INDU Committee Meeting

STANDING COMMITTEE ON INDUSTRY

COMITÉ PERMANENT DE L'INDUSTRIE

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, November 18, 1999

• 0908

[English]

The Chair (Ms. Susan Whelan (Essex, Lib.)): I'm going to call the meeting to order. This is a study of Bill C-276, An Act to amend the Competition Act, 1998 (negative option marketing).

I'm very pleased to welcome Roger Gallaway, MP for Sarnia—Lambton, our witness who is going to discuss the bill and tell us what it's all about.

Mr. Gallaway.

Mr. Roger Gallaway (Sarnia—Lambton, Lib.): I want to thank you for inviting me here today to address your study of Bill C-276, which is an act to amend the Competition Act, 1998, in regard to negative option marketing.

I should start by saying that at the heart of this bill lies one simple concept. Canadian consumers ought to have the right to express consent before they are charged for a new product or service. More simply, they should be able to say they know what the product is, they know what they're going to pay for it, and, yes, they want it. That's hardly a profound observation, and Bill C-276 is about giving them this right.

Express consent is a simple concept for most people to grasp, yet for some federally regulated undertakings like banks, telephone and cable companies, it gets complicated. When they appear before this committee, I would encourage you to ask these industries why they have difficulty with express consent. Bill C-276 is about dealing with this odious marketing practice.

• 0910

Negative option marketing or billing reverses the traditional buyer-seller relationship so that customers are offered new products or services and are required to opt out or expressly decline these new offers to avoid being charged for them. In other words, if you fail to respond to a negative option scheme, you are deemed to have given consent and you are billed accordingly. In my opinion, it's a rather perverse way of doing business and it's sleight of hand. It denies a very basic consumer right, the right to choose.

Just by way of history, this issue first came to my attention in December 1994, when I, along with a lot of other people in this place, received complaints over a cable company's plans to sell new specialty channels by negative option billing. Many of us will remember the consumer revolt of January 1995. We all remember the pictures of angry consumers lining up to cancel their cable service. We remember the phone calls that we received in this place and letters from constituents demanding government action on this issue.

I would ask in an open-ended way whether the cable companies stopped negative option billing. The answer is that they did not. They extended the free viewing period for the new channels and they offered money-back guarantees. But in order to avoid additional charges, consumers still had to opt out of the new services by sending in a reply card or somehow contacting the company to decline the offer.

I should also point out that with the last round of 15 English language specialty channels, Rogers and Cogeco chose to punish subscribers who did not voluntarily opt in. If you took their new mega-package, your cable bill was reduced by $2. If you refused, your bill went up by $2 for no additional services. These types of bully tactics make a mockery out of the cable companies' pledge that they have learned from their past mistakes.

To this day, negative option billing is the preferred method for foisting new cable services on consumers in the province of Quebec. I should point out that in 1996, the then president of the Canadian Cable Television Association promised all Canadians that this would not happen again, but his members in Quebec continue to do that very thing. I will address this point further in my remarks.

Bill C-276 historically has had a somewhat long and some might say tortured past. For the benefit of those who were not here in the 35th Parliament, the last Parliament, I'll just briefly trace the evolution of this bill to its present form.

In February 1995, I introduced what was then Bill C-300, which was an act to amend the Broadcasting Act. This bill sought to end negative option billing by cable companies and other providers of television services. It was inspired by an open letter from the Consumers' Association of Canada and the Public Interest Advocacy Centre to then Minister of Canadian Heritage Michel Dupuy. The letter urged the Government of Canada to prohibit negative option billing, pure and simple.

That bill died on the Order Paper at the end of the first session of the 35th Parliament. Its successor, Bill C-216, which was identical, was drawn up in March 1996 and was deemed votable. It passed second reading and was referred to the Standing Committee on Canadian Heritage in April 1996. The committee adopted an amendment, drafted by the CRTC, to address certain concerns over the viability of French language specialty channels, and I supported their amendment.

In September 1996, it passed third reading in the House and went to the Senate. I must say that despite the best efforts of its sponsor in the other place, the bill languished for quite some time, until the Senate passed a further amendment and sent it back to the House. I also supported that amendment.

Unfortunately, there was only about a week and a half left before the April 1997 election. Despite the fact that it was debated for two hours, the rules did not foresee a private member's bill being amended by the Senate and being sent back; therefore there was no way of bringing it to a vote.

When Parliament resumed in the fall of 1997, I reintroduced the bill and the Senate amendment as Bill C-288. That bill was deemed not votable.

In April 1998, I introduced Bill C-393, which passed second reading in May 1999. Parliament prorogued and it died on the Order Paper, but, as we all know, according to the rule changes with respect to private members business, I'm allowed to restore this identical bill, now called Bill C-276, in this session of Parliament.

• 0915

Bill C-276 casts a wider net than the first one, Bill C-216. It would not only protect consumers from negative option billing by cable, but also by telephone companies and banks. There's a simple reason for why I did this. Throughout earlier attempts I was receiving calls and letters from Canadians across the country who had been caught by other negative option schemes. They often asked if they would have been protected by Bill C-216.

I'd like to point out that in 1996 the federal Office of Consumer Affairs in Industry Canada released a study on negative option marketing that contained the following warning:

Negative option marketing has the potential to be an important marketing tool in the financial services sector. Examples include the sending of unsolicited credit cards and changes in account structure made without consumers' consent. The industry is seeking new sources of revenue, offering new services and changing old ones. Ever increasingly powerful computers make it easier and cheaper than in the past for the industry to effect these changes. ...the new technologies could allow industry to profit by slipping new charges and services past unsuspecting customers.

In October 1997, by way of example, the Toronto-Dominion Bank employed a negative option scheme to deprive bank customers of their privacy. The federal Privacy Commissioner made mention of this in his 1997-98 annual report to Parliament:

The Toronto Dominion Bank's new privacy brochure also moved many to call, objecting to the bank's requirement that customers opt out of its plans to share information with subsidiaries. Customers had until October 1997 to indicate their preference. No news meant the information would be shared. While privacy advocates prefer active over passive consent, opting out meets the consent test set out in the Canadian Bankers Association Privacy Code, and the Canadian Standards Association Code on which it is modelled.

On something as basic as protecting a customer's privacy, the bank's definition of consent includes someone not responding to their junk mail. They sent out a little flyer, one of those multi-paged ones, in bank statements. These came with bank statements and Visa statements and other things. If you read it, on page 6 of this flyer it says that you have to contact or write to the bank and say, “No, you're not going to share my personal information with your subsidiaries.” I'd like to suggest to you that this is a great way of doing business: just send out a flyer and do what you want with it afterwards.

The Consumers' Association of Canada has also provided another example of one bank's approach to negative option marketing. For example, the National Bank of Canada, in one of its areas, Montreal, offered its clients travellers' health insurance. It's health insurance for when you're in Florida or are leaving the country. The offer was presented in a brochure—in the same fashion—as a free trial period, so you got it for a couple of months. At the end of the so-called free trial period, many customers were shocked, amazed, and outraged to discover that their accounts had been debited $9.95 after the free trial period. In effect, they had purchased travel insurance by saying nothing.

Another example that has come to my attention involves university students. For example, in this city, when students at Carleton or the University of Ottawa move into town, one of the first things they do is get a telephone. They call Bell, the installation or hook-up occurs, and at that time they're informed that they will get call waiting—a special option, for example—free of charge for a couple of months. Of course, after the two months expire, into month three they receive their phone bill and they find out that there's an additional charge of $2.70 tacked onto their bill. Not once did they say, “Yes, I know what I'm getting, I want it, and I know what I'm going to pay.”

In Quebec, negative option marketing is still the preferred method for foisting new cable services. The usual excuse is the argument that French language speciality channels could not survive if they were sold on a positive option basis. I'm told by the industry that there are just under two million cable homes in the province of Quebec. We've also been told in past parliamentary hearings on this very subject that Quebec consumers have no problem with negative option billing, as some suggest; that in fact the province's consumer protection law forbids it. And I must say this is a favourite argument of the Bloc Québécois.

• 0920

Well, apparently the Bloc members have overlooked the consistent opposition to negative option billing by Quebec-based consumer groups like Action Réseau Consommateur. This particular consumer group recently filed a six-page brief with the CRTC, opposing the licensing of a French language specialty arts channel. In their brief, they provide commentary on the 1997 launch of four new French language specialty channels in Quebec:

[Translation]

When the channels were launched, Quebec consumer groups, the Consumer Protection Bureau and Videotron all received numerous complaints, particularly about the marketing method used, which was negative option billing.

[English]

It could be that my friends in the Bloc Québécois have had a change of heart. Their critic for Canadian Heritage, who I see here this morning, recently launched a public campaign against the distribution of a French language educational channel, TFO, in the province of Quebec. The member for Portneuf—bonjour—

[Translation]

Mr. Pierre de Savoye (Portneuf, BQ): Welcome, Mr. Gallaway.

[English]

Mr. Roger Gallaway: —explained in his party's apparent about-face, or should I say volte-face, on such issues in a TFO interview that aired on October 28, 1999:

[Translation]

Look, I have no objection if a Quebecker wants to subscribe to TFO. I have a problem with the CRTC, which is a federal organization, forcing all Quebeckers who get cable to pay for TFO, whether they want it or not. That's wrong. That is not what I would call a free- market practice.

[English]

Bill C-276 is about protecting the consumer's right to express consent prior to purchasing a new good or service from a federally regulated undertaking such as a bank, a cable, or a telephone company. It would amend the Competition Act. It does not propose an outright ban on negative option marketing.

There may be situations in which a consumer could benefit from such an arrangement; however, for this to be the case, consumers must be able to make an informed decision. That's why this bill proposes that certain steps be taken for a negative option scheme to be legal or acceptable. These steps include increased disclosure, three months' notice, and, most importantly, the express consent of the customer or the consumer.

As drafted, the bill proposes fines for those who contravene the act, and it also requires that an annual report of complaints filed with the Competition Bureau be tabled in Parliament. We here in this place could then get some reading of what is happening in the marketplace. This is similar to the approach taken by the government in Bill C-20, which dealt with deceptive marketing and passed in the last Parliament.

I must say that I've had the opportunity to sit down with officials from Industry Canada, Canadian Heritage, and the Department of Finance over the past few months to discuss various ways to improve this Bill at committee stage. In fact, because Bill C-20 passed, there is a practical need to amend this bill to take into account recent changes to the Competition Act resulting from the passage of Bill C-20. I must say, I want to thank the officials from that department, and particularly the people from the Competition Bureau, in this regard.

I'll turn to what some of the improvements that have been suggested by the government involve.

The first is making negative option marketing a civil reviewable matter under the Competition Act rather than a criminal offence. This would mean that the Competition Bureau could apply, on reasonable grounds, to the Competition Tribunal, the Federal Court, or a superior provincial court for an order requiring the practice to cease. Where warranted, the court could also impose an administrative monetary penalty. This change is in fact consistent with Bill C-20 amendments to the Competition Act that created this alternative civil track to deal expeditiously with cases involving misleading advertising and deceptive marketing practices.

• 0925

Secondly, amendments are going to be tabled that focus on sectors of clear and exclusive federal jurisdiction, for example, enterprises regulated by the Bank Act, the Broadcasting Act, and the Telecommunications Act.

Thirdly, amendments will be tabled that clarify that the Minister of Canadian Heritage could recommend that certain services be exempted from the application of this law.

I must say I wholeheartedly support the government amendments to this bill. In fact, Madam Chair, with your permission, I would like to table, in both official languages, the amendments that will be moved by the parliamentary secretary at the appropriate time.

I look forward now to your questions, and I will table those amendments.

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

You're going to circulate those. Mr. Gallaway is going to have his amendments circulated, and we'll take those under advisement.

Mr. Penson.

Mr. Charlie Penson (Peace River, Ref.): Yes, thank you, Madam Chair.

Mr. Gallaway, you've given quite a history of how this bill has come to be where it's at today. Would you care to comment on why the government has not picked up this bill? It seems like a pretty obvious choice to address a situation that needs to be addressed. Why did they allow it to die on the Order Paper and have the torturous past it has? They have the ability to pick up any bill and make it a government bill at any time. What's your view on that?

Mr. Roger Gallaway: I think if one looks at the philosophical backdrop to consumer protection law federally, there's a reason for that. If we look, just generally, at consumer protection law in this country, there's quite frankly a dearth of it. There is provincial legislation that deals with things such as the Book of the Month Club, things of that nature, where people are receiving certain things in the mail that they never ordered and didn't want.

There's also provincial legislation in most provinces that deals with such things as buying over the phone some particular good or dealing with itinerant salesmen—people knocking at your door.

But federally, it has always been assumed that for those industries that are regulated by federal bodies, principally the CRTC and the finance department—and surprisingly, in other cases that are not quite as consumer driven, things such as the NEB—the board would be there to balance the interests of industry and the consumer. That may have been true at one time, but I think we have seen a profound shift, and I don't hesitate to say that the exchange between the personnel, if I can call it that, at the CRTC and the industry it regulates has been quite open and, in my opinion, at times quite shameful.

I would say, as an example, that Mr. Bureau, who at one time I believe was the chair of the CRTC, left the CRTC and went to Astral Communications, where he sits now in a private, non-governmental corporation. But he has greater opportunity to pick up the phone or walk into an office of the CRTC than you or I would ever have. There's this relationship that has fallen that, in my opinion, is not exclusively arm's length or objective.

Mr. Charlie Penson: Okay. Well, I think we do know how that system works.

