, which deals with the investigations.

The power of the minister here, which is any minister appointed by the Governor in Council, is to cause an investigation. They can appoint an investigator. It can be an investigator from within the public service or any person outside the public service, as the minister sees fit, who is competent to handle the investigation.

The investigating powers are fairly reduced. One major power is set out in clause 5; it provides for a search and seizure mechanism. It would be seeking a warrant from a justice of the peace. Again, this is a common kind of provision you'll find in many federal regulatory legislations. You'll also find in many provincial legislations that the investigators or inspectors charged with enforcing the machinery of the bill seek a warrant authorization from a justice to do a search and seizure of certain premises. That's set out in clause 5.

Clause 6 is to ensure that there is no obstruction during the course of an investigation.

From clauses 7 through to 19, we get into the judicial enforcement machinery. It starts off with a ministerial

[Translation]

ministerial demand. A demand is a mechanism used in certain federal acts, especially the Investment Canada Act. It gives foreign publishers an opportunity to provide an explanation in order to determine whether there has been a contravention. It lets them express another point of view.

Section 8 talks about the injunction procedure. It is the only civil recourse. It is a fairly effective mechanism which gives a Canadian civil court an opportunity to stop any contravention of the Act.

One might describe section 8 as a complete code concerning injunctions. It talks about the application and the petition, the court order, the court order in urgency situations and an appeal mechanism.

Section 9 talks about a controversial question, namely whether you can bring an application at the civil level when proceedings have already been started at the criminal level.

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[English]

Clauses 10 and forward deal with the criminal enforcement procedure. Clause 10 sets out the offence and the level of fines, and I would point out to the committee that the level of fines here is commensurate with federal legislation in similar fields, such as the Competition Act, the Broadcasting Act, and the tobacco legislation. In terms of advertising, the level of fines is commensurate with those.

Clauses 11 and 12 deal with offences of a corporation. You have to account for the fact that a corporation acts through its officers and employees. This is the kind of machinery that we often find in federal regulatory statutes to deal with that kind of situation, where the accused is not a physical person—

[Translation]

it's a legal person

[English]

—and you have to deal with that situation.

Clause 13 is a provision to give the court discretion. In a particularly egregious case or in a case where the court believes that the level of fines set out in clause 10 is not sufficient or there are certain profits to be made, the court can, in the interest of justice, impose an additional fine.

And clause 14 is designed to give the court on the criminal side the kind of jurisdiction it would have on the civil side to stop future contraventions.

[Translation]

Section 15 talks about presumption. It contains a series of provisions in cases where the accused is outside Canada. It gives jurisdiction to the court at both the level of the offence and the level of the person. Subsection 15(3) sets forth exceptions in the Criminal Code in cases where the accused is not present. Once again, these are customary provisions found in these kinds of cases.

Section 16 concerns summary convictions. Normally, in the Criminal Code, the limitation period is six months. A longer period is given because, in cases of offences involving the operation of business, it provides enough time to terminate an investigation.

[English]

You have in clause 17 a mechanism to ensure that if a fine is imposed by a criminal court, you can execute it efficiently through the civil process mechanisms of the civil courts, because that's where, normally, such execution can be most speedily and efficiently had.

Turning to clauses 18 and 19, they deal with evidence in proceedings. It's often difficult in evidence to obtain certain originals of documents or copies. These clauses ease the burden of proof for the Crown, for the Attorney General, when the Attorney General is proceeding. I should point out that it's the Attorney General of Canada who will be proceeding in these cases, in all cases of civil or criminal prosecution. These clauses enable certain evidence to be tendered without going through very difficult or complicated evidentiary rules.

Again, we see these kinds of provisions in many federal regulatory statutes. They serve to render less complicated the often burdensome rules of civil or criminal procedure and evidence.

Finally, we have the last two clauses, which Mr. Clarke will handle.

Mr. Allan Clarke: Clause 20 provides for the possibility of the Governor in Council making regulations to help administer the act with regard to investigations and how investigations are conducted, as well as the possibility, if required, to introduce regulations to help define advertising services that are directed at the Canadian market.

