Proceedings of the Standing Senate Committee on
Banking, Trade and
Commerce
Issue 41 - Evidence
OTTAWA, Tuesday, November 24, 1998
The Standing Senate Committee on Banking, Trade and Commerce, to which was referred Bill C-20, to amend the Competition Act and to make consequential and related amendments to other Acts, met this day at 9:30 a.m. to give consideration to the bill.
Senator Michael Kirby (Chairman) in the Chair.
[English]
The Chairman: Honourable senators, today we have officials from Industry Canada's Competition Bureau, who are here to deal with Bill C-20. These witnesses will be back as our final witnesses at the end of our hearings on this bill, so we will have another opportunity to question them.
Mr. von Finckenstein, would you like to proceed.
Mr. Konrad von Finckenstein, Director of Investigation and Research, Competition Bureau, Department of Industry: Thank you for inviting us here to speak to you about Bill C-20. As you appreciate, we have a very good Competition Act in this country. In Canada, people have more freedom of choice on products and prices than do people in many other countries. However, we wish to ensure that the legislation is kept up to date. Hence the bill before you, which deals with three major areas that need to be updated. The first is deceptive telemarketing, the second is the establishment of a civil track for misleading advertising and other offences, and the third is streamlined merger procedures.
I will speak on these three topics and then walk you through the amendments that were made to this bill when it went through the House of Commons.
[Translation]
First, concerning the amendments to the bill regarding the deceptive telemarketing, our main purpose is to give the Bureau fast and effective ways to deal with telemarketing scam artists. Scam artists use the anonymity of telemarketing to defraud Canadians. They prey on all members of society, but tend to focus on the most vulnerable, our senior citizens. This is a real tragedy because when our seniors lose their capital, they lose their source of supplemental income and frankly, they have no other possibilities of finding a new source of revenue.
This is why we want to fight this type of crime. Currently, we estimate the annual losses due to deceptive telemarketing at $4 billion. This includes scams such as illegal prize pitches, lotteries, loan scams, et cetera.
[English]
These kinds of faults also cast a shadow on our very legitimate telemarketing industry, which is worth around $40 billion per year. It is a perfectly legitimate business, but its reputation is being smeared by fraud artists who use telephones to prey on the elderly.
The amendment on deceptive telemarketing will make using the telephone to make illicit interactive sales a criminal offence. We will have the power to penalize these people, as well as the power of bringing in injunctions to stop this activity.
The second track of the amendment deals with misleading advertising and other offences. Essentially, we have taken these offences and changed them from a criminal offence to a civil offence. In the case of misleading advertising, very often it is a question of going over the line. A fraud is not really being committed. If someone is hurt, this conduct should be stopped, and an injunction should be obtained. However, it is not something for which criminal penalties are appropriate. The legislation, therefore, will allow us to pursue these offences in a civil way, quickly obtain an injunction, and put a stop to the conduct.
Criminal penalties are still possible under the act, but they will be reserved for the most egregious cases, and where people wilfully deceive, we will not hesitate to prosecute.
The third part of the bill before you deals with streamlining the merger review. As you know, we are in the midst of an unprecedented wave of mergers, and it shows no signs of abating. The provisions of this bill will make this process more streamlined. It will also ensure that we obtain the information that we need, and that we do not obtain information that we do not need. It will allow the Competition Bureau to obtain interim orders, so that the closing of a transaction can be delayed while we examine it. It will also allow us to ensure that we focus on the important mergers, and do not become involved in a huge paper exercise. Further, it will reduce the paper burden for the business community.
Once implemented, we expect that these provisions will reduce the number of transactions in which we become involved by about 15 per cent. That is to say, we will be focusing on the big ones and we will not be dealing with the little ones. More to the point, we will be able to deal with the little ones in a quicker, more streamlined and efficient fashion.
[Translation]
There are other secondary amendments in Bill C-20. We do not have, for instance, the broadening of authority for the making of orders to avoid prosecution for less serious offences, the title of director of investigation and research becomes commissioner of competition in order to better reflect his mixed law enforcement and policy role. We will formalize the responsibilities of the Director in relation to the administration and enforcement of specific labelling statutes.
[English]
When the bill went through the committee process in the House of Commons, it was carefully studied. Many witnesses were called, and the committee made some amendments.
I wish to point those amendments out to you. The first concerns wiretapping. Under Bill C-20, the use of wiretaps -- that is, the interception of private communications without consent -- is added to section 183 of the Criminal Code. Section 183 now specifies the offences for which wiretapping may be used. It will now also refer to deceptive telemarketing, conspiracy and bid rigging, in accordance with the Competition Act.
When I testified before the House, I pointed out that we had intended to use those sections for conspiracy with regards to price fixing and market sharing. The committee agreed, but passed an amendment that allowed the legislation to reflect that. Of course, we will have to go through the normal procedures of convincing a judge that our existing powers are insufficient, and that there is reasonable and probable cause, et cetera, to wiretap. Once you go through this whole procedure and you wiretap, if it is under section 45, then it has to be in respect of conspiracy to price fix or market share.
Second, if it is regarding telemarketing, then it must be pursuant to an offence under 52(1)(3), which refers to deliberately misleading acts. You cannot wiretap in regard to a failure to make a disclosure; you must have a case where you suspect that someone is deliberately misleading people, and using the telephone to get them to make purchases, subscribe to lotteries, or whatever. Those are the clarifications on wiretap that the committee made.
The committee also clarified that persons engaged in fundraising efforts for charitable or non-profit organizations will be considered to be promoting a business for the purpose ofthe act. Thus, if funds are solicited for an allegedly charitable purpose, but it is not, in fact, charitable, and people are being misled, that can also be pursued under the act. It ensures not only that both the person making the representation, and the person responsible for making it, are considered to be misleading the public.
Let us imagine that a charity hires a professional canvasser, and that canvasser makes false and misleading representations. We can go after the canvasser, but we can also go after the organization that hired him or her, and the person in whose name he or she makes those misrepresentations.
Third, there is a provision regarding double ticketing under the act, and we think it is outdated. After all, any merchant with any sense who sells a product on which there are two prices will charge the lower one. Otherwise he will have an enraged customer who is unlikely to return to the store. We thought that this provision was no longer required. The committee, however, felt that it might be useful to retain it in case this behaviour changes. Therefore, this section remains in the act.
Finally, the committee added a whistle-blower protection clause. It is an express encouragement by Parliament to make people aware of the Competition Act. If an employee finds out that his or her employer is violating the Competition Act, he or she can tell us about it in confidence. If the employer fires that employee, or takes disciplinary action against him or her, then the employer will be criminally liable.
Mr. Justice Dubin, formerly of the Ontario Supreme Court, studied this issue. He pointed out that there are all sorts of protections under labour law, collective agreements and provincial legislation. Basically, the committee took the recommendations of Mr. Justice Dubin and put forward an amendment that would render people criminally liable if they were to discipline employees who acted as whistle-blowers in respect of the Competition Act. We would still have to investigate and lay charges. It is a protection that points out the importance that the committee felt should be added to the provisions of the Competition Act.
When I appeared before the House committee, I also tabled with them the guidelines that we will apply should this act come into force. I wanted to do this so that people would realize where the Competition Bureau is coming from, and what approach we will be taking. There are four guidelines. The first deals with how we will use deceptive telemarketing provisions. The second deals with how we will make the choice to proceed criminally or civilly in misleading advertising cases. The third is in respect of how we will interpret the provisions regarding ordinary price claims. The last sets out how we will exercise wiretapping provisions without consent powers, should they be granted us.
