Industry Committee on Sept. 28th, 2009

[The Chair, Conservative, Michael Chong]

Good afternoon to members of the committee. I hope you all had good weeks in your constituency.

Welcome to the 34th meeting of the Standing Committee on Industry, Science and Technology. We are meeting today pursuant to the order of reference of Friday, May 8, 2009, to study C-27, An Act to promote the efficiency and adaptability of the Canadian economy by regulating certain activities that discourage reliance on electronic means of carrying out commercial activities, and to amend the Canadian Radio-television and Telecommunications Commission Act, the Competition Act, the Personal Information Protection and Electronic Documents Act and the Telecommunications Act.

Welcome to our three groups of witnesses on our first panel, which will meet until 5 p.m. We have Mr. Yves Morency, vice-president, government relations; Mr. Bernard Brun, senior counsel, commerce and technology, Desjardins sécurité financière; and Yvan-Pierre Grimard, government relations adviser. All three are with Mouvement des caisses Desjardins.

We also have with us today Mr. Frank Zinatelli, vice-president of legal services and associate general counsel; and Mr. Peter Goldthorpe, general director of marketplace regulations issues. Both are with the Canadian Life and Health Insurance Association Inc.

Finally, in our third group of witnesses on our first panel we have Ms. Joanne De Laurentiis, president and chief executive officer; and Mr. Paul Vaillancourt, independent financial adviser. They are with the Independent Funds Institute of Canada.

Welcome to all three groups. We will begin with the Mouvement des caisses Desjardins and an opening statement of five minutes.

[Yves Morency, Vice-President, Government Relations, Mouvement des caisses Desjardins]

Thank you, Mr. Chairman.

Good afternoon, members of the committee. The Desjardins Group thanks you for giving it this opportunity to share its views on bill C-27 with you today.

First of all, allow me to briefly introduce the organization we represent. Desjardins Group is ranked 26th among the 50 most reliable financial institutions in the world, according to the list entitled “World's 50 Safest Banks 2009”. With total assets of approximately $160 billion, it is the largest cooperative financial group in Canada and the 9th largest in the world. Supported by its network of caisses in Quebec and Ontario, as well as the contributions of its subsidiaries, several of which are active across Canada, it offers a complete line of financial products and services to its 5.8 million individual and business members and clients.

Desjardins Group is also a hub of expertise in wealth management, life and health insurance, property and casualty insurance, services for businesses large and small, securities, asset management, venture capital and cutting-edge technology, all within an integrated service model that is one of a kind in Canada.

It must be noted that Desjardins Group has been concerned for quite some time about the problems caused by spam proliferation. The bill is without a doubt an initiative that targets more reliable, safe and secure electronic commerce. However, Desjardins Group believes that some of the bill's provisions will do more to restrict legitimate electronic commerce than to dispel the efforts of ill-intentioned users of this technology.

Bill C-27 needs to be adjusted in such a way as to slow down the proliferation of spam while allowing for the development of electronic commerce and the competitiveness of the Canadian economy. As regards consent, section 2 of the bill is excessively limiting and poses a threat to legitimate electronic commerce. Under the bill, it would be prohibited to send an electronic message requesting consent to receive commercial electronic messages. Desjardins Group believes that it is unrealistic to think that Canadians will give express consent to receive commercial electronic messages on their own initiative. Being far too restrictive, the prohibition of electronic messages requesting consent should be stricken from the bill.

As well, the bill should recognize that certain commercial practices do not constitute unsolicited commercial electronic messages. For example, a company should be able to solicit a client if it has first received a referral. It should be able to do the same if it holds an individual's email address as part of a prior business relationship, where the individual has not withdrawn his or her consent for solicitation purposes, or when a potential client contacts a company to obtain information and does not withdraw his or her consent. Electronic communications following referrals are common practice, they are legitimate and appreciated by clients. As such, the recognition of implied consent should be added to the bill with the possibility of such consent being regulated thereafter.

Another major source of concern not only for Desjardins Group, but for all Canadian companies are the clauses related to the Do Not Call List. We understand that the government does not plan to implement those clauses at this time, but their mere presence within the bill is worrisome. In this respect, it is important to remember that those subject to the act and their partners in government worked for three years on establishing effective regulations for this tool and significant financial and labour resources have gone into achieving compliance. It is therefore quite astonishing that the longevity of the Do Not Call List could be jeopardized just one year after coming into effect. Given these considerations, Desjardins Group recommends that a detailed study and public consultations be carried out before making any modifications to the DNCL.