Clause 21 is an exception clause. Again, as Mr. Wernick mentioned in his opening statement, the intention of this clause is to ensure that operations currently operating in the Canadian market will continue to operate in the Canadian market.

The Chairman: Thank you very much, Mr. Clarke.

Before we proceed to questions, I'd like to remind members

[Translation]

they received a document prepared by the Department, which sets out the sections and gives you explanations for a section-by-section examination.

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We will start the question period. Go ahead.

Mr. Benoît Sauvageau (Repentigny, BQ): Thank you and welcome to the officials here today. Thank you for your presentation and testimony.

Although I am not an expert on Bill C-55, I have a few questions. Please correct me if I go astray here.

The current bill is probably the result of the issue associated with Sports Illustrated and other magazines, namely whether the content is cultural and whether the magazine is a product or an item of merchandise. This was the focus of the Bill.

If I understood your testimonies correctly, the purpose was to avoid having the matter brought before the WTO, as was the case with the four forms of protection applied by Canada in order to be more effectively prepared in accordance with the General Agreement on Trade in Services.

So with this Bill, which the Americans have already denounced, I believe, you feel that if there was a reference to a tribunal or a court of appeal on this matter, it would come under the General Agreement on Trade in Services, and we could be cleared of the obligations placed on us by the WTO insofar as free circulation of goods and services is concerned.

Is that the thrust of Bill C-55? As far as I am concerned, it is.

Mr. Michael Wernick: What we have to say is quite simple. It is very clear that Canada did everything it could to comply with the WTO decision last year. Bill C-55 is a new measure.

Mr. Benoît Sauvageau: Bill C-55 can also be challenged by the Americans. According to you, if it is, it will be done in accordance with the General Agreement on Trade in Services, because it will be a service.

Now this is my question. It is based on an article published by Mr. Browne. If we settle a small problem by creating a large problem, in the discussions on the MAI, which will be brought before the WTO, or other multilateral discussions, will we not run the risk of antagonizing our American neighbours in regard to agreements on cultural exemptions when negotiations are held?

I understand that we wish to protect Canadian magazines, but if we are always trying to find a way out, will we not run the risk, in the other negotiating rounds, of setting our American neighbours against negotiations concerning cultural exceptions in the multilateral agreements?

Mr. Michael Wernick: This question lies beyond the boundaries of the bill as such. It has to do with the government's negotiating strategy. It would be better to ask Mr. Marchi. We have rules in place, concerning both NAFTA and the WTO, and we respect those rules.

Mr. Benoît Sauvageau: Nevertheless, they are attempting to circumvent the WTO rules with Bill C-55. That's its purpose.

Mr. Michael Wernick: Not circumvent. We feel that the bill fully meets our international obligations. The burden of proof is on the foreign government. Other foreign governments must provide evidence to the contrary.

Mr. Benoît Sauvageau: I wish to quote something, and I would like to have your opinion on it.

It is unfortunate that senior officials of Canadian Heritage and FAITC were unable to prepare a measure based on Canadian content rather than on Canadian ownership. The measures would then be tied in directly to the cultural content that we are determined to promote and make accessible to Canadians. The proposed measure suggests that foreign magazines will not contain any Canadian stories, but Canadian magazines will.

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And it goes on. That is not my opinion, it is a quotation.

The Chairman: Perhaps you could give the source of the quotation.

Mr. Benoît Sauvageau: As I said, it is Mr. Browne. I'm sorry. It's all in the same text.

The Chairman: It's the same document.

Mr. Benoît Sauvageau: I need to understand. That is why I asked the question.

Mr. Michael Wernick: Perhaps you should ask the Minister. Senior officials do not make that kind of decision. But I will nevertheless try to answer your question.

Mr. Benoît Sauvageau: Thank you.

Mr. Michael Wernick: We purposely chose not to get into questions of content. The government has nothing to do with regulating content in this medium. We made the decision at the outset, before drafting the bill.

There are other options available, but that is the direction we chose. It is not too onerous. It is a structural measure in the advertising services market. We decided to take this avenue.

Mr. Benoît Sauvageau: Agreed.

The Chairman: Is that O.K.?

Mr. Benoît Sauvageau: Yes.

