Industry Committee on June 11th, 2009

[Matthew Vernhout]

I would say what you're seeing is over 90%. I believe there was a study that came out last year that said it was 95% of traffic, and even the difference of a 1% increase represents billions of messages, as opposed to thousands, so the significance of a single percent of increase is very huge.

[The Chair, Conservative, Michael Chong]

Thank you.

Mr. Rota.

[Anthony Rota, Liberal, Nipissing—Timiskaming, ON]

Thank you, Mr. Chair.

Thank you for being here today.

I'm looking at the areas of resourcing and enforcement of the law. In 2002 the Utah legislature passed an anti-spam bill in an attempt to stem spam from being in the inbox of its citizens. The law classified spam as unsolicited e-mail sent to someone who was without a prior business relationship with the company, and the definition is very similar to that in Bill C-27, from what I understand. In their bill, they provided for a right to civil action for violation, much as clauses 47 and 51 of Bill C-27 do. Any spam sent to a person gave that person the right to file a civil suit against the company.

Although damages were limited to $10 per e-mail, the law also allowed for attorney's fees to be paid if the spam recipient was successful in court. Utah's anti-spam law resulted in a flood of anti-spam suits in the court. By the end of 2003, two Salt Lake City attorneys had filed more than a thousand lawsuits under Utah anti-spam law against companies such as Verizon, eBay, and Columbia House. These are clearly larger corporations.

In December of 2003 the U.S. Congress passed the federal anti-spam law, the CAN-SPAM Act, which trumps the state law, and in 2004 Utah's anti-spam law was repealed, but not before the Utah courts were basically clogged with anti-spam lawsuits. Many legal experts have said that it was because of the civil action for violations that this particular law was struck down.

That concerns me when I look at our legal system, and how backed up it is. When I look at this, I see this mad influx of civil lawsuits against companies that normally wouldn't be sued and that seemed to be doing the right thing. As Bill C-27 includes that private right-of-action clause, how do you see this affecting our legal system?

[Prof. Michael Geist]

As I mentioned, I recognize the potential for parallels, but I actually don't think that the concern within the Canadian legal system is as great. As I mentioned, there are reasons for that, including the fact that it is tougher to even get a class action status in Canada than it is in some states in the United States. There are court costs often to be paid in Canadian actions that are not paid, in terms of the losing party in Canada, and that doesn't exist in the United States. So we have some disincentives already in place in Canada against these kinds of frivolous lawsuits.

I would note, though, that in a Canadian context we have had--and it was stunning, frankly, to me as a member of this spam task force to learn this--a series of large Canadian-based spamming organizations. We knew who they were, we knew where they were, and yet we weren't doing anything about it. And we also knew that there were organizations out there that were anxious to try to launch private actions against them and felt that they couldn't do so in Canada.

The private right of action was a recommendation, as I say, from the unanimous spam task force report, which included some of the same kinds of members you've just referred to. The business community was there. I think we had members who came forward and said if they had that kind of power here, they might do it. If you refer to the Facebook lawsuit that was brought up earlier, you'll see that Facebook sees a Canadian-based spammer that's wreaking havoc on its social network. Canadians are huge users of Facebook--there are more than seven million Canadian-based accounts on the Facebook network--and yet they couldn't look to Canadian law to try to deal with the problem. Private right of action holds the promise of doing that.

[Anthony Rota, Liberal, Nipissing—Timiskaming, ON]

For clarification, you're saying that they would only be able to sue for damages?

[Prof. Michael Geist]

What I'm saying is that I don't anticipate the flood of lawsuits in Canada, in part because our court system is somewhat different from that of the United States. The fact that Utah was a leader in this regard isn't by accident. There was a very well-known spammer who was Utah-based, which is why the state felt that it was incumbent upon them to try to take action. You had other states that were of the same view, and then Congress jumped in to say okay, we're going to try to pre-empt all of those state laws, because now we're getting this patchwork, and that's making it difficult for business.

If there was a concern around spam laws at that time in the U.S., it was more that businesses were being faced with different regulatory systems in different states, not with the notion of complying with some sort of basic anti-spam legislation.

