INDY Committee Meeting

STANDING COMMITTEE ON INDUSTRY

COMITÉ PERMANENT DE L'INDUSTRIE

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, June 2, 1998

• 1530

[English]

The Chair (Ms. Susan Whelan (Essex, Lib.): I will call the meeting to order, pursuant to Standing Order 108(2), a study on information technology preparedness for the year 2000; and also pursuant to Standing Order 108(2), a study on the management and operation of the Standards Council of Canada, the Copyright Board of Canada, and the Competition Tribunal.

We are pleased to welcome several witnesses before us today. We have the Standards Council of Canada, the Copyright Board of Canada, and the Competition Tribunal. What I would propose is that the witnesses would give their opening statements and then we will go to questions altogether.

We will begin with the Standards Council of Canada. I have several witnesses listed. Ms. Lusby, if you could introduce whoever is with you, that would be great.

Ms. Linda Lusby (Chair, Standards Council of Canada): Thank you for the invitation to give you some information on the Standards Council of Canada.

I am Linda Lusby, the chair of the council. I have with me today Jack Perrow, Larry Moore, and Rick Parsons, who are all directors of the Standards Council of Canada. I will present the opening statement and then any of us will be prepared to answer questions for you.

The Chair: Do you have a handout?

Ms. Linda Lusby: No, we don't.

If I may, I will start by addressing a few of the activities of the Standards Council of Canada during the past year. I might mention that in 1996 there was a new act for the Standards Council that completely revised our mandate and appointed a new council.

Perhaps I will just refer to the mandate by the Standards Council of Canada Act. It is to promote the efficient and effective voluntary standardization in Canada where standardization is not expressly provided by law. In particular there are five points: to promote the participation of Canadians in voluntary standards activities; to promote public-private sector cooperation in relation to voluntary standardization; to coordinate and oversee the efforts of the persons and organizations involved in the national standards system; to foster quality, performance, and technological innovation in Canadian goods and services through standards-related activities; and also to develop standards-related strategies and long-term objectives.

All of these are in order to advance the national economy to support sustainable development; to benefit the health, safety, and welfare of workers and the public; to assist and protect consumers; facilitate domestic and international trade; and further international cooperation in relation to standardization.

That is the mandate we have before us. It is to those ends that we direct our activities.

The Standards Council is governed by a council of 15 members, all of whom were newly appointed in December 1996. The Standards Council itself has a staff of 70, plus some 3,000 volunteers who serve on national and international technical committees, subcommittees, and working groups.

In 1997 we adopted and we worked very hard on developing a three-year strategic plan, which serves as our organization's road map into the next millennium. The plan recognizes that ongoing changes in the world economy will only increase the importance of standards on Canada's economic and social agendas over the next few years. To that we see a heightened importance of the SCC to become a more proactive, strategic, and responsive organization.

• 1535

The SCC is committed to putting in place the standardization programs and services Canadians will need to compete both successfully in the new global economy and to maintain our standards of living and quality of life and our environment.

As part of the strategic plan and our ongoing yearly activities, we recently approved our corporate plan, which details our actions for implementing the first year of the strategic plan. That plan examines three program areas. I would like to briefly mention the three of them: the accreditation programs; the international representation; and our role in disseminating information on standardization.

Under the accreditation programs, SCC accreditation programs are all based on established criteria and procedures that are harmonized with international guides. We have accredited four Canadian standards development organizations, which you would probably know as BNQ, CGSB, CSA, and ULC.

In the field of conformity assessment we operate five accreditation programs: one for testing and calibration laboratories; one for product certification organizations; one in the quality management systems registrar area; and a second similar one in the environmental management systems registrar area. We also have a conformity assessment program for quality and environmental management systems auditor certifiers and training course providers.

Ultimately our goal is to have an internationally recognized accreditation program and system. To that end we have worked very hard in the last year to develop a series of mutual recognition agreements and multilateral agreements for internationally accepted schemes for standardization.

In partnership with DFAIT we have recently completed the negotiations of an annex for electrical safety for Canada with the European Union. We are also working with the Asia-Pacific Economic Cooperation in similar things. SCC has in the past and will continue to provide technical expertise and support to the Department of Foreign Affairs and International Trade in the negotiation of these mutual recognition agreements.

Together with the worldwide adoption of international standards, the SCC is working with ISO, the International Standardization Organization, and IEC, the International Electrotechnical Commission, toward the goal of one standard, one test, one certificate.

In the area of international representation, as I mentioned before, we have some 3,000 volunteers who are working on policies and programs designed to help make Canadian industry more competitive in world markets. Trade is encouraged by the Standards Council's work in harmonizing standards and conformity assessment practices at the international and regional levels so that Canadian experts need not meet several different national standards and conformity assessment schemes when exporting goods and services.

The SCC is committed to promoting regional acceptance of international standards. To that end we also cooperate and work with several regional standardization bodies such as the Pacific Area Standards Congress and the Interamerican Accreditation Co-operation.

Our third area of activity is the dissemination of standardization information. Information is one of the SCC's core business products.

In 1997 we were very pleased and delighted to launch our website. It's an Internet based website, SCC.ca, which includes the full texts of federal regulations as well as bibliographic entries on standards of the ISO, the IEC, national standards from Canada, the U.K., Germany, France, and Australia.

The SCC.ca can also identify which of the 240-plus facilities accredited by the Standards Council are equipped to provide testing certification or registration to a given standard. It's a fully searchable database website. We hope it will become a very utilized source.

In 1997 the Standards Council handled over 10,000 standards information inquiries. It is hoped that the website will channel a great deal of that information and be able to provide more information to Canadian industry and consumers.

One of our big goals for the upcoming years in terms of the Canadian standardization strategy, because free trade and globalization are widely regarded by industry and government as the predominant issues that characterize the next decade, is that we are looking to placing the Standards Council in a leadership role. In this regard we are now putting in place plans to develop a Canadian standards strategy that would be designed to harness the standards infrastructure to promote economic progress and social well-being.

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The Canadian standards strategy will serve as the nation's master plan in relation to its standards activities. It will identify the roles to be played by the various stakeholders, including government, industry, consumers, and standards organizations. This particular activity is unusual in the world today and promises a competitive advantage for the Canadian economy.

