Industry Committee on June 11th, 2009

[Prof. Michael Geist]

In this instance, I really don't think there's a parallel. What we're talking about here is, in some instances, clear criminal activity. It's activity that undermines the confidence in the legitimate market for many Canadians, and the extent to which it arises.... The only copyright connection is with respect to the Sony rootkit case, where there was that spyware, that stuff that was put into somebody's computer. That's an area where there was a bit of spillover from copyright.

But copyright, as we all know, is complicated; there are interests from the user's side and the creator's side and the industry's side, and we're trying to sort out that balance. There isn't really a balancing act here, when we're talking about scamming e-mails that are preying on individuals, or spyware that takes over your personal computer and uses it for all sorts of nefarious purposes.

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

You won't argue, of course, that copyright...that when you take something like that, it's criminal activity as well.

I'm just having a problem with that part of it: the view that this is free, this is something that we've developed, and if you have the ability and have the opportunity to use it, go for it.

[Prof. Michael Geist]

I think that misstates my perspective on copyright. My perspective on copyright—and hopefully we'll have a chance to talk about copyright sometime down the road too—and I think the view of tens of thousands of Canadians who have spoken out on this issue, is that it's not about a free-for-all. It's rather about a fair-for-all and about striking the right kind of balance.

In fact it's about, when somebody does buy a CD or a DVD, that becoming their property, and their having a certain ability and right to use it without its being locked down or their being labelled a criminal if they want to play it on their iPod or want to display it in a classroom, or a range of other kinds of activities.

I don't think those who are arguing for a fair copyright are arguing for another free-for-all, Wild West online. Actually, I think they're arguing for staying truer to the notions of balance within copyright.

I want to see rules that apply online too. I want to make sure they're balanced and fair, so that we can see the kind of innovation that takes place today from a technology perspective as well as the kind of creativity that we see taking place using these kinds of tools, using nothing more than this to speak out and engage in all sorts of exciting things. That requires some rules. It just requires rules that don't try to lock everything down.

[The Chair, Conservative, Michael Chong]

Thank you very much, Dr. Geist.

Madam Crowder.

[Jean Crowder, NDP, Nanaimo—Cowichan, BC]

Mr. Chair, this may be a question for both the panellists. It's a question around the economic costs.

What we often hear and what I've been hearing is that there's a cost to business, if we put this anti-spam legislation in. We recognize that spam costs businesses in terms of anti-spam software and those kinds of things. But I wonder whether anybody has taken a look at the productivity costs for a business, because depending on the complexity of a task, I know from some previous work I've done that when an employee is interrupted in their work, it can take anywhere from seven minutes to half an hour to get back to the same level of complexity they were at in the task.

Has anybody quantified that kind of cost to business of the spam that's hitting people's desks?

[Matthew Vernhout]

I don't have the numbers with me, but yes, there is a justified cost to what spam will cost a business, and it's somewhere in the range of $300 or more per year per individual employee, as an overall cost to businesses.

That includes additional hardware, it includes lost time from hitting the delete button or hitting the report spam button; it includes the productivity loss. It also includes just the infrastructure needed—extra bodies of support for that infrastructure, if you need an additional IT resource, or something like that. So there are justifiable costs.

[Jean Crowder, NDP, Nanaimo—Cowichan, BC]

Has anybody taken a look at what the number would be of the cost to business for implementing Bill C-27?

[Matthew Vernhout]

I don't know what the number would be, but I would think it would be relatively small to say, “You have given us consent to communicate with you”. In many cases, it's a database update that takes five minutes on your website to say, “Check this box. Now you've given us consent”, or “Reply to this e-mail to say you've given us consent”.

[Jean Crowder, NDP, Nanaimo—Cowichan, BC]

Many marketers already do that. You sign up for stuff and—

[Dennis Dayman]

That's the point I was going to make. A lot of them are already doing this today from a best practices standpoint. My experience in the U.S. with CAN-SPAM, when we were working on the law back in 2003, was that a lot of concerns just like that were brought up, and what we have found out over the last several years is that being in this business has now become a bit easier, because now we have a better grasp on the data flows that we have, either in our own companies or from what other marketers are doing today, because they're doing the right things. They're basically flipping the model from quantity over quality to quality over quantity, when it comes to data that's coming in—the opt-in aspect of it—so we have found that it's much better for us right now.

