Evidence of meeting #66 for Industry, Science and Technology in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was businesses.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Clerk of the Committee  Mr. Jean Michel Roy
Corinne Pohlmann  Vice-President, National Affairs, Canadian Federation of Independent Business
Paul Temple  Senior Vice-President, Regulatory and Strategic Affairs, Pelmorex Media Inc.
Scott Smith  Director, Intellectual Property and Innovation Policy, Canadian Chamber of Commerce
Monique Moreau  Senior Policy Analyst, Canadian Federation of Independent Business

5 p.m.

Conservative

The Chair Conservative David Sweet

Yes, send that to our clerk. Thank you very much, Mr. Temple.

Mr. Lake, the button wasn't pushed, so go ahead. You still have five minutes.

5 p.m.

Conservative

Mike Lake Conservative Edmonton—Mill Woods—Beaumont, AB

Thank you, Mr. Chair.

5 p.m.

NDP

Dan Harris NDP Scarborough Southwest, ON

Take 30 seconds off my time.

5 p.m.

Conservative

Mike Lake Conservative Edmonton—Mill Woods—Beaumont, AB

I don't blame him for leaving. It can get uncomfortable with these mean NDP guys asking their mean questions. I'm just kidding. They're friends of mine.

Now I'm getting heckled by my own guys.

I liked Mr. Thibeault's line of questioning on the payment thing, and I want to follow up a little. I imagine this could be an interesting discussion among your members, both with the chamber and with the CFIB. On one hand, typically your members would be advising us on a fairly regular basis to get out of their business, in a sense, and get out of the way and let them do their thing. In this area the messaging is a little different.

How do you find the balance there? What is the balance? I think Mr. Thibeault's line of questioning...he and I would probably have some agreement in this area. We might disagree on some things; in other areas we would have some agreement or at least be sympathetic to a similar position on behalf of consumers especially, and small business people.

Maybe you could articulate that balance.

5 p.m.

Vice-President, National Affairs, Canadian Federation of Independent Business

Corinne Pohlmann

It's not an easy balance. The credit card industry in Canada is dominated by two or three, and maybe now four, players, given the entry of Discover into Canada.

Given that they have such a dominance in that particular market, we believe there needs to be a little bit of oversight in terms of how they operate in conjunction with the merchant side of the community. Hence, we felt the code of conduct was a great step forward in trying to create some of that oversight.

We knew, as I mentioned earlier, that it had to be a document that would evolve as this industry evolves because it's a rapidly changing industry. We can learn from what's going on in other countries and perhaps try to adapt in Canada before it hits our merchants and consumers too quickly.

So it is a balance. We're not big fans of going too far in regulating the industry, but at the same time we need to balance that with what's happening in the marketplace when it comes to merchant fees and how they're being imposed on small business owners and, of course, ultimately on consumers.

5:05 p.m.

Conservative

Mike Lake Conservative Edmonton—Mill Woods—Beaumont, AB

Further to that question about balance, I'm just thinking about how there's a lot of talk when we're dealing with issues like this about the challenges, and obviously we want to find solutions to challenges. We want to try as a government to do everything we can to create a tomorrow that's better than today, I guess, in virtually every aspect of what we do. So naturally we look at some of the challenges and try to see if we can correct them.

One of the things that oftentimes is missing, I think, from the discussion when we deal with payments is the incredible opportunities that come with this new technology. Here we are as a committee right now addressing adoption of digital technology by companies and here we have this incredible world that is being opened up by new technology, in terms of payment systems, and we're not really discussing the opportunities presented. There's an opportunity, for example, for someone to start an Internet business and start accepting payments in their basement office. That's a world that was never open to them before.

Could you maybe speak to some of the opportunities that are presented to your members by these new technologies that are arising?

5:05 p.m.

Vice-President, National Affairs, Canadian Federation of Independent Business

Corinne Pohlmann

Absolutely. As I said, I think that mobile technologies as well as digital technologies have been great for small businesses because they have given them an avenue to the world and to customers, putting them almost on par with larger competitors. On the Internet everyone is sort of equal in some respects.

