Industry Committee on Nov. 14th, 2022

[The Chair, Liberal, Joël Lightbound]

I call this meeting to order.

Welcome to meeting No. 43 of the House of Commons Standing Committee on Industry and Technology. Pursuant to the order of reference of Wednesday, October 5, 2022, we are studying Bill C‑244, An Act to amend the Copyright Act (diagnosis, maintenance and repair).

Today's meeting is taking place in a hybrid format, pursuant to the House Order of Thursday, June 23, 2022.

I apologize for chairing the meeting remotely today. I would have preferred to be with you in Ottawa, but that was unfortunately not possible.

I will introduce the witnesses appearing before the committee in the first hour of the meeting.

We have, from the Canadian Vehicle Manufacturers' Association, Brian Kingston, president and chief executive officer, and Jennifer Steeves, director, industry and consumer affairs; from LKQ Corporation, Tyler Blake Threadgill, vice-president, government affairs, and Derek Willshire, regional vice-president, Canada; and finally, from the North American Equipment Dealers Association, John Schmeiser, president, and Eric Wareham, vice-president, government affairs.

Thanks to all of you for joining us today. It is much appreciated.

Without further ado, I will cede the floor to the Canadian Vehicle Manufacturers' Association for five minutes.

[Brian Kingston, President and Chief Executive Officer, Canadian Vehicle Manufacturers' Association]

Mr. Chair, honourable members, thanks for the invitation to appear here today as part of the committee's study of Bill C-244, an act to amend the Copyright Act.

The Canadian Vehicle Manufacturers' Association, CVMA, is the industry association representing Canada's leading manufacturers of light and heavy-duty motor vehicles. Membership includes Ford, General Motors and Stellantis FCA Canada. Canada's auto industry is responsible for over $13 billion in annual economic activity, 117,000 direct jobs and an additional 371,000 jobs in aftermarket services and dealership networks in 2020. The industry is Canada's second-largest export sector, with over $36.5 billion in exports last year.

The CVMA has been a strong supporter of the Canadian Automotive Service Information Standard, CASIS, since its inception 12 years ago. CVMA members are industry leaders, providing vehicle repair information and tools to the aftermarket at a level equivalent to their respective independent authorized dealers to ensure that Canadian vehicles are repaired to OEM specification to the benefit and protection of the consumer. Over the past few months, our members have reviewed and submitted recommended updates to the CASIS website to ensure technicians have up-to-date links to our members' respective technical information portals. Regular CASIS task force meetings provide an opportunity to bring forward details about any issue that is being encountered by the aftermarket for further study and collaboration on solutions.

Safety is automakers' number one priority, and OEMs are responsible to ensure vehicle safety systems comply with the Motor Vehicle Safety Act, the MVSA. Vehicle safety technologies provide societal benefit and may save lives, including that of the driver, other passengers and those in the surrounding environment, including other motorists and pedestrians.

Vehicle emissions systems must also comply with federal regulations under the Canadian Environmental Protection Act, CEPA. Modification to a vehicle's emissions system may put a sensor out of alignment, resulting in compliance issues due to increased emissions, and it may also affect fuel consumption. Allowing unrestricted access to vehicle safety and emissions systems software that is not required to complete a repair introduces significant compliance and safety risks in the event of modification resulting in a system not operating as originally designed. CASIS ensures that repairs are done safely and in compliance with the MVSA and CEPA, among other regulatory frameworks that apply to OEMs.

Cybersecurity is another top priority for industry, and data protection and data privacy are embedded from the earliest stages of product development. OEMs invest and include security measures beginning at the design process and throughout the automotive ecosystem, and abide by rules that govern cybersecurity management.

Circumvention of a vehicle technology protection measure, or a TPM, and the modification of vehicle system firmware may undermine cybersecurity protections, making vehicles more vulnerable to hacking. Automated vehicle and connected vehicle technologies, driver-assist systems and the transition to an electric fleet with charging infrastructure require an increasingly vigilant approach to cybersecurity.

The 2020 Transport Canada report “Canada's Vehicle Cyber Security Guidance” notes that “A cyber security breach—either deliberate or accidental—could have adverse consequences, such as compromising vehicle safety, unauthorized access of confidential information, and vehicle theft, among others.”

Context is critical here. The consequences of allowing unrestricted modification of motor vehicle firmware and certain software are more serious than compared to other consumer goods, which we understand is the intended focus of this bill.