You talked about the need for express consent, and it seems logical. But express consent in what form? I gather you're saying a written response.

Mr. Roger Gallaway: No, I'm not saying that.

Mr. Charlie Penson: Okay. Can you just expand on what you mean by express consent?

Mr. Roger Gallaway: I think you will hear from some of the department experts on this topic, so whatever I say is prefaced, and you'll want to pose that to some people.

Some people assume that express consent means in writing. That is not the case. The courts have ruled that express consent may be verbal. Express consent, certainly in an age of information technology, may be simply pushing a button on a bank machine. It may be by pushing a yes button on your computer. It can take many forms. And it may be in writing.

• 0930

I think for many of us, we're still tied to the paradigm that express consent must be in writing. Technology has overtaken that, and it can be in other forms.

Mr. Charlie Penson: But in order to do that, say a simple phone call to a company saying I don't want your service—

Mr. Roger Gallaway: That's not express consent.

Mr. Charlie Penson: No, because there's no way of documenting that, I gather.

Mr. Roger Gallaway: That is opting out of a negative option plan. What we're suggesting is that the company comes to you and says, do you want this? If you say yes or if you give them a card, perhaps a waiver, or if you hit the yes button on a bank machine, that's express consent and that's a positive—

Mr. Charlie Penson: So the onus is on the company then as opposed to the consumer?

Mr. Roger Gallaway: Exactly. It's like any other commercial transaction. If you go into a store, you pick something up because you want it and you pay for it. And that's all this is about.

Mr. Charlie Penson: Okay, that's fine. Thank you.

The Chair: Thank you, Mr. Penson.

Madam Jennings, please.

Ms. Marlene Jennings (Notre-Dame-de-Grâce—Lachine, Lib.): Thank you very much for your presentation. It was very clear. During your presentation you made reference at one point to a critical mass of viewers required for a television company or station to be viable. Do you know what that number is?

Mr. Roger Gallaway: No, I don't. I don't think I referred to a critical mass. What I was referring to was an argument made in the past. According to the industry, in Quebec there are about two million homes hooked up to cable. The argument in the past has been that if we launch a new service, we must provide that service to all homes, in the industry's view, to make it economically viable.

Without going into a great diatribe about this, the CRTC will continue to have the power to say that a particular service is mandatory. Or the minister, under this act, can say that a particular service is exempt from this legislation.

But remember that in Quebec, as in the rest of Canada—I don't regard this as anything to do with language—we're now dealing with speciality channels. Let's assume in 1997 in Quebec—and I don't want to pick on any one group—you are a senior citizen. Four specialty channels are being launched, and amongst them is a cartoon channel. As somebody of my age, even, you're not particularly interested in receiving a cartoon channel.

We're not dealing with profound cultural channels. We're dealing with fluff. We're dealing with specialty channels. We're dealing with what I call People magazine on the air. This is stuff that is purely diversionary and sometimes mildly amusing.

When you get into these very nebulous areas of entertainment, the question becomes, is it right and proper to say that all of these consumers in this marketplace, wherever it is and regardless of language, must buy this service? They have no choice.

Ms. Marlene Jennings: The question I'm asking is that there obviously has to be a business case that determines how many viewers or subscribers are required for any new service to actually continue to be offered, so that the company makes its bottom line. It covers what it has cost them to develop the service and to continue running the service. Do you know what that minimum number is in order for that to be viable?

Mr. Roger Gallaway: No. Of course, it would depend upon what they're charging. So I don't know what that number is.

Ms. Marlene Jennings: Okay.

I have a second question. You made reference to Action Réseau Consommateur, that they filed a brief before the CRTC regarding licensing of another French language specialty channel. They referred to the launching of four specialty channels. The quote you used said they had received numerous complaints. Do you know how many complaints they received?

Mr. Roger Gallaway: No, but I believe they will be appearing before you, and you can ask them that question.

Ms. Marlene Jennings: Great. Thank you.

• 0935

In terms of the amendment you've tabled—which I'm assuming you're supporting—

Mr. Roger Gallaway: I said I was, yes.

Ms. Marlene Jennings: —I notice there is a change so that the Minister of Canadian Heritage would be able to exempt a specific channel or new service. Would that have an impact on French language specialty channels?

Mr. Roger Gallaway: Would it have an impact—

Ms. Marlene Jennings: Negative or positive?

Mr. Roger Gallaway: Let me put it to you this way. Let's assume that another cartoon channel is being launched in Quebec.

Ms. Marlene Jennings: Let me stop you for a second. I know a lot of seniors, and I know a lot of people who are our age—which means we're approaching, you know, seniorhood—and on Saturday mornings there are a heck of a lot of us who watch the cartoon channel.

Mr. Roger Gallaway: All right.

Ms. Marlene Jennings: So I don't think the interest in terms of cartoon channels is necessarily gauged on our chronological age or even our mental age. I think it simply has to do with what our interests and tastes are.

Mr. Roger Gallaway: Exactly.

Ms. Marlene Jennings: For me, that's not a good argument. You say that a senior doesn't want a cartoon channel. I know a lot of seniors. I have a high level of seniors in my riding. A lot of them find some of the cartoon channels really interesting, as they do some of the nature channels, some of the art channels, some of the cultural channels—you name it.

So I think there's a wide variety.

A voice: South Park is not on the cartoon channel.

Ms. Marlene Jennings: I don't watch South Park.

Mr. Roger Gallaway: What is the question?

Ms. Marlene Jennings: The question was, do you know what, if any, impact the amendment that would provide for the Minister of Canadian Heritage being able to exempt a new specialty channel could have on French language?

Mr. Roger Gallaway: It's not a question of language; it's a question of—

Ms. Marlene Jennings: I understand that.

Mr. Roger Gallaway: Let me answer your question. Under the amendment, the minister would have the right to exempt a channel, regardless of language. In my opinion, what this does is it puts some accountability into the system.

So in my example of the cartoon channel, if you want to.... Let's assume that were the case and it was exempted. Then you deal with your constituents and defend why they're being forced to buy.

Ms. Marlene Jennings: As I do on many other issues.

Mr. Roger Gallaway: It puts some accountability into the system. That's all I'm saying.

Ms. Marlene Jennings: If it goes through, does that amendment also provide some positive impact on specialty channels that are developed possibly by aboriginals and first nations?

Mr. Roger Gallaway: The CRTC will be appearing before you. You're asking technical questions now. I think you should properly address those to them.

Ms. Marlene Jennings: They're also philosophical questions.

Mr. Roger Gallaway: In what sense?

Ms. Marlene Jennings: In the sense that we have a diverse culture. The aboriginals are the first nations of this country. We also have an increasingly diverse ethnocultural society. Demographics have shown that by the year 2020, I believe, visible minorities will be the largest group making up Canadian population. This means we have an increasingly diverse interest and culture and therefore the possibility of increased specialty channels to meet the needs of that increasingly diverse culture.

Mr. Roger Gallaway: Ms. Jennings, nothing in this bill would preclude specialty channels.

Ms. Marlene Jennings: Would anything in this bill preclude, if the amendment goes through, the minister providing an exemption on a cultural basis?

Mr. Roger Gallaway: Absolutely nothing.

Ms. Marlene Jennings: Great. That's what I wanted to hear. Thank you.

The Chair: Thank you, Madam Jennings.

[Translation]

Mr. de Savoye.

Mr. Pierre de Savoye: One thing I admire about you, Mr. Gallaway, is your perseverance. The intent of your bill is extremely praiseworthy. If you remember, during the 35th Parliament, the Bloc Québécois objected to it because the Quebec television broadcasting and cable distribution market was more restricted, and the rules of the game had to stay the same.

• 0940

But at the time, during the debate, I pointed out that if you were to add a provision to your bill—the one you had introduced in the 35th Parliament—stipulating that the bill did not apply to francophones in Quebec, the Bloc Québécois would no longer have a problem with it.

What brings me here today is yourself and your interpretation of my comments. From your standpoint, it is quite natural that you would try to find support from myself or the Bloc Québécois for your bill. But if you had a greater understanding of the TFO issue, you would see that there is no relation between the two. Let me explain.

You are focussing on including a television channel in a package of channels at its correct price. Though TFO is of course a channel, there is a major difference there. TFO is not available at its correct price, but at ten times cost price. In other words, TFO tells the CRTC that its cost for including the service in its Quebec package is $320,000, and suggests that it be billed—I'm giving you TFO figures here—at somewhere between $3 and $4.5 million over six years. That's a return of 1,200 percent.

As you know, TFO is an Ontario Crown corporation. What is TFO planning to do with the income it generates from this? It will use it to pay down its accumulated debt, not to improve service. At the end of six years, it will declare an accumulated surplus of $600,000.

I'm quite certain that you can distinguish between providing a channel at its correct price within a package, and asking Quebeckers to subsidize an Ontario Crown corporation at ten times the real cost of the service provided. That is taxation without representation, and that is what we refuse to accept.

TFO would be welcome throughout Quebec. In any case, over 100,000 homes already get it. But the Ontario government should not use the CRTC to ensure that its accumulated debt is paid off by Quebeckers. That is the point, and the only point, we are trying to make.

The Bloc Québécois maintains its position, and will not allow Quebeckers to be taxed without representation by the Ontario government through the CRTC. Do you see the difference, my friend?

[English]

Mr. Roger Gallaway: Not at all. I must say that I did quote you, but I do have 11 pages of your interview. You're making a distinction that I don't think any logical person will buy from you.

Certainly in Quebec in these bundles there are American signals, such as PBS. You've apparently done an analysis of the balance sheet of TFO and you've arrived at the conclusion that it is in some way subsidizing an Ontario crown corporation. That's your conclusion, and you're certainly entitled to it.

Could one not make the same argument for a number of the shell companies that launched their specialty channels in 1997 in your province? If you look at their applications to the CRTC, you will see they're nothing more or less than shell corporations without any assets. The only asset they have is a proposal to the CRTC. They have no line in terms of assets, yet once they get that licence it's worth something.

• 0945

Yes, they have debt. You could apply the same argument you're using to the CBC. In 1995, we had a deficit in this country and they were broadcasting in the province of Quebec. Take that and extend it to the 1997 launch of shell corporations. Once they're given licences by the CRTC, they have some value. But they start out in a deficit situation and it flows through to the end—

Mr. Pierre de Savoye: I just don't get it, Roger. Are you telling me the Ontario government is comparable to a shell corporation? Is that what you're saying?

Mr. Roger Gallaway: I'm not. I'm making the comparison to you that somehow we have to distinguish who can broadcast on the basis of their balance sheet. I find that pretty absurd.

[Translation]

Mr. Pierre de Savoye: Madam Chair, if I understand correctly, my honourable colleague Mr. Gallaway feels that, when it comes to reimbursing a government of Ontario debt, it would be absurd to determine where Quebeckers' money was going and Quebeckers should not be worrying about it. I'm sorry, but I do not agree with the witness, and I give the floor back to you. Thank you.

[English]

Mr. Roger Gallaway: I must say in conclusion that I agree with you that we have to talk about the marketplace and a free and open market. Thank you.

The Chair: Thank you.

[Translation]

Thank you, Mr. de Savoye.

[English]

Mr. Malhi please.

Mr. Gurbax Singh Malhi (Bramalea—Gore—Malton—Springdale, Lib.): Thank you Madam Chair.

Mr. Gallaway, according to the information, will the negative option marketing lead to increased costs to consumers because of the higher administrative burden on the business?

Mr. Roger Gallaway: No. If you follow that line of logic, you could force people to buy all sorts of things to drive down the cost. We're talking about a marketplace here; we're not talking about the essentials of life. If you're referring to television, at least, we're talking about specialty channels. I assume you're referring to television.

You're talking about offering a service that may be of interest, for example, in Mrs. Jennings' case, to seniors. But that isn't of interest to everyone. We're talking about the right to choose in the marketplace. Do people want it? If a lot of people want a product, sales will increase and presumably the price will go down. If you're offering a product that is not of much interest to anyone, sales will be low and price presumably will be higher. It's not a profound observation.

Mr. Gurbax Singh Malhi: Could this bill result in conflicts with policies set out in the Broadcasting Act, such as preventing the availability of non-English and French television?

Mr. Roger Gallaway: Absolutely not.

Mr. Gurbax Singh Malhi: Thank you.

The Chair: Mr. Solomon, please.

Mr. John Solomon (Regina—Lumsden—Lake Centre, NDP): I just have a comment to share with colleagues on the committee. We had a circumstance in my district about two or three years ago, whereby one of the cable companies undertook to practice the negative option billing procedure and changed their bundle and their programs to their subscribers.

I received a lot of complaints, as a member of Parliament, so I met with the cable company. During our discussions, I suggested they hold a public meeting with their subscribers, which they did. They had a very good turnout and people unanimously requested that the cable company reverse this, which they did. They just went back to the original programming system.

I'm not sure if anyone else has had this experience. This was a possibility in our district because a member of Parliament was available to do it, and it's a smaller community, and you can do it in a smaller community as opposed to a larger city.

I'm wondering, Roger, if you have had any other experiences like this, or whether this would be possible, if your amendments didn't go through, in a community like Toronto or Vancouver. Did this ever happen?

Mr. Roger Gallaway: That's interesting. It's the first I've ever heard of it. I'm not aware of any other cases.

The fact of the matter is that in this country there are four cable companies—and I'm generalizing—that probably have somewhere in the neighbourhood of 90% of the market. I don't know who the cable carrier is in your district. There are a number of smaller companies that are much more sensitive to the marketplace because they're closer to the marketplace.

