Industry Committee on Oct. 5th, 2011

[Janet DiFrancesco]

As Helen indicated, I think the real contribution is making the online environment more safe, so one of the key elements of the anti-spam legislation, in addition to targeting unsolicited commercial electronic messages, is to also target things like malware, malicious software that can do real damage to businesses that are doing business online as well as to individuals.

In addition to the references that my colleagues from the Competition Bureau have made about deceptive market practices, all of these things I think are steps in the right direction, steps to giving Canadians confidence that the online market is safe, that they're not at risk of attracting a malicious virus, that they can actually control their inbox in terms of who they correspond with, and that there are measures in place for things like deceptive marketing practices.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

In my remaining time, I'll turn to the Competition Bureau.

Ms. Campbell, in your presentation you mentioned those situations where you had investigations: the Bell situation, and I think there was a Rogers, and a Nivea. Were all of those driven by consumer complaints?

[Lisa Campbell]

Partially. We receive upwards of 15,000 complaints a year at the bureau. We also get information from domestic partnerships, from law enforcement partnerships across Canada, as well as internationally, but sometimes it can be something we observe in the marketplace that consumers haven't complained about or have complained to someone else about, so sometimes yes.

The Rogers matter you've mentioned involves active litigation ongoing by us in which we found that Rogers made advertising about having fewer dropped calls than new entrants, which in our view was false, and that is before the courts at the moment.

In the Yellow Pages matter I mentioned, that was the result of an international investigation that Canada led, involving the U.S., Australia, and the U.K., targeting individuals in Spain with money potentially in another jurisdiction, but targeting consumers in those four other jurisdictions, including Canada. I mentioned our new powers to freeze assets. We recently obtained an injunction and also an asset freeze for future restitution for consumers.

[The Chair, Conservative, David Sweet]

Thank you very much, Ms. Campbell.

Now we'll go on to Mr. Julian and Mr. Thibeault for five minutes.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Thanks, Mr. Chair.

I wanted to come back to Ms. Campbell and ask her if she's aware of any cases internationally where e-commerce sites were cited when they were abroad. You talked earlier about the Bell case, and that's certainly a case where obviously the Competition Bureau has jurisdiction and obviously there's a way of following up with a way to activate and enforce Canadian law. But either in Canada or in the case of another jurisdiction, are you aware of a foreign company or a foreign website that has been successfully prosecuted for infringing upon basic competition law with fraudulent behaviour, misleading advertising, etc.?

[Lisa Campbell]

In fact, we have cases in Canada. In the Yellow Pages case I mentioned, there were, in our view, fraudulent misrepresentations made on the Internet. That's precisely what our case is about; it's to cease those representations, at least in Canada. But we're doing something that in our view has greater effect: we're collaborating with our colleagues in other jurisdictions so that we can take global enforcement action and hopefully put a stop to this.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Thank you.

I'll turn things over to Mr. Thibeault.

[Glenn Thibeault, NDP, Sudbury, ON]

Thank you.

I want to direct this to the folks from the Competition Bureau.

I want to thank you for those answers. They were great and to the point. You've been very informative, but I want to get back to the mobile payments piece. I want to get your thoughts and your input on what has been done in the past in relation to small business and the burden, I guess, that they've been receiving from the unnecessarily high merchant fees that accompany credit card payments.

Could you foresee a shift to mobile payments, particularly with the emphasis on mobile credit card applications? Will that saddle small and medium-sized enterprises with additional merchant fees? Also, should we not be looking at allowing the debit market to compete in this area as well? The cost to small and medium-sized enterprises is significantly less for debit. I'd like to hear your input.

[Lisa Campbell]

I'll start, and then turn to my colleague Mr. Kellison.

Essentially a lot of the important cases we have brought recently are about transparency, showing consumers the real cost for various services they're being offered, like the CREA case, the real estate case. It was the same thing with the Bell case. It's about telling consumers what it actually costs and letting them choose and decide. Don't hide costs that merchants then ultimately pass on to consumers, which is hard on small and medium-sized enterprises.

Mr. Kellison.

[Matthew Kellison]

I think that's absolutely right, and I think your point is well made.

What our credit cards case focuses on is rules that are raising merchant acceptance fees of credit cards and making it more costly for merchants to accept credit cards. For most merchants, accepting credit cards is a necessity. And particularly for small and medium businesses, that can be a huge cost. One of the things we're hoping to do is challenge these rules and somehow mitigate the fees that merchants pay, which in a lot of instances they really have no choice but to pass on to consumers.

In answer to your question on whether mobile payments would fill the gap a bit, I think that is possible. I think there are a variety of payment methods that are competing in one form or another, whether it be cash, cheque, debit or credit cards.

As you observed, in many cases merchants pay significantly lower fees for accepting debit card transactions than for accepting credit cards. A credit card fee for a merchant may be up to 3% of the total purchase price, whereas for debit in this country, it's usually fixed at about 12¢, regardless of the size of the purchase. However, in many cases consumers aren't aware of that, and consumers aren't aware that merchants may be paying higher fees.