So I think that has really been important. When it comes to the payment side of things, we believe strongly that we should push for more new technologies, one of them being a better way to do business-to-business transactions electronically, which doesn't exist in this country yet. Well, it exists, but at a high price.

So I think we want to encourage companies to continue to grow and expand into new technologies that are obviously going to benefit small business, but we have to make sure that.... It's an interesting industry in that the credit card companies' market or people they're trying to cater to are really the banks. It's not the merchants and it's the consumers because the credit card companies are trying to get the banks to distribute their credit cards. So they become the people they're trying to attract to their product, not so much the merchants.

So the merchants almost become a secondary off-shoot and end up having to just accept the conditions the credit card companies are imposing on them. It's a bit of a skewed industry that way. So we would love to see new models out there that are going to compete with that and we would encourage that more and more, and we're hopeful that by looking at some of these new options that are out there, we can allow the same rules to be applied to new entrants and even the playing field a little more, so that it isn't so dominated by MasterCard and Visa and American Express and Discover and all those others.

I don't know if I answered your question.

5:05 p.m.

Conservative

Mike Lake Conservative Edmonton—Mill Woods—Beaumont, AB

Thank you.

5:05 p.m.

Conservative

The Chair Conservative David Sweet

Thank you, Mr. Lake. That concludes our second round of questioning.

Now we're going to a third round of questioning and we start with Mr. Carmichael for five minutes.

5:05 p.m.

Conservative

John Carmichael Conservative Don Valley West, ON

Thank you, Chair.

I wanted to follow up on my friend Mr. Thibeault's comments with regards to the surcharge issue.

That area concerns me greatly because I come from business and as a retailer and service provider, if I had the choice to provide that surcharge on top of the bells that I'm going to provide to my customers, it's nothing more than an additional tax, and our government is totally focused on reducing taxes, not increasing them. I truly believe that the discussion has to occur between the merchants and the providers. To his point, if there are areas where we have to be involved in that discussion, that's fine, but competitive advantage and competitive alternatives should provide a solution in that discussion.

Could you comment on that? Again, the surcharge piece really worries me because that's going to hit the consumer, as he stated, and that to me is a real problem. That's where we've got to be very careful because then you're penalizing the people you're trying to support and supply.

5:05 p.m.

Vice-President, National Affairs, Canadian Federation of Independent Business

Corinne Pohlmann

I hate to tell you this, but it's already hitting the consumer. I mean, the merchant fees are being put into the price of the product. The way it is today, anybody who pays cash or uses Interac is subsidizing those who are paying by credit card, because the merchants have to incorporate their costs into the products.

This way, you—

5:10 p.m.

Conservative

John Carmichael Conservative Don Valley West, ON

That's a competitive issue, isn't that right?

5:10 p.m.

Vice-President, National Affairs, Canadian Federation of Independent Business

Corinne Pohlmann

That's right. But this way, at least you're only charging those people who choose to use maybe a premium credit card. That's where we would like to see it.

Most of our members who would surcharge.... Frankly, as I said, we believe that the vast majority are not going to do it. It's really about the power piece of it. But if someone pulls out a card that you know is going to cost you 4%, and you know they have a card that would only cost you 1.5%, you might say, “If you want to use that card, I'm going to have to charge you the 4% fee.” It's about bringing some of the power in the relationship back to the merchants, so that they can control their own costs in a better way.

Right now, they can't control those costs. Even the Competition Bureau agreed that these are probably anti-competitive behaviours and took these companies to the tribunal. We're awaiting the decision on whether the tribunal agrees. But this is part of the reason we think these rules need to be looked at.

5:10 p.m.

Conservative

John Carmichael Conservative Don Valley West, ON

That's a good point.

We started off talking about websites and talking about ICT technology and the whole gamut. The last question I have is, when you look at the cost of small business's competing in a technological world, what is the greatest hindrance today? Is it the service providers, or is it just the capital cost of getting in, for a small business owner, an SME?