The Canadian standards strategy is targeted for completion in 1999.

If I may, I will make a few comments on our preparedness for the year 2000.

In 1998 we established an internal task force that includes representatives from senior management to oversee the Standards Council's preparedness. The task force mandate was to ensure that all potential year 2000 impacts arising out of our programs, interfaces with clients and vendors, and all hardware, software, and embedded systems are identified, examined, repaired or replaced, and tested.

We feel totally confident that our preparedness for a full year 2000 implementation is expected to be completed by December 1998.

The Chair: Thank you very much.

I am now going to move to the Copyright Board of Canada. Mr. Hétu, are you going to be doing the presentation?

[Translation]

Mr. Michel Hétu (Vice-Chairman and Chief Executive Officer, Copyright Board): Thank you, Madam Chair. My name is Michel Hétu, and I am Vice-Chairman and CEO of the Copyright Board. I am accompanied by the Secretary of the Board, Mr. Claude Majeau.

With your permission, I will begin by reading my presentation, which will last no more than ten minutes. I believe you have received a copy of the text of my presentation.

The Board is an economic regulatory body empowered to establish, either mandatorily or at the request of an interested party, the royalties to be paid for the use of works of authorship and other subject matters protected under the Copyright Act, when the administration of such a copyright is entrusted to a collective society. Moreover, the Board supervises agreements between users and licensing bodies and issues licences when the copyright owners are unlocatable.

[English]

In the exercise of its mandate, the board aims at setting royalties that are fair and reasonable for both copyright owners and the users of copyright-protected works.

To date, most of the board's activities have been in the following areas: first, the fixing of tariffs for the use of musical works in public places and on radio and television; second, the fixing of tariffs for the retransmission of distant radio and television signals; and third, the issuance of non-exclusive licences for the use of published works when the copyright owners are unlocatable.

Bill C-32, which received royal assent on April 25 last year, conferred on the board additional responsibilities in the following areas: first, a system of tariffs for so-called neighbouring rights, that is, a system of equitable remuneration for the use of sound recordings in public places and on the radio for the benefit of performers and producers of sound recordings; second, a system of compensation for the reproduction of sound recordings at home, the so-called private copying regime, for the benefit of authors, performers, and producers of the recordings; third, a system of tariffs for the recording of radio and television programs and their use for teaching purposes by educational institutions. Again, this is for the benefit of the various owners of copyright in the works, performances, sound recordings, and radio and television signals that are reproduced.

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[Translation]

The Board's current financial situation is very precarious. In recent years, the Board's budget has suffered numerous cuts. Its goods and services operating budget has gone from $ 406,000 in 1990- 91, our reference year, down to $ 117,000 for the current year, 1998-99, a decrease of 71%. The Board was only able to avoid a budget deficit last year only because of a transfer of $ 250,000 to its initial parliamentary appropriation. The two departments allocating this additional amount to the Board were Industry Canada and Heritage Canada. This additional amount served only to balance the budget for the year just past.

The Board has already informed the Minister of Industry of the financial and human resources it needs to carry out its new responsibilities. At his request, we will have a consultant conduct an A-base review in order to determine our long-term needs. Only afterward will the Board's reference levels be revised. In the interim, the Board should be receiving the funds it needs to balance its budget from the two departments concerned, as it did last year. We expect to receive in the order of $ 400,000 for the current year, which will again be only an interim measure.

Once the review has been completed, we should be able to adopt a more stable and permanent operating and financial structure that will enable us to carry out our new responsibilities effectively. This is our top priority.

Change management issues are also key initiatives to which the Board will give its attention in the coming years. In this age of high technology, the environment in which the Board must work is in a constant state of flux. The issues brought before the Board are increasingly complex, and require a very broad understanding of the communications and cultural industries sector. As a result, the Board will have to call on internal resources or contractors to help it analyze such highly complicate matters as the use of music and other works on the Internet.

[English]

In summary, the board's priority for the coming year is to be fully operational with appropriate resources so that it can continue to exercise its original mandate effectively and carry out the new responsibilities it has as a result of the passage of Bill C-32.

The appropriations currently shown in part III of the estimates for 1998-99 and the next two years are clearly inadequate and will have to be revised upward. Otherwise, other funding sources will have to be considered, such as a cost-recovery system. But this is an entirely different matter that must be looked at by the ministers concerned.

Thank you for your attention. I will be pleased to answer questions.

[Translation]

The Chair: Thank you, Mr. Hétu.

[English]

I am now going to turn to the Competition Tribunal. I believe Ms. Annaline Lubbe is going to begin.

[Translation]

Mrs. Annaline Lubbe (Registrar, Competition Tribunal): Thank you, Madam Chair and committee members. I am accompanied today by Mr. Larry Séguin, Deputy Registrar, and Mrs. Carole Ménard, Director, Management Service of the Tribunal registry.

[English]

Allow me to give you a brief outline of the background to our report. I would point out in the first place that it's important to underline that the tribunal is strictly an adjudicative body consisting of up to four judges and up to eight lay members with expertise in economics and business. It hears and decides matters under part VIII of the Competition Act that relate to mergers, abuse of dominant position, and a number of unfair or uncompetitive trade practises.

The registry's 12 employees—we are talking about a small agency—are public servants. They provide the administrative support to the tribunal for its hearings. The hearings usually take place here in Ottawa at its headquarters but could be held elsewhere, depending on the needs and the circumstances of a particular case.

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[Translation]

The Competition Act allocates clearly distinct roles to the Competition Tribunal on the one hand and the Director of investigations and research on the other.

The Tribunal is a strictly adjudicative body, which operates independently of any government department. It performs no advisory function as far as the government is concerned, nor does it have any investigational powers. It has no surveillance function as far as investigations carried out by the director on uncompetitive practices are concerned.

[English]

With the minor exception of specialization agreements, cases can only be brought before the tribunal by the director. It is the director who decides whether and when a matter will be brought before the tribunal.

