Industry Committee on Oct. 31st, 2017

[Josephine Palumbo]

Let me begin by saying that there is the memorandum of understanding between the three agencies. That was implemented as a way for us to share information and in order for each of these different agencies, which have different objectives in terms of our mandate, to share information.

Again, I think we have a specific role to play under our Competition Act. We use the statutory requirements that are listed within the act. When we're looking at CASL-type behaviour, we're looking at it within the context of false and misleading representations with respect to the sender, with respect to the subject matter, and with respect to the locator. We're looking at it within the context of the Competition Act test, and we apply that test. We apply materiality within that test to a certain extent within some of the provisions of CASL.

We work with our agencies, but we each have our own distinct roles and responsibilities. We, of course, rely on the spam reporting centre in terms of the data that's available there in order to gauge information in respect of possible future investigations within the digital economy space. We rely on that. We use that. We find that helpful. There's information sharing with the three agencies. There's the access to the database through the SRC, which is helpful.

Perhaps my colleague would like to add to that.

[Morgan Currie, Associate Deputy Commissioner, Deceptive Marketing Practices Directorate, Competition Bureau Canada, Department of Industry]

There are perhaps just a couple of soft spots we've noticed in the course of our examinations over the last three years, just points of clarity that don't appear to be readily apparent to us. For example, we have an injunctive power that's been added to our act with CASL. We can prevent a third-party provider of telecommunications services from providing Internet service to someone who is issuing spam or violating our provisions. We are not entirely sure whether we have to have an investigation, or a substantive case, or a formal inquiry in order to be able to engage in that. It's just not clear. We may find out about something where there's apparent harm, and we don't have an investigation up, but we'd like to stop it right away. It just seems to be a bit of a spot where we may encounter some difficulties.

Second, it might be helpful if we had a clearer definition of what constitutes an “electronic message”.

[Lloyd Longfield, Liberal, Guelph, ON]

Yes, we've heard that.

[Morgan Currie]

What is meant by “send or cause to be sent ” under the Competition Act? This would allow us to better understand how to use our new provisions to address online threats such as those technical support scams in which you receive a pop-up on your computer screen. We would take the position that that's an electronic message, but it's not entirely clear or well defined, as are other means of conveying false and misleading representation such as text messages, tweets, emails, social media, and others, which are clearly covered.

[Lloyd Longfield, Liberal, Guelph, ON]

There's so much to ask and so little time. I have only a minute and a half left.

Earlier in our study, I was looking for information around the threats from outside of Canada and how we might be able to have this legislation address outside threats. Does the Competition Bureau address the outside threats? Some of your presentation includes international companies. How do we deal with outside threats?

[Josephine Palumbo]

The Competition Bureau has very strong relations with its international counterparts. We have 20 international instruments with about 15 different jurisdictions. Some of those jurisdictions have consumer protection remedies and requirements within them. We work very, very closely with our international counterparts.

We know that online activity crosses national borders, and we coordinate with our counterparts in other countries to amplify the reach of our enforcement action in the extremely challenging frontier of e-commerce. We partner in coordinated Internet sweeps for searches with respect to certain sites that may be problematic. Annually, we conduct the Internet sweep under ICPEN, the International Consumer Protection and Enforcement Network. These sweeps essentially are aimed at designating particular sites that may be problematic not only for Canadians but for other parts of the world as well.

Again, our aim is always to improve consumer confidence in e-commerce by demonstrating vigorous and effective global law enforcement presence here in Canada and abroad.

[Lloyd Longfield, Liberal, Guelph, ON]

You put a lot in, in a short time, so thank you very much.

[The Chair, Liberal, Dan Ruimy]

Thank you very much.

We'll move to Mr. Eglinski for seven minutes.

[Jim Eglinski, Conservative, Yellowhead, AB]

You mentioned in your presentation the amounts of money that you've received. I think you said something like $52.6 million?

[Josephine Palumbo]

Yes.

[Jim Eglinski, Conservative, Yellowhead, AB]

How do you go about assessing those penalties? You talked about Avis and then you talked about Amazon. Do your bureaucrats or your department heads decide on the fine, or is it kind of a gentlemen's agreement between both parties?

[Josephine Palumbo]

Let me start off by saying that administrative monetary penalties are not punitive in nature. They're not there to punish. We associate deterrence with being punitive, and this is not what administrative monetary penalties are about. They are about fostering compliance, encouraging compliance with enterprises that are on our radar for particular investigations.