• 0950

In terms of the large carriers, in no particular order, they are Rogers, Cogeco, Shaw, and Videotron. They have 90% of the marketplace, and they drive it any way they want.

Mr. John Solomon: For the record, Roger, it was a company called Image Cable Systems in Saskatchewan. They were very democratic.

The Chair: Thank you very much, Mr. Solomon, for that.

Mr. Pickard, please.

Mr. Jerry Pickard (Chatham—Kent Essex, Lib.): Thank you, Madam Chairman. Mr. Gallaway, that was an excellent presentation.

One area I would like more clarification on is the Minister of Heritage being allowed to recommend certain exemptions to the application of the bill. I read into that the possibility that any issues the Canadian government of any stripe may wish to promote, through an order in council, could set a scenario that would allow billing automatically on a negative base, on any issue they wished to proceed with.

Is that a pretty narrow-minded view of what that exemption is? Since you support it, I'm wondering if you could further clarify and explain what that is intended to do.

Mr. Roger Gallaway: Sure. I think you've hit it. APTV, which was launched September 1, would be an example, if this law had existed on September 1. The minister could say “we believe it is in the national interest to carry this channel”. You may want to question people from Heritage about this, but it is my understanding that under the present regime on basic cable, the CRTC can say “this is mandatory and you must carry it”, pure and simple.

The band is getting crowded in many markets. There's no more room on the basic service. Let's assume another channel comes along and has to be carried on an upper tier, as an example, on a tier other than basic. It could be deemed by order in council that a particular channel must be carried—it's mandatory, it's a negative option being imposed by the government, if I can put it that way. It's not a sale; you're going to receive it and you're going to pay for it. It's deemed to be in the national interest that this occur.

Having said that, let me go to another scenario I've tried to use, and I'll back away from cartoons because some people here like them.

Mr. Jerry Pickard: I enjoy cartoons as well once in a while.

Mr. Roger Gallaway: Let me go to some other speciality channel—home and garden, or whatever. Let's assume I live on the 25th floor of an apartment building in Toronto and it's not of much interest to me. Let's go one step further and say there's an order in council that says everybody in Canada must take the home and garden network. You know and I know there would be a big outcry over that. This is something that may or may not be of interest to you.

This amendment puts some, what I call, accountability into the system. Under the present regime, who would you complain to if that were forced on us through some means other than order in council?

In 1995, when the problem erupted, a lot of finger pointing went on. The Department of Canadian Heritage said it wasn't their fault. We said it was the CRTC's fault. The CRTC said they didn't have anything to do with it. So this puts in accountability. You know who made the decision; presumably you know why they made the decision; then it's an accountable system. Under the present system, it's all over the place. It's finger pointing.

Mr. Jerry Pickard: So bringing the whole thing in line, you point the finger and say it's the responsibility of cabinet, from this point forward, or the Minister of Heritage.

If there is a national interest in an aboriginal channel or a French channel from so many across the country, those are the things Heritage and cabinet would probably be most responsible for, but it leaves the door open for future options as well.

Mr. Roger Gallaway: That's correct.

Mr. Jerry Pickard: Okay, thank you very much. That's good.

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

Mr. Jones.

• 0955

Mr. Jim Jones (Markham, PC): In principle I agree with your bill, but I'd like to ask some questions on what Mr. Malhi was alluding to. You're saying it doesn't cost anything more. What are the administration costs of this bill? In my area, Shaw Cable did the same thing. If they had done it the right way it would have cost a lot more to try to get these services out there. And do you have any stats of how many complaints any of these companies got?

Mr. Roger Gallaway: No, I don't. You might want to ask the CRTC.

Mr. Jim Jones: So if they put out 100—

Mr. Roger Gallaway: I can tell you—and Mrs. Chamberlain is not here, but she has made the statement in the House—that it was the biggest issue on which she ever received complaints. I don't think all of us quantify the number of complaints we receive, but I can tell you it's a huge issue.

Is there an additional cost to doing business? Perhaps, depending on the nature of the business and what is being done. But is there a cost to the consumer? Yes, there is. If you're receiving something and paying for it and you didn't want it, and in some cases didn't even know you were getting it, who should pay? The answer to that question is, of course, the person who is doing business should pay. Why should I pay for something I don't want? Why should I receive something I don't want? There will undoubtedly be some cost. What it is, I don't know. But in a free market economy, Mr. Jones, there's always a cost of doing business.

Mr. Jim Jones: Now, what's the difference between this and, say, the book club where every month they send you the selection and if you don't send the letter back, you automatically get the book?

Mr. Roger Gallaway: Well, the difference is that the sale of goods in Canada is regulated under provincial law; it's a constitutional difference. Every province has a sale of goods act of some description, and most provinces have legislation that deals with sale of goods.

One of the complaints I think a lot of us hear about is weed companies that do your lawn. They use a negative option technique in some markets, where they send you a letter in the wintertime and if you don't respond to it, they come and spray your lawn in April and send you a bill.

But that's all regulated. That's the sale of goods and that's all regulated provincially.

Mr. Jim Jones: How is this negative option billing handled in the U.S.? What type of laws do they have or what type of system?

Mr. Roger Gallaway: The U.S. has a myriad of consumer protection laws, both at a state level and at a federal level. There's a much more stringent regime placed on federal businesses. Of course, the U.S. has a culture of protecting consumers, everything from utility companies to banks. Ralph Nader started the consumer protection movement in the United States 35 to 40 years ago, and there's a vast myriad of laws. We have a real dearth in this country. We have none compared to the U.S., if I can put it quite simply.

There are groups that deal with utility companies in the United States; there are groups that deal with banks. Consumer protection is a big, big industry in the U.S. And of course their courts have a different philosophy too in terms of dealing with those who would take advantage of consumers. Their route is through punitive damages usually, in a general sense, in these types of behaviour.

Mr. Jim Jones: Thank you.

The Chair: Mr. McTeague.

Mr. Dan McTeague (Pickering—Ajax—Uxbridge, Lib.): Thank you, Madam Chair. Mr. Gallaway, an excellent presentation. I sort of see a bit of déjà vu in this for both yourself and myself.

I'll try to limit myself to the excesses of competition as opposed to getting back to the old cable fight of 1994-95.

Mr. Gallaway, I wanted to take up where your last comments were with respect to the constitutionality, the comparison of Canada to the United States with regard to the culture of protecting consumers, and the dearth of laws that exist here in Canada.

It has been noted that our Competition Act says a lot, but it's practically impossible to enforce. You've elected, and I think rightly so, to make this legislation as part of the penalties to be civilly reviewable. And for the record, some of us may not be aware of the fact that civilly reviewable does not carry with it what the American Clayton Act would in terms of an injunctive effect or a general application.

• 1000

Are you comfortable, therefore, with the idea that it is completely possible complaints may come before the Competition Bureau that may never be readily addressed or, if done in that fashion, may never actually provide consumers with any type of real protection?

Mr. Roger Gallaway: I regard this bill as a first step in terms of consumer laws at the federal level, that the old paradigm of the CRTC and the finance department protecting consumers has not worked and is not working, and this is simply a first step. I recognize that complaints may not be dealt with in a fashion that a consumer may like, but having said that, I deal with enough people to know some people are never satisfied.

Secondly, this also has a provision in it that there will be a report tabled in Parliament that gives us some idea of what's happening in the marketplace, of what the nature and extent of this is. At the moment I'm having questions like, how many complaints were made to you, or, how many people in Quebec complained about this practice? There is nothing in the Competition Bureau that will quantify those types of numbers in an objective fashion.

You know and I know that in 1995 there were a lot of people in this country who were really angry. How many were there? I don't know.

Mr. Dan McTeague: Probably a lot. You've mentioned marketplace several times. I'm interested in how you would define it in the context of greater competition among those who have entered the market since that problem. Also, maybe the whole question of dealing with the constitutionality.... You and I both know several provinces, as you quite rightly pointed out, under our division of powers, have instituted their own negative option billing specifically designed at certain industries.

Ironically, today the ministers of consumer relations across this country will be meeting with our federal minister, so it will be interesting to see if one of those items that will be discussed will be the efficacy of those provincial laws cantilevered against your own proposal here, which I think is both laudable and may be far more effective if we have an understanding.

In the case of banks, for instance, we have a section in the criminal side dealing with a per se offence for tied selling. Would you not find it more appropriate to deal with prima facie cases of bald-faced, naked, call-it-what-you-will, negative option billing if they were seen as simply that, as an attempt to rip consumers off, and therefore the penalty you would look for might be more effective if you put it on a per se offence?

Mr. Roger Gallaway: Let me deal first with the constitutional issue you raise. In the province of Quebec there is a consumer protection law, and that law explicitly exempts cable, telecommunications. So there is first a recognition in at least one consumer law I'm aware of that this is federal domain. If you have any other questions on that I'd refer you to the Senate committee hearings of 1996, which also went into this at length and concluded it was in fact constitutional.

Second, with respect to the behaviour of banks on tied selling, the reality is it's not tied selling that's prohibited, it's coercive tied selling that is prohibited, and I would suggest that's a much different behaviour.

Mr. Dan McTeague: Madam Chair, do I have any more time or is that it?

The Chair: You're done.

Mr. Dan McTeague: Thank you, Mr. Gallaway.

The Chair: Mr. Dubé.

[Translation]

Mr. Antoine Dubé (Lévis-et-Chutes-de-la-Chaudière, BQ): We are running short of time, so I will ask two or three questions at the same time.

First, I will refer to an Industry Canada document entitled “Negative Option Marketing: A Discussion Paper”. Allow me to repeat the last paragraph on page 2:

Given general residual jurisdiction over contracts, the provinces play an essential role.

Further on in the same document, the same topic arises again:

At the federal level, current regulations appear to provide sufficient flexibility to control the practice of selling by negative option.

• 1005

The paper also lists existing federal legislation that could be used to define boundaries. There are a number of these, including the Telecommunications Act, the Broadcasting Act, section 7 of the Broadcasting Act, and other provisions.

You have set forth your objective, and your arguments are taken from the field of telecommunications, and therefore television. Your amendment would remove that aspect from your bill. I have a simple question for you: what exactly are you trying to achieve? There are many existing federal and provincial legislative provisions that could be used to deal with the problem. You seem to be aware of that yourself, since in your bill there is a provision that excludes telecommunications and television.

I confess I am somewhat confused.

[English]

Mr. Roger Gallaway: No, I have never in this bill said I exclude television. I'm confused by your question.

[Translation]

Mr. Antoine Dubé: The proposed amendment to section 128 reads:

(1.2) The Governor in Council may, by regulation, on the recommendation of the Minister of Canadian Heritage, exempt from the definition of “service” in section 74.051 any licensed service distributed by a broadcasting undertaking that, in the opinion of the Governor in Council, should be exempted in order to achieve the objectives set out in subsection 3(1) of the Broadcasting Act.

That is what your own article states. Let me go back to some cases. You said that this comes under federal jurisdiction, and that Quebec has recognized the fact. But there are a number of cases, the best-known of which is Irwin Toy Limited, which did not wish to comply with applicable Quebec regulations. They lost before the Supreme Court, because Quebec regulations did not explicitly target telecommunications companies. The cases therefore came under contract law and—as the Constitution stipulates several times, particularly in section 92.13—commercial contracts come under provincial jurisdiction.

These are comments from the Department of Industry. We could add some details with a little help from officials. Have you read this document, and noted the objections expressed by Industry Canada, not by the Quebec government?

[English]

Mr. Roger Gallaway: First, these are not objections. These are observations that come from the industry department, so I would never characterize them as objections. The only objections come from your party.

I've heard this story before, but if I follow your line of logic, then, none of these things would have occurred. There wouldn't have been a public outcry in Montreal, for example, about the National Bank taking $9.95 from the bank accounts of people. These people obviously were operating under some false paradigm.

If I follow your logic, then, and the logic used in 1995, 1996, and 1997 by your party in the House, the Quebec law applied. If you weren't there, I'll certainly send you the transcripts in which Madame Lalonde, Monsieur de Savoye, a number of them, said they didn't need this law in the province of Quebec because the Quebec provincial law prohibits it.

Yet at the same time, you will have the opportunity, then, when they come before this committee, to speak to consumer groups from your province who say it's a problem, it's happening, and they're getting a lot of complaints about it. I invite you to ask them how many complaints they're receiving.

So I have to say to you I totally reject the premise of your questions, and I have to say to you that the argument in the case to which you refer is the old red herring that has been used by your party, which was studied by this committee in 1996, not only here in the House, at that time by the Standing Committee on Canadian Heritage, but also at the Senate hearings. It was clear that this was federal jurisdiction.

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That would be consistent with your party's opposition to Bill C-20, which was passed last spring, I believe, and which you also maintained was provincial jurisdiction.

What I'm saying is that I'm not hearing anything new.

The Chair: Just to clarify, my understanding is that the bells are still ringing to start the House. Anyone on House duty may want to go over.

Mr. Roger Gallaway: Well, never mind, I'm on House duty, but I'll stay.

The Chair: They're just having difficulty getting the House started. That's my understanding.

A voice: I need the exercise. I'll walk over and then I'll be back.

The Chair: Okay.

[Translation]

Mr. Antoine Dubé: Madam Chair, I don't believe the session has begun yet. We will have to vote in about half an hour.

[English]

The Chair: No, the House has not begun yet. This is not the bell for the vote. This is still the bell to start the House. It has gone into two bells, which means that it has been ringing for more than 15 minutes, which is unusual for starting the House. That's why I had the clerk check again.