As the committee continues its study of Bill C-244, we strongly recommend the committee hear from a cybersecurity expert to receive a briefing about cybersecurity threats as related to vehicle security safeguards including measures to protect the integrity of vehicle systems. We also recommend inviting an appropriate Transport Canada official who can provide input to the committee from a road safety and motor vehicle regulation perspective as well as an Environment and Climate Change Canada official who could speak to the importance of vehicle system integrity related to fuel consumption and emissions compliance.

In closing, the CVMA remains committed to the CASIS model, which has been working for over a decade and may serve as a model for other industries to adopt. We urge the committee to continue its detailed review, hear from the vehicle cybersecurity and safety experts, and continue to engage with CVMA as this study moves forward.

With that, I'll be pleased to take your questions, and thank you again for the invitation.

[The Vice-Chair, Conservative, Rick Perkins]

Thank you. I'm in temporarily, since our chair's computer has apparently frozen.

I will go to the next witness, the LKQ Corporation.

[Derek Willshire, Regional Vice-President, Canada, LKQ Corporation]

Mr. Chair, honourable members, my name is Derek Willshire, and I'm the regional vice-president for Canada at LKQ. I'm here today with my colleague, Tyler Threadgill, vice-president and head of Federal Government Affairs.

Thank you for giving LKQ the opportunity to comment on Bill C‑244, an important bill that seeks to improve the right to repair. Comprehensive regulation of the right to repair is urgently needed. Small businesses and consumers, particularly those in rural areas, will suffer significant negative impacts if action is not taken. For more information, we invite you to read the brief that we submitted on Bill C‑244.

LKQ distributes quality automotive replacement parts, whether OEM parts or aftermarket parts, for consumer vehicle repair, as well as a comprehensive diagnostic and calibration services throughout Canada and the United States.

LKQ is also the largest automotive recycler, recycling more than 900,000 end-of-life vehicles per year in North America.

LKQ employs 1,175 people at 37 locations across Canada. I work in office in Lévis, a suburb of Quebec City, alongside 92 men and women I'm very proud to consider my family. Our employees in Canada represent only a small portion of the 491,000 employees in the automotive aftermarket in Canada.

For many Canadians, a car is one of their most important purchases after buying a home. While innovation and technology have allowed for greater mobility, automobiles can be difficult to maintain. What we've seen and heard from the majority of our customers is that consumers have less and less choice in where they can have their vehicles serviced. According to the Auto Care Association, 70% of car repairs are done in the independent aftermarket. We are here today to advocate for the advancement of Bill C‑244 to ensure that Canadians continue to have that choice.

The Canadian Automotive Service Information Standard, or CASIS, a voluntary agreement reached in 2009, is outdated, as vehicle repair professionals now use technology that did not exist in 2009.

Consumers deserve a vibrant aftermarket that allows them to choose how and, above all, where their vehicle is serviced. That's a real need for them. Bill C‑244 does just that.

My colleague Mr. Threadgill will address some of the current obstacles.

[Tyler Blake Threadgill, Vice-President, Government Affairs, LKQ Corporation]

Thank you, Derek.

Mr. Chair, honourable committee members, my name is Tyler Threadgill. I'm the vice-president of government affairs for LKQ Corporation, working across Canada and in the United States. Thank you for having us here today to share our thoughts on this important piece of legislation.

Bill C-244 is integral to protecting not only Canadian consumers but Canadian small business owners. Our goal is to develop a framework that allows repair and maintenance data to be shared with the automotive aftermarket and a vehicle owner's repair shop of choice. Specifically, we believe the inclusion of a right-to-repair regime for the automotive diagnostic, repair and service sector is imperative to keeping up with the ever-changing automotive industry.

As Derek alluded to, in 2009, the CASIS agreement was reached, which would allow the automotive aftermarket to access important repair and maintenance information. Similarly, a memorandum of understanding was reached by the same parties in the United States about five years later. However, there were unforeseen flaws in this agreement. They did not account for various technological advances. For instance, when these agreements were signed, in order to access vehicle data, a computer needed to be plugged into a car. Now vehicle data is sent through a telematic system that transmits data wirelessly to a server managed by the manufacturer, a process that was not around when these agreements were signed.

To remain up to speed in this technologically evolving landscape and safeguard access to vehicle data by the independent aftermarket, Bill C-244 should take into account the following concepts:

Vehicles compile extraordinary amounts of data, such as where you go and how fast you drive. It's a lot of personal information. I want to be very clear: We do not want that information. What we're looking for is the aftermarket having access to vehicle repair and maintenance data that is necessary to repair a car.

Cybersecurity is another key component to consider. This data needs to be sent in a safe, readable format for all technicians to access.