In conclusion, in Desjardins Group's view, the current text of the EPCA will threaten legitimate electronic commerce.

Quite honestly, the bill seems more geared to protecting service provider bandwidth than electronic commerce itself. With this in mind, we believe that it is essential for certain parameters to be readjusted and for more flexibility to be added to the ECPA in order for it to achieve its intended objectives without discouraging growth in the Canadian economy.

Thank you for your attention.

My colleagues and I would be happy to answer your questions.

[The Chair, Conservative, Michael Chong]

Thank you, Mr. Morency.

During the next five minutes, we will hear from the representatives of the Canadian Life and Health Insurance Association Inc.

[Frank Zinatelli, Vice-President, Legal Services and Associate General Counsel, Canadian Life and Health Insurance Association Inc.]

Thank you, Mr. Chairman and members of the committee. I would like to thank the committee very much for giving us this opportunity to contribute to your review of Bill C-27, the Electronic Commerce Protection Act.

My name is Frank Zinatelli, and I am vice-president of legal services and associate general counsel of the Canadian Life and Health Insurance Association. I am accompanied today by my colleague Peter Goldthorpe, who is the CLHIA's director of marketplace regulations issues. We welcome this opportunity to make constructive contributions to the committee as you seek to develop your report to Parliament on this important bill.

By way of background, the Canadian Life and Health Insurance Association represents life and health insurance companies accounting for 99% of the life and health insurance in force across Canada. The industry protects 26 million Canadians and some 20 million people internationally.

With your permission, Mr. Chairman, we would like to make a few introductory comments.

In August, we submitted written comments to the committee. Several of the matters were technical in nature and involved providing greater clarity and certainty to the language of the bill. We trust that these are relatively free of controversy and will be addressed by the committee.

This afternoon we would like to focus our remarks on a broader issue. The issue is the proposed restrictions on obtaining consent by electronic means, and my colleague Peter Goldthorpe will now address this.

[Peter Goldthorpe, General Director, Marketplace Regulations Issues, Canadian Life and Health Insurance Association Inc.]

Thank you, Frank.

Mr. Chair, the stated purpose of the bill is to regulate the commercial conduct that discourages the use of electronic means to carry out commercial activities. Everyone, I think, agrees that this is an important objective, so it is equally important that we avoid restrictions that would have the effect of discouraging or making impossible exactly what the bill seeks to protect.

Our contention is that within an opt-in framework contemplated by Bill C-27, greater flexibility can and in fact should be provided as it relates to the means of obtaining consent. As we noted in our written comments that were circulated earlier in the summer, the proposed restrictions threaten to undermine the viability of commercial communication by electronic means. The problem is that in a great many instances people will simply not use one medium to give consent to communicate in another medium.

In the life and health insurance industry, and I think more generally in the financial services industry, many contacts are developed through referrals. By and large, the referral process is an informal process, and that sets up an important disconnect. The person being referred may be quite happy to be contacted by e-mail, but it is extremely unlikely that many will be willing to take the time and effort to write out express consent or take the initiative to contact an adviser.

We appreciate that there is a concern that e-mails intended to obtain consent could be misused. But it is important to keep in mind that e-mails following up on a referral need to clearly identify the person who is sending them. Our suggestion is that e-mails to obtain consent be permitted if they clearly state the purpose and do nothing else to promote the sender's services or products.

It's important to keep in mind that an e-mail that's doing this must clearly identify the sender who is using the e-mail for these purposes. So if there is any misconduct, if they're deviating from any of the restrictions you care to put in place, their identification is all over the e-mail. This fact should be more than enough to discourage misuse.

Mr. Chair, the use of electronic communication has important economic and environmental advantages. It would be unfortunate if the restrictions in Bill C-27 had the effect of forcing businesses to rely on more costly and less environmentally friendly ways of communicating with prospective customers. An important step in avoiding this outcome is to permit e-mails intended to obtain consent.

The industry greatly appreciates this opportunity to contribute to the committee's review of Bill C-27. I would like to thank you for your attention. We'd be happy to answer any questions you might have.