The Chairman: You can return to it later.

Mr. Benoît Sauvageau: O.K.. Thank you.

[English]

The Chairman: Mr. Muise, do you have any questions?

Mr. Mark Muise (West Nova, PC): I have a couple, Mr. Chairman.

First I'd like to thank our guests today. It's always very useful.

Going to the grandfathering, how can the people who are affected by this clause be assured that this won't hinder their ability to...? If, for example, they choose to expand their operation in Canada, how can we assure them that this is not going to be detrimental to them?

Mr. Michael Wernick: There's a good chance you'll be hearing from people in the course of your hearings. All I can say that might be helpful is that the intention was a very clean grandfathering of the operations that were in place before the bill: if you were here before, you can continue afterwards.

If you discover or come to the finding that the drafting isn't as good as it could be, then we'd be very pleased to work with you on clarifying that. We're very clear on the intention, but we have had representations that there's some ambiguity about how it might work. If there is such, we obviously want to clean that up.

Mr. Mark Muise: Okay.

Under the fines clause, you mentioned the option of levying additional fines. Could you go into a bit more detail as to exactly what you were referring to and how much?

Mr. Michael Wernick: As a general statement, I should say the enforcement side of the bill is constructed as a ladder, starting with very soft and moving up to firmer and firmer penalties. There are discretionary steps along the way, so you don't leap immediately to the most severe penalties in the bill. It may be helpful if we provide you with a flowchart of how that process works from the beginning to the end.

The Chairman: That would be really useful. Whatever you can provide that would help the members better understand the thrust of the bill....

Mr. Michael Wernick: We'll get that to you as quickly as possible, because I think there may be some misunderstanding about how it works. People have gravitated, at least in the media, to some of the more severe things, when in fact there's a fair bit of discretion at the beginning. Effectively you can be let off with a warning, and then, if you commit repeated and more serious offences—and Jeff will correct me....

What you asked about is the very last end of the spectrum. If a court found that there had been repeated offences or flagrant offences, there's just that one extra step for a court—not the government, but a court—to fine a higher level of fine to really act as a punishment or a deterrent.

Mr. Mark Muise: It would really be helpful, as you suggested, if we could get something along those lines.

That's okay for now, Mr. Chairman.

The Chairman: Thank you, Mr. Muise.

Mr. Bonwick and then Mr. Godfrey.

Mr. Paul Bonwick (Simcoe—Grey, Lib.): Thank you, Mr. Chair.

Thank you, gentlemen, for taking some time out to clarify some of these points for us.

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My comments and concerns do not relate to supporting foreign publications. In fact it's quite the opposite: I would like to see greater support in place for Canadian publications to allow them to thrive and do better.

But I have some concerns over Canadian companies being able to market their products. What if Canadian companies, through diligence, decide on an in-depth marketing plan, and the mechanism of choice for them is in fact a foreign publication servicing the Canadian sector? If they feel that is the best way to market their product and in turn thrive, would this not be seen as a government impediment to allowing them what they feel is the best chance of success for their product?

Mr. Michael Wernick: Well, perhaps that is a question you should ask them, but I'll try to answer it.

At its most general level, if you are a purchaser of advertising services or a buyer of media campaigns, the choices you have open to you after this bill are the same choices that you had open to you before the bill, grosso modo. This doesn't change those choices.

Canadian magazines are competing against foreign magazines and against other forms of media, such as television and so on.

Mr. Paul Bonwick: I understand the grandfathering portion of it, but the scenario I'm working with is if a foreign publisher, tomorrow or a year from tomorrow, creates a periodical magazine that is niche-focused on fishing. If I'm a Canadian producer of lures, I may feel that is the best vehicle for me to promote my product in Canada. Yet there's a government regulation on the books that says, if I'm understanding it properly, I should be focusing my advertising dollars on the Canadian publisher, not the foreign publisher serving the Canadian market.

Mr. Michael Wernick: You have access to foreign publications as a vehicle. You can advertise in foreign magazines.

Mr. Paul Bonwick: Servicing the Canadian market, though?