[Jean Crowder, NDP, Nanaimo—Cowichan, BC]

That would make sense. I think legitimate businesses that are already practising good marketing techniques with regard to spam have already developed the technique, so it shouldn't be a huge cost to other legitimate businesses to adopt something that's already out there.

[Prof. Michael Geist]

I was just going to say that I find it amazing that more than ten years after we introduce private sector privacy legislation we're still acting as if obtaining appropriate consent from their customers is something new for business. I mean, please.

PIPEDA, the private sector privacy legislation, was introduced in 1998. It didn't take effect until several years later. We all thought that would provide everybody with plenty of time to get used to this, just as with the do-not-call list, and now with this. Businesses have been operating in an environment where obtaining the consent of your customer has been in place for the better part of a decade. Making sure that your customers are agreeable to hearing from you is not something that is so new.

[Jean Crowder, NDP, Nanaimo—Cowichan, BC]

I have a quick question on enforcement, as I'm running out of time here.

I know there are the hefty fines and all that kind of stuff, but are the enforcement provisions in Bill C-27 adequate? In your view, are there enough funds around resourcing those enforcement measures? Oftentimes in legislation we put the enforcement mechanisms in place but then we simply don't resource them.

[Prof. Michael Geist]

I can't answer the resourcing question because I don't know how much money has been allocated.

[Jean Crowder, NDP, Nanaimo—Cowichan, BC]

That's a question for the minister.

[Prof. Michael Geist]

I do know that one of the recommendations that came out of the spam task force was on the resource side. One of the barriers that we consistently encountered was that there were agencies or enforcement agencies that were willing to take action, or said they were willing to take action, but there was a resource problem.

Are the enforcement provisions deficient? I think on paper they are. I will tell you that throughout the process of the anti-spam task force, we consistently looked for action from some of these enforcement agencies, and frankly we had a hard time getting it. In fact it hasn't come up, but I launched the first anti-spam privacy complaint under PIPEDA with the Privacy Commissioner's office. It was a successful complaint in the sense that it was found to be well founded, but it didn't really get much further than that.

I realized from that, and I think other people realized throughout that process, that it's going to take a clear mandate so that enforcement agencies understand that this is a priority of government. It became very clear that the way you do that is you pass legislation that really targets it, and then you resource it appropriately. That's clearly what Bill C-27 is trying to do.

[The Chair, Conservative, Michael Chong]

Thank you.

Mr. Brown.

[Gord Brown, Conservative, Leeds—Grenville, ON]

Thank you very much, Mr. Chair.

I want to thank our witnesses. This is actually quite interesting.

As a business person, I am keenly interested in what you touched on a little bit, Professor Geist, about how this is actually going to be a benefit to business. I know, and I've already had some business organizations talk to us about how they fear this will be a negative thing for business.

All of you could get in on this and explain just a little more why business shouldn't fear this and how this will actually be a benefit to them.

[Prof. Michael Geist]

I'll give you some views from my perspective and then pass it over.

I think we've recognized and been talking for the better part of a decade as well that electronic marketing represents a huge opportunity. It is obviously lower cost. The one thing we have seen happen over the last ten years is this huge migration of the public into the online environment as well. So I think everybody recognizes that this is a great way to go. It seems everybody but the newspapers were happy with this. The newspapers weren't so happy, of course, because we are moving into this online environment more and more. So it's obvious that there's great commercial potential there.

I think not just in this country, but particularly in this country, given the absence of legislation, the potential and the promise of using electronic marketing has been undermined by consumer confidence, by the amount of spam that you get and the overzealous spam filters that weed out legitimate mail from the illegitimate mail so you never actually get the messages that you want to get. You get people who ignore just about anything that's commercial, because suddenly they think it's all that spam stuff, even when it's something they might otherwise want to hear about--for instance, when the banks have to warn their customers to ignore the messages that purport to come from them, because they're not going to send those messages. That's harmful. That's harmful to a bank, clearly, but it's harmful generally to businesses who see a real opportunity and who in many ways might have a customer base and a demographic that would respond to electronic messaging yet are facing an environment where there's just a flood of the unwanted stuff with no way to try to stop it.