I'm sorry, Mr. Dubé. Do you have a final question?

[Translation]

Mr. Antoine Dubé: I know you understand that our objectives are based on the Canadian Constitution. It is fairly odd that a Bloc Québécois member should feel obliged to use the Canadian Constitution to bolster his arguments, but...

Ms. Marlene Jennings: [Editor's note: Inaudible]

Mr. Antoine Dubé: No, but it's in 92.13. You are a lawyer yourself. You can read it. That is the same argument, yet you say that the bill which was passed may also be contested because some people have announced they were considering the possibility of contesting it. So it's a substantive argument.

What about arguments based on the Constitution? The Supreme Court has handed down decisions in a number of cases, including the Kellog's case, the Irwin Toy case, and others. These decisions have then been interpreted in a variety of ways. I think that should be clarified before anything else.

Moreover, legislation is useful if it fills a gap or plugs a loophole. But the Department of Industry has determined that there are a number of federal statutes that would serve perfectly well. There are also provincial statutes, given that civil contracts come under provincial jurisdiction. So why have you introduced this bill?

[English]

Mr. Roger Gallaway: Maybe, Monsieur Dubé, you'd like to be a little more specific as to what these acts are and perhaps table them with me, because I think a lot of Canadian consumers and a number of consumer groups, both nationally and provincially—for example, in your province—would be very interested to hear of this very profound discovery you are revealing today. They would find that quite surprising.

Secondly, once again, I can only say that with respect to your constitutional observations, your party made the same arguments, identical arguments, when we passed Bill C-20 last spring or last winter. This is a parallel piece of legislation. It's much smaller, but it applies the same principles. Your party raised the same objections and argued the same old constitutional line in the House when we debated Bill C-20 in the House of Commons.

So I appreciate what you're saying this morning. You're bringing those arguments here, but they were rejected when we did Bill C-20 and they're the same arguments today.

The Chair: Thank you, Mr. Gallaway.

Thank you, Monsieur Dubé.

Mr. Murray.

Mr. Ian Murray (Lanark—Carleton, Lib.): Thanks, Madam Chair.

Mr. Gallaway, I only have one quick question, but I want to congratulate you on your perseverance and also on the clarity of your presentation this morning. To me, this bill falls into the realm of common sense. I find it hard to imagine that anyone would want to argue with what you are attempting to achieve here. However, this whole question of negative option billing shows that we should never underestimate the potential for human creativity when it comes to making money.

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I'm not sure if you feel there was some compromise along the way in terms of bringing forward the amendments and massaging this bill somewhat from its original form, but—and this is my question—do you see any shortcomings now in this soon-to-be-amended bill that could lead us to have to come back again with further legislation because we neglected to do some things right now?

Mr. Roger Gallaway: I must say I don't.

A number of the amendments that are being tabled with you today flow from the passage of Bill C-20. It has to do with this bill being drafted by legislative counsel and then the subsequent passage of Bill C-20, which was an amendment to the Competition Act. Obviously, the amendments have to make this act, which also amends the Competition Act, consistent with those amendments made by Bill C-20. That's a great part of this.

With regard to the other amendments, this was a problem we had in 1995, 1996, and 1997 with the old Bill C-216 where we did arrive at a compromise with Canadian Heritage, recognizing that there are times when it's in the national interest—or perhaps even in a regional interest, one could argue—to allow a channel to go—and you can call it negative option, mandatory, or whatever you want—as a must carry, and those things can occur. So there's recognition of that.

I'll repeat myself and say that I regard this as a first step in a process about protecting consumers when they are dealing with federally regulated businesses, and that's all it's about.

Having said all of that, I can assure you that there will be groups, such as the Canadian Bankers Association, coming here and telling you why this is just bad, bad, bad and why it's not in their interest to allow this to pass.

Mr. Jones raised the issue of cost. Nobody wants to incur more cost, whether you're an individual or a corporation. But the reality is that we have to have a little bit of fairness in the marketplace, and if that adds an additional cost to business in this country, however modest that cost may be, then so be it. The way it's playing out now is that everybody is paying.

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

Mr. Penson.

Mr. Charlie Penson: In amending the Competition Act your new proposed paragraphs 53.1(2)(a) and (b) lay out how that would have to take place, how a new company would have to meet certain conditions in order to start the process. But you also talk about the need for the commissioner of the Competition Bureau, I guess, to report annually to the minister concerning the number of complaints received pursuant to proposed section 53.1. I don't quite understand. If they have to meet certain conditions in order to operate, that's a legal requirement.

Mr. Roger Gallaway: Yes.

Mr. Charlie Penson: Maybe I'm in a different clause here, but could you help me through this?

Mr. Roger Gallaway: I think what you're saying is if this imposes a legal duty upon whomever to follow the law, then why the reporting procedure?

Mr. Charlie Penson: Exactly.

Mr. Roger Gallaway: It's because like every other law, people will break it or attempt to find ways around it. There is no end to the inventiveness of business, especially in terms of things such as electronic commerce. So it will quantify in a specific way how big this is, and that's all it's about.

Mr. Charlie Penson: But why wouldn't the Competition Bureau just lay charges in those cases where there's no compliance?

Mr. Roger Gallaway: This is not a criminal matter, so it's not laying charges in that sense. It's a reviewable civil matter. There may be cases where it offends certain provisions of this law, if passed, that are of a minor or perhaps inconsequential nature. You can ask the people from the Competition Bureau, but they have ways of dealing with those things. If it's a much more serious widespread net that is being cast by a particular business, then the Competition Bureau may want to take a different approach to it. So it gives some flexibility to the Competition Bureau people.

• 1020

Mr. Charlie Penson: So you're essentially saying that it would be up to the individual to sue that company under civil law if there were an abuse of this section of the Competition Act.

Mr. Roger Gallaway: No, I'm not saying that. I'm saying—

Mr. Charlie Penson: What are you saying with regard to the civil aspect of it?

Mr. Roger Gallaway: The competition commissioner operates under a civil track as opposed to making it a criminal offence. So there's a distinction in law as to what the commissioner can do.

I think you're raising the spectre of a consumer who doesn't like the way it's being resolved and what their recourse is.

Mr. Charlie Penson: If the company doesn't meet the criteria that are set out, what can the consumer do about it?

Mr. Roger Gallaway: Let's assume there's an infraction of some nature. The commissioner can decide that it's going to go to court, and the court can impose what is called an administrative monetary policy. This is the regime laid down by Bill C-20, a government bill dealing with how to stop illegal telemarketing practices. This bill of necessity must be consistent with that bill because in a sense it's parallel to that bill—or analogous or similar, whatever you want to say.

Let's assume an individual has filed a complaint and 1,000 other people have complained about the same thing. While 1,000 people may be satisfied, one may not be. That's the age-old practice in all sorts of things before the courts.

Mr. Charlie Penson: Essentially what you're saying is that if the commissioner of the Competition Bureau gets enough complaints, they have room to take action. Then there would be a report to Parliament.

Mr. Roger Gallaway: That's right.

The Chair: Thank you, Mr. Penson.

Mr. Cannis, please.

Mr. John Cannis (Scarborough Centre, Lib.): Thank you, Madam Chair.

Roger, thanks for a great presentation.

I have just a quick comment and a short question. My comment is predicated by a comment Mr. Solomon made earlier when he referred to his community and what unfolded, and he actually put the question on the floor.

I wanted to put this on the record, Madam Chair, and for you, Roger, as well as the committee to hear this. Mr. Jones referred to the company, Shaw Cable. When this whole situation unfolded, my colleagues in the then City of Scarborough, now the Greater City of Toronto, and my colleague who's sitting with me today, Dan McTeague, worked with the community, and I'm pleased to say that the cable company serving that area responded favourably.

It just put my faith once again in...if the community collectively works together and responds either way to an issue, the enterprises that provide services, whether it be cable companies, banks, or phone companies, do provide an ear. I think they do. I think they've learned a lesson over the past couple of years that the general public out there is a force to be reckoned with.

You talked about the lawn-spraying companies. It caught my interest. I try to get my spraying done consistently in order to keep a good lawn. I don't know if my wife just cuts a cheque or gets notification. I'm going to be asking her.

Could you touch on other areas? As you said, lawn-spraying companies just send you a notice and all of a sudden they're there. They leave you an invoice for services rendered, which you must pay. What about other areas?

Mr. Roger Gallaway: You're talking about provincial jurisdiction in those areas. You're talking about the sale of goods and some services. The only areas we can deal with here are federally regulated, and they are as laid out, telephone, cable, and banks.

• 1025

But in provincial, I'm trying to think of something. I have files of letters from people about all sorts of bizarre and wondrous things that are sold in that fashion. Seed companies do it, for example.

Mr. John Cannis: So there are a number?

Mr. Roger Gallaway: Yes.

Mr. John Cannis: Do you think that in this initiative we're undertaking federally, there's an obligation to educate the consumer and the general public out there that there are areas on the provincial side that they must raise their antennas to?

Mr. Roger Gallaway: Oh, absolutely. I can only speak from an Ontario perspective, but we've heard principally from Ontario MPPs, and we've also been contacted by a number of Conservative MPPs in Ontario, such as Cam Jackson, who I think is the provincial minister for this. They're looking at a much more explicit law provincially in Ontario.

Mr. John Cannis: Thank you.

The Chair: Thank you, Mr. Cannis.

Mr. Lastewka.

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

I couldn't at all understand the point the Bloc was trying to make, because it's very clear in your revised bill, especially Bill C-276 the way you have it now, with the amendment to get a federal viewpoint right across Canada, that the same applies whether it be banks, broadcasting, telecommunications, cable companies, or whatever. Whatever is applied in Saskatchewan is applied elsewhere across the country.

I understand from the discussion between Mr. Cannis and you that provincial governments need to put certain things into play, because not all provinces have good laws in this area, as per your last discussion. There's a lot of room for the provinces to do what they should be doing in their own areas.

Mr. Roger Gallaway: That's correct.

Mr. Walt Lastewka: The bill makes that very clear the way it's been revised and so forth.

My question is, have you heard complaints from other provinces? So often a province will say, “Oh, we have no problem in our province, it's perfect”, until a law comes federally, and then people start to hitchhike on it and say, “Gee, we should be doing that in other areas in our own province.”

Mr. Roger Gallaway: Yes. Well, I know we've heard from Ontario, and we've also heard from Alberta, which is examining this.

It's the inventiveness of the marketplace. Everyone knows about the Book-of-the-Month Club. I don't think you have to educate Canadians about that. But does everybody know about lawn-spraying companies that are doing this?

We've had direct inquiries from Queen's Park and from some ministers' offices there, and we've also heard from Alberta that they're looking at ways of either introducing laws or, depending on the jurisdiction, amending their laws to deal with this shift of negative option.

Mr. Walt Lastewka: I've heard they do it in travel companies too. If you buy your ticket at the last minute, they charge you so much, and in the fine print it says you'll be charged from there on in too.

There are a lot of areas open for the provinces to get their act in order.

Thank you.

Mr. Roger Gallaway: You could buy a ticket to Cuba and land in Mexico or something like that.

Voices: Oh, oh!

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

Monsieur Dubé has one final question.

[Translation]

Mr. Antoine Dubé: When I spoke earlier, perhaps I referred rather too quickly to the Industry Canada discussion paper, which I know Mr. Lastewka did not read. I would like to table the June 24, 1996 version of the Industry Canada document entitled “Negative Option Marketing,” so that all committee members can read the sections I quoted earlier at their leisure.

I understand why Mr. Gallaway is taking this approach; he is responding to complaints by his voters. But I also receive complaints about a variety of issues, as do all members. Some complaints are about the federal government. There is a civil law consideration here, since you want to remove the penal aspect. Yet you are well aware that, under the Constitution, civil law is under provincial jurisdiction.

The Chair: Please put your question.

Mr. Antoine Dubé: Do you feel that companies targeted by your bill may or may no longer be subject to Quebec's Charter of the French Language?

• 1030

[English]

Mr. Roger Gallaway: Mr. Dubé, I would simply suggest to you that you go back and examine the arguments that were made both by your party and by everyone else when it came to Bill C-20. This bill is analogous or parallel. Your party has made those arguments for some time. You're the only group that appears to understand the argument, and you're the only people who appear to agree with the argument.

Once, again, I'll say I appreciate the points you're making—

[Translation]

Mr. Antoine Dubé: Quebeckers really do feel alone.

[English]

Voices: Oh, oh!

The Chair: Thank you, Mr. Dubé.

Mr. Roger Gallaway: —but you may want to find out what the consumer groups in Quebec who will be appearing here have to say about this, because perhaps they reflect a different point of view from that of you and your party.

The Chair: Thank you.

Mr. Gallaway, I have just two quick comments on your opening presentation. You mentioned two examples of negative option marketing. One was the Toronto-Dominion Bank and the privacy brochure. I'm just wondering how this bill would apply or prohibit this if no fee is being charged.

Mr. Roger Gallaway: It wouldn't prohibit it, but it's an example that this is being used by banks and it's being used in the industry.

The Chair: Okay. The other thing you talked about was Bell Canada and free call waiting for a few months. Could it not be said the consumer is being given the power to consent during the time period when they're using the service for free and while the offer is being made?

Mr. Roger Gallaway: No. The way it happens—and it's not only students, but this is the group I've heard a lot from, both in Ottawa and in southwestern Ontario, Windsor and London—is this appears on your line when you're getting the service. They say, “Oh, we're going to give you a couple of months of call waiting”, and that's it. It's dropped at that point. That's as far as they go. Then it's at month three, when you get your third bill, that this $2.70 charge appears.