Mr. Michael Wernick: No. The test is whether the vehicle is aimed at the Canadian consumer as a market. If it's a general North American or worldwide campaign, if it's not clearly aimed at the Canadian consumer market, it's not affected. So if you're a small company, you can buy ads in American fishing magazines. The test is whether the fishing magazine had aimed at the Canadian consumer market.

Mr. Paul Bonwick: So to help me understand that, because it's helping me feel a little bit more comfortable, I think what you're saying is if a foreign-owned publisher creates a magazine to specifically target Canada, then in fact that's when the regulations click in. But if the publisher has created a magazine to promote itself from a North American or an international standard, then it's hands off.

Mr. Michael Wernick: The test is, was the service aimed primarily at the Canadian consumer market?

A voice: Primarily.

Mr. Mauril Bélanger (Ottawa—Vanier, Lib.): You can buy an ad in the American edition.

Mr. Paul Bonwick: Okay, but if there is a Canadian edition, you can't buy the ad.

Mr. Michael Wernick: In a Canadian edition of a foreign publication, if the advertising service were aimed at the Canadian consumer market, that would be caught in the legislation.

Mr. Paul Bonwick: Okay. So if I choose Britain, for example, and Britain has a fishing magazine that they publish throughout the world, but one arm of that fishing magazine is specifically tailored to the Canadian market, what you are saying in effect is that even though it's specifically tailored to the Canadian market, the Canadian manufacturer or Canadian company would not have use of that, or they would have use of that?

Mr. Allan Clarke: That would be a periodical under the definition of the legislation. If that periodical is directed at the Canadian market and if the advertising services contained in that periodical are directed primarily at the Canadian market, that would be captured by the legislation.

In the case of a foreign publication that is not primarily directed at the Canadian market, Canadians can today, and will be able to tomorrow, advertise in those vehicles. The Economist, for example, is distributed across the world. Canadians can advertise in The Economist.

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Mr. Paul Bonwick: Yes, but my concern is not the existing ones; it's if one is created tomorrow or next year. Again, it's an international magazine; however, it specifically target-markets one of its editions or several of its editions. It breaks them up geographically: it has one set for the United States and one set for Canada. And this is potentially probable. Our needs in Canada might be different from the needs, for example, in Venezuela when it comes to fishing. So if they focus a specific periodical towards Canada, we will not have use of that periodical, if I'm understanding it correctly, from a Canadian advertising position.

The Chairman: Mr. Godfrey.

Mr. John Godfrey (Don Valley West, Lib.): Thank you again for coming.

I have just a short factual question. This comes from a fact sheet that the American embassy has been circulating. It says, amongst other things, that Canadian tax dollars are used to subsidize Canadian competitors. It continues:

Formerly, this was done by setting lower postage rates for Canadian-owned publishers. Under C-55, those tax dollars will go to direct subsidies to those publishers.

My question here is simply, does Bill C-55 make any reference to...? Is this under a Bill C-55 regime, of which this would be a part? Is that what this is?

Mr. Michael Wernick: Let me put that nod on the record. Bill C-55 does not affect the publications assistance program in any way.

Mr. John Godfrey: Okay. I wanted to get that on the record.

The second question has to do with parallels and precedents. Do other countries in the world do things close enough to this, in the specific realm of advertising services, from which we can derive some comfort as a precedent? Or are we on the cutting edge here, which is a nice way of saying we're on our own?

Mr. Allan Clarke: Not to our knowledge. I'd have to say that we're on the cutting edge.

Mr. John Godfrey: I try to find the positive.

Voices: Oh, oh!

Mr. Michael Wernick: I think, Mr. Godfrey, it would be very instructive for you to talk to the magazine publishers about the way the industry works. It works quite uniquely in Canada. Canada's relationship in the North American market is quite unique, and in the magazine industry worldwide. It isn't done the same way in Europe or anywhere else, and that creates a particular challenge for the people who make Canadian magazines. They'll be able to shed some light on that.

Mr. Jeff Richstone: I'd just like to add something, Mr. Godfrey, in terms of precedents. It may not be in legislation, but members should note that under the GATS, the General Agreement on Trade in Services, most countries have not taken on obligations in terms of advertising services in print media. So in that respect, we are not on the cutting edge; we are very much in the majority.