I'd like to reiterate the industry's goal: We are asking for legislation that maintains the historical status quo in the repair and maintenance market.

This is a time of tremendous technological advancement. It is critical that legislation keep pace to ensure that Canadians' choices and rights remain protected.

Thank you again for your time. We welcome any questions and look forward to working with you on this important issue.

[The Chair, Liberal, Joël Lightbound]

Thank you very much.

We'll now turn to the North American Equipment Dealers Association for five minutes.

[John Schmeiser, President, North American Equipment Dealers Association]

Thank you, Mr. Chair.

Thank you to the INDU committee members for the invitation to appear before you today to discuss Bill C-244.

The North American Equipment Dealers Association Canada has represented farm equipment dealers in the country since 1927. In addition to the over 850 farm equipment dealers across Canada that we represent, we also have many construction, material handling, forestry and outdoor power equipment dealers as members. We're also here today on behalf of our sister organization in Quebec, AMMAQ, which has represented dealers in that province since 1949.

Our farm equipment dealers directly employ over 20,000 people across the country. For the most part, our members are located in rural areas and, in a lot of cases, our equipment dealers are the largest employers in these rural communities.

We want to be very clear that farm equipment dealers in Canada support the customers' right to repair their own equipment, and no one has taken away a farmer's right to repair their own equipment. This is a relationship-based business, and our dealers' success is dependent on our customers' success. This is also a very highly competitive business; if the dealer doesn't take care of the customer, they will take their business elsewhere.

To show how we support a customer's repair, I'd like to share the industry commitment that OEMs and dealers have made to the customer. OEMs offer our farmer customers access to error or fault codes, plus the same repair manuals, diagnostic equipment, special tools, training and parts that are available to dealers. Should a farmer or a third party repair shop wish to purchase them, they are available from all the major manufacturers who have signed on to this industry commitment and, with this industry commitment, 98% of the repairs can be performed by farmers or third party repair shops. The remaining 2% of repairs involve access to safety or emissions criteria or may need a software reset.

Another part of our industry commitment is our “repair done right” initiative, through which we train dealership employees on what is available in the marketplace. This is to ensure that our staff and our customers know what's available to support their repair.

Dealerships invest millions in parts inventory and technician training to support customer repair. Additionally, our association has spent over $3.5 million in the last few years on capital projects for technician training at some of Canada's finest post-secondary institutions, and we have awarded over 1,200 scholarships to dealership technicians to upgrade their training. We do this because it's not only good business; it's also critical that when a machine is down, our dealership staff know what the problem is and can fix it right the first time.

An independent survey showed that 56% of the parts we sell are installed by someone other than the dealership, so we clearly do not have a monopoly on repair. That same survey shows that independent repair shops, in many cases, are the top parts customers of our dealers. What we don't support, though, is modification, and Bill C-244 would open the door to modification that has negative consequences to the environment and safety concerns.

Our dealers report many instances of customers altering the emission systems on their off-road equipment in an effort for better fuel economy and performance. However, this violates the Canadian Environmental Protection Act, and there's a lack of enforcement in this area. If Bill C-244 passes in its current form, this will open the door to widespread altering of emission systems, as there will be open access to the software.

Additionally, access to the software will create many safety hazards. As an example, a tractor's brakes are designed for the maximum speed of 40 kilometres per hour; however, with access to the software, that speed can be increased to as high as 70 kilometres per hour. That speed makes the tractor unsafe and creates a hazard to the public. Allowing access to farm equipment software also creates a cybersecurity concern.

Most modern farm equipment has remote access and diagnostic capabilities. Already we have hackers who are boasting about their attempts to remotely shut down tractors. Opening up access to the software will put Canada's food supply chain at risk.

Earlier this year, John Deere was able to remotely disable tractors that were stolen in the Ukraine by Russian troops. If proprietary code is allowed to be accessed, this could put control of the units in the hands of others with possible disastrous consequences and national security risks.

For these reasons, we oppose Bill C-244 in its current form. It doesn't take into consideration the industry commitment that supports customer repair and has unintended safety, environmental and cybersecurity consequences for the Canadian agricultural industry.

We welcome MP Miao's comments that he was willing to entertain amendments to the bill with respect to our industry, and we have submitted draft language that would exempt our construction in agricultural industries.

Our industry has stepped up to support a customer's right to repair their own equipment. I hope you agree that an industry solution is preferable to a legislated solution.

Thank you, and we look forward to your questions.

[The Chair, Liberal, Joël Lightbound]

Thank you very much, Mr. Schmeiser.