So there's never any engaged discussion. There's never any attempt to say, “After two months, you'd better call us and tell us yes or no” or “We'll be back to you at the end of two months to find out what you think of it and to find out if you want it”. It's very deceptive. It's sleight of hand in the sense that they give it to you, but they forget to tell you the rest of the story, and that is, there's a cost at month three.

The Chair: Okay, great.

We definitely appreciate your presentation this morning, and we look forward to the review of this bill at this committee and we look forward to meeting with you again.

We're now going to move to our next group of witnesses.

Mr. Roger Gallaway: Okay, thank you.

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

We'll just take a two-minute break and have our witnesses exchange places.

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• 1035

The Chair: We're going to reconvene the meeting. I would ask the witnesses to take their places.

The following issue is going to be at the discretion of the committee. We have a 30-minute bell that's just started and we have an opening statement from the commissioner of the Competition Bureau. I don't have in front of me an opening statement from Finance or Heritage. Is there one?

A voice: Yes.

The Chair: There is one, and there is one for Heritage as well.

I was going to suggest we start the opening statements and then give ourselves about 10 to 15 minutes to get over for the vote. Is that okay? Then we'll have to come back.

I apologize to the witnesses, but all we can do is start and then come back. We'll begin with the commissioner of the Competition Bureau. We welcome you here and we look forward to what you have to say. So begin whenever you're ready, Mr. von Finckenstein.

Mr. Konrad von Finckenstein (Commissioner of Competition, Competition Bureau, Industry Canada): Thank you, Madam Chairperson.

I have with me deputy commissioner of fair business practices, Johanne d'Auray, and the assistant commissioner on amendments, Mr. Don Mercer. I'm pleased to appear before you on Bill C-276.

[Translation]

Before commenting specifically on Bill C-276, I would like to review some basic principles underlying the Competition Act and the Bureau's mandate.

First, the Competition Act is framework legislation which applies to all aspects of a broad and diverse economy.

Second, its purpose is to protect competition for the benefit of consumers.

Third, we believe that the wide scope of the Act is the reason why it has been very successful in protecting the interests of Canadian consumers.

Fourth, the Act has contributed to a growing Canadian economy by providing a stable anti-trust environment.

Lastly, in enforcing the provisions of the Act, the Competition Bureau ensures that all Canadians enjoy the benefits of a competitive marketplace—low prices, product choice and quality of service.

[English]

As you know, Bill C-276 was first introduced as Bill C-393. Both Bill C-393 and Bill C-276 in their unamended form would have made it a criminal offence for an enterprise to charge a fee for clients for new services unless (a) express notice had been given to the client, (b) the notice had been sent once a month for a period of three months, and (c) the client had given express consent to the new service.

The bill would have applied to financial institutions, broadcasting undertakings, telecommunications undertakings, and body corporate regimes to which the Insurance Companies Act applies. Further, it would have created criminal offences that carried the maximum penalty of $100,000 upon conviction.

[Translation]

The Bureau had several problems with C-393 and with C-276 in its unamended form.

First, it would have turned a business practice into a criminal offence, when the problem could be dealt with under Civil Law.

Second, its wide-ranging ambit raised serious jurisdictional issues.

Third, no allowance was made for a client waver.

And lastly, it would not have contained an exemption for conduct otherwise mandated.

The new amendments to C-276 proposed by Mr. Gallaway, assuming they are adopted by Parliament, would address the concerns of the Competition Bureau.

[English]

With the amendment, the bill is in essence a consumer measure. It seeks to prevent businesses from charging for new services without clients' expressed consent. We agree with that. Consumers should not be billed for services they did not agree to purchase.

We agree that negative option marketing is not a pro-competitive marketing strategy. It is not consistent, in our view, with a competitive economy, which depends in part on the ability of consumers to make informed choices about products and services they choose to purchase.

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We are not opposed to Bill-276 in its amended form for the following reasons.

One, it would make negative optioning marketing a civil reviewable matter rather than a criminal offence. In our view, that's the appropriate way to treat it. This would mean that the Competition Bureau could apply to the Competition Tribunal or a civil court for an order requiring such practice to cease should it be engaged upon. This would be consistent with the changes this committee made to Bill C-20 in the act to amend the Competition Act, whereby several offences such as misleading advertising were moved from the criminal track to the civil track.

Secondly, the amendments now relate to specific industries, which are unquestionably in the exclusive jurisdiction of the federal government. For instance, banks regulate under the Bank Act, enterprises regulate under the Broadcasting Act and the Telecommunications Act—thereby avoiding any jurisdictional issues that industry-specific provisions could have raised.

Third, the act now will contain an exception for enterprises that receive an express waiver from a client to the notice requirement.

Fourth, it also contains an exception for enterprises that are required by law to provide a service and are authorized to charge a fee for that service. Lastly, the bill contains an amendment giving the Governor in Council regulation-making power on recommendation of the Minister of Heritage to exempt services in order to achieve the objectives of the Broadcasting Act.

In summary, it's our view that the exercise of informed consumer choice is one of the key components for the operation of an effective marketplace, the creation of which is the mandate of the Competition Act. We do not see how negative optioning, under any circumstances, can be seen as pro-competitive. Hence, the Competition Bureau has no objection to Bill C-276, assuming the amendments Mr. Gallaway put forward will be adopted.

Thank you for giving me this opportunity to present our views. I'll be glad to answer your questions.

The Chair: Thank you very much, Mr. von Finckenstein.

I'm now going to proceed with Mr. Swedlove from the Finance department.

Mr. Frank Swedlove (Executive Director, Financial Sector Review Group, Department of Finance): Good morning, Madam Chair, and members of the committee. I am pleased to have the opportunity to speak on behalf of the Department of Finance regarding private member's Bill C-276, an act to amend the Competition Act.

The Department of Finance appreciates the concerns about potentially abusive negative option marketing practices. We are strongly supportive of efforts to protect consumers. Indeed, the government released the paper on a new financial sector framework on June 25 of this year, and a key proponent of the proposed new framework is a set of measures to better protect consumers and financial services. Thus, Madam Chair, we commend this expressed interest in consumer welfare and support the premise of Bill C-276.

Nonetheless, we do have some concerns with the bill. As you know, banks periodically increase the prices of service fee packages. These price increases are often paired with service enhancements such as providing several additional withdrawals monthly. We recognize that consumers need to be fully aware of these price increases before being subjected to them. That is why the Bank Act requires advance disclosure of any fee changes, 30 days' written notice to customers, and 60 days' in-branch posting. This requirement is designed to help consumers make choices about continued use of their existing bank account fee package. Providing advance notice gives consumers the opportunity to change service fee packages or move to another financial institution if they so desire.

Bill C-276 would go much further, requiring banks to provide notice and obtain consumer approval before charging more for service fee packages that had been enhanced in any way. Thus the bill would effectively deter banks from enhancing service packages and increasing the price. By taking away this pricing option from them, banks would likely resort to other approaches to price increases. For example, they could increase package fees without modifying services. They could also choose to leave fees unchanged but reduce services within a given package. Thus the bill could stifle innovation in banks' service packages and could also prompt banks to shift from offering packages to charging on a per transaction basis, neither of which could benefit consumers. In general, we believe that the prohibition on negative option marketing should be targeted at monopoly service provider situations where abusive negative option marketing may be more likely to occur.

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As I indicated earlier, the Department of Finance supports efforts to enhance consumer protection. It is particularly important for consumers to be adequately protected in their dealings with financial institutions. For example, in our June policy paper, the government committed to require banks to open accounts for individuals meeting minimum requirements and to provide standard low-cost accounts.

We also wanted to see an increase in the transparency and disclosure of financial service documentation. We are creating a federal consumer agency to strengthen oversight of consumer protection measures and to expand consumer education activities. We are establishing a new Canadian financial service ombudsman to provide independent resolution of individual consumer complaints about financial institutions. These measures are targeted to the key concerns raised by consumers of financial services during our current review of the financial sector legislation.

We would note that negative option marketing by banks has not been raised as a concern. Instead, consumers have told us they want to be fully informed about the cost and features of financial services, have a range of financial service providers to choose from and access to affordable accounts, and have recourse to an impartial dispute resolution mechanism in the event of problems.

The steps we are taking address these concerns and provide a comprehensive framework for consumer protection within the financial sector.

In closing, then, I would like to reiterate that we support Mr. Gallaway's effort to eliminate abusive negative option marketing practices and therefore support the underlying principle of Bill C-276. However, we believe the bill could have a perverse impact on bank pricing practices by prohibiting one type of price change. The net result may not always be in the best interest of consumers.

Thank you, Madam Chair.

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

I'm now going to turn to the Department of Canadian Heritage and Mr. Guérette.

[Translation]

Mr. Antoine Dubé: Will the meeting be suspended for the vote?

[English]

The Chair: Pardon me? At 15 minutes. Two bells means 15 minutes, so as soon as you hear two quick bells together it will be 15 minutes.

[Translation]

Mr. Guérette.

Mr. Jean Guérette (Director General, Broadcasting Policy and Innovation, Canadian Heritage): Madam Chair, members of the committee, it is with great pleasure that I appear before you today to talk briefly about Bill C-276 as it pertains to the broadcasting sector.

My name is Jean Guérette and I am Director General, Broadcasting Policy and Innovation, at the Department of Canadian Heritage.

[English]

In recent years, and in 1995 in particular, as we've heard this morning, the practice of negative optioning for new broadcasting services provoked numerous debates and sharp reactions from cable subscribers affected by this practice, who rightfully complained about this marketing approach. Following protests, primarily from those cable subscribers who were obliged to contact their cable company if they did not want to be subsequently billed for the new specialty services, a legislative process aimed at preventing cable companies from using this approach was initiated by Mr. Gallaway.

Since that time, however, the practice of negative optioning has largely been abandoned by cable operators, who for their own marketing reasons no longer use this approach. Nevertheless, it is important to mention at the outset that we support resolving any remaining concerns in this regard.

I will remind the committee that when a previous bill was introduced on this subject in the last Parliament, amendments were introduced at various stages, and most notably, during the deliberations of the Standing Senate Committee on Transport and Communications.

The discussion of these amendments highlighted that the bill, while preventing undesirable marketing practices in the broadcasting system, needed to be constructed so as not to prevent the attainment of the broadcast policy objectives set out in subsection 3(1) of the Broadcasting Act and with the realization that the broadcasting system is evolving and being transformed by competition and a converging communications sector.

In response to this more competitive environment and the arrival of digital technology, which enables suppliers to better respond to the demand of consumer choice, it is fair to say that the industry is likely to increasingly back away from using marketing approaches that could alienate existing subscribers and make it harder to attract new ones.

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The Chair: Monsieur Guérette, I hate to stop you there, but I will stop you there because I did tell everyone they would have 15 minutes, and we've hit two bells. I apologize to the witnesses.

But we will return after the vote. Perhaps I could ask members to return as quickly as possible.

We're now going to suspend for the vote.

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The Chair: Could I ask the witnesses to return to the table, please? I'll reconvene the meeting. I want to apologize to the witnesses for the delay for the vote. I apologize to Mr. Guérette, who was in the middle of his statement, and I would ask him to please continue.

Mr. Jean Guérette: Thank you, Madam Chair. I'll simply pick up where I left off.

It is difficult, if not impossible, to predict with complete accuracy the revolution of the Canadian broadcasting system beyond a certain timeframe in this new era of globalization and digitization.

[Translation]

Broadcasting is an ever-evolving phenomenon. For example, the original bill as drafted would have caused problems with the 1997 launch of four new French-language specialty services, and more recently with the launch of the new Aboriginal Peoples' Television Network across the country.

The point to be made is that, in broadcasting, a situation that may be one thing today may be totally different tomorrow, and we believe that the Broadcasting Act, which supports the development of broadcast policy in Canada through a so-called “technology-neutral” approach, is essential and must remain flexible in order to tackle unforeseen challenges with success.

[English]

We therefore support the amendment to subsection 128(1.1) through the addition of subsections (1.2) and (1.3) of Bill C-276, which recognizes the key roles of both the Minister of Canadian Heritage and the application of the Broadcasting Act in guiding the development of the Canadian broadcasting system. In effect, this clause provides the required flexibility to seek, when necessary—and only when necessary—an exemption to Bill C-276 in cases in which it might be warranted to support the policy objectives of subsection 3(1) of the Broadcasting Act. It should, however, be understood that such an exemption, if used by the Minister of Canadian Heritage, would only occur after consultation with the public, as well as with the CRTC.

[Translation]

In closing, I would like to convey to you the message that the Canadian broadcasting system has been undergoing significant transformation in recent years.

For example, consider the sustained and increasing importance of specialty channels; the metamorphosis of the industry through a number of technological innovations, including fibre optics, digital technology, and the Internet; the new actors in the distribution system, including satellite and wireless cable; the introduction of competition and the move towards convergence; and the deregulation of markets and creation of strategic international alliances and mega-mergers.

[English]

These phenomena combined are creating a new environment for broadcasting services, one that will reconfigure many aspects of their operations. This should be good news to consumers, who will reap the benefits of enhanced competition and improved services. We need to be careful not to impede our ability to ensure that these developments take place and that benefits to the consumers do in fact become a reality.

Madam Chairperson, thank you for your kind invitation to appear in front of your committee this morning. I will be happy to answer questions if there are any.

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

We're now going to begin with questions, starting with Mr. Penson.