Mr. John Godfrey: My next point has to do with the way in which this whole thing got started. Appropriately enough for a committee that is looking at cultural policy as affected by new technology, as I understand it, the thing that triggered all of this with the Sports Illustrated decision was the fact that the editorial material was satellited into the country.

What I find intriguing about this is that, had it not been satellited into the country, there seemed to have been some kind of mechanism to protect or shield—whatever the verb is—the Canadian magazine industry. It was the act of satelliting, the new technology, that raised the issue.

I understood the issue to be one of dumping, basically. That's what it's about. It's considered unfair to be recycling editorial material basically for free and then charging advertising for it.

So since it was triggered by this very specific thing, which seemed to violate a long-standing principle, I'm curious about why we didn't somehow or other attack the fact that it was the technology that brought it in, and then expand our traditional definitions to include the technological challenge. We've taken a totally different route.

Mr. Michael Wernick: When we looked at all the different options about how to proceed, this one was discarded. There are a number of reasons, but a lot of it has to do with the way the rules of the game for dumping regimes are written. They tend to be defined in terms of goods. We could provide a longer answer for you perhaps later, if you'd like, but over the course of the last year, we've held up all kinds of possible courses of action, had a look at them, and this is the one that, in the end, ministers approved.

Mr. John Godfrey: I have a final question, if I may. Given the avowed intent of the U.S. trade representative to go crazy if we do this thing, can you just give us a sense of...?

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If we're to take these folks at their word that they're going to undertake certain actions for things of equivalent value, just in terms of process, before any decision is made by any international body that will say yea or nay to us, can you play out the scenario, given the normal way in which these things work in the United States and internationally?

The challenge gets launched whenever, and then how long does the process turn out before we know whether we have the right one or we have to start yet again on one of your other options?

Mr. Michael Wernick: This is going to sound a little unhelpful, but you're asking me to speculate about hypothetical scenarios where there are quite a few.

Mr. John Godfrey: Give me some ranges, I guess.

Mr. Michael Wernick: What I can tell you is that the burden of proof is not on Canada to prove its compliance or its innocence, so to speak. The burden of proof is on a foreign government to challenge.

Mr. John Godfrey: As was the case the last time?

Mr. Michael Wernick: Yes.

It's entirely hypothetical at this point that there would be a challenge. If there is one, and if it is by the United States, they have several avenues to try. We've discussed with our colleagues at Foreign Affairs and International Trade the possibilities and so on. I guess all I can say is we'll have to see which one they would choose, if they chose to pursue it. Then our trade lawyers will defend our interests as vigorously as they possibly can.

Mr. John Godfrey: Over how long a period of time are we looking at?

Mr. Michael Wernick: Well, it's our firm assertion that this is a new measure and it could take quite some time.

Mr. John Godfrey: Like...?

Mr. Michael Wernick: A couple of years. I have to stress that is speculation.

Mr. John Godfrey: Thank you.

[Translation]

The Chairman: Mr. Sauvageau, do you have any questions?

Mr. Benoît Sauvageau: No, thanks.

[English]

The Chairman: Mr. Muise.

Mr. Mark Muise: Further to Mr. Bonwick's questions, to understand it more clearly, let's say, for example, a new fishing magazine starts up in the States. If they sell ads, as a Canadian lure producer, I can buy an ad, but it has to be an ad that's directed to the North American market—the States and Canada. If it's an ad that is only directed to Canada, am I contravening the new regulation?

Mr. Michael Wernick: First of all, it's the sale end of the transaction that's regulated. It is the foreign publisher that's being regulated and it's the foreign publisher that bears the burden of the enforcement of the statute. So first of all, I don't know how comforting this is to the people who buy advertising, but the whole burden of the statute falls on the sellers of the advertising services.

And the test is, was the vehicle aimed at the Canadian consumer market? It's not the advertising. It's not the ad itself. It's whether the vehicle in which the advertising service was delivered was aimed primarily at the Canadian consumer market.

Does that help?

Mr. Mark Muise: So we say the publication has to be directed to the North American market and not solely to Canada?