The tribunal gets no advance notice but must nevertheless be ready to proceed as expeditiously as circumstances and considerations of fairness permit. Time is invariably of the essence in these matters. The outcome of a hearing may have very far-reaching economic consequences for the parties and indeed for the industry involved. In short, the tribunal and the registry have to deal with a caseload and a workload that are unpredictable and non-discretionary but subject to tight time constraints.

To give you a small snapshot of the work that was on the plate during 1997-98, there were nine cases that proceeded before the tribunal that conveniently we would say fall broadly into three categories.

First there were the contested applications. There was particularly the Canadian Pacific cost merger case, which involved over 300,000 documents and was slated to go to hearing on January 8. However, the parties arrived at a settlement in September when a new player entered the market in the port of Montreal. That resulted in the director asking for a stay of the proceedings. It came to pass after eight months of probably the most hotly contested procedural pre-hearing phase in any case to date.

The other contested case was the Warner abuse of dominant position case, which raised the very interesting and very complex question of the dividing line between competition law and copyrights. The tribunal dismissed the application in December, only three months after it was filed, because the respondents in the case challenged the question as to whether the tribunal had jurisdiction. The decision was not appealed.

The second group of cases concerned the first applications for consent orders under the new rules of the tribunal. With consent orders we are talking about a situation when the director and the parties concerned arrive at an arrangement that satisfies them mutually to eliminate the alleged substantial lessening of competition in a particular market. They then put their arrangement in a draft consent order and the director comes to the tribunal and asks the tribunal to approve the consent order.

It had been a concern that these consent orders were taking too much time. The tribunal had entered into consultations with the stakeholders, and in 1996 a new consent order procedural regime had come into force. These were the first applications that proceeded under this new regime. Under the new regime it takes about 40 to 45 days, give or take, for a consent order situation to resolve itself in a very straightforward case, shall we say.

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There were the Canadian Waste and the ADM Agri-Industries consent orders. I don't know whether those mean anything to you. There was another one that was filed shortly before the end of the fiscal year, and actually the order went out in April of this year.

The final group of cases is applications that are made to vary consent orders that were handed down previously. We had a number of very high profile ones in the past year.

There was the Southam case where the application to vary the 1993 divestiture order resulted in a two-week hearing in Vancouver. The tribunal ultimately refused the variation. We have a situation where the original order was handed down in 1993, and you are asking why is there an application for a variation in 1997-98. It is because the tribunal's order was stayed in the intervening five years while appeals were proceeding through the higher courts, up to the Supreme Court.

Another variation was in the C-Span case where the tribunal approved a consent order, again this time modifying a 1997 divestiture order.

In Interac the tribunal issued a consent order that added amendments to the 1996 consent order. It now provides for monetary sanctions to be imposed on connectors to the Interac network whose performance does not meet appropriate standards and results in people going to the Interac machines and the transactions breaking down.

The 1998-99 main estimates proposed planned expenditures of $ 1.253 million, which is $ 134,000 higher than our actual expenditures in 1997-98. The lapse in 1997-98 is attributed obviously to various factors, including particularly that there were no extensive hearings requiring simultaneous interpretation in that year and there was also pending staffing of vacant positions.

[Translation]

In the first two months of the 1998-99 fiscal year, the Tribunal brought down a consent order in Canadian Waste Services Inc. and Ressources environnementales Capital Inc. There are no cases pending before the Tribunal at the present time.

[English]

The unpredictable, non-discretionary workload disciplines resource management. The registry must obviously always be mindful that a major case may arise, proceed, and be decided in the closing months of the fiscal year, as happened in 1993-94 in the Gemini case.

The registry actively pursues economies through alternate service delivery arrangements with other agencies. Two such arrangements just came into effect on April 1, 1998. One is with the Office of the Commissioner for Federal Judicial Affairs for delivery of corporate services. The other is with the Canadian International Trade Tribunal for the delivery of informatic support.

[Translation]

I shall now hand things over to my colleague, Larry Séguin, who is responsible for the Registry's information technology program. He will speak to you on the year 2000 requirements. Thank you.

Mr. Larry Séguin (Deputy Registrar, Competition Tribunal): Hello, Madam Chair and committee members. As deputy registrar, I am responsible, as you have just been told, for the informatics program of the Registry.

The Registry of the Competition Tribunal is aware of the informatics implications of the year 2000, and has drawn up a plan to ensure compliance with the year 2000 requirements. The Registry continues to work in close collaboration with representatives of Treasury Board and other departments and agencies in seeking the most cost-effective solutions and eliminating duplication of efforts to solve this problem.

[English]

The registry's informatics environment comprises a small local area network of 12 users. It is a case management system to register document and case information and some commercial software used for administrative purposes. The registry does not have any mission critical systems. Its financial services are provided under a memorandum of agreement with the Office of the Commissioner for Judicial Affairs.

• 1600

In actively implementing its year 2000 plan, the registry is taking the necessary measures to ensure compliance of existing software and hardware through reprogramming or procurement.

In March 1998 work stations were upgraded with year 2000 compliant components and operating systems.

In May 1998 the registry reviewed its software inventory in order to identify non-compliant software and systems that will be replaced during the summer and fall of this year.

Conversion of the registry's case management system from a DOS environment to a Windows environment will commence this summer. The reprogramming of the system will address the year 2000 issue.

[Translation]

By December 1998, the Registry expects to have an informatics environment that complies with year 2000 requirements.

[English]

The Chair: Thank you very much, Mr. Séguin. I want to thank the witnesses for their opening comments. I am now going to begin questions with Mr. Schmidt.

Mr. Werner Schmidt (Kelowna, Ref.): Thank you very much, folks, for appearing before the committee. I am not entirely sure why you are here. What I heard from the Copyright Board is that you don't have enough money. We heard from the Standards Council that you don't have enough money either. I really wonder.

The only indication seems to be that you don't have a mission critical system, and so I guess my questions have to be given to the Standards Council of Canada. The real question, I think, is what standards have you applied to bring about some kind of readiness? What standard test do you apply to people who have mission critical systems? It is very much in the area of the companies and the businesses you work with on a voluntary basis to set up their standards. It seems to me that there might be some sort of awareness of a responsibility on your part to make sure the manufacturers have year 2000 compatible components. That's one part of the question. When you've answered that one, I'll go to my next one.