[The Chair, Conservative, Michael Chong]

Thank you very much.

Now we'll go to the Investment Funds Institute of Canada.

[Joanne De Laurentiis, President and Chief Executive Officer, Investment Funds Institute of Canada]

Thank you, Mr. Chair. We appreciate the opportunity to speak with you today.

My name is Joanne De Laurentiis. I'm president and CEO of the Investment Funds Institute of Canada. I'm joined by Paul Vaillancourt, who is an independent financial consultant who runs his own successful business here in Ottawa. We will share our comments this afternoon.

The Investment Funds Institute of Canada is the national association of the Canadian investment funds industry. Like Paul, individuals representing our members work in almost every town and city across Canada. IFIC's mutual fund manager members manage over $560 billion in mutual fund assets, and 70% of these assets are held in retirement saving vehicles and are helping Canadians build their wealth.

We believe the clauses in Bill C-27 that combat and punish illegal and harmful activities and that damage the trust surrounding electronic commerce are necessary. We support the recommendations in clauses 7 and 8 regarding the prohibition of the altering of transmission data and the unauthorized installation of computer programs on another's computer. We also support the proposed amendments to the Competition Act to prohibit misleading commercial e-mails and amendments to PIPEDA regarding the use of e-mails collected through selected computer programs.

We are here to encourage you to better balance the protection of individuals and businesses from unwanted e-mails while still allowing responsible communications by legitimate businesses to their potential clients and customers. We think this can be accomplished with several simple amendments.

[Paul Vaillancourt, Independant Financial Advisor, Investment Funds Institute of Canada]

Bonjour. My name is Paul Vaillancourt.

The proposed clause 6 prohibits one-to-one e-mails of specifically directed marketing communications, which are not by their nature intrusive in the lives of recipients and do not create economic harm. My clients are my best sources of new business. A financial adviser like me regularly sends e-mails as a follow-up to a referral from an existing client to a friend or a family member who is looking for a financial adviser. In fact, such referrals are crucial to my business.

E-mails are an efficient means of contacting potential new customers based on referrals without being a nuisance to the recipient. In years past, we used the postal service to follow up on referrals. E-mail has replaced the old technology of writing letters, but it is essentially the same thing. In addition to being less expensive, less intrusive, and more environmentally friendly, it is an accepted, indeed an expected, form of introduction. Individuals are able to access the information at their convenience and have complete control to respond or not.

Clause 6 should be limited to those who target individuals or entities through mass e-mails, where there is no reasonable identifiable relationship between the recipient and the sender. Where the recipient has been referred to the sender, there should be a specific exemption allowing the sender to contact the referred individual or entity. Regulations pursuant to this legislation could be developed to prevent abuse of this exemption and to ensure there was indeed a referral.

Subsection 10(4) of Bill C-27 defines “existing business relationship”. That definition may be sufficient for relationships based only on contract dates or specific sales operations, but it is ill-suited to a consultant service relationship where the consultant has a fiduciary responsibility to contact and inform his client. This type of relationship should be viewed differently.

In many cases, our relationship with the client is linked to an investment made by the client that is followed by none of the operations targeted in subsection 10(4). Consequently, we recommend that in the case of persons who have a fiduciary relationship with the client, the 18-month period targeting subsequent communications begin when the professional relationship or the consultancy relationship ends.

Canadians are world leaders in the use of social networking sites such as Facebook, Twitter, LinkedIn, clubs, and associations. The proposed legislation does not contemplate the popularity and widespread use of these social networking groups or the fact that these groups already effectively govern the boundaries of the communications. The definition of “existing non-business relationship” in subclause 10(6) should be expanded to include members of established electronic social networks to better reflect this emerging reality.

[Joanne De Laurentiis]

We believe the anti-spam provisions are too broad as they relate to business-to-business communications. Where a business makes its e-mail address public and the address is not accompanied by a statement that commercial messages are not welcome, Bill C-27 should treat this as implied consent by the business.

Electronic communications have evolved to be a convenient, quick, and cost-effective way to communicate employment opportunities. One way our members grow is by recruiting new financial advisers through electronic communications. We propose that clause 6 be amended to include an exemption for electronic communication that has as its sole purpose information regarding legitimate employment opportunities.