Mr. Michael Wernick: Yes, that's the distinction. At the end of the day you'd look at the vehicle in which the advertising services are delivered and who was the target for that vehicle.

Mr. Mark Muise: Late last week, I read an article in one of the major Canadian newspapers that said this is somewhat a protectionist piece of legislation. I'd just like you to touch on that a little bit.

Mr. Michael Wernick: I'm not quite sure what to say. It's hard to see it as a protectionist measure.

If you're a reader, you can access any foreign magazine you want to. There's no limitation, before or after, on your ability to subscribe to any magazine you can find or to purchase any magazine you find at a newsstand, in a bookstore, or wherever. If you walk through the magazine racks at Chapters down the road, it's hard to argue that Canada is in any way closed to foreign magazines.

The Chairman: Mr. Muise.

Mr. Mark Muise: I'm okay for now. Thank you.

The Chairman: All right.

Mr. Bonwick.

• 1200

Mr. Paul Bonwick: Two points needed to be cleared up. You cleared up one, and that is that the Canadian advertiser is not at risk at all throughout the act. No matter how many times that company, that person, or an agent thereof tries to place ads, no matter where they might be, the onus is completely on the seller of the advertising.

Mr. Michael Wernick: That's correct.

Mr. Paul Bonwick: To narrow this down a step further, there were, and I assume there still are, foreign publications that target the entire North American market in a specific industry—furniture, for example. However, there were opportunities for Canadian manufacturers, or Canadian retailers more specifically, to simply place an ad that would be focused on the Canadian market.

Say XYZ Furniture retail chain does not want to market itself in Mexico and doesn't want to market itself in southern United States, but yet may want to market itself to the Canadian market in a North American trade magazine. If that advertisement is not distributed right across the continent but rather centred on the publications that are coming into the Canadian market, would that be deemed a breach?

Mr. Michael Wernick: It's difficult to work your way through this. The choices that are there for the media buyer are the same. Those kinds of niche magazines were there before and they'll be there after. The test is if a foreign publisher were to set up a vehicle aimed primarily at the Canadian consumer market.

Mr. Paul Bonwick: Sorry, I'm obviously not giving a clear enough description of the situation. I'm not dealing with the grandfathering situation.

I picked furniture. It could be fishing lures; it could be anything. For this one I'll choose furniture. If you have a furniture publication that is based in North Carolina and is dealing with the North American market in its entirety, but it has the ability to offer a Canadian retailer the opportunity to put an ad in that will concentrate strictly on Canadian markets, would that be a breach?

Mr. Allan Clarke: Yes. You're basically asking, if a vehicle is designed to sell advertising services directed at primarily the Canadian market, would that be a breach? Yes, it would be.

Mr. Paul Bonwick: Again, I'm not defending the foreign publication. My concern is that we not impede the ability of Canadian businesses to market their product in whatever manner, shape, or form they think is the best. That's the focus of my argument. That's a statement.

You've clarified proportionate advertising—if a proportion of the advertising is concentrated in one market versus another.

Mr. Michael Wernick: It's not, strictly speaking, a grandfathering issue. Magazines will live and die, new ones will come on the market, and so on.

Mr. Paul Bonwick: Precisely.

Mr. Michael Wernick: There may be new magazines that are perfectly in conformity with the bill and new magazines that are outside of it.

Mr. Paul Bonwick: I would give you the example of a Canadian retailer. If a Canadian retailer wants to promote itself in a national publication, and the national publication says they can buy an ad for $5,000 and it will hit the Canadian market, under this legislation, as I understand it, you're saying no, you can't do that to the Canadian market. So the foreign publication would then have to sell them an ad for the entire publication, in which case it becomes $12,000, if they want to choose that vehicle to promote their product.

Mr. Michael Wernick: Yes.

The Chairman: Mr. Muise.

Mr. Mark Muise: The last comment clarified my question. If this vehicle goes across North America and I choose to say that I only distribute my product in west Vancouver but I'm willing to pay the price, that's not in contravention. It's not contravening the rules.

Mr. Michael Wernick: No, it's not.

Mr. Mark Muise: Because the vehicle goes everywhere.