Mr. Rick Parsons (Treasurer and Director of Administration, Standards Council of Canada): The Standards Council is busy assessing its own internal environment. We do have a website set up now with some basic information on Y2K awareness. We are also in the process of communicating with all of our suppliers and our clients as well with some self-assessment criteria. We're expecting to complete that task by June 30.

I could add that the Standards Council is a voluntary standards organization. We don't really have a mandate to regulate or control what the companies are doing.

Mr. Werner Schmidt: That wasn't the gist of my question, to demand, but surely if it's voluntary it's in the best interests of everyone. The whole idea of a standards council is to have compatibility between one manufacturer and another one on certain components so that there is a standard application and you can do these things.

Clearly, it would seem to me to be in the interests of all suppliers that there be a standard test that might be applied to see whether or not they are Y2K compatible. Does that exist?

Mr. Rick Parsons: No, we haven't been involved in activities such as that yet.

Mr. Werner Schmidt: Does that mean then that the manufacturers who make up the voluntary council are not concerned about this standardization?

Mr. Rick Parsons: We do have a board meeting coming up in June. We intend to raise this issue with the board in June. On the whole issue of the year 2000 preparedness for the Standards Council of Canada, they are well aware of the issue and have been issued with documentation. Perhaps that will come up in the discussions with the board.

Mr. Werner Schmidt: So the answer is you really don't know.

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Mr. Jack Perrow (Director of Standardization, Standards Council of Canada): At the moment, we're not involved at the council in any standards work related to this activity. We do have committees that are functioning in the international area in information technology. Areas such as that are probably working in this area, but I don't have any information on that.

Mr. Werner Schmidt: So a company trading internationally really wouldn't get any guidance from you. There's no help available to them. If they wanted to find out where they could go for information, you wouldn't be able to provide that for them. Is that true?

Mr. Jack Perrow: The only information we have that we are providing to anyone who has requested or approached us is the information that is provided through Industry Canada.

Mr. Werner Schmidt: What kind of communication is there on standardization between yourselves, the manufacturers of medical devices and the people who use those medical devices? Is there any kind of communication requirement or suggestion that people who manufacture medical devices that have in them embedded chips do indeed provide the information about the characteristics and the specifications of those embedded chips to the people who actually use the medical devices?

Mr. Jack Perrow: Again, I'm not familiar with any activity within the council's network that is involved in that area.

Mr. Werner Schmidt: I'm really wondering whether you shouldn't be, though. The Ontario Hospital Association was before this committee. At that time not more than 120 manufacturers of medical devices had in fact responded to a request as to whether or not they had chips embedded in their medical devices that were in fact Y2K compatible.

I find it strange that there seems to be no awareness of this kind of a problem or even an attempt to do anything about it on the part of the council.

Mr. Jack Perrow: In the area of medical devices, I know that Health Canada has activity in this area, but we haven't worked with them on this up until now.

Mr. Werner Schmidt: Thank you.

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

Madam Jennings.

[Translation]

Mrs. Marlene Jennings (Notre-Dame-de-Grâce—Lachine, Lib.): I must admit that I too am a bit confused. Perhaps I do not understand the mandate of the Standards Council of Canada, but it seems to me you are there to encourage industry to develop standards. It seems to me that the year 2000 issue, particularly where equipment is concerned, could lead to the creation of certain standards, so I do not understand.

I have a question for Mr. Hétu. It is not really to do with the year 2000. Yesterday I got a letter from one of my constituents on a Copyright Board decision to reduce the royalties payable by the television industry to use music, to reduce the way music is licensed for use on television.

This is the third I have received in 10 days, which is most unusual for my riding. The three letters were from musicians, and each one was written individually. They were not form letters, which can be recognized right away. In all three letters, the musicians were telling me they would have trouble earning a living because of the Tribunal decision.

[English]

The decision also weakens SOCAN, the collective society that I along with many other Canadian composers and publishers belong to.

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SOCAN helps us deal efficiently with the impossible task of collecting music licence fees, and through SOCAN we can avoid the difficulties of dealing directly with those who use our work, whomever, wherever, whenever or however it's used. Unfortunately, the Copyright Board's decision forces us into a David and Goliath situation in which we as individuals must deal directly with the powerful interests from a position of weakness, rather than through our performing rights society, SOCAN.

[Translation]

I would like to hear your comments on this.

Mr. Michel Hétu: Thank you.

First of all, I must state that I personally wrote the comments I am about to make into the decision, because I issued a dissenting opinion at the time the board made its decision. I did not share my colleagues' views on the two matters you have referred to: the reduced rate and the question of direct negotiation of rights between the television station and the authors.

That said, the decision holds because it is a majority decision and holds until any subsequent Federal Court decision, since it has been referred there. It will be examined from the legal point of view in order to determine whether it is properly justified. If it must hold, then it will hold.

The Board has a certain degree of discretion in weighing the evidence presented to it. My colleagues did so in their own way, and found the arguments advanced in support of reduction and the creation of a fee scale allowing direct negotiation convincing. I personally do not dispute that their opinions are well-founded.

As a dissident member, I expressed my point of view in the decision. As for future developments, we shall see, but for the moment the decision hold firm.

Mrs. Marlene Jennings: I greatly appreciate your frankness. You can be sure I will get myself a copy of that decision.

Returning to the Standards Council. Is this something that has already been discussed? Given the questions asked of you today, it is your intention to at least look at the appropriateness of starting to draft standards for voluntary compliance by the stakeholders in the industry concerned, so that equipment in the medical field, pacemakers and the like, can be made subject to standards which you could develop?

[English]

Ms. Linda Lusby: I think I can assure the committee that yes, we will be looking into this. We do have a council meeting on Monday, June 8. The year 2000 preparedness is an agenda item for the council meeting. This is certainly something we will be raising and trying to take whatever action we can appropriately.

Ms. Marlene Jennings: Can you inform us of whatever decision is taken at your meeting on Monday, the 8th?

Ms. Linda Lusby: Yes, we will. I'll direct it to you.

The Chair: That would be great.