We also tabled draft regulations under the new merger provisions. All these documents will be undergoing further consultations and the regulations will be pre-published. I am tabling them with you so that you can appreciate the approach we are taking. We want all of these provisions to be as open and transparent as possible.
Finally, I wish to address the change from a criminal to a civil regime. Lawyers being lawyers, it is possible that people will say, "Parliament required something different. By changing it from civil criminal to civil you really change the whole tenor of these sections." That is not our intention. Our intention is to ensure that we can pursue these offences criminally or civilly, but not to put all the existing jurisprudence in doubt.
Therefore, pursuant to the recommendation from the consultative panel, I urge both you and the House of Commons committee to put a statement in your final report. That statement should say that, "Where the law is reasonably settled in respect of the current provisions, precedents should not be opened up again for debate simply because of the shift from criminal to civil adjudicative jurisdiction." That paragraph will make it clear that the body of law that we have will continue to apply, notwithstanding that we are now talking about a civil offence rather than a criminal offence.
Mr. Chairman, my colleagues and I will be more than pleased to answer any questions you may have.
Senator Oliver: I should like to thank you, as I did when I spoke in the Senate, for sending some of your senior officers to my office to help explain the bill, and to answer a number of questions that I had.
I wish to address three main areas today. The first one is the same issue that I discussed with your officials in my office -- namely, section 206 of the Criminal Code.
I should like to begin with a letter to our chairman, Senator Michael Kirby, from the Canadian Bar Association, dated November 18. They indicate that, when they appear before us, they will be urging the Senate Banking Committee to recommend deleting clause 47 from Bill C-20, because the wiretap is one of the most invasive tools available to the state to investigate the activities of its citizens. They feel that there was not sufficient consultation. Could you comment on that?
My second question deals with whistle-blowing. On whistle-blowing, they say that they would like this committee to delete sections 66.1 and 66.2, and forward them to the Competition Bureau for consideration and public consultation in the next round of amendments to the Competition Act. They are saying, "Postpone this and give the public a chance to discuss it before you bring in something so intrusive."
They go on to say -- contrary to what you have told the committee today -- that this matter was discussed by the Honourable Mr. Justice Dubin. According to them, he said that the whistle-blower legislation in other jurisdictions has had little impact, and that it is not necessary to bring in this whistle-blowing section, because protection is available through existing processes. In other words, he is saying that it is redundant, so let us not do it again. That is what the Canadian Bar Association will tell us when they appear here.
Perhaps you could address each of those three areas in turn.
Mr. von Finckenstein: Let me start with wiretapping.
We are seeking the provisions regarding wiretapping primarily in order to deal with telemarketing. We want to put an end to the kind of conduct that is happening right now. People prey not only on the elderly, but also on others, calling them up to establish a personal relationship, exploiting their loneliness, and selling them bogus products or prizes or by asking for loans or for a bogus donation. They do not do it once -- they do it two or three times. They are very clever and exchange the lists between each other. Once the victims reach a loss of $30,000 or $40,000, they suddenly realize that this is never-never land.
Let me explain how the scam works. Someone phones you up and says, "Senator Oliver, how are you?" This is done in the middle of the afternoon, when elderly people are at home and lonely. A certain relationship is established, for example, by saying that you have won a prize such as a car. They explain it to you -- that is, what colour it is, what options are available to you, and everything. They then say, "We will deliver it to you tomorrow morning, but we cannot pay the GST for you. The government will not allow us to do so. We would be breaking the law if we did that, and we are a law-abiding organization. We want to give you the car, so pay us the GST and we will come over with your car."
The person then pays the GST. The car never comes, and a week later the victim is told, "That model is not available. We have a fancier model, but you would have to pay additional money for it." The victim is then taken for a second time. Some new twists are added, and the person is taken advantage of a third time.
When none of that has worked and the person finally hangs up, someone phones up and says, "I am from the RCMP. I understand someone has taken advantage of you. Tell me what happened. Please lay it out." You are feeling victimized at this point in time and someone is offering you some assistance, so you explain it all. After you have unburdened yourself, the person says, "We will get your money back with interest, but you know how under funded the RCMP is these days. We do not have the means to do this. We need special surveillance and we need the funds to do it." The person is then taken for the last time.
These are the people who I want to put out of business. To get at them, you need to record their spiel. Witnesses usually have frail memories. They will say one thing; the person will say another. Some of them do not make good witnesses, but they are really victimized. I can go to a judge and tell him, "Look, I have the power to seize and search records. We can force people to reply to our inquiries under oath and all of this, but those powers are not sufficient here. In this instance, we know that this person is doing this kind of business. Let us intercept this person." Under the provisions of the act, if the judge says "Yes," we will record it, and we will then have it in black and white.
This act now sets out that when you do telemarketing, you must explain who you are and what you are selling. If it is a product, you must give the reasonable value of the product. If it is a lottery, you cannot ask them to pay for it ahead of time, and so on. It must be a very specific event.
Senator Oliver: Did you do extensive public consultation before you brought in this fairly intrusive remedy? Did you consult intensively?
Mr. von Finckenstein: No, not intensively, but we did have two parliamentary hearings. That is, we had one before the House of Commons, and one before you here now. The bill was introduced over a year ago, and there was plenty of time to discuss it.
I have also spoken personally to many members of the bar. I went to Toronto twice to meet with leading members of the bar and industry to explain exactly what we are trying to do.
Section 183 of the Criminal Code sets out the offences for which you may wiretap. There are the usual criminal offences, but there are also a whole host of economic offences -- such as fraudulent bankruptcy, fraudulent customs declarations, and so on. This is an economic crime, and I do not see that it is any different from those economic crimes. We are taking the existing procedure under the Criminal Code and saying, "to those offences, add three specific offences under the Competition Act: Telemarketing, conspiracy and bid-rigging."
There was considerable concern about the concept of "conspiracy" being too wide. Therefore, we issued guidelines. The House of Commons committee felt that, if it was only to be used for price-fixing and market sharing, then that should be put specifically in the act, so they did that.
Why do we need it for those offences? Because when you have a conspiracy to price fix and market share, a few times what has happened is that witnesses come forward and explain to us, "I am part of this conspiracy. I want to turn states evidence." So that the other person can get the evidence -- and a meeting is taking place next week in Vancouver -- the witness is asked, "Can we put a body pack on you?" The person says "No. I will not do that." Yet we know the offence is occurring, and we would be using it for those rare cases.
Senator Oliver: On whistle-blowing, can you speak to the fact that the bar says that what you are trying to do is really redundant?
Mr. von Finckenstein: Absolutely. We commissioned Mr. Justice Dubin. He did two studies for us, and they are both on our Web site. He did a survey of all whistle-blowing legislation in Canada. There is quite a bit of, especially on the environmental side and with regards to labour relations.
Senator Oliver: Most of it is not very effective.
Mr. von Finckenstein: It has not been used extensively. You do not know if it is effective in terms of deterrence, and whether the provisions as they currently are deter people from punishing whistle-blowers.
I asked him to do a second study for us. If the government decided that it wanted to deal with whistle-blowing, how should it be done? The second study said "if you do it, you should really do it in a targeted way, as this bill does," -- in effect establishing a criminal offence. The fact that it is there will heighten the awareness of the fact that whistle-blowing is encouraged. It is protected under this legislation, and it will give you a means of punishing people who discipline whistle-blowers, or who retaliate against them.