I think for those who are doing legitimate business, this is really going to be a ray of sunshine, where suddenly now there is an opportunity to legitimize this form of marketing.

[Matthew Vernhout]

I would fully agree, and that is something we have experienced working with both direct mail marketers and electronic mail marketers. There is a significant shift because of cost, especially in a down economy. People are looking at how they can save their budget. Online marketing budgets are getting larger. Offline marketing budgets are starting to shrink accordingly, because of the cost, because of the return on investment.

The Direct Marketing Association saw a $45 or $48 return on investment for online electronic e-mail communications with consumers, so what you're seeing, even with the direct mail piece, is that if you send 10,000 messages and 100 people respond, that is considered successful. If you send 10,000 e-mails and 100 people respond, you've failed at what you're doing, because the response rates and the interactions of people are such a significant thing that businesses are relying more and more on electronic commerce because of the cost, because of the cost savings, and because of the high returns and the measurable, tangible results, which they can see through how many people are opening, how many people are buying, and how many people are interacting with their messages. There are the tangibles that will help business in this regard.

[Dennis Dayman]

Just to add to that, I was saying earlier that, at least in America with the CAN-SPAM Act, we've seen improvements in marketing. From Eloqua's standpoint, it is the same thing. Especially in this down economy we've seen people go from the postal side to the online side mostly because it is cheaper, but we've also found we can send a more relevant message to people. We can better segment people so we can say that this one group of people have not gone as far into the buying process or the education process of buying, let's say, anti-spam software, whereas this group might have, so let's send them kind of a different message. Let's send them a more targeted message so they are happier. They're unwilling to unsubscribe or complain about it, and again, you're continuing to educate this person, so, again, you get a better understanding of what is really going on in your marketing and sales groups now versus just batching and blasting out the same postal mailer over and over and wasting your time with it.

[Gord Brown, Conservative, Leeds—Grenville, ON]

All right. Thank you for that little enlightenment on how we can help reassure some of the businesses that are concerned about the impact of this.

I'd like to get a little bit into this spam reporting centre and the understanding of what the mandate for that would be, how it might work, and what might be the best model for that to coordinate this whole effort.

[Prof. Michael Geist]

My view is that it is an issue that has evolved. At the time when we were on the spam task force, the Federal Trade Commission spam centre--fridge or freezer or whatever it was called--was seen as a useful tool for investigative purposes, and there was the sense that we ought to create a Canadian equivalent. I think it was the fridge, and we were going to be called the freezer. Today I'm not sure that is as necessary, but what I think is necessary is empowering Canadians generally with something to do. I get this a lot in some of the other areas I'm involved with. People get these spam messages. They know there is spam legislation out there. They want to do something. Creating a spam reporting centre that can engage in some analysis and that can actually track incidents of spam and perhaps try to identify where some of those Canadian sources are would be of some value.

To give the parallel on the do-not-call situation, in my office I have literally 2,000 pages obtained under access to information that show four months' worth of the complaints that have been filed with the CRTC under do-not-call. They go by date, and you can actually see the telemarketing campaigns as they wave through the country. All of a sudden, over a week, you will get--I won't bother naming the companies--a particular company about which there are suddenly dozens of complaints in a segmented time. That could be very valuable to someone for investigative purposes if we were dealing with something that was illegal.

Creating that kind of spam reporting centre has some of those benefits and also gives people a bit of empowerment in terms of having something they can do when they receive these messages.

[The Chair, Conservative, Michael Chong]

Thank you, Mr. Brown.

Before I go to Mr. Rota, my understanding is that 70% to 80% of all SMTP traffic over the Internet in Canada is spam.

[Prof. Michael Geist]

We have even higher numbers.