IFIC supports the proposed penalties. The maximum penalty for a violation is $1 million in the case of an individual and $10 million in the case of any other persons. For violations of clauses 7 and 8, where prohibited actions have the potential to result in large-scale system damage or fraud, these are at the right level.

In the case of clause 6, we believe the penalties are excessive and out of scale to the potential harm caused by a breach. The penalties for contravening clause 6 should be different from the penalties applicable to a contravention of clauses 7 and 8. Within clause 6, we would also propose much smaller deterrent penalties for those businesses that are simply using electronic means as a supplement to their business efforts and where individual violations are not harmful.

IFIC supports the right of public action for violations of clauses 7 and 8 where prohibited actions have the potential to result in large-scale system damage or fraud, but for clause 6, the right of public action seems unnecessary, excessive, and potentially open to abuse. We propose that the right to a public action be limited to violations under clauses 7 and 8.

As noted earlier, the investment industry has rules in place governing communications with the public. The Mutual Fund Dealers Association and the Investment Industry Regulatory Organization of Canada require that all sales communications from their members to the public must first be approved by an officer of the member company. We believe these requirements, together with the provisions of Bill C-27, provide the necessary protection to the public on matters of content as well as the need for sanctions. Accordingly, we recommend an exemption to clause 6 for industries where existing regulatory structures are in place.

We all recognize that technology has changed the way we interact, both on a personal and a business level. Whereas in the past we would have met friends and made new personal or business contacts through dinners, meetings, and other gatherings, today we are doing it through technology. Cyberspace has redefined how we communicate and interact.

Our concerns about the overly broad application of this legislation could be corrected by very simple amendments, primarily in clauses 6 and 10, to provide exemptions and safe harbours for referral business, ongoing fiduciary relationships, business-to-business communications, employment opportunities, and established social networking relationships, together with a refinement of the penalties and private right of action to target the actual wrongdoing in cyberspace.

Thank you for listening. We look forward to your questions.

[The Chair, Conservative, Michael Chong]

Thank you very much.

During the next 75 minutes, the members of the committee will ask their questions.

We shall begin with Mr. Garneau.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

Thank you, Mr. Chairman.

First of all I want to thank all of the witnesses who came to submit their views to us today on this bill, which, in order to be well drafted, practically requires the wisdom of Solomon.

On the one hand, of course, we want to get rid of spam as it is very harmful, as everyone agrees, but on the other hand, we don't want to prohibit legitimate electronic commerce communication. For a bill to make good sense, I think that two different philosophical approaches can be adopted. In one case, we impose all sorts of restrictions, but in the final analysis, these may be excessive and this could hinder electronic commerce. Consequently, those who use electronic means to do business are forced to prove that some important exceptions have been forgotten.

On the other hand, we can choose a much more open approach, with few restrictions, and then realize over time that a great deal of spam is still getting through and that the bill has to be applied in a much stricter manner. In short, this isn't easy.

Today, I have the impression that you have found arguments to prove that the bill should be amended because it will interfere with commerce and legitimate communication on the Internet. That is clearly what your presentation led me to conclude.

I would like to put a question to Mr. Morency or to another representative of the Desjardins Group.

You took issue with clause 2 in particular. You mentioned that Bill C-27 affected electronic commerce and needed to be readjusted. I understood your arguments.

Do you have any concrete suggestions to make to us in order to bring about this balance and allow you to continue to do your work in a legitimate fashion?

[Yves Morency]

I am going to give the floor to my colleague Mr. Brun.

[Bernard Brun, Senior Counsel, Commerce and Technology, Desjardins Sécurité financière, Mouvement des caisses Desjardins]

Thank you.

I believe you have defined the concerns very well, Mr. Garneau. Industry and all of the stakeholders in the business arena share these concerns. Everyone advocates legislative intervention but would like to see a better balance. In our opinion, that balance is mainly related to the matter of consent. In this case, it is much more restrictive. In order not to be penalized in comparison with international businesses in particular, all of the business community would need a much more flexible notion of consent.

In fact, several of our comments converge. We feel that business relationships are in a separate category. When a business decides to release its email address, people should be able to contact it for legitimate commercial purposes. Moreover, the concern with regard to referrals was raised in particular by the IFIC representatives. This reality affects all of industry. We think that amendments allowing businesses to contact clients after a referral would facilitate things greatly.