I have testified before the House of Commons, and I will tell you that I was neutral on this. I am not sure whether this will be effective or not. Canada is generally a law-abiding society. There is no question that having provisions that prohibit something will deter that conduct. It is difficult to determine how to measure deterrent, however. Will having the provision there deter conduct or not? Basically, what this legislation does is to err on the side of caution. We put it in there to deter people from even thinking about it.
Senator Oliver: Let us consider section 206 of the Criminal Code.One of the concerns I have is that bona fide organizations -- such as banks and other groups -- have been using lotteries to raise money for important charities, and they may now be stopped from doing that because of the provisions you are bringing in. Can you tell us about the apparent conflict between the Criminal Code and this act?
Mr. von Finckenstein: I will let my counsel respond to that. I am talking about fraudulent lotteries done using a telephone, where people call and try to get a person's money by claiming that they work for a lottery, and that the victim has won something. The telephone is used as a means of promoting these fraudulent lotteries. As you said, the banks are not in that business. I am talking about fly-by-night artists who are trying to rob innocent citizens.
We have been very careful to draw a line between legitimate telemarketing, which is a huge part of our economy and one which we do not wish to impair, and fraudulent activity. We wish to get the fraud artists out. Therefore, we have said anyone who is in this business legitimately will have no problem identifying himself if he is selling something at a reasonable price, and if he is conducting a lottery he will not ask for payment prior to the lottery. Therefore, they should have no problem with it, and that is how we drafted it. Now, Mr. Côté, do you wish to answer the specific question on section 206?
Mr. François Côté, General Counsel and Director, Legal Services, Department of Justice: My understanding of section 206 is that it prohibits lotteries, raffles, or schemes whereby in order to participate in the lottery, a sum of money is asked of the people who will participate. You buy a ticket to participate in my lottery -- everyone buys a ticket to participate in my lottery. After that, I draw a ticket, and the winner is known.
These are prohibited under section 206 of the Criminal Code, but under section 207 they are permitted if carried out under the authority of the provincial government authorities specifically appointed to deal with these lotteries. What we have under proposed section 52.1(3)(b)(i) is a case where there is a lottery, and there is no consideration for participating in the lottery.
I understand that to be a promotional contest, where the point is to get as many people as possible to join in the lottery. The object is to expose your wares, hence there is no consideration for participating in the lottery. However, if you win the brand new car that the lottery is about, before they deliver the car they will ask you to pay for this and that. That is the aim of the section in the bill presently before you. These are two different things.
Senator Kolber: Generally, I think it is a rather good bill. I should like some clarification on the charitable side, however. Speaking as a consumer, when I am home in the evening, my wife and I probably receive four or five calls a week asking us to give to a variety of charities. We are good pickings, because we have a charitable foundation.
Occasionally I try to follow up on it, because it sounds good when they call you on the phone; they are going to give to poor children or something. I normally say, "Here is my fax number at the office. Please fax me the information, and we will respond." Once in a while they do fax me, but most of the time they do not. When they do, I have had our charitable people check up on it. In most cases, they had no charitable number and nobody was answering calls in the listed telephone number.
How do you police it? By way of example, let us assume that someone wishes to start a charitable endeavour using telemarketing, and it turns out that when all the money is sent, 1 per cent is actually given to charity and 99 per cent is for expenses. It does not sound illegal; it sounds bad but not illegal. Is there any policing of this? Can this only be fixed by whistle-blowers?
Mr. von Finckenstein: Does the person who calls have a charitable designation from Revenue Canada or not?
Senator Kolber: No. Is that really a requirement? It is for me, but does it make it illegal if they do not have a number?
Mr. von Finckenstein: Not if we are talking about non-profit charities. Last year, during the flood in Manitoba, some people claimed to act for something called the "Red River Victims Relief Committee." I have never heard of it; it does not exist. They were asking people to send money, or to give them their visa card number so that they could immediately make a donation.
Senator Kolber: How did you find out about it?
Mr. von Finckenstein: We received a complaint from someone who had been called on the telephone and who had given them something. He told us: "I just phoned them up. I tried to find this organization, and it does not exist. I cannot find any reference to it, and I think I may have been taken in." We have a 1-800 number that people can call during business hours. That is how we receive information like that, which we then follow up on.
Senator Kolber: What about my example where they collect money and give a minute fraction of it to charity, or to whatever it is they say they are giving it to? It does not sound illegal.
Mr. von Finckenstein: I do not police a person's charity status. That is something that Revenue Canada does. If that is the case, registered charities risk the danger of losing their charitable status, but that has nothing to do with me.
You are talking about whether it is a misrepresentation or not. That depends on what they say when they talk to you. If they say they are a charity, and give 99 per cent of their funds to the poor, using only 1 per cent for internal administration, and the reality is the opposite, then it is clear-cut misrepresentation.This is something that we could pursue, and something that we would pursue.
Senator Stewart: I have a question or two about mergers. I am looking at page 2 of the background paper about the Competition Bureau. The first paragraph is headed "Merger Review." How extensive is your jurisdiction? Let us say two large companies in the same province propose to merge. Does federal jurisdiction cover such a situation?
Mr. von Finckenstein: Yes. We must be notified of mergers resulting in Canada from an industry that is not regulated or those that have not been exempted from the Competition Act that are beyond a certain threshold. If they are below the threshold, they need not notify us. However, we can look at either of those and determine whether the merger raises anti-competitive effects or, in the language of the statutes, could lead to a substantial lessening of competition.
Senator Stewart: I am not asking for great precision in this question. You say in that paragraph that you will have time under this new arrangement to examine the transaction to determine whether it will substantially lessen or prevent market competition. How do you decide in advance?
Mr. von Finckenstein: Senator, to which document are you referring?
Senator Stewart: It is entitled "Backgrounder," issued by Industry Canada.
Mr. von Finckenstein: My colleague can walk you through the details. Essentially, we look at the industry and speak to the merging parties, their clients, and their competitors to take a snapshot of the industry as it stands right now. We bring in experts if necessary and determine, for that industry, what drives it, what are the key products and the market, both in terms of the product and geography. We then make an economic analysis as to whether this merger will likely lead to a substantial lessening of competition. Are there other people who will likely come into the market? Are there foreign alternatives? Are there substitute products that could be used if this product were to become too expensive?
Mr. Lancop can address this question.
Mr. Robert Lancop, Assistant Deputy Director of Investigation and Research Mergers, Department of Industry Canada: Essentially, we are attempting to assess the state of competition prior to the merger and the state of competition after the merger. The law provides a fair amount of guidance. There is a non-exhaustive list of factors for the tribunal to take into account, such as barriers to entry. Is this a market that other competitors could enter quite easily? As a result of this merger, will there be effective competition remaining in the market? What kind of market share are we looking at if the two companies come together? That is the sort of considerations we use.
Senator Stewart: This question has interested me for some time. We hear about automobile companies, not so much in Canada, but abroad, merging. We hear about banks and insurance companies merging.
My attention was revived by a question that I heard on a CBC program on Saturday or Sunday. It dealt with the pork industry, particularly in Prince Edward Island. Apparently, the price that the farmer gets for his product has dropped dramatically, perhaps by as much as 60 per cent; however, the price has not dropped in the major stores that were mentioned on the program, which suggests to me that there is inadequate competition. You do not need a major conspiracy when you have three or four players in a field. There will be an understanding that it is not desirable to start this race down in prices. In other words, no one gains except the consumer, and he does not count. I raise that as an example. I will not press for details on how that concentration took place.