Mr. Charlie Penson: Thank you.

Mr. von Finckenstein, with the bill that's before us today, I understand Mr. Gallaway has changed the scope of it so that it's not a criminal matter but a civil matter, which meets more with your approval. If companies don't comply with the negative option billing aspect that's being introduced here, I gather the Competition Bureau would then make a judgment at some point about what the threshold would be in terms of complaints and would then initiate an action. Could you just explain how that would work?

Mr. Konrad von Finckenstein: Yes, essentially we are a complaint-driven organization. If the bill with the amendments as proposed by Mr. Gallaway is enacted, it then is illegal to engage in negative optioning. If a company does that, consumers presumably would complain to us and we would investigate. We would bring an application before the competition tribunal and ask for an order of cease and desist. The consensus is clear. If the evidence is there that the company has engaged in negative optioning, then the court would grant that and the company would have to abide by it. If it didn't, it would be breaching a court order, which then becomes a criminal sanction for which fines can be paid and for which people can be put in jail.

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Mr. Charlie Penson: So it really wouldn't matter how many people complain. If they're not meeting the criteria set out, an action could be initiated by the Competition Bureau?

Mr. Konrad Von Finckenstein: Yes. When we investigate, of course, we contact the company and find out the facts, etc., first of all. Very often, the mere fact that we investigate and bring something to their attention shows that it may have been done in ignorance of the law or it may have been an isolated incident. The company stops on its own and we might not have to prosecute. It depends on the gravity and the duration of the offence.

Mr. Charlie Penson: Just the fact that there's legislation there probably would be a major deterrent.

Mr. Konrad Von Finckenstein: Exactly. I would expect that with this being on the books, it would probably.... After all, you're talking here about very large companies engaged in a regulated environment. I don't expect them to adopt a policy of breaking the law.

Mr. Charlie Penson: We heard from the Department of Finance, from Mr. Swedlove, that banks, for example, often offer enhanced services, and they therefore like the aspect of negative option billing essentially because they are offering another service to that particular customer. But Mr. Von Finckenstein, how would you respond to that? Lots of companies offer enhanced services, but they don't have an account from which they can take it out through automatic billing. Do you have a different point of view in that area? How would you characterize it?

Mr. Konrad Von Finckenstein: Let's go back to principle. I don't see how negative optioning can ever be pro-competitive. The basic, underlying concept of a competitive market is that consumers have a choice and exercise that choice, and they exercise it knowingly. If you have a negative option, you don't even know this has happened. You never get a choice. You have obviously not been able to exercise choice. That's why we are not opposed to the bill that has been put forward.

The bill addresses the sale of new services. If a new service is introduced, you can't just impose it on somebody without getting that person's consent or a waiver. The Department of Finance has a certain objection, and I think they should speak about their objection. In our reading of the act—and I can only say this generically or generally—we do not oppose it.

Mr. Charlie Penson: Okay, maybe I can ask Mr. Swedlove, then. In that particular instance that we're talking about, as I said, many companies offer enhanced services. You're supposedly knowledgeable about them when you make your purchase, but at least there's no account there to take it out of automatically, as in the case of the banks. What would be wrong with asking consumers, their customers, if they want that enhanced service and giving them the choice to say yes or no?

Mr. Frank Swedlove: In essence, we more or less think that is the case. For example, what we are concerned about is the situation in which a bank decides to revamp a package of services that it has wrapped around specific accounts. What is very common today, for example, is that for an $8 charge you get a number of services that might include a certain amount of withdrawals, the use of an ATM card, the use of debit transactions in grocery stores, etc., so you buy a package of services. Over time, that package may shift in the sense that, for example, banks may start to include in that package opportunities for use of banking over the Internet as an added service. At the same time, they may choose to increase the charge of the service more generally. Under the legislation, under the Bank Act now, they are required to provide notice to consumers that they are changing the cost of that service. Consumers then have the choice as to whether they want to go into their institution—

Mr. Charlie Penson: I understand that, but what's wrong with the idea of putting the onus on them to acquire consent?

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Mr. Frank Swedlove: The difficulty would be that the Royal Bank, for example, has about nine million account holders, as we understand it. The bank would have to send out notices to those nine million account holders, and those account holders would have to respond. We understand that in any request for a response, the response rate tends to be about 1% to 2%. Even if they get 5% in such a case, they're very much in a position of not being able to alter the account in the way that is being suggested.

If I could just finish, what we're concerned about is that they would look at alternatives—for example, increasing the fee without changing the account—and consequently the consumer would end up getting less over time. Six months later they could then change the attributes of the account, and they would be getting around this law in a sense.

Mr. Charlie Penson: The banking industry is probably going to be here, so I'll have a chance to ask them as well. Are you suggesting that you don't think the enhanced service would be offered if the consent aspect was altered so that the onus would have to be put on the company?

Mr. Frank Swedlove: I'm sorry?

Mr. Charlie Penson: On the enhanced services that banks now provide, are you suggesting that those services would not come into play if this bill were to go through?

Mr. Frank Swedlove: I'm saying that in order to respond to the difficulty of getting responses back from nine million consumers, I think banks will start to look at ways of not having to be subject to the provisions of this legislation. The ways in which they would do that may lead to the consumer being worse off than better off.

Mr. Charlie Penson: So your opposition to this particular bill is reflecting the financial services companies' concerns.

Mr. Frank Swedlove: I have not talked to them directly about this, but they are concerns that we in the department have, given what is in the bill.

The Chair: Thank you.

Are there any other comments on that? No?

Mr. Murray, please.

Mr. Ian Murray: Thanks, Madam Chair.

I think Mr. Penson's questions anticipated mine. I may be having a hard time understanding what is probably a very simple concept. In terms of some monopoly services that most people receive, such as hydro or even cable TV, when the price goes up, you pay the increased price. There's no question of hydro having to get permission from me if they want to increase the price of my hydro. I understand there's probably some act that regulates this, and there's probably some notice on the bill saying the price is going up. It's made public through the media as well when hydro prices go up, but the fact is that most of us don't pay much attention to it.

When most of us sign on with a financial institution for banking services, we rarely change. At least, that's been my experience. Unless you're very unhappy or somebody is offering you a much better deal, you stick with what you have. You get to the point at which you don't even notice what's coming out of your account in terms of service charges. You just don't pay attention to a lot of it.

When we're looking at this problem of enhanced services, at not being able to bring in enhanced services without notification and then acceptance by the consumer if this bill were to go through, I'm just wondering if we're creating perhaps a false problem here.

I can understand that if the Royal Bank has nine million customers, they'd have to notify everybody and get responses back. Canada Post would be very happy, I'm sure, because it would sell a lot of stamps. I can understand that it's very expensive and an administrative nightmare.

I have to confess that I have to go find the exact part of the bill that applies to this—and my question is probably both for Mr. Von Finckenstein and Mr. Swedlove—but are there not other examples? I mentioned hydro and cable, and they tend to be monopolies. But are there other examples in the field of commerce in Canada in which this already exists? Maybe we've just missed something here. Maybe the bill has to be tweaked a bit, or something has to be done to accommodate this.

I just want to mention that I personally like the bill the way it stands. I'm not very happy with the idea of having to change it, but we would have to address it if there's a major problem.

Mr. Konrad Von Finckenstein: You mentioned hydro. This, of course, is not the subject. This bill only applies to three areas.

Mr. Ian Murray: I recognize that.

Mr. Konrad Von Finckenstein: In proposed subsection 53.1(3), the bill has three specific exceptions. It says that it does not apply:

where the new service replaces another service for which the client has already paid a fee and the same fee or a lesser fee is charged to the client.

• 1145

That's obviously to bring in operational flexibility: substitute one account for another as long as they are the same.

The other one is where the new service offered is not subject to a “separate and specific” fee, and, lastly, it is where the enterprise is required by law to provide the service and also has to charge a fee to a client for that service, which is to take account of something like your telephone. You have to supply it and you're allowed to charge a fee to it, so therefore the telephone company can do it without having to go through these three triple notice provisions that are here.

Then you have the overall exception saying that:

Paragraph 2(a) does not apply where the enterprise receives from the client a waiver of the notice requirement set out in that paragraph.

So clients can give a waiver.

With those proposed sections, the drafters of this bill—which weren't us—have tried to anticipate all sorts of circumstances.

The Department of Finance believes it doesn't cover the situation in which banks find themselves. I have no opinion on that because I haven't spoken to the banks. This is really their domain.

I'm just saying that the structure of the bill has sort of anticipated, generically, these types of problems that you, sir, suggest.

Frank, maybe you have something to add on that.

Mr. Frank Swedlove: No, actually, I don't.

Mr. Ian Murray: I know you covered it, sir.

I'll just ask one other totally separate and quick question of Monsieur Guérette, about consultation. You mentioned that if the minister were to use this amendment that's being proposed, it would occur only after consultation with the public as well as the CRTC. When you talk about consultation with the public, are you talking about a Canada Gazette notice, for example, whereby people will be asked to respond if they have any concerns? Is that the level of consultation we're talking about?

Mr. Jean Guérette: That's correct. It's the Canada Gazette. In fact, it is in this proposed legislation that it has to be published in the Canada Gazette for public information.

Mr. Ian Murray: You don't see going beyond that at all, though.

Mr. Jean Guérette: Not specifically, but that by itself generates a lot of consultation by all interested parties. It's not something that would go unnoticed.

Mr. Ian Murray: Sure.

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

Mr. McTeague.

Mr. Dan McTeague: Thank you, Madam Chair.

Commissioner von Finckenstein, I'm interested in the shift from the criminal to the civil or, I should say, the civilly reviewable. I think you might be able to anticipate my question because it's very similar to the one I asked of Mr. Gallaway.

I, along with many members here who have expressed this, am concerned with the volume of calls we received as a result of this practice—particularly at one time by the cable industries—which your department may not have the resources to investigate.

Considering the fact that matters reviewable by the tribunal are in themselves not really civil sanctions because they carry with them no opprobrium and they in fact do not apply generally and have no injunctive effect, I'm wondering if you might find that case-by-case analysis or case-by-case review by your department might exhaust the ability of your very capable organization in doing its job. I'm wondering whether or not there might be some consideration, based on this bill, to actually consider some form of private right of action, given that you are the only agency that can refer a matter if necessary and trigger the adjudicative powers of the tribunal.

Mr. Konrad von Finckenstein: There are two things. The scope of the bill is really quite limited. It applies to banks. It applies to broadcasting undertakings and to Canadian carriers under the Telecommunications Act. All of these are very large, publicly traded companies and very renowned, law-abiding companies. I do not anticipate that they would deliberately breach the act.

As I mentioned in answer to Mr. Penson's question, if this law should be enacted, then, those are the rules of the game and I expect that people will abide by them. Should there be violations, I would anticipate that they would be accidental, and we will deal with them. I don't expect there to be a major draw on my resources as a result of this act.

Mr. Dan McTeague: Do you feel that once legislation is suggested, inferred, or placed in writing in the act that it is more often than not a substantial deterrent that goes beyond the federally regulated industries, that it's understood in this bill?

Mr. Konrad von Finckenstein: No. It would apply only to the enterprises listed in this bill. I don't think such an inference will necessarily be drawn.

Mr. Dan McTeague: I think Mr. Gallaway had suggested all federally regulated industries, but perhaps he's more specific and your version is correct.

I wanted—

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Mr. Konrad von Finckenstein: I'm talking about the bill as amended, on the basis of the amendments that he introduced.

Mr. Dan McTeague: I see.

Given that you may not have all that many cases to deal with under the circumstances, are you comfortable with inserting specific industries, as the amended version has suggested?

Mr. Konrad von Finckenstein: As you know, generally it's not industry specific but general, in that it applies to all kinds of industrial and commercial behaviour in Canada.

These amendments are specific to banks, broadcasting companies, and Canadian carriers. As I mentioned in my opening remarks, it's essentially consumer legislation. You could have put the identical provisions in the Bank Act, in the Broadcasting Act, and in the Telecommunications Act.

I gather that Mr. Galloway, for simplicity, put them in here and put them in the Competition Act because he wanted to make sure that there is somebody to investigate. I'm surmising, but it seems to me to be the logical thing. Therefore, he put it in the Competition Act.

Given that these three are all clearly within the federal sphere of jurisdiction, I don't have any problem with it.

Mr. Dan McTeague: Commissioner, my final question is, do you anticipate or could one look down the road and say that we might, for instance, wind up in a situation where the tribunal eventually reverses a decision, notwithstanding your investigation, on the basis that somehow there is an argument that in some instances negative option billing does indeed produce certain economic welfare and ultimately protects competition?

Mr. Konrad von Finckenstein: There's no competition test in this legislation. This legislation basically says “this is prohibited”. I would have to go before the tribunal and make out the case that the company in effect engaged in the conduct that's prohibited. If it is, I don't think they have any choice to say no, we refuse to grant an order because we thought the activity was pro-competitive.

The act does not give them the power to balance pro- and anti-competitiveness. It gives them the power to determine this: did that conduct take place or not? If it did take place, an order will be issued. If they think I have insufficient evidence or if there's a doubt, then of course they can refuse to grant the order.

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

[Translation]

Mr. Dubé.

Mr. Antoine Dubé: Mr. Guérette, I was absent when you made your presentation, but I do have the text of your brief. I'm somewhat concerned about the scope of the amendment to section 128, and I will focus my questions on that.

With the amendment, are we not transferring authority from the CRTC to the Minister of Canadian Heritage?