[Translation]

Do you have a question, Mrs. Lalonde?

Mrs. Francine Lalonde (Mercier, BQ): Mr. Hétu, I hope you are a brave man, because judging from what you tell us, there are some clouds hanging over the Copyright Board. Please allow us, myself and my colleagues over there, to help you out if we can.

The Board's operating budget has been cut from $ 406,000 in 1990-91 to $ 117,000 this year, a 71% cut. Is that correct? You were only able to avoid a deficit because of a transfer of $ 250,000 and this year you will need $ 400,000 transferred to balance your budget. I have a few questions to ask you.

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The passage of Bill C-32 has doubled your work load, as everyone realizes. What do you assess your financial needs to be?

You say there could be a cost recovery regime. I myself have written to Mr. Manley, and my colleague asked him a question when he came to report to us here. His response was that he was thinking of eventually adopting a cost recovery regime. He did, however, assure us that there would be consultation. I wish to know what the subject of that consultation will be.

You are an expert in these matters, and some people have said that the CRTC was funded on a cost recovery basis. Do you think that what is going on at the CRTC is comparable to what is going on with the Copyright Board?

Mr. Michel Hétu: You started by referring to the cuts we have experienced over the years. There are all kinds of reasons for this. I will remind you that all departments were affected at some point or other, either by the Gulf War or by later cuts. The Board itself experienced all these cuts, as the other departments did, but the difference was that its budget was tiny to begin with, so its operating budget ended up cut to a level that made its job extremely difficult. This led to a difficult and precarious situation—extremely precarious, I would say—particularly in the past two years.

We have made efforts to reduce our requirements and to ensure we stay within our budgets, even though they are deemed insufficient, but that has proven impossible since last year. We made some requests.

You ask me at what level we assessed our long term needs. In the long term we estimate them at about $ 1.9 million yearly. That covers additional salaries as well as additional operating funds. This was our own estimate last year, after passage of the bill increasing our responsibilities, to which I have already referred.

As I said in my presentation, at the Minister's request we will be carrying out a more systematic review of our resource base and long term needs and later this year, once that review is over, we should be in a position to determine the appropriate reference levels to allow us to assume our new responsibilities properly. We shall be reporting to the Minister on this in a timely manner, and discussions can then come to an end.

You referred to the matter of cost recovery and asked if there would be consultation.

Mrs. Francine Lalonde: There will be consultations. I wanted your opinion on this. Can your organization be compared to the CRTC?

Mr. Michel Hétu: The cost recovery issue is a complex one. First of all, it raises a question of public policy, and it is up to the minister concerned to reply. There are also considerations of a practical nature which, in the long run, may play the deciding role in determining the solution.

In a broader perspective, where principles are concerned, I think we first of all have to look at what the purpose of the Copyright Board is. The purpose of our board is to ensure a certain balance where copyrights are concerned between the management societies on the one hand and the users on the other.

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With the Copyright Act, Parliament encourages the formation of collective societies for the management of what are really private and individual rights, with a view to encouraging the dissemination of works and public access to this body of work. It is in the public interest, therefore, to encourage authors to create coalitions in the form of such societies. In order to avoid potential abuses, however, a board was created: the Copyright Board. Its very existence, along with the fact that people have recourse to it, encourages a certain discipline in the market place. This is even true for those societies which call upon the Board only infrequently, or not at all.

We are in a way—and I am pleased to see the Competition Tribunal here today—a regime that is complementary to the general one applying to competition in Canada, which is the Competition Tribunal. If we did not exist, the general one would apply and the director might occasionally bring before it questions of the abuse of market position. Disputes of this type would be handled in this way.

I do not believe the Tribunal currently has a cost recovery policy for monitoring monopolies and market balance. On this overall level, the very concept of cost recovery raises some rather basic questions of principles.

You mentioned the CRTC. It does indeed have a cost recovery policy, but the CRTC differs from the Board rather considerably. It regulates industries. It regulates market entry. In reality, it regulates the viability of an industry. We, on the other hand, intervene to determine charges for use, nothing else. We deal with royalties to authors and those who own the rights.

The CRTC has public policies for implementation. We do not. We set fair rates. That is our fundamental role. The CRTC regulates the public airwaves. It issues operating licences. It is, when it comes down to, rather normal for it to levy charges for the privileges it is responsible for granting.

I could add a lot of considerations of a practical nature, to which we could return for discussion, and which are equally pertinent. If ever there were a cost recovery arrangement, who will need to pay? The societies, or the users of the works? In either case, a cost recovery arrangement would run the risk of impacting on the Board's rates: either copyright holders would receive lower royalties, or users would have to pay more. There are, therefore, some fundamental questions to which answers must be found.

You referred to the Minister. I believe he indicated that he would look at the feasibility of following up on this proposal or idea, and would mandate a committee to do so. I am sure that we will take part in this analysis and that all points of view will be looked at: practical, theoretical, principles. In due course, we shall see what comes of this proposal.

Mrs. Francine Lalonde: Thank you very much, Mr. Hétu.

[English]

The Chair: Ms. Brown.

Ms. Bonnie Brown (Oakville, Lib.): Madam Chair, I want to direct my comments to the Standards Council. I understand you have been through quite a transition over the last few years. I have several questions, which I'll group together and perhaps you can take notes.

I wanted to know the year in which you first received no government funding. What year was that? I wonder if anybody among you can remember the approximate budget of your agency in the previous year. Also, does anybody remember what the budget was in 1997-98?

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I ask these questions, Madam Chair, because I see a situation where they have really no dependable money, except what they can earn. I would assume then there are few paid staff, most of the work being done by volunteers. Certainly that's to be encouraged, but, for example, a team of volunteers develops a set of standards and then you want voluntary conformity to those standards. This becomes pretty nebulous. You have the volunteer setting the standards and then you're hoping that maybe the people in that industry or who make that widget will conform.

My other question is, in the last year when you didn't have a government grant, how many of these groups of volunteers actually concluded and agreed to a set of standards? If you could give me an example or two, that would be good.

How do you measure the rate of conformity after standards are agreed upon? What if you have a team of volunteers who are giving their time to your organization, they create the standards, and then nobody in their industry will agree to them? What good does it do?