However, do you follow up to see if prices show a consequence of your permitted mergers, and did you indeed look at the grocery stores or chains that happened to be involved in this particular case? I realize this is a recent case.
Senator Oliver: It is also true of beef, not just pork.
Mr. von Finckenstein: I have three points on this.
First, when we look at merger review, our job is only to look at what will happen as a result of the merger, not whether the industry already has a low level of competition. We are not there to rectify things. Our job is to ensure that it does not get worse.
Second, you made the statement that when you have three players in the industry there is an "accommodation" -- I think that was the word you used. Under the act, if there is what we call conscious parallelism -- that is, people align their prices with each other and follow each other without any agreement or any kind of accord between them -- that is perfectly normal market behaviour. They are allowed to do that. However, when they agree to do that, when there is an understanding between them, however it is communicated, when it is clear that they are acting in concert, that is when you violate the act, and we can look at that under the criminal and civil provisions.
In terms of the groceries, that is an ongoing case before us, so I am afraid I cannot comment other than to say we are looking at these mergers pursuant to the provisions of the act, examining them and looking at the effect on the market, and trying to ensure that if those mergers go ahead they do not result in substantial lessening of prevention of competition, which is a test set out in the act.
Senator Angus: I congratulate you, Mr. von Finckenstein, and your colleagues. I subscribe to the view that this type of legislation needs to be brought up-to-date on a regular basis. It needs to be reviewed in an in-depth way.
I cannot help asking you why you want to change your name to "commissioner." It makes you look more like the RCMP, or a baseball scenario.
Mr. von Finckenstein: The director really has a double role. It is both enforcement and policy, and we do many interventions. The title of "commissioner" is one that is normally used in the government for people who have this dual role of enforcing or administering a statute and also making policy recommendation. You have the Commissioner of Official Languages, for instance. You have the Commissioner of RCMP, who also has a policy role.
The title "director of investigation and research" is completely misleading. First, I do not do any research, and, second, it appears as if I am a second-tier librarian doing research. When I go to international meetings, people who see my title wonder exactly what it is I do. They wonder what I have to do with competition. It is a misnomer, and that is why we are correcting it.
Senator Angus: Was it your request?
Mr. von Finckenstein: It was my suggestion, yes.
Senator Angus: The bar has also approached us on this issue. They feel that, in these times of cost-cutting, it would be expensive to change every single document that uses the word "director." It does not matter to me whether you are called king, queen or whatever, but it stands out like a sore thumb.
Mr. von Finckenstein: Let me assure you that we will not reprint any letterhead. We will use our old letterhead, to the extent possible. Most of our communications these days are wireless, and with the Web sites; it is just a search and substitute function. It takes two seconds to do it.
Senator Angus: Your answer is basically what I anticipated, but the bar continues to make the point, and others have as well, frankly, that there has not been a satisfactory explanation. I have read the transcript. You have been asked this before. There is no other deep, dark or shallow, light reason?
Mr. von Finckenstein: No. I answered your question.
Senator Callbeck: I thank the director for sending senior officials to my office before I sponsored the bill.
I want to follow up on Senator Stewart's mention of the price of pork. I have been asked several times why, when the cost of production to the farmer has gone down drastically, consumers do not see any changes in the retail price.
You say this is competition. Who can these consumers contact if they have concerns?
Mr. von Finckenstein: I do not know anything about the pork industry. I do not know whether there is a marketing board involved or whether it is a regulated industry. If it is not, then pork prices are a question of supply and demand in the market.
My colleague tells me it is regulated; therefore, the consumer should go to the regulator.
In an unregulated industry, the consumer should talk to us. We do have a 1-800 number. You can call us or write to us or fax us. When there is behaviour that is not competitive and does not make sense, such as falling input prices but no falling retail prices, we will look to see whether behaviour between the players in the market is preventing prices from adjusting to demand.
Mr. Lancop: Pork is a commodity sold on the international market. International prices of pork have dropped quite dramatically. It is a regulated industry. Provincial marketing boards have authority to market pork to the processors. Above that level, it is competitive, but the prices from the provincial marketing boards have actually kept the price within Canada at a higher level than we have seen on international markets.
That is not something over which we have jurisdiction because it is a regulated industry with full authority to set prices through its marketing boards. We cannot intervene in that process and stop that. If, however, there were anti-competitive behaviour further downstream at either the processor level or among retailers, we would certainly look into that.
Senator Callbeck: What is your 1-800 number?
Mr. Mercer: It is 1-800-348-5358.
Senator Callbeck: When senior officials were in my office talking about this bill, Senator Oliver referred to some criticism from people who felt that there had not been enough consultation, especially on the wiretapping.
You said you have spoken to some groups. How extensive were those talks? Were you able to change the thinking of any of these groups of people who have been very much opposed to wiretapping?
Mr. von Finckenstein: No, I have not been able to change their views. Their opinion is that wiretapping is intrusive and has nothing to do with business. I agree that it has nothing to do with business, but it has much to do with crime. Unfortunately, some crime is conducted in a business context. If people conspire to fix prices, every consumer gets hurt. If people use the telephone not for legitimate telemarketing but in order to fleece people of their savings, then I feel we have every right to prosecute it.
Nobody has ever come forward with a substantive objection other than this lack of consultation. We live in a democracy. In two parliamentary hearings, a concerned citizen can point out what they find that does not make sense. Other than requesting more consultation, nobody has shown potential harm. The use of wiretap is very tightly circumscribed. We are using an existing procedure that is absolutely no different than any other wiretapping that could be authorized.
A judge must be convinced that the existing powers are not enough. In our case, that will not be easy because we have fairly extensive powers. The authorization itself is subject to all sorts of limitations. When the evidence is collected and presented in court, there will invariably be a motion to disallow it for whatever reason. The judge must rule on the admissibility, on its relevance, and whether it was properly obtained within the four corners of the authorization.
Protections that have been built up in the jurisprudence regarding wiretapping will apply here. I fail to understand the concerns. That being said, you are right, I have not been able to convince them.
The Chairman: Thank you. As agreed, you will return on Thursday as our final witnesses.
The next witnesses are from the Retail Council of Canada and Ford Motors.
Mr. Peter Woolford, Retail Council of Canada: Mr. Chairman, this morning, Mr. Stewart and I are both wearing our normal representational hats. We were also members of the consultative panel who advised the then director, now commissioner, on the changes to the legislation. We thought it might be helpful for the committee to ask questions of a couple of people who went through that consultative process regarding the conclusions and balances we tried to reach in the amendments that we reviewed.
You have our submission, on behalf of the Retail Council of Canada. I do not plan to go through it in any detail. With respect to the amendment process, panel members felt it worked very well. It provided for thorough, well-balanced discussion. The various interest groups -- consumers, business, and the bar -- had good insight into how the law is applied and enforced by the bureau. In turn, the bureau got a sense of how business is done in Canada. It provided a useful opportunity for interchange. One of our strongest recommendations is to have that process repeated whenever there are further amendments to the legislation.
On behalf of the panel, it is our opinion that this piece of legislation has come out in the right place. It provides a balanced, fair set of changes to the law, which reflect recent developments in the marketplace. For that reason, we would encourage senators to pass Bill C-20. The broad elements in the package do meet the needs of the marketplace and of all the players there.
The panel tried to arrive at a balance between the interests of consumers and the interests of business and, equally, the interests of various competitors within a marketplace. There should be a fair balance across the competitive marketplace so that competition is assured. Our sense is that that was achieved.