[Anthony Rota, Liberal, Nipissing—Timiskaming, ON]

Lawyers can act on contingency in many provinces in Canada. That's pretty well the same anywhere. When you have lawsuits that go up to $10 million, that's a heck of an incentive for individual lawyers.

Would we be better served if it were the state that imposed that fine, rather than having individuals filing civil lawsuits, as far as fining goes, for people who break the law?

[Prof. Michael Geist]

I think the legislation already includes.... There is an enforcement arm. The goal of the task force, I assume, by virtue of this legislation, was to try to find a number of tools to go after this.

Certainly there is within this legislation, as you know, a number of enforcement agencies that can go after spamming activity. It can result in pretty sizable penalties. I'm not about to go out and launch any of these lawsuits, but we heard consistently from certain businesses who are deeply affected by this that if we had a private right of action in place, they'd be inclined to try to use it. In some instances, they grew so desperate about the Canadian situation they filed suit, but were forced to do so elsewhere.

[The Chair, Conservative, Michael Chong]

Thank you, Dr. Geist.

Thank you, Mr. Rota.

Mr. Lake.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

Thank you again, Mr. Chair.

I'm going to just revisit the business side of things and the cost of doing business.

Prior to getting elected in 2006, I worked for the Edmonton Oilers hockey club. At one point, I was the director of ticket sales back in the late nineties. I thought it would be a good idea, as director of ticket sales, to post my e-mail address on the website. People would e-mail requests for season tickets and I could pass them on to the sales staff.

It didn't turn out to be such a great idea. I got a tremendous volume of many of the types of e-mails you've talked about. Of course, this was back in the days before we had the spam filters to the extent that we have them now.

In the end, I had to eventually change my e-mail address and of course change all my business cards. All the people who would have had my e-mail address couldn't use it any more. They couldn't reach me, because there is no way to fix that. I couldn't just have the e-mails forwarded, because I'd get all the spam again, right?

We had to hire an extra staff person to clean up the spam. I remember we had to invest some fairly significant dollars into technology software to filter out the spam. If you multiply that cost business by business, across the country, you start to see some pretty enormous costs of doing business.

That's enough said on that. That's a little bit of a speech, I guess.

Do you have a sense of how high the cost is to business?

Maybe I'll give the fellows on the right side of the table a chance to answer that. I sense that you do have some numbers you can attach to this.

[Dennis Dayman]

Yes. I was actually taking a look at a statistic I did a couple of years ago. Back in July of 2004, the United Nations actually estimated that spam cost the global economy around $25 billion annually. Obviously since that time it's heavily increased.

That's one of the numbers I've been able to work from.

[Matthew Vernhout]

I would imagine it's double now--

[Dennis Dayman]

It's way higher now.

[Matthew Vernhout]

--if not more than that, mainly because of the industry, almost, that came up to prevent spam. People have heavily invested in it, and the services are not cheap. The price for some of these services is somewhere in the area of $50 a month per mailbox. If you times that by 10,000 employees, that's a pretty hefty anti-spam bill you're fighting annually.

Those types of services and costs are based not only on what it costs to prevent spam but also on what it costs in employee time. We had briefly touched on that earlier with one of your colleagues. It would cost easily $300 a year per employee for just the time it takes to hit the delete button or to move it to a junk folder. That's significant time that you're breaking someone's work flow.

[Dennis Dayman]

Yes.

If I may, Jay Thomson, the former head of the Canadian Association of Internet Providers, estimated that the average cost to consumers was $5 a month. That cost that has since jumped up.

What's interesting, though, is that the amount of spam you see today in your inbox is probably only 10%. The other 90% is actually being taken care of either by the government or by Hotmail or whatever organization that hosts your e-mail. So you can imagine the amount of e-mail that's coming in.

AOL, about four years ago, noted that they had blocked about half a trillion messages. That was only four years ago. Again, we would look at that and say it's probably doubled, if not tripled, to that extent. Once you start adding in that $5 on their side of it.... It's going up.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

It's funny hearing you illustrate some of the problems, because even as a consumer, sitting at home, I get these pop-ups that come up and say that my anti-virus software is out of date, or that my Windows needs to be updated. I don't even automatically do that any more, because I'm worried that someone has sent me something to look like Windows or look like the anti-virus that I might be putting on my computer.