How do you get a handle on whether what you're doing is having results? I'm not saying what you're trying to do isn't important. I think it's super important. I'm just wondering, if it's that important, can we depend on volunteers and conformity that is only voluntary. From that question I would say, was there ever a time when your organization had any clout?

The Chair: Ms. Brown, one question at a time, please.

Ms. Bonnie Brown: That's a whole series, but they were taking notes.

The Chair: Mr. Moore, Mr. Perrow, does somebody want to try to respond?

Ms. Linda Lusby: I'll ask Mr. Parsons to answer.

Mr. Rick Parsons: As far as the budget is concerned, you mentioned that we don't get a government grant. I'd just like to correct that. We have in fact, since our inception in 1970, received some funding from Parliament through an appropriation.

Ms. Bonnie Brown: I'm sorry, I thought you lost that a couple of years ago.

Mr. Rick Parsons: No. We've had some definite cutbacks over the years, as everybody has, but we still receive some. This year our main estimates are $ 4.95 million from parliamentary appropriation. Our total budget for this year is $ 9.2 million. The difference is raised through cost-recovered programs, particularly in conformity assessment and sales of standards.

Ms. Bonnie Brown: Okay.

Mr. Rick Parsons: Last year's budget was approximately $ 11 million.

Ms. Bonnie Brown: My notes say the Standards Council of Canada no longer receives funding by vote, thus there is no part III estimates documentation available, and you're telling me you get $ 4.95 million.

Mr. Rick Parsons: I hope so.

Ms. Bonnie Brown: I guess some of my questions are irrelevant then because the notes are wrong.

In any case, what about the conformity issue? How do you measure it?

Ms. Linda Lusby: We have a very extensive information system. I'm just grappling with how best to answer your question.

Although our standards are developed as voluntary standards, many of our standards are adopted and adapted and made mandatory through legislation in the various provinces and federally. For instance, the Canadian electrical code is a standard that's developed by one of our standards development organizations, the Canadian Standards Association.

The Standards Council itself does not develop standards. We certify the development organizations.

You mentioned that we have very little staff. We do have a staff of 70 here in Ottawa who are part of our program. We have some 3,000 volunteers who are involved in voluntary standards activities, both nationally and internationally.

Can you remember the number of standards that were approved last year, Jack?

Mr. Jack Perrow: Yes, 150.

Ms. Linda Lusby: There were 150 completed standards.

Ms. Bonnie Brown: You must let me redeem myself, Madam Chair. I sat in on the Standards Council discussion several years ago and was very impressed. That's why I knew the work they did was important. But my notes have suggested to me that you had no money, and if you had no money, I didn't know how you had the staff you used to have or how you were able to do the work you used to do.

Ms. Linda Lusby: I'm afraid we don't have the same notes.

Ms. Bonnie Brown: Exactly.

Ms. Linda Lusby: We have suffered from cutbacks, but I think we've been able to keep going quite well.

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Ms. Bonnie Brown: Absolutely. It might have helped if you had a presentation that did have some of the facts about your organization when you came before us. I thought somehow or other you'd been a great organization, had had the rug pulled out from under you, and now you were struggling to do the important work that you do. Obviously such is not the case. I'm totally relieved. It's good news.

The Chair: Thank you very much, Ms. Brown.

Are there any other comments? No?

Mr. Pankiw, did you have any questions?

Mr. Jim Pankiw (Saskatoon—Humboldt, Ref.): Madam Chair, I'd like to question the witnesses from the Standards Council of Canada. Am I correct in my interpretation that any initiative undertaken by the Standards Council of Canada to assist in solving the year 2000 problem has been a recent thought at best?

Mr. Larry Moore (Director, External Relations, Standards Council of Canada): Madam Chairman, let me attempt to answer that and perhaps one of the questions raised earlier by Ms. Jennings. I'll start by trying to explain a little bit how the standards process works.

As Dr. Lusby explained a minute ago, the role of the council as far as standards are concerned is accreditation. We accredit organizations that develop standards.

The idea for a standard originates in the marketplace. The process is essentially driven by the marketplace. An organization, an association, or an individual identifies a need for a particular standard. They will then go to one of these accredited standards organizations and ask them to develop a standard. They may in some cases come to us if they don't know where to go and we will refer them to a standards organization. They pretty much divide up the field, so there's some efficiency in terms of standards development.

The standards development organization will then seek to find the funding for it. They don't fund it themselves. They will try to bring together a balanced committee of various interests, including representations from industry, consumers, government, environment, and so on, all of those who might have an interest in that particular standard. But it has to be self-funding. They will then develop the standard.

That standard, once it's developed, is purely voluntary. Industry may or may not choose to adopt it; it's entirely up to them. As Dr. Lusby also noted, governments may in fact reference legislation, in which case it becomes mandatory. The process is driven by the marketplace. It's done at the standards development level, not at the standards council.

I'm no expert in the area of the Y2K problem; I'm probably less informed than most of you. My understanding is that the problem is an immediate one that's essentially a technical problem. I'm not sure that we could develop a standard fast enough in any event to be much help to the problem. Dr. Perrow, as the director of standardization, could talk more about the process.

I'm aware that there are diagnostic tools available, and having identified whether something is compliant or non-compliant it's then a technical thing, a manpower issue, rather than a standards problem. At least, that's my view of things.

I don't know whether Dr. Perrow has anything to add.

Mr. Jim Pankiw: I agree, it probably is far too late. I'm just wondering, though, clearly it would have been of benefit to all, to business, government departments of Canada, everybody, had this been done. Who was remiss in taking the initiative to get some type of standard on the go in time to have had an effect? What group, what individual or government department, should or could have approached you and initiated something like that?

Mr. Larry Moore: I'm not sure we were remiss.

Mr. Jim Pankiw: No, no, I didn't say you were.

Mr. Larry Moore: I understand. I guess I'm trying to exonerate the council.

The process, as I explained, is essentially market driven. Industry, if it felt there was a need for a particular standard, would have come forward. We would be remiss if, having been approached by industry, we failed to heed that and encourage perhaps the standards development organization to do something.