Mr. Michael Wernick: That's right.

Mr. Mark Muise: I just chose to pay the high price.

Mr. Michael Wernick: Yes.

• 1205

Mr. Mark Muise: Okay.

The Chairman: Monsieur Bélanger.

Mr. Mauril Bélanger: What we have to understand is that the intent here is to prevent a foreigner who publishes a magazine, whose costs of publishing that magazine are already covered—producing it, content-wise—

Mr. Mark Muise: I understand.

Mr. Mauril Bélanger: —from taking out all the publicity and reissuing it, if you will, under the guise of a split run or whatever, but really targeting Canadian advertising services at a serious discount, because the production costs of that particular magazine are covered.

We are saying we need to make sure that our Canadian publications have that advertising revenue secured somehow for the Canadian market, not so that foreigners can come in with extremely low production costs and skim that revenue from the advertising services. That's what we're trying to do here.

Nothing prevents anybody in Canada from starting a magazine for that particular industry, whether it's fishing or furniture or whatever. That policy has been in place for 30 years, and that's what allowed the Canadian magazine industry to grow to what it is today, with 1,400 or so publications. If successive governments hadn't done that, we wouldn't have a publication industry like we have today. That's what we have to understand.

We're not telling Bombardier or whomever that they can't advertise in The Economist or Newsweek or whatever. Of course they can. We're telling Newsweek that they can't come around here and undercut the advertising services market. That's what we're saying.

The Chairman: Do you have any questions?

Mr. Mark Muise: I have just a comment to Monsieur Bélanger's intervention.

That's fully how I understood it, but the discussions this morning were clouding the issue, and I just wanted to understand it. It is still as I understood it.

Thank you.

The Chairman: If there are no other questions, I would like to thank you very much for your time and contribution.

I would like to ask the clerk to make you aware of a a document that one of our members received from the Embassy of the United States of America. Mr. Godfrey referred to it, and I'd ask the clerk to give you a copy, just in case. I realize a lot of these issues are political in nature, and we're not asking you to comment on those, but on the technical side, if anything in there strikes you as something you could comment on, that would be really useful to the members. I'll make sure you have it.

Mr. Michael Wernick: I appreciate that.

In terms of follow-up, the one I did hear was that you'd like some sort of flow chart on the enforcement side, as a case would go through.

The Chairman: Yes.

Mr. Michael Wernick: If anything else occurs to you, we'll be very pleased to provide it. Thank you for the opportunity to come today.

The Chairman: Thank you very much.

Would members stay for five minutes? We just have a few items of business. It won't take very long. We are way ahead of our schedule anyway.

We've been given a notice of motion by the subcommittee on sports, which is a subcommittee of this committee.

On motion of Wayne Easter, seconded by Peter MacKay, it was agreed that the Subcommittee on the Study of Sport in Canada of the Standing Committee on Canadian Heritage seek authority to sit in a televised session in Toronto on November 10, 1998 with the NHL Players' Association. For technical purposes, they require our authority to go to the liaison committee and make arrangements for travel. So it's a case of us—

Mr. Mauril Bélanger: They can go to the Ottawa Senators instead of the Maple Leafs, Mr. Chairman.

The Chairman: No, they have to see the NHL Players' Association. All they need is our authority to be able to go to the liaison committee and negotiate budgets or whatever.

This motion is in order. Notice was given to us. What is the feeling of the members?

Mr. Mauril Bélanger: Mr. Chairman, I don't recall this committee having authorized travel even for itself, let alone subcommittees. Or have we?

The Chairman: Could you explain it?

The Clerk of the Committee: The committee has not been asked to give authority to travel. All the committee is doing is giving its authority to the subcommittee to seek the necessary authority from the necessary authorities to travel. The funding and the House are the bodies that give authority.

• 1210

Mr. Paul Bonwick: So moved.

Mr. Mauril Bélanger: I have a problem with that, Mr. Chairman.

This committee has been undergoing a study on Canadian cultural policy for quite awhile now. Three times we've decided that we would, as a committee, travel to do that. I would hope that we would not, by this, jeopardize this committee's efforts to do just that. I have a serious concern indeed. This should have been discussed with you first, before we agree to it. I'm sorry. I find this.... We've had two or three recommendations coming at us from this subcommittee, sometimes without very much notice. I'd like some time to think this one through, personally.