I think I actually know a thing or two about computers, and I'm uncertain about this; I can't imagine how difficult that makes it for someone who is a newer user.

[Prof. Michael Geist]

I think it's almost impossible to overstate the effect that this has on consumer confidence.

I can recall, actually, that when we launched the spam task force, there was a press conference. I remember one of the reporters turned to the task force members and asked--I happened to be the one who responded--what would make this a success. I noted that when e-mail first arose back in the mid-nineties, people started popularly using it. You used to follow up with a phone call to make sure that the person got the message. Then there was a period of time when we stopped doing that. We just assumed that the message had been received.

We're back to making that phone call. If you don't hear back from the person within a day or so, you almost assume that you either have to pick up the phone or re-send the message because it's been caught in the spam filter. It has rendered what is otherwise an exceptionally important tool for communication into one that is simply not reliable any more.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

I have a last question. I think my time is almost up. If I could, I would like to close with Dr. Geist.

We're in a minority Parliament situation. Time and time again, we've seen legislation come up, good legislation, that winds up not passing through the House and the Senate before you get an election. Who knows when we might be headed to an election? Hopefully it's three years from now, but I'm not holding my breath until then.

What is the importance of getting this legislation through and not having it die with a parliamentary dissolution?

[Prof. Michael Geist]

It's taken four years to get from the point of a unanimous task force report that included everybody across the spectrum to finally just getting legislation tabled, and there were a couple of false starts along the way. The notion that we're going to go back to zero I think would be enormously problematic, particularly at a time when we've seen, from across the spectrum, all parties—this is clearly a bipartisan issue—industry, and consumers saying that Canada is quickly falling behind from a digital perspective. We need a digital strategy, otherwise we're going to fall further and further behind.

From my perspective, this forms a part of that digital strategy. And if we're unable to see this get through, and get through quickly, it represents a setback not just for this particular piece of legislation but for the larger Canadian digital environment more generally.

[The Chair, Conservative, Michael Chong]

Thank you, Mr. Lake.

Monsieur Bouchard.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

Thank you, Mr. Chairman.

My question is for Mr. Geist. You stated that legislation is effective when there are penalties. If I understood you correctly, without penalties, enforcement is just about nil or in any event weak.

Are you happy with the penalties included in Bill C-27? What can you tell us about the penalties under this bill?

[Prof. Michael Geist]

As I think we've mentioned, the experience elsewhere is that unless you have strong penalties, this doesn't work. I think there were even some quotes in the press from one Canadian-based spammer, who was laughing when told about the prospect of Canadian anti-spam legislation and indicated they figured they could just keep on going.

There's obviously a certain kind of profitability that a spammer or a fraudster is going to have. The only way to counter that is to make the risk far greater than it is today, that there are real financial penalties at stake. This legislation has that.

We keep bringing up Australia, but Australia is the one place where they brought in penalties that at the time were seen as unprecedented. The reports coming out of that country were that many of the spammers were either picking up and going elsewhere or finding a new line of work. It really did have the effect of increasing the risk of engaging in that business to the point that they went and did something else or did it somewhere else.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

Mr. Chairman, I am going to share my time with my colleague. But first I would like to ask another question.

Let us talk about coordination. Three agencies have a role to play under Bill C-27: the Competition Bureau, the CRTC and the Privy Council. When the minister last appeared before the committee, he told us that a coordination agency would be set up and that it would not be very large. I would like to hear your views on this. You mentioned that each organization should have a specific mandate. I understood you to say that it will be important to assign a clear mandate to each organization. Is Bill C-27 clear enough in terms of coordination?

[Prof. Michael Geist]

There are provisions that discuss that ability for information-sharing and coordination between agencies. Obviously the provisions themselves, in some instances, are targeted to a specific agent, one or the other, and one would hope that, properly resourced, there will be the ability to carry out that mandate. And as I mentioned, the fact that this legislation will come, and one would hope would come in a unanimous fashion from the House, from across all sides, I think sends the strongest signal possible that this is a priority and the time to act is now.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

Thank you.