That is not the case. We haven't been approached, so we've assumed that the problem is taking care of itself, that what is in place is satisfactory. I realize that a lot of people may not yet be fully compliant, but presumably they are addressing it. If there's a need for a standard, it certainly hasn't been identified to us.

Mr. Jim Pankiw: Okay, but you slightly missed my question. I agree that no blame could possibly lie with your council since you weren't approached. But what individual, groups or organizations could or should have approached you, in your judgment?

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Mr. Larry Moore: The example was given earlier of medical devices. I'd expect that if manufacturers of medical devices felt there was some need for a standard in that area, they would have approached one of the standards development organizations. I'm not sure, but it would probably be the CSA. They would say that they have a need for this and they would like to have a committee, and in fact there probably is an existing committee in place to address this issue.

Mr. Jim Pankiw: In your judgment, the responsibility for that would lie solely in the hands of private industry. There is no government department or leadership that could or should have been in existence. At quite a practical level, industry wasn't aware of the problem.

Mr. Jack Perrow: I could comment that we do participate in the international work as well as national work on medical devices. I'm not familiar with what they have done with respect to this problem, but we can certainly find that out.

I believe that the medical devices branch in Health Canada is addressing this issue as well. I'm not familiar with what they have been doing in this area, but again it's something that they have under their responsibility. I'm assuming they have taken some action.

Ms. Linda Lusby: If I could add to this general area, in the field of conformity assessment, when our accreditors go out and talk to manufacturers in the testing labs and the testing organizations, they are looking now and checking to see under the quality management systems that those testing organizations have in place that they are checking for the preparedness for the year 2000. So we are passing that along and checking that they are checking for that as part of the accreditation process through the Standards Council.

The Chair: Thank you.

Mr. Lastewka.

Mr. Walt Lastewka (St. Catharines, Lib.): I'm going to follow up on my colleague Mr. Pankiw's questions. I do believe the year 2000 work group that was put together by Mr. Monty did not assign any assignments to the Standards Council, but the Standards Council had to be prepared within their own system. Did I hear clearly that whatever mechanisms you have, that you are year 2000 compliant? Am I right?

Ms. Linda Lusby: Yes, that's correct.

Mr. Walt Lastewka: And you're delivering the message out to the people where you have standards and anyone you come in contact with?

Ms. Linda Lusby: Yes, that's correct.

Mr. Walt Lastewka: That is what I understood. I didn't think it was up to the Standards Council to be the year 2000 project people, but to be ready to make sure that you could carry out your responsibilities.

Ms. Linda Lusby: That's correct.

Mr. Walt Lastewka: Is that your understanding also?

Ms. Linda Lusby: Yes.

Mr. Walt Lastewka: That answers my question. As long as they're ready when the year 2000 comes, because that's the only standard that sticks.

The Chair: Thank you, Mr. Lastewka.

Mr. Shepherd.

Mr. Alex Shepherd (Durham, Lib.): My question is directed to the Competition Tribunal. I listened with interest to your dissertation on all the cases. I think there were nine cases that you dealt with last year. There were reviews of existing consent orders and so forth. In an economy that is the seventh largest in the world, does that seem like an unduly small schedule for you to be dealing with competition?

Ms. Annaline Lubbe: I beg your pardon? I couldn't hear very clearly.

Mr. Alex Shepherd: Canada is the seventh largest economy in the world. It would appear to me that the tribunal heard less than nine cases to do with the restraints of trade through competition. Is that a fair assessment?

Ms. Annaline Lubbe: As I pointed out, the tribunal has no control over its workload. It is the director who does the investigations. It is he who decides to come to the tribunal. He decides what his enforcement policy is, and it is in the first place a compliance policy.

Mr. Alex Shepherd: In looking at other jurisdictions, would you say that was a...?

Ms. Annaline Lubbe: My understanding is that it is comparable percentage-wise.

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When they compare cases that go to the comparable bodies, for example, in the United States and before the restrictive trade practices court in England, they find that percentage-wise, yes, it's not far out.

The tribunal is a little bit like the cop that stands at the corner. He stands there and so the robberies don't take place.

Mr. Alex Shepherd: In the cases that you addressed, can you show me an example of where you enhanced competition in Canada?

Ms. Annaline Lubbe: It's not for us to enhance competition in Canada, except by the quality of the decision of the tribunal. It is not for the tribunal to take a proactive role in deciding that this is the case. They have no supervisory role. It is entirely the director who is responsible for the administration of the Competition Act.

Mr. Alex Shepherd: But the judgments that you laid down and the carrying out of those judgments—surely the object of the exercise is to enhance competition, isn't it?

Ms. Annaline Lubbe: Oh yes, I see what you mean. You want to know whether we do any analyses of the quality of the decisions, whether they have the desired effect.

It's a little bit like the courts, I would say. The decisions are handed down, and it's for others to analyse whether the decision stops people from committing murders, for example. The tribunal itself does not conduct studies to determine whether the order that the director came and sought and the decision that they made on the basis of the evidence, which usually involves evidence of large numbers of expert people, in fact had the desired effect and to what extent.

Mr. Alex Shepherd: The orders you gave out, how many of them changed an existing economic condition, in other words, required mergers not to occur and things that were thought to be in restraint of trade? How many of those cases involved judgments?

Ms. Annaline Lubbe: The director examines the merger and decides no, he is opposing this merger because it is going to result in a substantial lessening of competition. Let us say in the port of Montreal with the cost case. He first tries to negotiate with them a new configuration. In other words, the parties would divest themselves of some of the assets that they're acquiring so that their position would not be as dominant as he perceives it's going to be. Then if they agree, which they obviously do in the vast majority of cases, they just make an arrangement with him and everybody goes away and they're happy.

Sometimes they come and they put the arrangements, the commitments they make with the director, in a consent order form. Then they ask the tribunal to approve the consent order. The tribunal does not just approve in the sense of rubber-stamping. They have to convince the tribunal that the arrangement they've come to meets this bottom threshold of eliminating the substantial lessening of competition.

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

[Translation]

Mr. Dubé, please.

Mr. Antoine Dubé (Lévis, BQ): I have two questions. They will be the same for each of the three organizations.