How do we determine the administrative monetary penalties? There are 11 aggravating and mitigating factors that are listed within the confines of the Competition Act. Those can include things like the duration and the scope of the conduct at issue, the gross revenues generated by the conduct at issue, and the vulnerability of the groups of individuals who may be targeted by the conduct that is at issue. History of compliance with the Competition Act will also dictate where on that spectrum someone would fall in terms of the quantum of the administrative monetary penalty. We're also concerned about the financial viability of the company that is the target of our investigation. All of these factors are taken into consideration when we assess what the quantum is. There is also a catch-all provision under which the bureau can consider other factors when assessing the quantum.

I need to explain that administrative monetary penalties in the cases of Avis, Budget, Hertz, Dollar, Thrifty, and Amazon were all the result of negotiated settlements, so they were arrived at through consent agreements. Consent agreements are a form of negotiation in which the parties and the commissioner and the bureau work together to promote compliance with our act. They can be quite effective. We negotiate them, and we work with the parties in order to achieve the public interest. These consent agreements are actually registered with the courts and with the competition tribunal, and they carry the same force of law as a court order.

Also, the administrative monetary penalties can be levied in the context of the courts if there's an application to the competition tribunal, for example. Within the remedies that the tribunal would consider, administrative monetary penalties would be one of the remedies, as would corrective actions, and possibly restitution payments.

We don't just pull these numbers out of the air. We work with the targets of the investigation, and come up with the right quantum that reflects the public interest. Ultimately, if we're able to accomplish it in the context of a consent agreement, we're actually avoiding the costs associated with lengthy, costly, and sometimes uncertain litigation.

[Jim Eglinski, Conservative, Yellowhead, AB]

Have you had any repeat offenders?

[Josephine Palumbo]

It's interesting you might ask. We have a pretty good track record on repeat offenders. On the record, we currently have one case, the Matthew Hovila case. The individual had agreed to a consent agreement, under the Competition Act, and a few years later decided to repeat the conduct. As a result, this individual faced jail time as well as restitution costs.

[Morgan Currie]

When there is a consent order with the Competition Tribunal, and a civil matter is violated in this fashion, it slips things over to a knowing and reckless offence. In this case, we're looking at criminal charges. In the end, Mr. Hovila spent two and half years in jail and was ordered to pay restitution to victims of his scheme in the amount of $185,000.

[Josephine Palumbo]

Again, that's one example—

[Morgan Currie]

It's the only one.

[Josephine Palumbo]

—out of a large number of consent agreements.

[Jim Eglinski, Conservative, Yellowhead, AB]

The figures you've given us, were those for North American companies registered in Canada? Have you had any penalties levied against foreign companies through your co-operation with enforcement in other countries?

[Josephine Palumbo]

Amazon is a company that crosses the Canadian border. That would be one example of extra-jurisdictional reach. Obviously, the law confines us to our Canadian borders.

[Jim Eglinski, Conservative, Yellowhead, AB]

Do you have enough personnel to handle the workload you have in front of you? I think you're talking about 7,700 cases that you've looked at. Are we providing you with enough resources to be efficient at what you're doing?

[Josephine Palumbo]

We continue to make the most of our resources. We take stock of our enforcement experience. We review evolving trends in international best practices to ensure our enforcement actions remain modern and relevant. Each investigation is different. The costs vary from one case to another. We use the resources that we have available to ensure the most effective and efficient enforcement to provide high-impact results for Canadians.

We maximize our effectiveness and the resources we have. Could we do more with more? Probably.

[Jim Eglinski, Conservative, Yellowhead, AB]

I notice you mentioned a million-dollar penalty to Amazon and a $100,000 payment for costs. Do you normally go after costs in these cases? Is it roughly 10%?

[Josephine Palumbo]

It depends. If you look at Hertz, for example, there were no costs levied against Hertz and Dollar Thrifty. But we weren't even on inquiry, at that point. The company came in, and we negotiated a resolution. They wanted to co-operate. We want to achieve compliance. Fundamentally, that's what we're aiming for. We want compliance and we want it fast. We were able to accomplish that. There were no costs levied.

In any event, administrative monetary penalties or costs to the bureau are payable to the Receiver General for Canada and fall into the consolidated revenue fund for further distribution to other programs within the government.

[Jim Eglinski, Conservative, Yellowhead, AB]

Thank you.