Mr. Jean Guérette: I don't think that there is a transfer of power away from the CRTC. Previous CRTC decisions did not contain such specific details. As you can see, the exemption would be executed as would any other provision in the Broadcasting Act. There are some powers vested in the Governor in Council, though there are others as well. All those powers are exercised upon the recommendation of the Minister of Canadian Heritage, though always in consultation with the CRTC. Such consultation is provided for in the amended section 128.

Mr. Antoine Dubé: Supposing all that were implemented... We would have to see how applicable the procedures were in the end. Though demand television does not yet exist, we have to make some attempt to imagine what it will be like, so that we can predict its future impact. What criteria will the current or a future Minister of Canadian Heritage use to apply the new Act?

Mr. Jean Guérette: A new demand television service would come under the same requirements as all other services offered with consumer approval. In my opinion, that would meet the requirements of the Act as amended.

You talked about future services. As I said in my presentation, in the future services may well be delivered very differently than they are today. We can therefore expect that exemptions will be required to remain in line with broadcasting policy objectives. Such exemptions would be proposed if they became necessary.

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But once again, we know that when a standard like that comes through an Order in Council, there was consultation first. All the parties had the opportunity to make known their point of view on the situation. We know full well this precaution means that an Order in Council, normally and because of its very nature, must take into account whatever concerns and conditions already exist.

Mr. Antoine Dubé: I'm saying that because when I travel in the rest of Canada, I try to tune in to RDI. You know that you can't get RDI, in French, everywhere. I understand the problem, because you have to pay to get it, in any case. In some cases, TVA is available free. If I'm concerned with that, it's because I'm thinking about Canada's French language minority. You could also think Aboriginals in some cases or even other groups.

I had understood that the spirit behind the Broadcasting Act was to protect the cultural interests of certain minorities. Do you think those criteria could be considered? And why not mention them right away to have these minorities protected?

Mr. Jean Guérette: You're right in saying that the clause does have flexibility that would allow concern to be down for those matters in future.

We also believe that the businesses should, as early as now, procure the technology that will further facilitate the offer of that kind of services. I'll just take the example of certain French-speaking areas outside Quebec—I actually live in one of those areas—the number of services available in the French language is often lower than what exists elsewhere. In what's available by satellite now, you'll find all the French language services. This competition will actually facilitate greater availability in the future. To answer all the consumers' needs, businesses will have to adapt to these new technologies.

Mr. Antoine Dubé: Let's say that you're thinking along those lines, but there are no assurances.

I have a question for the Competition Commissioner. I put it before to my MP colleague, Mr. Gallaway. You've certainly heard it. Actually, still referring to the study done by the Department of Industry, there's the matter of the famous Irwin Toy Limited case. This case referred to the applicability of government regulations, those of Quebec, in this instance, when a business falls under federal jurisdiction. As the measure concerned all businesses, and not just some of them specifically, the judgment handed down stated clearly that what applied were the regulations stemming from the Quebec legislation.

I don't know if you know about that judgment. If you are aware of it, I'd like your comments.

Mr. Konrad von Finckenstein: In our opinion, this bill applies only to broadcasting businesses and Canadian businesses as set out in the Telecommunications Act. Those three areas are clearly in the federal government's jurisdiction.

Now, as I was saying to Mr. McTeague, the amendments here that are to be included in the Competition Act could be included in each one of those acts instead of counting only on the Competition Act. Mr. Gallaway, the author of this bill, chose to include it in the Competition Act. I'd like to ask him why.

In our case, we have no doubt that this is part of federal powers. If it were included in this legislation instead of being added into each one of the three acts, the Bank Act, the Broadcasting Act and the Telecommunications Act, the result would be the same.

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I don't see why this bill would pose any jurisdictional problems.

[English]

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

Mr. Lastewka.

Mr. Walt Lastewka: Mr. Swedlove, I've read your report a number of times now. I'm a little bit concerned by some of the remarks you made. The fact that the finance department is now going to have an ombudsman—is that in place now, the Canadian financial service ombudsman?

Mr. Frank Swedlove: This is a proposal in the paper we tabled on June 25. It's our intention that the government bring it about. There is, at present, a Canadian banking ombudsman. We would like to see that expanded into other financial services.

Also there will be a role for the Minister of Finance in terms of choosing a number of the independent directors. There will be a broad oversight responsibility that is different from the existing Canadian banking ombudsman.

Mr. Walt Lastewka: I take it you never had any complaints about negative option marketing by the banks. Wasn't there any concern when the National Bank did what they did, and some of the other banks? Are you saying you never got any complaints? There wasn't a concern?

Mr. Frank Swedlove: The department has not directly received a complaint that would be analogous to what occurred, for example, in the case of the cable company. Obviously from time to time there are complaints about increased service charges, and those are things that are received by members of Parliament as well as the minister.

Mr. Walt Lastewka: I guess I have another concern also. Mr. Von Finckenstein, if you could just look at the opening page of Mr. Swedlove's package, he said the banks could also choose to leave fees unchanged but reduce services within a given package.

This is another problem. Where a customer signs up for a certain fee to get a service, then for one reason or another the services are dropped. Isn't that almost like negative option billing? It is almost a reverse negative option billing.

Mr. Konrad von Finckenstein: It's reverse. To talk about these things theoretically is very difficult. Here is a bank that can change a service, etc. If they continue to advertise their services at one level and they actually provide them at a different level, at that point in time they may be actually engaging in misleading advertising, and they would run afoul of the Competition Act.

But if they're just changing the service, a package of the contents, etc., that wouldn't be an offence. But I think Mr. Swedlove was only speaking in the hypothetical, that this is a possibility. I have never seen a case like that. I don't know whether he's heard of cases where that has happened.

Mr. Frank Swedlove: I think there are cases in the sense that from time to time an institution may indeed choose to take something out of the package and start to charge for that separately. I suppose it does happen from time to time.

Mr. Walt Lastewka: Doesn't this get to the root of the problem? That people want to know what they're paying for and make sure they get that service?

Mr. Frank Swedlove: Yes, I think disclosure is a very important part of the puzzle. That's why in the existing legislation there are requirements for disclosure of changes of fees. I think the disclosure element of this legislation is something that could also be supported.

Mr. Walt Lastewka: So in the end, if you support Mr. Gallaway's bill, you're giving a very cautioned support. I'm trying to get from you what it is you would like to have in the bill that would make you less cautious in your support.

Mr. Frank Swedlove: Our concern is it could lead to behaviour that, in some ways, may be less advantageous for the consumer.

• 1205

I think we understand, and certainly our minister understands, the negative aspect of this kind of negative option billing. At the same time, we wonder if there are other ways that could be used to address some of these concerns. One is clearly through improved disclosure, and that possibly combined with some opportunities for the customer to seek redress if there is in any way any confusion with respect to the changes in the rate. That might be another way of dealing with this difficulty.

The Chair: Thank you very much.

Mr. Penson.

Mr. Charlie Penson: I just want to follow that up.

Mr. Swedlove, what about the passage in the brief from the Competition Bureau, page 5, where they talk about the third section? It says “The amended bill contains an exception for enterprises who receive an express waiver from the client.” Is that one of the ways you might anticipate this being resolved? Doesn't that address part of your concerns?

Mr. Frank Swedlove: Seeking waiver could be helpful with respect to new customers. For example, a bank could include a provision in the forms that would be filled out when an individual comes and opens an account. The waiver could be sought at that point in time to allow service charge fees to be changed from time to time at the same time as products are improved. That might be part of a waiver for new customers. I guess the difficulty would relate to the many millions of customers that banks now have on the books and the difficulty in seeking waivers from those individuals.

Mr. Charlie Penson: So do you see that as a good thing to resolve the issue? How would you characterize it?

Mr. Frank Swedlove: I see it as a good thing in the context of new customers, but with respect to existing customers, you'd run into the same kind of difficulty you would run into with respect to seeking their approval for the price change as part of the negative option billing process.

Mr. Charlie Penson: If you went to the other style of obtaining consent for changing a package in the banking industry, for example, you would see this waiver as being in the same category as seeking a consent?

Mr. Frank Swedlove: I think it would get right into the same difficulties, but it is advantageous in the context of new customers.

Mr. Charlie Penson: I'm just wondering if anybody else has any view on this from the panel.

The Chair: No?

Mr. Konrad von Finckenstein: I guess the whole thing is a question of interpretation. The act applies to a new service. What is a new service? When the bank alters its package, is that a new service or is that the same service? I think that's one of the key issues that causes some concern.

Mr. Charlie Penson: Okay, thank you.

The Chair: Thank you.

[Translation]

Ms. Jennings.

Ms. Marlene Jennings: Mr. von Finckenstein, I have a few questions for you. You have set out the Commissioner's opinion or point of view very well, and you are the Commissioner, to wit that negative optioning cannot be pro-competition. Was that also the Commissioner's view in 1996 when this bill was examined in committee and sent to the Senate?

Mr. Konrad von Finckenstein: Yes, I think that is also the Bureau's opinion.

Ms. Marlene Jennings: Excellent. Now, you know that if the bill is passed, your bureau will be getting complaints. Now, from what I've understood, you have a rather vague idea of the number of complaints you might get. Am I wrong?

Mr. Konrad von Finckenstein: Not at all. We think that the corporations will observe the law and that we will get no complaints or very little. The law will be there and the companies will be respectful of the law.

Ms. Marlene Jennings: So you're very optimistic.

Mr. Konrad von Finckenstein: That is the Canadian experience.

• 1210

Ms. Marlene Jennings: Yes, but just in case your optimistic view were not to materialize, in the way of financial, human or technological resources you already have available, in other words within your budget, do you have a surplus at the end of each year?

Mr. Konrad von Finckenstein: No, not at all.

Ms. Marlene Jennings: No. So if the bill were passed—and I'll show my colours right away and say that I'm in favour of this bill especially with the amendments we're making to it—do you think that at some point your budget would have to be reviewed once you have a better idea of the number of complaints that might be sent your way? If your optimistic scenario doesn't play out and your budget isn't big enough to allow you to investigate these complaints and follow up on them, will we have to increase your budget?

For example, in the case of those complaints that are shown to be valid, would you be in a position to go before the Competition Tribunal? Do you think you'd have to review your budget if ever the number of complaints were to exceed your budget's possibilities?

Mr. Konrad von Finckenstein: Of course. If, contrary to my expectations, we had a great number of cases on negative optioning, we would have to ask Treasury Board for more resources. But, as I've indicated, I don't think that will happen.

Second, these cases aren't very complicated, the evidence is simple: did the company send a notice or not? I don't see that it would be a great burden for us.

Ms. Marlene Jennings: Except that there's always the matter, legally speaking, as to whether it's a new service or not. You yourself raised the Department of Finance's concern as to the definition of what constitutes a new service. Thank you very much.

I now have a few questions for Mr. Swedlove. You say that if the bill is passed in its entirety with amendments, it could act as a break for financial institutions, especially for the banks, for the improvement of their services and so on but that transparency and notice are very important.

If we were to set this bill aside, if it were not being presented today, do you think that a 30-day period for banks to give advance notice to their clients in case of any change in fees would be enough?

Secondly, is the 60-day period for notices in the branch enough? And I'll explain before you start your answer. At this time, banks encourage clients to do their banking electronically, over the phone or otherwise. So there are more and more clients that never set foot in a bank. So the notices posted in the banks are totally useless for them. I can tell you that I set foot in a bank last week for the first time in six months.

On top of that, more and more Canadians in the labour force tend to have two jobs or are self-employed. Sometimes, they're not even physically at home for a matter of some weeks. So is a notice sent to them 30 days before a change in fees really enough?

[English]

Mr. Frank Swedlove: Certainly there are changes in the marketplace, there's no question about that. We recognize that many fewer Canadians are using their branches. There is, of course, still the requirement, even if you never go to your branch, that you be notified by mail of a change in the cost of the account. Notwithstanding you're never in to your institution, you will still be notified. Whether it's sufficient or not, in our review of financial sector legislation, which we've just gone through, and previous to that the report of the McKay task force, there were not a lot of complaints surrounding a lack of sufficient time or notice with respect to increases in prices.

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[Translation]

Ms. Marlene Jennings: I put this specific question because the task force itself didn't raise it. Nobody says anything about it, but as soon as the point is raised everyone says that yes it's true and that there's a problem.

[English]

Mr. Frank Swedlove: We did have, and continue to have, extensive consultations with consumer groups across the country and seek their views as to what is most disturbing for consumers.

I think everyone is supportive of greater disclosure and greater transparency, but this, the time period, was not identified as a problem.

Having said that, as I noted earlier, if the focus of this bill, with respect to banks, related to disclosure—and the disclosure provisions are tougher than the existing disclosure provision. But if in the view of Parliament the fact that a negative option billing situation warranted greater disclosure than there is today, that, we think, could go a long way in dealing with some of the concerns we have about the sorts of perverse behaviour by banking institutions.

[Translation]

Ms. Annette Gibbons (Head, Consumer Questions, Finance Department): Could I add something?

Usually, price changes are posted beside the automatic tellers. Even if the clients don't walk into the branch, they can still see the changes posted there.

Ms. Marlene Jennings: Thank you very much. That's an important point.

The bill on privacy is mentioned in the same breath as e-mail. Once that Act is enacted, the banks will have to get express consent unless they can show that there's already tacit consent to have the right to send personal information on their clients to a third party.