I gather that all three of your organizations are financially dependent on the credits of the Department of Industry. Do you feel this is a good thing? The Copyright Board also obtained an allocation from the Department of Canadian Heritage, which more or less saved it. Is the Department of Industry the right structure for your funding?

In the context of budget cuts, is it your impression that all independent bodies such as yours underwent cuts according to a set rule, or is it your impression that there was a concrete, case-by- case evaluation, without a basic yardstick?

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Mr. Michel Hétu: As far as the first question is concerned, I have no particular comment. We report to the Minister of Industry, which is perfectly normal. We are a tribunal, and administer an act that deals with intellectual property. The other legislation dealing with intellectual property falls under the jurisdiction of the Minister of Industry, whether it deals with trademarks, invention patents or whatever. This is why we report to the Department of Industry.

On the other hand, we are an independent tribunal. Consequently, regardless of which minister we report to, there is no interference. We are autonomous, if you like. The minister is simply a channel through which we access Parliament for our budgets. I have no point of view on this.

As far as revision of the policies relating to the creation of new rights for the cultural and other sectors, obviously the Minister of Canadian Heritage is very interested in this. That, moreover, is why Bill C-32 involved two ministers. It involved legislative policies on copyrights and so on.

When the Board intervenes, it is an independent body. As far as the cuts it has undergone in recent years are concerned, I believe that they were made on a more or less general basis across all departments and agencies, a purely mathematical basis. I do not think that there was a close scrutiny of the specific needs of the organizations in question, or the effects cuts might have on them, particularly the smaller ones. This in part explains the difficulty we find ourselves in. I trust it is only temporary.

Mr. Antoine Dubé: And what about the others?

[English]

Mr. Rick Parsons: As to your first question on support from Industry Canada, the Standards Council of Canada is a crown corporation. We act fairly independently of the department. They do obviously provide us with some support in the policy area and so on, but as far as their administration and general operations are concerned, we're totally independent of the department.

On our budget and our appropriation over the last several years, again our cuts have also been largely across the board, based on program review activities through Treasury Board and so on. We've seen over the years a number of small cuts to our appropriation. As far as I know, these don't result from any specific study of the Standards Council, but rather they were across-the-board cuts.

Many years ago...well, not many years ago, but about nine years ago the Standards Council did have a large cut that was pretty much directed strictly to the Standards Council. That brought our base funding down from about 90% of our operations to about 70%. Since then we've seen a number of incremental decreases again based on program review that have brought our appropriation down to about 45% to 50% of our operating budget.

[Translation]

Mrs. Annaline Lubbe: Mr. Dubé, I have nothing to add to what Mr. Hétu said in answer to your first question.

For the second, of course our budget was also reduced. As I explained, we did our utmost to make arrangements with other agencies. Treasury Board encourages agencies to make arrangements with others on sharing certain services. We have two arrangements for the present fiscal year, one with the Office of the Commissioner for Federal Judicial Affairs and the other with the CITT.

[English]

The Chair: Thank you.

[Translation]

Thank you, Mr. Dubé.

Mr. Bellemare, do you have a question?

Mr. Eugène Bellemare (Carleton—Gloucester, Lib.): Mr. Lastewka has already asked it.

[English]

The Chair: Mr. Lastewka asked your question. Do you have more questions, Mr. Pankiw?

Mr. Jim Pankiw: In keeping with a similar quest from Mr. Bellemare of previous witnesses, the commitments that have been made, the goals as outlined by the Standards Council of Canada in terms of their preparedness for the year 2000, I wonder if they could provide that in writing to the committee.

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Also, at the anniversary date of the commitment to have all the commitments they made in place, could they confirm to the committee, again in writing, what the status of that is?

The Chair: Mr. Pankiw, as committee chair, on behalf of the committee, I will be writing to all the agencies of industry on the year 2000 preparedness issue asking them for their state of readiness. They will be getting a formal request from us.

Mr. Jim Pankiw: And you'll be asking them to keep in touch with us when those anniversary dates—

The Chair: It's our responsibility to monitor them, and we will continue to do that. They will keep in touch with us. And you've now put them on notice, so that's fine too.

That being said, I do have just a couple of brief comments before we close the meeting.

I think there's some confusion over the year 2000 issue and responsibilities. My concern with regard to the Standards Council is that consumers rely on your standards. Consumers are out there thinking and believing that any of the products and services that have a standard on them will work as they ought to. A lot of consumers buy microwaves, televisions, VCRs. All those things have embedded chips. If you purchased them in 1998, there is no guarantee they will work, but if they have your standard on it, the implication is that they will work in the year 2000.

That's where I address my concerns to you. I am pleased to see that you are bringing it up at your next meeting, because I know there are computers on the shelf right now that will not work. We're trying to bring awareness to consumers, and that's why we wrote our report.

I would also direct you to a Globe and Mail article on Tuesday, May 19 about the medical devices. Mr. Perrow and Mr. Moore, and Mr. Perrow in particular commented that he thought the medical community was getting ready. The medical community is globally behind for the year 2000. Medical devices are globally behind from what we can tell. We do know that Health Canada is monitoring that.

We did an interim report as a committee on May 14, which you may be interested in looking at. It is on the Internet. It touches on a variety of areas. There's a summary in the report as well to give you a brief overview.

You may also want to note that members of this committee, at the beginning of our hearings on the year 2000 issue back in the fall, did not see it as more than an information technology problem. They did not understand the depth of the embedded chip problem and thought everyone was doing what they were supposed to be doing.

We're hoping that more businesses are doing what they're supposed to be doing to get ready. We hope that the Stats Canada survey results, which are due out in June or July, will confirm that. But back in November, 30% of all business wasn't doing anything to get ready and didn't see it as their problem.

Bearing that in mind, we are pleased to have you here today. We are pleased to have you review your different areas of responsibility.

We apologize for not having you appear before us before the estimates had to be completed. Because we were trying to get the interim report on the year 2000 out to bring awareness to consumers and small and medium-sized business, we had to delay these hearings.

I want to thank you all for being with us. We look forward to meeting with you again soon.

The meeting is now adjourned.