The Chairman: November 10 is next Tuesday.

Your point is well taken, because we have a request before the liaison committee for a budget ourselves, which includes travel, and we don't know—

Mr. Mauril Bélanger: Why can't the Players' Association come to Ottawa?

The Chairman: Mr. Bonwick.

Mr. Paul Bonwick: I have a couple of questions, either to the chair or to the clerk. Does this in any way affect our budget?

An hon. member: Sure.

The Clerk: I'd say that's a decision for the liaison committee.

Mr. Paul Bonwick: Is this potentially going to affect our budget?

The Chairman: One suggestion, so that we don't appear contrary, would be to make an amendment to this motion to say that our budget takes precedence, that this comes after the budget. So if it's beyond our budget, then that's fine.

The Clerk: Mr. Chair, if I may try to answer that question, this is a public meeting, but I was thinking that if they sought—

Mr. Mauril Bélanger: Do you want to go in camera?

The Clerk: That's all right.

If they sought their own authority, then I would imagine it would be their own budget. It's their own activity. Whereas if the standing committee seeks a budget, then it becomes an activity of this committee, which is why the advice was given that they seek their own authority, separate from our own budget.

Mr. Paul Bonwick: I like the chairperson's qualifier, even though they're a subcommittee.

Mr. John Godfrey: The understanding that our travel requirements take precedence....

The Chairman: Without prejudice to the request of this committee for a budget.

An hon. member: That's right.

The Clerk: So it's a separate item, a separate activity, and we have a separate budget.

Mr. Paul Bonwick: No, that's not how it—

The Clerk: And a letter explaining the point.

The Chairman: No, not separate. It has to be without prejudice to our request.

Mr. John Godfrey: It has to be with the understanding that the committee of the whole's budget requirements take precedence.

The Chairman: Absolutely.

Mr. Godfrey, are you prepared to make the motion? Okay.

There's a motion then that this motion be amended to take in the precedence of the budget of the committee of the whole.

(Amendment agreed to) [See Minutes of Proceedings]

(Motion as amended agreed to) [See Minutes of Proceedings]

The Chairman: We have a notice of motion by Mrs. Lill, which has been circulated to you. The motion will be acceptable to be discussed at the next committee meeting, for a vote or otherwise.

And the last item of business, we have to now take care of hearing witnesses on Bill C-55. The first witness on the list is the minister, and unfortunately the minister can't appear on Thursday. The bill hasn't been voted on in second reading as yet, and the minister can only appear for the first time on Tuesday, when we return. It would be very desirable for the committee to start with the minister, so that we can ask her questions relating to the political implications of Bill C-55 and hear the answers from the minister herself.

My suggestion would be that we definitely start with the minister and delay it until we get back on the Tuesday.

• 1215

Mr. John Godfrey: Which would have the practical effect of delaying our consideration of Ms. Lill's motion until that point as well.

The Chairman: That's correct, yes.

Mr. John Godfrey: Fine.

The Chairman: Is there agreement?

Some hon. members: Agreed.

The Chairman: I want a motion that the clerk invite witnesses on Bill C-55, as determined by the chair, and that members submit to the chair the names of potential witnesses.

I'll give you a list of the witnesses we have so far, which have been suggested by the ministry: the Association of Canadian Advertisers; the Institute of Canadian Advertising, ICA; l'Association québécoise des éditeurs de magazines, AQÉM; Canadian Business Press, CBP; Time Canada; Reader's Digest; and the Canadian Magazine Publishers Association. Some of these wrote to us to ask that they be put on the list.

Can we receive your suggestions—I asked that before already—so that we can complete the list and start inviting witnesses, please?

Mr. Mauril Bélanger: Can we approve those you mentioned already, so that the clerk can go ahead?

The Chairman: Yes, could we approve this list so far?

Some hon. members: Agreed.

The Chairman: The next meeting of the committee will take place on Tuesday after the break, November 17.

The meeting is adjourned.