Mr. Norm Stewart, Ford Motor Company of Canada: My role in the process started in the middle of June 1995. I represented both the Alliance of Manufacturers and Exporters of Canada and the Canadian Chamber of Commerce in some initial discussions with the bureau.
Both Mr. Woolford and I had experience in other kinds of consultative processes in the past that had worked fairly well. That information was of interest to the bureau because they wanted to construct a process that really brought stakeholders together to try to come to consensus on issues. Equally as important is the desire to reach out to the broader stakeholder communities as the process was unfolding so that the bureau could have a level of comfort that, as we were reaching understandings on various issues, there would be general support for it in the public place. That was a very great and tangible benefit, too.
Through that process, we achieved a much greater understanding of the bureau's work, the resources that they must deploy and the limitations on their resources. In turn, they got a much better understanding of the business community and what it was trying to accomplish on the various issues that were discussed.
When it is all said and done, we ended up with a package that could be brought forward in terms of legislation that was comprehensive, that did address the needs of those stakeholders and allowed us to form a basis for further discussions going forward.
From a business perspective, we like the idea of periodic reviews of framework-type legislation such as the Competition Act. If you recall, in the past, the reviews happened on a much longer time frame and were much more omnibus in nature. As a result, there was a great amount of pent-up frustration in the business community and frustration from legislators' points of view, in terms of trying to accomplish change. This way, by biting off reasonable chunks that we could address on a more frequent basis, perhaps every three to five years, it allows us to do a much better job of keeping the legislation timely and responsive to consumers in Canada. From that perspective, we think it is an excellent process.
The Chairman: On the question of wiretapping, can you help me understand why some parts of the business community have been opposed to wiretapping? I would have thought that a legitimate business would feel that any use by authorities to ensure that non-legitimate business activity is stopped would have been viewed as desirable. Given the fact that this is not the first time we have had wiretapping legislation in Canada, there is already wiretapping legislation for other things, can you help me understand what is underlying this opposition?
Mr. Stewart: I believe some of it comes from a misunderstanding. A number of the people who are practitioners in the area are not necessarily criminal lawyers who would have experience with the wiretapping provisions under the Criminal Code.
The Chairman: Practitioners in what area?
Mr. Stewart: Competition law practitioners, either in private practice or in-house counsel who work in this area. They do not have a background in dealing with wiretapping provisions under the code. If you look at the code, and I know you have, it is comprehensive in terms of how it deals with wiretapping. When you look at it, there are enough safeguards and checks that a reasonable business person should not have a concern with it, particularly if you are not engaged in any criminal-type behaviour.
That was the first level of concern. The second one involved misunderstandings for some elements of the business community who thought that the consultative process we undertook to bring forward the great bulk of what is in the bill would be totally inclusive and that there would be no other discussion of other issues. That is unrealistic. Life moves on, and the government must look at other issues that were coming along. The legislation was there; the government felt a need and as such introduced these provisions into Bill C-20.
Once people understood that, they also got to see the draft guidelines that the director had put together in this area, which gave them some comfort. The amendments that took place in the commons committee focused on where wiretapping will take place, both price-fixing and bid-rigging, and that gave much more assurance to people.
When it is all said and done, you have a smaller group, and it tends to be practitioners who still believe we should not move forward with it now that we should consider it in the next round. From a business point of view, I feel we should move on with it as it now stands.
Mr. Woolford: Certainly in the consultations that I had with retailers, and with some of the legal community that Mr. Stewart referred to, the concerns that were raised were the ones that were just mentioned.
The third element that came forward is that firms are always very nervous and careful about the confidentiality of their own internal business. The concept of intrusiveness bothered some firms, certainly some more than others. Interestingly, as you will see from our brief, where the Retail Council of Canada ended up was that we felt there was no concern here.
We worked that through with our members. We had some useful discussions with members from the bureau, and at the end of it our members felt pretty comfortable that it would be used where a crime is actually being committed as opposed to normal confidential business. In working that through with the director, they came to the conclusion that they could understand the distinction he was trying to draw.
My sense is that there may be other parts of the business community that have not taken the time and the effort to understand and really work through that distinction that the bureau has tried to draw in this area. That may be part of the reason for their continued discomfort, plus the fact that there had been such an exemplary consultative process for the bulk of it. Given that life was moving on, that there were emerging problems, particularly in the telemarketing area, presumably the minister felt he needed to act, and so he decided to move forward with this extra piece. From our point of view, that is understandable; you cannot hold everything up to complete yet another process.
Senator Meighen: Mr. Stewart, are you a member of the national competition law section of the Canadian bar?
Mr. Stewart: I am not, but two of the lawyers on my staff are.
Senator Meighen: I accept what you say, but I note in the submission of the section that they do say that they continue to oppose the introduction of the wiretap portion of this legislation without adequate public debate on whether it is necessary. I gather from both of you that you feel there has been adequate debate. Did debate within the section take place, to your knowledge?
Mr. Stewart: There was debate within the section. There was debate among the various business groups, the chamber, the alliance, the retail council, and others who had actively participated in the original consultative process. The director came out to meet with groups -- for instance, the Canadian Chamber of Commerce -- on a couple of occasions when I was personally present. I know he had individual conversations with any number of businesses and lawyers within businesses. If you look at it, what he was doing there was what was perhaps the more traditional form of consultation after a bill is introduced. The difference was, as I said before, this consultative process had worked through a number of the key areas and had proposed that to Cabinet for consideration for legislative purposes. People started to believe that that would be totally inclusive. That was the real issue.
Senator Meighen: You were quite laudatory in terms of the consultative process. Is this, in your experience, a departure from past practice?
Mr. Stewart: It is the first one of this nature that I have seen the bureau do. I was part of the processes that took place in the 1980s, and they were good. The 1980s were a real breakthrough in terms of discussions between the bureau and stakeholders. This approach was much more streamlined and would lend itself to outreach to the broader community. That is its greatest success.
I can give you an example. When the bureau issued its discussion paper in June 1995, they were looking at misleading advertising, and even that part of the process was done well. They said that there were different ways of doing this: You can keep the current criminal process, but there are pros and cons about it; you can go to a purely civil process; or perhaps there is a hybrid. Immediate reaction in the business community was split. Some people said they did not like the criminal process but it is the devil we know. They said, "We have known it for years, leave it alone, we are afraid of how it might be changed." Other groups felt that the criminal process is too heavy-handed for most misleading advertising, that they would prefer a purely civil process. At the outset, no one in the business community would have opted for a hybrid. That would be a confusing situation for people.
What this process allowed was good discussion within the panel, good outreach into the broader business community. By the time the discussion paper was released, there was broad consensus in the business community that this was a much better way to deal with things. I do not think we would have reached that point without the consultative process that took place, to achieve that kind of a conclusion.
Senator Meighen: You do say in your brief that there is a continuing malaise about whether the possibility of following either track will be used by the bureau to go on a fishing expedition that will result in a hesitancy by business to cooperate before they know on which avenue they will proceed.
Mr. Woolford: I should make clear that the brief you received this morning is from the Retail Council of Canada, so you cannot tar Mr. Stewart with that brush.
Making that choice is an ongoing concern with some of our members. We understand both sides of that issue and have tried to reflect that in our submission. From the director's point of view, there is a concern about deciding too quickly which track to follow, thereby shutting off the criminal track in the case where additional evidence suggests that there has been a deliberate attempt to defraud people. We understand that danger from the director's point of view.