I sat on the committee and, if memory serves, the banks didn't come to tell us that this obligation would cause very many problems for them either on a technological, administrative or other level. So I don't see at all how the provisions of this bill which oblige the banks, in the case of a new service or a change in fees, to inform the client beforehand and get express consent would actually cause them any more problems.

Could you explain how, in the first case, it doesn't seem to pose any problems for the banks while it would actually do so in this case? The Finance Department officials have stated that it could cause difficulties.

Mr. Frank Swedlove: I'll ask Ms. Gibbons to answer that question.

Ms. Annette Gibbons: The banks don't send any personal information on their clients to third parties at this point. This is not done because they recognize it would not be very well received. Their clients wouldn't accept that practice.

Ms. Marlene Jennings: During the last six months, I got an offer from a bank. When we read the extremely fine print, we noticed that the bank would divulge privileged or personal information to the branches and corporations it deals with.

• 1220

Just as an experiment, I filled in the form and said that I wanted to get the service but I inked out those paragraphs and initialled them and added that in no case would I authorize any personal information of mine to be divulged. Two months later, I got a new form with a letter saying that there had been a problem in treating my request.

I think you should meet with the banks again to ask them if the information they give you is true or not. Thank you, Madam Chair.

[English]

The Chair: Thanks.

Mr. Swedlove.

Mr. Frank Swedlove: Just to note, one of the reasons the government supports the concept of an embellished ombudsman is to try to deal with difficulties you've defined as they arise.

The Chair: Thank you.

I have Mr. Dubé and then Mr. Cannis.

[Translation]

Mr. Antoine Dubé: Mr. Guérette, you say, and justly so, that the broadcasting area is evolving very rapidly and that it will probably accelerate even faster because of the satellites and all the rest.

I'll do like Ms. Jennings and tell you a personal story. I'm a client of Videotron who offers a basic service that is becoming more and more restricted. On top of that, we have the option of subscribing to an assortment of additional stations. Of course, they also have Videoway which is something else all together. It could be that in the future, you might be offered many assortments within...

In your opinion, could adding a station in one of the assortments in that area mean that it's a new service? Would it become a new service because it's a different service? If that's the case, as soon as you add a new service, the corporation will have to request an exemption or ask for the consent of each and every consumer.

If it's the second option, you'll still need a permit. The request for the permit must be accompanied by a business plan and it must indicate the possibilities that... You can see that it's rather complicated.

Since someone mentioned Bill C-20, after the vote, I tried to remember the reasons why we objected to C-20. It was highly complex, which is also the case here, it seems to me, even with the amendment to clause 128, which reads as follows:

(1.2) The Governor in Council may, by regulation, on the recommendation of the Minister of Canadian Heritage, exempt...

(1.3) The Minister of Canadian Heritage shall consult with the Canadian Radio-television and Telecommunications Commission...

That seems extremely complex and burdensome. Are you not under that impression, Mr. Guérette? At the end of the day, couldn't that limit the development of the service?

Mr. Jean Guérette: I think your question is twofold. The development of this system is in fact highly complex, but the development of broadcasting has always been highly complex. Moreover, the issues you raised are currently being examined by the CRTC and will continue to be in the future. Absolutely nothing has changed in that regard.

Now, if, with the development of the system, an exemption were necessary to allow the development of services... You were right in saying that orders are not always simple. However, there is the advantage that they cannot be used lightly, that they require a lot of study and analysis. From that perspective, it can trigger certain steps.

I would like to point out that the development of technology and the system is such that consumers have an even greater say over the services they choose and that the development of the system will allow the services to evolve without the constraints experienced in the past.

• 1225

Mr. Antoine Dubé: I was not trying to trap you, Mr. Guérette, but you said something very important. You said that it would not change anything because it already exists. Are you implying that the new act, even with the amendment to clause 128, will not change much, except making consultations more cumbersome? In a nutshell, does the CRTC already have the power to do what Mr. Gallaway is seeking?

Mr. Jean Guérette: The CRTC will continue to enforce its regulations and apply its approach to developing services. Having said that, in broadcasting as such, the problems that have been identified here become less and less obvious because we are less inclined to use that type of marketing technique.

However, without Mr. Gallaway's bill, there would be no legislative tool to prevent that type of marketing. It is just that in broadcasting, those kinds of techniques are used less and less.

It is a safety net for broadcasting, but it is growing increasingly unnecessary, since the system itself lends itself more and more to the use of techniques that meet the requirements of clients or consumers.

Mr. Antoine Dubé: I'm going to ask the same question of the officials from the Department of Finance. Do you think that if this bill were not adopted, if it were to die on the Order Paper, that what Mr. Gallaway is seeking might create problems in the banking sector?

Ms. Annette Gibbons: Are you saying...

Mr. Antoine Dubé: If the bill were not adopted and we were left with the status quo, do you foresee there being any serious problems?

Mr. Frank Swedlove: No, I do not think so.

Mr. Antoine Dubé: So there are no serious problems?

Mr. Frank Swedlove: In our opinion, there would not be any serious problems, because clients are already entitled to information.

Mr. Antoine Dubé: Thank you. I am going to put the same question to the Commissioner of Competition. If we keep the status quo, do you foresee there being any serious problems?

Mr. Konrad von Finckenstein: This legislation will protect consumers and prevent consumers from not being able to choose the goods and services they want. To my mind, it is an improvement over the current situation.

Mr. Antoine Dubé: That is an improvement, but as far as I can see it would not necessarily be a priority.

Mr. Konrad von Finckenstein: The last time there was negative option billing in cable, we received a lot of complaints. I imagine that if another company launched a campaign involving negative option billing, we would receive complaints as we did in the past. For the time being, that is not the case.

Mr. Antoine Dubé: However, since it was criticized in the media, and by consumers, etc., it is highly unlikely that large corporations would run that risk again.

Mr. Konrad von Finckenstein: You will have to draw your own conclusions. I do not have a crystal ball.

Mr. Antoine Dubé: Thank you.

[English]

The Chair: Thank you, Mr. Dubé.

Mr. Cannis.

Mr. John Cannis: Thank you, Madam Chair.

I know time is running out. I had a whole slew of questions, but my questions now are a result of hearing from my colleague, Marlene Jennings.

I just wanted to put this on the record, Madam Chair, hearing her concern and her experience with respect to the personal information being passed. We've indicated that there's a bill before the House complementing the legislation the Province of Quebec has and improving it in terms of addressing federally regulated areas such as the problem Madam Jennings described.

I'll start with finance. When you spoke about improved disclosure, redress, etc., you also talked about a waiver that a new client, a new customer, would sign off. That's a great idea, but there's also a concern, because once they sign off—and maybe you can give me your comments on it—what happens six months down the road when there's a new service offered, or a year down the road and there's a $1 charge for it, or what have you? Does that initial sign-off mean this customer automatically has to take the package or the improved part of the existing package they have?

• 1230

One suggestion I'd like to put on the table...because in the past, hearing from my constituents who said they were charged every time they went to an ATM machine to get their money, my rebuttal was that in designing and developing technology, software, etc., to accommodate and make our lives easier, it's a cost factor; it's an expense. The rebuttal—and I want to bring this to your attention—is that's their cost of being in business, staying competitive, retaining their clients, and improving their client base. Why should we pay for it, in terms of their taxing the benefits, etc.?

Maybe you can give me your view on that.

An idea that was mentioned with respect to the ATMs was to have this information about changes and charges posted next to the banking machines, and that's great. But from what I've experienced, most of the people will go in, they'll do their transaction, and very rarely would they pay attention and read the new literature, if they identify it as new literature.

What about an idea of having a notification on the screen, for example, and maybe confirmation of acceptance or not, because we access those ATMs through our personal identification numbers. Earlier today we talked about a phone call and whether that would suffice as acknowledgement of accepting the service. It's not really. But I'm acknowledging it as a user if I access the machine with my PIN number, and if that isn't confirmation from me, then whoever is doing it obviously is committing some fraud.

Can I get your view on whether you think that might be a resolution that the bank could...? The one-month part of it, the 30 days, even the 60 days, is not really sufficient given that our lives are moving so quickly—and I don't mean as politicians; I mean generally speaking, being away on holidays or what have you.

The Chair: Mr. Swedlove.

Mr. Frank Swedlove: The issue about how the information is disclosed is something we've looked at fairly closely. A number of institutions do provide it on the screen and others choose to post it beside the ATM. So there are a number of different ways to do it.

One could debate what is the more effective way of doing it. I suppose if there's a lineup to use the ATM, for example, you may be more likely to see the notice beside the ATM, rather than—

The Chair: You're missing Mr. Cannis' point, Mr. Swedlove. I think he's asking specifically why you can't do the consent on the ATM machine.

Mr. John Cannis: On the ATM machine, as I access to use my—

The Chair: Sounds simple to me.

Mr. Frank Swedlove: You can, and as I say, some institutions...oh, to provide the consent, in terms of the yes or no.

Mr. John Cannis: Yes. You have a new service, a new charge—because you talked about a timeframe and notifying people—a statement, for example.

Mr. Frank Swedlove: I see. I'm sorry. The actual consent.

Mr. John Cannis: Yes.

Mr. Frank Swedlove: I suppose that's a possibility. Some people, of course, don't use ATMs, so you get into the same situation.

Mr. John Cannis: Let me ask, you mentioned a nine-million account client base. Has there ever been a study done on that nine million of the percentage usage of the ATM machines?

Ms. Annette Gibbons: No. There was a study in Quebec by a Quebec consumer group that said 25% of the population never uses ATMs. There is a particular market, at least...and that's, I think, a couple of years old at this point. But there is certainly a group of the population who don't, and it is a significant group.

Mr. Frank Swedlove: There would be an issue about providing sufficient information in an ATM environment, because you would have to explain that charges are going from x to y in terms of price and that these services are being added. And that would all presumably take some period of time.

• 1235

Mr. John Cannis: Going through the banking issues in the last Parliament, I narrowed it down to a lack of communication, because the banks had services people were not aware of. The timeframe is important. You mentioned the 30 days, for example, and I don't think that's sufficient, from what I hear on the street.

I'll just close with this question to the commissioner. Earlier today, during Mr. Galloway's presentation, even though he talked about specific sectors in applying his bill, he used the word “marketplace”. I'd just like your comments or views in applying that word. Is it a good word to use? Do you think it's there and it's substantial?

Mr. Konrad von Finckenstein: Do you mean with regard to this bill?

Mr. John Cannis: I mean with regard to competition in general.

Mr. Konrad von Finckenstein: The whole concept of competition is based on the marketplace, the marketplace being the economy in which an exchange of goods and services takes place. If you look at the Competition Act itself, it always speaks of a market. That can be a product market or a geographic market. Market is not defined; it changes from situation to situation.

Mr. John Cannis: Thank you.

The Chair: I just have a couple of comments before we close the meeting.

Mr. Swedlove, you said in your paper you were going to create a new ombudsman. I hope that when we create a new ombudsman, we create one that actually has some power—not just an ombudsman for the sake of having an ombudsman. With all due respect, I've dealt with several ombudsmen this past year and I don't find it a satisfactory process, so I would be surprised if the Quebec consumers do.

Secondly, on Mr. Cannis' point and on several points that have been raised, we have had the banks appear before this committee on a pretty regular basis. We've discussed service charges and service fees in the past and have been told that service charges and service fees are continuously coming down, or there are more options provided, and it is a customer-oriented and consumer-oriented market.

I would think that Mr. Cannis' suggestion that it be on the person's account and you do it when you're doing your banking right at the machine—a yes or no—would be a very simple solution. Years ago you said only 25% never used ATMs. That number's obviously decreased. It would be a very simple process as well for the teller dealing with the person in the bank to ask for that simple consent.

With the arguments I've seen put forward today, with all due respect to the bankers' association, I hope they don't come and make the same arguments because I find them quite offensive. In this day of technology, consumers can have choice. As technology increases and efficiency increases, the one thing that bothers me about banks is that the charge for using an ATM that isn't at your branch has actually gone up. What's the basis for that, when the price of every other technological thing you buy in the marketplace has come down?

I say go back to the financial institutions. As a committee, I see some real difficulty on all sides of this table with the suggestion that it's going to be difficult to implement. I don't know if you have any response to that.

Mr. Frank Swedlove: Our objective here is not to say whether the service charges are too high or too low or anything else. We are raising concerns that in order to get around the difficulties of getting consent from such a large client base, banks will choose other means to not have to respond to this act. Those other means could be through increasing a charge without increasing the services, or decreasing the services without increasing the charge.

The Chair: Maybe we need to fine-tune the act.

Mr. Frank Swedlove: We have a concern that it may be unfriendly to consumers, and that's our purpose here today.

The Chair: Then maybe we need to take another look at the wording of the act that's before us, but I don't think it's a reason to not go forward with the act. As the commissioner said, consumers need choices. Without choices, there's no fair competition. Banks are always telling us how important competition is, and what's important for their consumers is that they have choices.

Mr. Frank Swedlove: We thought it was important to express our concerns on how pricing may occur and present that in front of you.

The Chair: I appreciate that, but I also hope the Canadian Bankers' Association will come and say that's exactly what they won't do—what you're suggesting could possibly happen. It would be completely unethical for the bankers to do that to get around the wording of this act. I hope we don't go down that path with the bankers. If today is any indication, the members sitting around this table would like to see them come with a solution, instead of continuing to add to this discussion.

• 1240

I want to thank all three of you for being here today.

I'll remind members of the committee we have a meeting on Tuesday. We won't have an opportunity to deal with the motions today. We'll deal with them on Tuesday morning, and we look forward to further debate on this bill.

The meeting's adjourned.