Finally, the possibility of obtaining consent through electronic means may be the most important factor. When we use a medium, we want to be able to obtain consent through that same medium, i.e. through electronic means. It is very clear that everyone is in favour of a legal intervention and agrees that consent would normally be required, in order to be able to communicate. The way in which that consent is obtained is mostly what needs to be amended in order to attain a good balance.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

Very well. Thank you very much.

Perhaps I could ask a question of the Canadian Life and Health Insurance Association. I think one of the primary arguments you brought forward, which has just been referred to, is the issue of getting consent to interact, to communicate. If I understood you correctly, if one has to go and ask for that consent by some other means of communication than an e-mail saying, “Can we communicate, can we establish a relationship?”, you said that doesn't work very often and that it would be more practical, more environmentally safe, to be able to communicate directly initially by following certain rules.

I don't know if there have been any studies on this, but do you have any evidence to support the fact that requests for consent, let's say by written letter or other means, don't really work, as opposed to being able to do it directly through e-mail?

[Frank Zinatelli]

Thank you, Mr. Garneau.

We base our comment on the fact that there are different types of clients. Some clients want to be communicated with in an oral fashion, and some prefer being contacted by mail or telephone. But a growing number of people are making use of electronic means and want to be communicated with electronically. If they get a letter, there's more likelihood that they will ignore it than if they receive an e-mail, which they're familiar with and know how to address. They know how to scan their e-mail and choose what they want to pay attention to and what they want to delete. People who use electronic means are very savvy about the use of this technology, and I think they expect to be communicated with in that way.

[The Chair, Conservative, Michael Chong]

Thank you, Mr. Zinatelli.

Mr. Bouchard, you have the floor.

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

Thank you very much for your testimony. What you have come to tell us this afternoon will help to improve Bill C-27.

My first question is for Mr. Morency, from the Mouvement des caisses Desjardins.

You talked about an implementation delay of one year, and among other things, you said that consultations should be held. I would like to hear more about this from you.

Who should we consult and who should do the consulting in order to arrive at a time period that would seem fair and equitable to you?

[Bernard Brun]

Thank you. If I understood your question correctly, you are referring to the transition period, the consultations...

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

... yes, for the implementation of Bill C-27. You referred to a one-year transition period before its implementation.

[Bernard Brun]

Before the implementation of this bill.

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

In any case, you spoke of a one-year period before its implementation. Then you mentioned that there should be consultations before the bill is passed, if I am not mistaken.

[Bernard Brun]

The consultations we referred to concerned the possible abolition of the Do Not Call List. That exclusion list is now a reality, but it was brought in quite recently. This bill, although it does not apply to telephone communications, could conceivably be extended to all telephone communications by a simple order in council.

We feel, quite humbly, that if we wanted to go forward and abolish all of this infrastructure, given all of the technological developments that businesses have to keep up with, they should at least be consulted first so that we have some idea of the impact of the abolition of that list and of the adoption of a different system, the one set out in this bill.

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

Mr. Brun, unless I'm mistaken, you see two types of clients to whom emails may be sent. There are emails between businesses—that is one of your categories—and then emails sent by a business to consumers.

Would you like to see these two categories of clients expressly set out in Bill C-27?

[Bernard Brun]

Yes, absolutely. Indeed, to our way of thinking, an business-to-business relationship for the development of business relations... We know that most businesses in fact publish their electronic address precisely so that people can communicate with them. This to our mind is a different category. We think that in the bill, we should allow this communication with other businesses with whom we may eventually conduct business.

Currently, in the bill, it says that businesses may communicate but strictly to request information on activities. We feel that this is not sufficient; businesses should be allowed to communicate to set up business relations.

We understand that there needs to be a tighter framework where individuals are concerned because this bill aims to protect consumers and individuals.

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

My question is for Mr. Paul Vaillancourt.

I don't know if you are talking about the same thing, but I thought I understood that you wanted a clarification on the matter of mass emailing.

I thought I understood that you were talking about the clients of a business when you talked about fiduciaries. I presume that you were talking about the clients of a business. You are establishing a distinction.

You also said that there had to be an 18-month waiting period after the end of a business relationship. Once again, I presume you are referring to the business relationship with the clients, those who had a connection to the business.

Could you elaborate a little?