Equally, there is a concern from the firm's point of view that they will give away too much information, believing that they are in a more cooperative civil process, only to get caught down the road.
We talked that through with our members at some length. Our sense at the end of it all is that, with time and with experience, both sides of that table will get a fairly clear sense of how that balance is struck and how the director will move.
I think the guidelines were a sincere and honest attempt to provide additional information on how the choice would be made. I am not sure they are that helpful at the end of the day. Experience alone will give people the comfort they need.
Senator Meighen: In that vein -- I think Mr. Stewart made have alluded to it -- is the notion of an ongoing consultative process. Will the panel remain in force, or can it be called into being when you want or need it?
Mr. Stewart: The life of this panel came to an end once the legislation was introduced. If there are to be further rounds of potential amendments to the legislation, the bureau will have to consider reconstituting the panel, restructuring the panel or some other mechanism.
The Chairman: Given your comments about the advantages of updating the legislation on an ongoing basis, is there not something to be said -- not in legislation -- for a process whereby once a year or once every two years a group of you who understand the subject sit down and take a couple of days with the bureau to explore the issues bothering you?
As I understand your response to Senator Meighen, the initiative for looking at changes to reflect future evolutions will rest with the government. Is there not something to be said for a review process, even if you meet and conclude that there are probably no significant changes and that this should be left for a while? I am attempting to formalize your notion that a regular update may happen.
In the Bank Act, for example, and now in the Insurance Companies Act, there is an explicit sunset provision. The review is forced because the act is out of existence. I am not suggesting a sunset provision here, but we have found in this committee that things like sunset provisions have the advantage of moving the natural tendency in any large organization like the government to not change things.
Mr. Stewart: We spoke about this on the panel, and some came forward with your suggestion that perhaps we should formalize it in the legislation. The consensus conclusion was that at this stage we should not formalize it by making it a requirement that every number of years it must be reviewed.
On an informal basis, with a fair bit of structure to it, the bureau has put together an amendments unit. It is the intent, every three or four years, to take a good look at the legislation and come forward with suggested changes.
In the interim, one of the intangible benefits of the past exercise is that there is a much more quasi-formalized, informal discussion going on. There is a much better dialogue with the bureau than ever before. I think it would start to turn up.
For instance, the Canadian Chamber of Commerce has an ongoing concern about the financial thresholds for merger pre-notification. That can be discussed on a regular basis with the bureau. If there is an agreement to bring it forward, perhaps in one of those more formalized three- or four-year amendment processes it could be done.
Rather than formally structure it, I like what we have been developing. However, if it turns out that this does not work, then I think your suggestion is good.
[Translation]
Senator Hervieux-Payette: I am well aware of the ambiguity of competition and telemarketing done by phone and I was wondering whether you dealt with that area?
The ambiguity came from the fact that people did not know to which institution complain: the CRTC or the Competition Bureau. Do you think that the bill will make things easier for consumers? Where are they going to lodge their complaints? For instance, they are told: We are offering you a service, its wonderful, it does not cost much, but tomorrow morning we are going to disconnect you from the Bell network. The involved person does not know about it and is not told about it. Is this any clearer in the new legislation?
I know that you are not representing consumers, but those who are selling services and who want to have a good reputation with consumers. Is the bill going to solve that ambiguity? Will consumers have an easier task in lodging a complaint with the Bureau?
Mr. Woolford: We feel that the new act and its amendments establish requirements for people who do telemarketing. We feel that this will help clarify things for consumers. We could tell consumers about the requirements in the act. The sections in the new system are quite clear for the education of consumers.
We feel that this probably has to do with the Competition Bureau because it is a real fraud. The director emphasized this morning the difference between business and crime. What we are dealing with in the act is fraud. We believe the Consultative panel considers the crimes directors are confronted with. In this case it is fraud.
We find it necessary to be able to contact easily the Bureau. The president suggested this morning a number that is easier and simpler to dial like 1-800-FRAUD. It is necessary to tell consumers about their rights and responsibilities.
It is a little difficult to identify other protection means in the act. It is the responsibility of the other telemarketers to comply with the act. We hope to create a climate where we will know how to receive a telemarketing call. If we receive a different call, a somewhat strange call, we must ask for more information.
Senator Hervieux-Payette: Is your association going to really educate its members on what is allowed with the new legislation? It is also important that your members know the limits for legal advertising.
Mr. Woolford: We consulted our members concerning the amendments. In the retail sector, there are a lot of people who do not do telemarketing and of course a lot who do it. The Canadian Direct Marketing Association represents its companies directly and we are making efforts in that regard.
We tried to educate our members on the amendments before they are passed. Then we will continue to identify the requirements of the legislation and to comply with them.
[English]
Senator Oliver: On page 4 of your presentation, you say that you generally agree with Bill C-20. However, you go on to make the same recommendation for change and amendment that you made in the House of Commons. In the other place, you said that the definition of telemarketing itself is not clear. You state as well that the Canadian Bar Association, and other groups, also said that it could use some clarification.
As I understand it, the clarification that you want is the addition of the words "live voice." For the benefit of those here, could you explain the magic in the language "live voice"?
Mr. Woolford: The magic for us is that in our view, at this point anyway, with a relatively new piece of legislation like this legislation, it should be limited to cases where there is an actual live person on the phone making that outbound telemarketing call.
What we were trying to get at there is that the manipulation of the consumer that occurs is usually done using human intelligence. Our concern was that, without being very clear about on this point, some of the automated answering systems and some of the automated outbound calling systems might be caught under this legislation. The director of the bureau has stated numerous times, and he has provided it in his guidelines, that the intention is to deal with live voice, outbound calls. It is a person on a phone calling the consumer and trying to work them, trying to misrepresent information.
Senator Oliver: In other words, by your definition, they could not use a tape recording.
Mr. Woolford: That is right. Our sense is that technology has not got to the point where it can work sufficiently interactively with a human being in order to be used to misrepresent or defraud people.
I was part of a panel that looked into telemarketing. We recognized that the day might come when you might have machine intelligence that will be good enough to use for fraudulent purposes. Our sense is that it is not there yet and that that aspect required more thought.
We do not feel terribly religious about this. We thought that more clarity in the legislation would be desirable.
The Chairman: Gentlemen, thank you for coming.
Our final witness this morning is Mr. John Gustavson, President and CEO of the Canadian Direct Marketing Association. Mr. Gustavson has circulated a fairly short brief.
Please proceed, sir.
Mr. John Gustavson, President and Chief Executive Officer, Canadian Direct Marketing Association: Mr. Chairman, we represent many of the major organizations that are engaged in legitimate telemarketing, as well as other forms of information-based marketing, which includes electronic commerce on the Internet. The association is the largest marketing association in the country, with some 750 corporate members and some 3,000 individual members. They include our major financial institutions, cataloguers, publishers, charitable fundraisers, and anyone engaged in customer relationship marketing.
Last year, Canadians bought some $12.4 billion worth of products from direct response marketers. That is a 12 per cent increase over the year before.
Our members use many media, including, obviously, the telephone, various electronic media, newspapers, radio, television and so on.
With respect to telemarketing, it is important to know that while it is a fully integrated process call centres employ tens of thousands of Canadians.
Home shopping has become a real convenience for Canadians with busy lifestyles. It is not just a convenience for many Canadians; it is essential, in particular for the elderly and the disabled. Consumers must be able to deal over the telephone with confidence, and ethical conduct is a key to that. We believe that ethical conduct is essential to winning consumer trust and confidence, which is the key to building business.