Because of the rules imposed by Visa and MasterCard, in our view, merchants really don't have the ability to steer consumers to different types of payments. We suspect that if they had that ability, not only might it make merchant fees that are set by the credit card companies more competitive, it might also make these other methods of payment more of an option for consumers.

[Glenn Thibeault, NDP, Sudbury, ON]

You're excellent at getting 30-second answers in, so I'll do my best to get the question in there.

Interac uses their line, and there's a different line that can be used by credit card companies. If Rogers or other telecoms get involved in the mobile payment, will they be using specific lines that would then cost merchants more, or are they looking at using the current type of debit line to ensure those costs stay low?

As you mentioned, people don't understand, they just pay. They don't understand the whole process that ends up costing the SMEs more money.

[Matthew Kellison]

That's a very good question. There are a variety of payment processing networks that have been set up, by a number of independent companies. Interac has a network. Visa has a network. Quite often they will partner with different payment processes at the point of sale.

My understanding is that it could be a network that could be accessed by an entrant, or it could be an area where they seek to establish their own network. As I mentioned before, whether a company that basically owns the pipes has the ability to influence the way people use the pipes, or to favour their own content in some way, is certainly something we're mindful of.

[The Chair, Conservative, David Sweet]

Thank you very much, Mr. Kellison.

Now on to Mr. Braid for five minutes.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Thank you, Mr. Chair.

Ms. Campbell, picking up where we left off, you indicated that the Competition Bureau can initiate an investigation on its own; it doesn't need to be driven by a customer or consumer complaint. Is that correct?

[Lisa Campbell]

Yes.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

In the case of consumer complaints, or consumer protection generally, how do you outreach, educate consumers, that they have that option of coming to the Competition Bureau?

[Lisa Campbell]

The volume of complaints that we receive I think speaks to Canadians' willingness to come forward. As I mentioned, it's about 15,000 annually.

Our challenge—and it's the challenge that our partners to the south, the Federal Trade Commission, face as well—is doing data analytics of those complaint trends, working with law enforcement agencies to see whether we are dealing with a criminal problem or a civil problem. We have authority under both regimes. Is it something that's connected to organized crime, or is it more about misleading advertising by a large corporation? We're guided by that complaint database.

We're also guided by competitor complaints. One company, which is often represented by counsel, will come to us and complain about what their competitor is doing. We are not obliged to act on those complaints. We consider it. We do an initial investigation to see whether we've already been active in that industry, and then try to pick our cases very carefully to have maximum impact, as I was saying at the outset.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Ms. McDonald, as we know, the manufacturing sector in Canada has been particularly hard hit through the global economic downturn.

Many manufacturing companies that have survived and thrived are those that have embraced and enhanced innovation. Can you speak to the importance of the manufacturing sector adopting e-commerce practices, implementing digital technologies, and perhaps any case studies or examples you might have in terms of success stories?

[Helen McDonald]

My experience is going to be much better with the ICT industries, since that is part of my portfolio, rather than autos or airlines. Aside from the general economic downturn, there has been a gradual diminution of manufacturing in Canada, because there are offshore, lower-cost countries, like China, that are able to make more and more of this gear at affordable prices.

We also see that software and services are increasing as a proportion of our GDP. So it's not just in manufacturing; it's also in software and services. You want to make sure the creators of these kinds of products and services are using ICTs to the extent possible to create new products or reach new markets.

If you are selling software, you could do it entirely online. You don't have to ship a product across a border, other than in digital form. Services may be also something that you can provide, such as health advice or educational services. We increasingly see these offered online. Moving up the value chain and making sure the processes and products are as innovative as possible are important for manufacturing. But there are also opportunities in the other types of economic activity.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

How does the Department of Industry, in its day-to-day business, use e-commerce or apply digital technology?

[Helen McDonald]

I spend most of my life on my BlackBerry when I'm not in meetings. I can't really say how much of our purchasing of supplies is done online with delivery later. I am unaware of that. A lot of our transactions with our colleagues and clients are done through e-mail or website postings. Certainly, when we have formal consultations on aspects of spectrum management, it's all done online. Then, of course, inside we print entirely too much paper.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Does the Department of Industry assist or influence the rest of government in its use of innovation and technology, or is that more a Treasury Board Secretariat responsibility?

[Helen McDonald]

That's a Treasury Board Secretariat responsibility within the new Shared Services Canada, I presume. Treasury Board also has a service sector that promotes good delivery of services and cost efficiency. Therefore, they are presumably also promoting electronic means where it makes sense.

[The Chair, Conservative, David Sweet]

Thanks, Ms. McDonald.

We will go to Mr. Braid first, and then to Madame Leblanc.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Is there anyone here who has questions?