We'll now turn to Mr. Perkins to start the discussion. You have six minutes.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

Thank you, Mr. Chair. Thank you, witnesses, for appearing.

Mr. Schmeiser, I'd like to explore a couple of the points you raised.

Maybe you could explain the last one, modification, a little more. It would surprise me that somebody would pay a million dollars for a piece of farm equipment and then try to fix it themselves and modify it.

What are some of the modifications that you see? What is the impact of that on the equipment?

[John Schmeiser]

Thank you for your question.

There are two.

The first one is the installation of a DEF delete kit on, typically, off-road diesel engines. That gets around the emissions standards that have been set in the Canadian Environmental Protection Act. That is illegal. However, we have reports from some of our dealers that in their trade area, as much as 50% of the farm equipment has a DEF delete kit installed on it. The problem is there is no enforcement.

The second issue is chipping and tuning. That is the installation of a chip to increase the horsepower of a tractor or combine. It's not illegal, and a customer can do whatever they want with their farm equipment after they purchase it. However, it voids the warranty with the manufacturers. The manufacturers make it very clear that any alteration from the OEM standard is a violation of the warranty.

There is a risk that comes with both of those things. On the one hand, it's illegal or it voids your warranty, and then there's a downstream effect. Ninety-five per cent of the equipment that our dealers sell involves a trade. If a dealer takes in a piece of equipment that has been altered or chipped and then sells it to another customer, who's liable if a transmission or an engine blows up because it's been chipped?

Those are the two primary issues. They're the installation of DEF delete kits and chipping and tuning.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

If you're altering the horsepower, you're also impacting, presumably, the transmission and its ability.

[John Schmeiser]

Absolutely.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

There have been discussions about whether or not this bill breaches provisions of CUSMA. I'm wondering if each of the three groups, starting with Mr. Kingston, wants to briefly comment on that aspect.

[Brian Kingston]

I can't give a definitive answer. I would recommend that Global Affairs Canada trade officials be engaged on that question. There are commitments and requirements through CUSMA with respect to things like intellectual property. I think that needs to be investigated further.

[Tyler Blake Threadgill]

I think we would agree. We can't say for certain one way or another whether it would, but we'd be happy to work with you and other members to get a definitive answer.

[Eric Wareham, Vice-President, Government Affairs, North American Equipment Dealers Association]

I agree with Mr. Kingston's comments.

I would add, though, that this process.... When we're looking at the classes of work represented here by auto manufacturers and farm equipment, we're going to hear—and you'll hear about many other products—that this is an all-encompassing piece of legislation. It doesn't distinguish between an airplane, farm equipment or a cellphone, and those have very different characteristics.

I will say that in other markets, generally speaking, there's a deliberative process that makes a distinction among classes of work so that individuals can petition for exemptions from copyright protections for the purpose of repair and maintenance. It's not as blunt an instrument as this legislation would be. It's more a scalpel to dissect among classes of work in a more deliberative way, with safeguards in place for some of the concerns that have been raised here.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

Obviously with commercial vehicles, there might be a bit of a different consideration.

I'm going to turn the rest of my time over to Mr. Vis.

[Brad Vis, Conservative, Mission—Matsqui—Fraser Canyon, BC]

Thank you, Mr. Wareham.

I want to continue on that point.

Looking at the current legislation, do you believe there's a way to get around that all-encompassing approach you just referenced through an amendment?

[Eric Wareham]

That's a great question.

In these other markets that I referenced, there's a process by which producers of different products or proponents of products seek an exemption from technological protection measures for the purpose of repair and maintenance. They would initiate the petition, and then have the evidentiary record explaining their rationale for why they need it.

[Brad Vis, Conservative, Mission—Matsqui—Fraser Canyon, BC]

Right now, what's before us today in Bill C-244, as you mentioned, is all-encompassing legislation. What I'm hearing from equipment dealers in my riding is that there are some major consequences to what's at play here.

Have you submitted possible amendments in good faith to this committee?

[Eric Wareham]

Yes, we have.

[Brad Vis, Conservative, Mission—Matsqui—Fraser Canyon, BC]

What were your general recommendations about a way to get around some of the challenges that we're hearing about right now?

[Eric Wareham]

Well, I think you have it in your evidentiary record that we submitted to you. We could talk more in detail, I think, about those amendments. Right now, it's a list of products—

[Brad Vis, Conservative, Mission—Matsqui—Fraser Canyon, BC]

Okay.

[Eric Wareham]

—but I think that that may be somewhat—