We have had a long history of self-regulation. Our Code of Ethics and Standards of Practice is not a model code. It is compulsory for our members to follow. They must sign a commitment to do so every year.
Fraudulent telemarketing causes real harm to many Canadians. Obviously, not all telemarketers belong to our organization. Membership is voluntary. Although we represent 80 per cent of the direct response sales in the country, there are many who are attracted, because of the rapid growth, who engage in unethical and fraudulent conduct. They enter the field because consumer confidence has been growing. It has become an increasingly effective sales technique for many businesses.
Those people, unfortunately, go after the most vulnerable in our society. That threatens not only their direct victims but also the tens of thousands of Canadian jobs created by legitimate telemarketing in this country.
In our view, Bill C-20 is an important step forward. It improves the framework that already exists. It equips law enforcement agencies with investigative tools to crack down on this fraud. We welcome the wiretap provisions, a quicker injunction process, stiffer penalties and the disclosure requirements.
We have two areas of concern. The first has to do with the wiretap provisions. I also happen to be a member of the Canadian Bar Association. I must respectfully disagree with my professional association in this regard.
I believe the wiretap provisions are entirely appropriate. I have dealt with some of these people firsthand. I have listened to the tapes and have heard the way they manipulate people. I have looked at the inventive schemes that they propose to people. The wiretap provision still requires an application. It is not to be done on a whim. These people are going after the most vulnerable people in our society. On balance, after due consultation, the wiretap provisions should go forward, in our view.
I know Senator Oliver in his remarks to the Senate expressed some concern about the live voice issue and the prescription of certain types of disclosure information in the legislation. Perhaps we can cover those topics in questions.
No matter how much legislation you pass and no matter how many regulations are enacted under that legislation, there will always be fraud artists and victims out there. This bill is a good step forward; however, it is not the answer. The best protection against telemarketing fraud remains an educated and cautious consumer. There is a lot going on out there.
We have participated in an event called "Hang Up on Fraud," held in cooperation with the Ontario government, Phonebusters and seniors' groups. We helped to produce a scam alert video, which has been distributed to many senior citizens' homes. We have worked with Bell Canada. The CRTC adopted key provisions found in our code of ethics as requirements for telemarketing. We have participated actively in the deceptive marketing prevention forum that will be launched as an intergovernmental program in January 1999. However, there is much more to be done.
The messages are simple. You must remember three things. First, do not do business with companies you do not know. Second, do not be pressured into making a purchase right away -- any legitimate telemarketer will be pleased to send you information. And third, if in doubt, consult; talk to your friends, neighbours and relatives if you are in doubt. If people remember those three things, they can prevent themselves from becoming victims.
Much of our job remains to be done in educating consumers about how to protect themselves. In the meantime, unfortunately, consumers do not always ask those questions.
We believe Bill C-20 is an important step forward in accomplishing what we need to do to shut down some of the more flagrant telemarketing fraud artists that are out there.
The Chairman: I have a couple of questions about your business. Many business groups have been before us, but you have not been before us for quite a while. You said there were $12.4 billion in sales last year. Can you tell me roughly how much of that would be telemarketing and how much would be Internet? If you think of the various ways of doing direct marketing, approximately how is that distributed?
Mr. Gustavson: Unfortunately, you have asked a question that is impossible to answer. You do not know what triggers the sale. You may see the offer on television and dial the 1-800 number; you may get the catalogue, fill out the coupon and send out the order form. You get the pitch from the telemarketing firm but it is for a company from which you bought something retail and would now like to sell you some insurance. There is no way, that we have figured out, to decide what actually triggers the sale.
We can tell you, from a federal-provincial study done a few years ago, that they estimated that three-quarters of telemarketing are not out-bound cold calls to consumers.
The Chairman: They are not out-bound cold calls?
Mr. Gustavson: That is correct; they are not. They are either out-bound calls where you already know the company because you have done business with them before or inbound to a call centre, which represents almost 50 per cent of telemarketing calls.
The Chairman: The inbound call would be where I see a 1-800 number on television and I phone for a record or a CD, is that correct?
Mr. Gustavson: That is correct. Some other form of advertising has attracted you to make the phone call.
The Chairman: Typically, it is a toll-free long distance call of some kind?
Mr. Gustavson: That is right.
The Chairman: Half the business is incoming business?
Mr. Gustavson: Yes. If you ask the vast majority of our members what they did they would not describe themselves as a direct marketing firm, they would say, "We are a publisher or a cataloguer or an insurance company or a bank." They happen to do direct marketing as an element of their marketing mix. They often employ an outside company -- that is, a call-centre company -- often located outside central Canada. These days in telecommunications, there is no need to be in central Canada. They are located in New Brunswick or in Manitoba or wherever. As a result, an outside firm does it. For most of those firms, the large telemarketing call centres who are employed by a major marketing company are also members of the association.
The Chairman: You say that your rate of growth from 1996 to 1997 was 12 per cent. Give me the rate for a couple of years previously. Are you holding steady on that?
Mr. Gustavson: Yes, we are holding steady on that year. Last year, we had a little dip because of the postal strike but it has averaged almost 10 per cent for the last five years.
The Chairman: You mentioned that the CRTC had adopted your code of ethics. What regulatory role, if any, does the CRTC have to do with your business? I would not have thought that they were involved.
Mr. Gustavson: The authority of the CRTC is for the use of the telephone lines and for business purposes. They lay out a regulatory framework; if you wish to use your telephone line for certain business purposes, there are guidelines you must follow. The CRTC has adopted into their regulations governing the use of telephone lines a good portion of our telemarketing code of ethics. For instance, if you tell a telemarketer that you do not want to hear from them again, they are not supposed to call you for three years. That is a CRTC regulation. Strangely enough, despite our request, they declined to put in restricted calling hours, which is found in our code of ethics. That is the one area where they declined to follow our code of ethics. A lot of telemarketers call at all times of day or night. We have not figured out why they did that.
Senator Oliver: The CRTC is holding a series of public hearings now, for two weeks, on whether they should regulate e-commerce on the Internet. Yesterday, Mr. Colville said that he does not want to bring in any kind of intrusive regulations. That is the another sign of the jurisdiction that they think they might want to assume in relation to the Internet.
Mr. Gustavson: That is correct.
Senator Oliver: You are to be commended with the work that you are doing in trying to educate consumers. I was happy to see you raise it, and I am happy to see it is such an important part of the work that you do.
When I look through your list of companies, I see some of the key companies in Canada, for example, the banks and Sears and others, who have things to sell and could sell them by telemarketing. I am interested to know your view on whistle blowing and whether or not any of the companies that you are associated with have had concerns about the whistle-blowing concept. After you tell me about that, I will talk about the Dubin report.
Mr. Gustavson: Our companies have not expressed concern.
The Chairman: For the record, I want you to explain your reference to the Dubin report.
Senator Oliver: If a company is doing something wrong and an employee in the company decides to make a disclosure about it, "whistle blowing" means that in so doing the employee is protected, that he or she cannot be disciplined or fired.
Mr. Gustavson: For internal purposes, although there is always some nervousness on a legislative provision that allows employees to potentially break commercial confidentiality, it is the view of our association that, on balance, this problem is serious enough to outweigh those concerns. Therefore, we believe that the whistle-blowing provisions are extremely important. Scam artists threaten and intimidate their own employees, not just their victims. We believe that this protection will encourage people to come forward and help the Competition Bureau uncover a lot of what we know is happening but cannot get a handle on.