5:10 p.m.

Director, Intellectual Property and Innovation Policy, Canadian Chamber of Commerce

Scott Smith

I would actually look at it as a skills issue more than anything else.

5:10 p.m.

Conservative

John Carmichael Conservative Don Valley West, ON

Skills?

5:10 p.m.

Director, Intellectual Property and Innovation Policy, Canadian Chamber of Commerce

Scott Smith

Yes. One of the key barriers for a lot of small businesses—you hear it in the surveys, it was suggested by CFIB, and we have heard it in our own surveys—is that there are challenges for small businesses in understanding what the next level of technology is or how to take best advantage of it.

There are too many options out there for them. Larger companies have the resources to bring in people with the right skills. Smaller businesses don't necessarily have those resources; some do and some don't. But one of our recent studies suggested that the skills gap is one of the keys.

5:10 p.m.

Conservative

John Carmichael Conservative Don Valley West, ON

Has that portion been narrowing, though? In other words, are we seeing less of a gap between the haves and the have-nots?

5:10 p.m.

Director, Intellectual Property and Innovation Policy, Canadian Chamber of Commerce

Scott Smith

We're seeing less of a gap, yes, because there have been improvements in adoption, but there are still challenges.

5:10 p.m.

Conservative

John Carmichael Conservative Don Valley West, ON

Okay.

Is there any other comment, from your end?

5:10 p.m.

Senior Policy Analyst, Canadian Federation of Independent Business

Monique Moreau

I would just add that while this is an issue, cost remains an issue for small businesses.

Just today we looked at some of the monthly payments that small business owners have access to through our incumbent providers. The cost just to get Internet access can range up to $150 a month. That can be a substantial cost, especially for a small entrepreneur or a sole proprietor. It eats into relatively thin margins for small businesses.

So it is a skills issue—I think we support that—but it remains a cost issue, not in terms just of a capital cost but of the monthly ongoing cost as well. Whether you make any money that month or not, you're still paying for your Internet bill.

5:10 p.m.

Conservative

John Carmichael Conservative Don Valley West, ON

Thank you very much.

I have finished.

5:10 p.m.

Conservative

The Chair Conservative David Sweet

Thank you, Mr. Carmichael.

Now we go on to Mr. Harris for five minutes.

5:10 p.m.

NDP

Dan Harris NDP Scarborough Southwest, ON

Thank you, Mr. Chair.

Once again, Mr. Carmichael, your first question was exactly what I was going to ask. I've been part of the tour that has been launched looking at merchant fees, and that's exactly what all the merchants have said, that they are now charging prices that reflect what they are going to be paying in credit card fees.

If, then, someone is paying by cash, cheque, or Interac, they're actually paying more for products because the companies have to accept credit cards. They have to honour all cards, including the new high-rate cards, and the next level of premium cards could have percentages for merchants that could be up to 6%. That's a huge markup in cost.

I want to branch off a little bit, looking at digital adoption of technologies. There are some cities in the world that have brought in broadband Wi-Fi access across an entire city. That's something that could probably be very attractive to small businesses, because no matter where they were within that municipality, they would have instant access. If they were a mobile business, they would have access wherever they went.

Is that something CFIB has been looking at or has done any work on respecting how it could help your members?

April 30th, 2013 / 5:10 p.m.

Vice-President, National Affairs, Canadian Federation of Independent Business

Corinne Pohlmann

We haven't actually asked our members about that particular model. What we would always have to look at is what the cost of it would be to that community and where it was going to get the funds to create that kind of wireless system. This would be a big concern for us; municipalities tend to be some of the heavier taxers on our members as well.

The concept is certainly an interesting one. We know that many communities, as you mentioned, are starting to go down that path. I think even the City of Ottawa was looking at it at one point. But we would have to go to our membership and ask them. It would really depend on the cost to the community and what that means in cost to them spread over the entire community.