Industry Committee on April 25th, 2007

[Douglas George]

This is part of the work we're doing, analyzing the situation and looking at both legislative questions and resource questions.

Other countries, like the U.S., the EU, and Japan, have worked on updating their legislation in recent years. We're all responding to the same international phenomenon.

If you look at some of the developing countries with less secure systems, they have much more significant problems than we do when it comes to health and safety issues. In some of the least-developed countries, up to 50% of the pharmaceuticals sold there are fake.

It's a recognized problem in Canada that we're working on, but it's a major international problem.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll go to Madame Brunelle.

[Paule Brunelle, Bloc, Trois-Rivières, QC]

Good afternoon, ladies and gentlemen. Thank you for coming.

I did not expect to find such a widespread problem, and that is what really surprises us. Moreover, you say that companies that are victims of counterfeiting can take legal action, but that very little legal action is taken.

Why? Is it because the process is long and costly, which is what I suspect, or for another reason?

[Susan Bincoletto]

Criminally speaking?

[Paule Brunelle, Bloc, Trois-Rivières, QC]

Yes, criminally speaking.

[Supt Ken Hansen]

If I can use an example, one international investigation that was successful was led by the FBI. This was a case of high-level hackers—people who would decipher the codes on software and then sell it. Some of the best people in the world were doing this. It resulted in 90 searches being conducted in 12 different countries simultaneously. The coordination on that was absolutely incredible, but it took down the whole network.

That's the way it should be done, but in most cases it's not, because we simply don't have the resources to do that. Normally we take out one level. It's just like drugs. We take out perhaps the middle level, and somebody down the road fills it in, or the same person comes back. So there's definitely an issue there. It's not as if we're doing nothing. We're doing about 400 investigations a year, but we could easily be doing ten times that if we had the resources.

[Paule Brunelle, Bloc, Trois-Rivières, QC]

You say that when you dismantle a network like that, it can come back. How long does it take criminals to rebuild a network that large? Does that mean that once those networks have been dismantled, it takes some time for them to come back?

[Supt Ken Hansen]

It does if they're getting jail time. In some cases these people get jail time, but if it's a fine, we've had many cases where—

I can give one example. A national company was selling dangerous electrical products right across the country. He was charged in 1999 with five counts. He was convicted and fined $1,500 on each count--that was $7,500. He was convicted again in 2004 and given a $150,000 fine. We investigated the same company again in 2006, and it's presently in front of the court. It's alleged that he's been at it three times at least, so fining was not much of a deterrent for him to stop.

[Paule Brunelle, Bloc, Trois-Rivières, QC]

Does that mean that the sentences are not harsh enough? The person may expect to make a lot of money and to lose a little, and will start over.

[Supt Ken Hansen]

I think that's one of the main reasons, but it's not the only one. The legislation is difficult to use sometimes.

[Danielle Bouvet]

In some cases, educating a large number of people, including judges, is extremely important. Under the Copyright Act, a judge can already find a person guilty of a criminal offence and sentence that person to a maximum of five years. However, it is clear that to date, the courts have been reluctant to give sentences that long. The act exists and gives the court to power to impose sentences like that. So there is no need to amend the act to enable it to do that, that is already the case, except that to date, the courts have been very reluctant to act.

[Paule Brunelle, Bloc, Trois-Rivières, QC]

There is something I find very troubling. You are showing us electrical equipment that was found, for example, in institutions. But there are standards in place. When a hospital, for example, places an order, it relies on suppliers, on wholesalers. There are order forms. I do not understand how equipment like that can end up there. I suppose these are highly complex criminal networks.

[Supt Ken Hansen]

Yes, I guess that's our point. Ten years ago this probably wouldn't have happened, but now we're starting to see it infiltrate into the legitimate supply chain.

Just to add to what my colleague Danielle said, she's accurate when you speak about the Copyright Act—it does have up to five years. But the Trade-marks Act has no criminal offences. When we use the trademark provisions of the Criminal Code, the maximum is only two years, which is unheard of. I've never heard of anybody getting that.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll go to Mr. Van Kesteren.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Thank you, Mr. Chair.

Thank you all for attending.

I have a few questions.

We talked about electronics and things of that nature. I'm surprised we haven't mentioned tobacco and alcohol. Where would tobacco rate percentage-wise in this country?

Mr. Hansen.

[Supt Ken Hansen]

I don't have all of the statistics for the whole country, but I do have them for Vancouver, a major entry point. In Vancouver, since 2003, the RCMP and CBSA, working together, have seized over 800,000 cartons of counterfeit cigarettes.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

With 800,000, you've got about 5%. Is that right?

[Supt Ken Hansen]

Well, I don't know if we're even getting.... I don't know what percentage we're getting. I guess CBSA might be able to answer that.

And that's one commodity in one city—although it's a pretty major city.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

So am I right in assuming that tobacco is the number one problem, cost-wise?

[Supt Ken Hansen]

I don't think I'd say that; I'd be more concerned about things like batteries. We seized over two tonnes in Quebec, and these things float, so that's a—

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

With all due respect, are you trying to tell me there is more smuggling of batteries than tobacco?

[Supt Ken Hansen]

I'm not sure if we have—

[Steve Sloan]

Do you mean smuggling now or—?

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Smuggling. Well, I guess we're talking about counterfeit goods, you're right. And I understand there are cigarettes coming in from other countries that are counterfeit, too, but—

[Steve Sloan]

I'll just add one point on that. In terms of smuggling, because counterfeiting itself isn't an offence—it's not an offence to import counterfeit goods—we don't see counterfeit goods smuggled in many of the instances. However, for goods that are highly taxed, like tobacco and alcohol, it's a different matter. So counterfeit tobacco is almost always smuggled, and we have had a significant number of seizures. In terms of smuggling cases, that would be one of the highest ones.