Senator Oliver: Do you have an opinion on the problem I have with section 206 of the Criminal Code concerning the contests?
Mr. Gustavson: I am satisfied with the director's explanation. I do not believe that there is necessarily a conflict. I will not pretend to be an expert in conflict of laws, but I have listened to the assurance of the director and believe that he understands it well. I do not think there will be a problem going forward with that.
Senator Oliver: What is the difference to you between something that is in a statute, something that is common law, and something that is an SOR -- that is, statutory order or regulation?
Mr. Gustavson: In terms of the first and the last, the act and the regulation have the same force of law, all the weight of the law and enforcement that comes behind that. The fact that it is in the law is a public pronouncement. This is almost not a legal question but a public relations question. If this is the law of the land, and it is clearly articulated by Parliament or Parliament's intent further amplified by the regulations, then corporate citizens understand what is expected of them.
The common law, for which I have great respect but which is a more mysterious process, is not as well known, certain or clear. While the body of common law interpreting the statute will build up over time, Parliament must step in and codify it or correct how the courts have interpreted the law. The clear statement by the legislature of its intent is a great benefit to the corporate community in understanding what they should be doing.
Senator Meighen: This question is, perhaps, outside the context of the particular piece of legislation we are looking at this morning. I know about the efforts of the CDMA to deal with unsolicited advertising that comes to householders and how they can request that it be stopped. However, from personal experience -- and I know that you have worked well and effectively in that regard -- I find the effectiveness lacking in unsolicited and, in my case, unwanted fax machine solicitation by advertisers.
Often -- and it may have been at your instigation -- there is a phone number referred to at the bottom of the page where recipients can phone and ask that the practice cease. I have tried that on a number of occasions, with no perceptible effect whatsoever. Can you tell me whether the CDMA is involved in this matter and, if not, whether you intend to do so?
Mr. Gustavson: You are quite right. We have been less than effective in this area. Major telemarketers, all of whom belong to our organization, do not send unsolicited faxes because they are not effective. They cause more irritation than benefit. For that reason, we offer a "do not mail" or "do not call" service. However, many individuals may be quite happy to respond to advertising they have seen on television or in a magazine. You do not want to alienate them by engaging in practices that might annoy them. That is why most of our members do not use broadcast fax.
We do allow people to register their phone numbers, and our members must eliminate them from their marketing programs. Unfortunately, a lot of the unsolicited faxing and telephoning is done by small, local companies who do not belong to the association.
We went, along with Bell Canada, to the CRTC to put forward a proposal to which the CRTC had agreed. That proposal deals with placing certain limitations on broadcast fax. One of the limitations is the agreement to adopt restricted calling hours as defined in our code of ethics for fax. Another limitation requires removal of the phone numbers of individuals that wish to be taken off the fax list. The company sending the faxes must comply with this request. Otherwise, the penalty for failing to comply, if there is a consistent practice of ignoring those requests, is to pull the business' telephone lines. There is a complaints number that people can call and which the CRTC would be pleased to give you.
One of the requests we made is to require a proper return phone number. However, if this request is not effective, I would be pleased to provide you with access to the complaints area that deals with these broadcast fax rules.
[Translation]
Senator Hervieux-Payette: I wish to congratulate you on the quality of your document in French, for its format and its content. It's always refreshing to see a national association with a provincial chapter that doesn't think that we only function in French in Quebec and that gives us documents in French.
You are one of the sectors which really are on the hot seat. I would like to thank your group for supporting those amendments. You helped improve the sector and protect a rather vulnerable client base.
We changed the rules concerning the possibility of investigating, of wiretapping. Do you think we have the necessary expertise and that we will be able to get results? We still have to be able to trace those calls and locate the sources technologically. Those people can operate from a number of places. As legislators, we have good intentions, but on the technical side, we cannot enforce the act. Do we have the means to make in-depth investigations which will bring about wiretapping? Do you think that we have the means to do that?
[English]
Mr. Gustavson: We certainly hope so. This legislation has been created after lengthy periods of consultation between a number of organizations that support it and believe that it will make a significant difference. Unfortunately, it will not solve all the problems.
One of the difficulties is victims who may be elderly, less sophisticated, or sometimes so embarrassed that they will not come forward. It is often too late for them to give consent for the telephone call to be taped. The people engaged in these fraudulent practices are not coming back to the same person.
Project Phonebusters confirms that the largest problem they encounter is the refusal of people who have been defrauded to speak about it because they are embarrassed. They do not tell their relatives or friends, and will not speak to an enforcement agency.
One of the most essential provisions in these amendments is obtaining independent authority to engage in wiretapping without the consent of at least one of the defrauded parties. Otherwise, it is difficult to get the perpetrator
[Translation]
Senator Hervieux-Payette: Aren't the companies which belong to the organization being targeted? Even before the offences are committed, we can get complaints but how are we going to stop the practice? Those who will commit the offence are not easy to trace.
Your association recommended wiretapping because your members are not going to be the main criminals in this area. Those who will abuse people will not necessary be within our borders and they will be able to change constantly their telephone number and address, so they will be difficult to trace.
Did we introduce a provision that we will be able to use? Will we be able, technologically, to trace them? Those who are your members and who have legitimate operations would not gain anything by abusing people and would not stay in business very long.
[English]
Mr. Gustavson: It is also important to trace the people involved in cross-border shopping schemes. There are a large number of people calling for help because they have sent a cheque or a money order to some Post Office box in Las Vegas, usually without a clue as to where they have sent their money or to whom. Typically, they have heard a telephone pitch, signed a cheque and sent it off or e-mailed their credit card number off into cyberspace over the Internet.
There is no defence against that sort of stupidity. I am sorry to use that kind of strong language, but that is what it is. For that reason, consumer education is the best defence against this type of activity.
Within our borders, there is no excuse not to take some action against those operating in our country. Yes, they shut down and start up again, but the individuals tend to be known. In many cases, they change their company name. The consumer does not know that, but the law enforcement people have a pretty good idea of who is behind some of these businesses. The police keep an eye on them if they start engaging in these telemarketing programs, which usually go on for some time. It may be too late to get consent from a person who has already been victimized. However, once you start receiving complaints you have a pretty good idea of which company is involved. You can then engage in some effective wiretapping.
Senator Callbeck: I have a question about this Code of Ethics and Standards of Practice pamphlet. You mentioned that the CRTC tells direct marketers they have to do certain things and that most of that is in this document, but it is not all. You also go on to say that this is mandatory for your membership. How do you know that they do comply with it? Do you have people who look at this?
Mr. Gustavson: No, we assume that our members, as in most of society, are law-abiding citizens until we have complaints, at which time we feel we have an opportunity to investigate.
We have an ethics and privacy committee. When we receive consumer complaints, we determine whether someone made a mistake or whether there is some pattern of misconduct.
Often we have found that a small committee of members chatting with the member in question discovers that the person is engaged in conduct that is not illegal, not even necessarily unethical, but bad business practices as a result of total ignorance, and is looking for guidance and education. We then follow up with those members. There is a process of revisiting the member to ensure that improvements are under way.
We do have an enforcement process, but it is triggered by a complaint. We do not have a flying squad of auditors dropping in on a member or listening in on their conversations.
The Chairman: Mr. Gustafson, thank you very much for your interest. We appreciate you taking the time to be with us.
The committee adjourned.