Mr. Speaker, it is my pleasure today to speak on a bill that is important to the success of business competition in Canada. It is a bill that introduces amendments that will modernize regulations for the Canadian business environment. The amendments in Bill C-20 strive to guide business in a fair and more equitable fashion.
The Canadian Competition Act was last substantially amended in 1986. These amendments gave Canada a powerful law that served the business community well. However with the huge changes in the technology of doing business and the rapidly evolving marketplace, the law is long overdue for revision and review.
We understand that in 1995 the director of investigation and research released a discussion paper which had been sent out to 1,000 interested parties. About 80 responses were received regarding the proposed changes to the Competition Act. We also understand that the director set up a consultative panel whose mandate was to discuss the comments made within the discussion paper and to hold indepth reviews with concerned parties.
Over a year later in April 1996 the report of the panel was released and provided the basis for Bill C-67 which died on the Order Paper in the last Parliament. Almost another year later we finally get to debate Bill C-20 which is essentially the same as Bill C-67.
However through my own consultation with concerned parties, there are segments of this new bill that are radically different than those existing in C-67. The addition of amendments that have not passed through the same rigorous debate with the consultative panel has me concerned. Is this government trying to slip these through discreetly?
There were four main amendments that existed in Bill C-67 which have not changed. These will require adjustment.
I would like to focus on these aspects of the bill: misleading advertising, ordinary price claims, pre-merger notifications and deceptive telemarketing practices.
Misleading advertising practices can and do have serious economic consequences especially when directed toward large groups or done over extended periods of time. Misleading advertising is detrimental to both competitors who follow the rules and engage in honest promotion and to consumers themselves.
Covered under the act are such promotional tricks as double ticketing, where the higher of the two ticketed prices is charged, pyramid selling, and bait and switch selling when a product is advertised at a bargain price but a reasonable supply is not available.
Proposed amendments to the Competition Act relating to misleading advertising are intended to change the focus on the misleading advertising and deceptive marketing practices provisions from punishment to quick and effective compliance.
In discussions with key members of the Canadian marketplace, I believe this amendment is acceptable. We are supportive of this amendment in philosophy. The creation of a dual criminal-civil system is expected to result in the majority of cases involving misleading advertising being dealt with through civil means, including such remedies as cease and desist orders, corrective notices, consent orders and where needed, administrative monetary penalties.
The competition bureau will then have to create a set of guidelines which clearly explains to retailers and businesses what types of misleading advertising will result in civil penalties and which will result in criminal enforcement. We strongly urge the competition bureau to have full public consultations regarding these guidelines as this issue is very important.
Ordinary price claims is a powerful marketing tool used by retailers and businesses. It is the representation of significant savings by the reduction of a regular price.
Consumers often wait for items to go on sale before purchasing. Many companies will say that their product is on sale when in fact a number of these businesses usually sell that item for that price.
Section 52.1(d) currently prohibits materially misleading representation to consumers regarding the price at which items and similar products are or will ordinarily be sold. There are certain criteria which must be met for a business to claim that an item is at a discounted price as opposed to its regular price.
The current provisions in the act do not clarify sufficiently the circumstances which determine whether a retailer is making an ordinary price claim properly. The competition bureau listened to concerned members of the retail industry who asserted that a significant number of businesses could not comply with a test based on sales volume and that a time based test would be better suited to their situation.
Through discussions with the consultative panel, the competition bureau and the members of the retail industry, it was agreed that the amendments represented in Bill C-20 for regular price claims are fairer and more equitable. The test for ordinary selling price will now consist of two parts: a substantial volume of the product that has been sold at or above the claimed regular price within a reasonable period of time before or after the making of the representation, or the product has been offered at or above the claimed regular price in good faith for a substantial period of time or immediately after the making of the representation.
Although some of the terms in the testing prescriptions are ambiguous, members of the retail and commerce community which I have spoken with feel that the setting of rigid tests would not be in the interests of Canadian businesses or consumers. Stringent tests would not allow retailers to act and respond according to competitive initiatives and other market dynamics.
We are comfortable that the guidelines as they exist in the amendments will effectively eliminate some of the confusion around the regular price claims and that setting guidelines in this area will also help businesses understand the parameters for effective pricing policies, yet there is flexibility for the exercising of judgment.
The one area that should be excluded from the regular price claims arena would be the critical issue of clearance sales. We urge the government to look into this aspect of pricing and ensure that the scope of the ordinary price claims provisions explicitly excludes clearance pricing.
Pre-merger notifications is another area I would like to address. Companies are obligated to notify the Competition Bureau of a proposed merger when two thresholds set out in the Competition Act are met. However, the consultative panel and many of the business community recognize that a vast majority of transactions that are subject to pre-merger notification do not raise serious competitive issues. This concern can be mended by raising the thresholds in sections 109 and 110 of the Competition Act and by creating additional exemptions.
Raising the pre-merger notification thresholds and creating additional exemptions is now more essential than ever. As of November 1997 there was a substantial fee of $25,000 plus $1,750 in taxes imposed with pre-merger notification filings. Because so many transactions are caught due to the low thresholds, we believe that raising these thresholds would not only alleviate the number of cases the bureau would have to review, but it would also allow the thorough research of the cases that are truly detrimental to competitiveness in Canada.
The increases that have been suggested to me from key members of the business community include raising the size of parties and their affiliates' threshold in section 109 from $400 million to $500 million. I believe when this came out it was $400 million, but through inflation that is equivalent to $530 million, so $500 million is reasonable. Raise the size of transaction thresholds in section 110 from $35 million to $50 million, and in the case of amalgamations from $70 million to $100 million.
The recommended increases in the above noted thresholds are particularly warranted in view of the fact that these thresholds have caught substantially more transactions than initially contemplated.
There is little risk of substantially lessening or preventing competition by increasing the size of parties and their affiliates' thresholds because, one, the director has the ability to challenge a merger up to three years after its completion. Two, this fact clearly leaves merging parties, where there is any material overlap between their operations, to submit a significant amount of information to the bureau in support for a request for some type of comfort that their transactions will not be challenged subsequent to closing by the director. Finally, in any event, only a handful of mergers each year raises serious competition issues.
In addition to raising the thresholds, we are looking also at the possibility of reducing the burden of information that the bureau requests for pre-merger notification. The amount of time and effort it takes for a member of the private sector to prepare the pre-merger notification is not justified.
We believe that the bureau receives information not pertinent to mergers and that the filing of this information is time consuming for the companies giving notice. We suggest that this burden could be reduced by streamlining the amount of information required to be filed. This streamlining is likely to be accomplished through the joint operation of the proposed amendments of the act, which would transfer the information required currently in sections 121 and 122 of the act to the notifiable transactions regulation and the proposed revisions to the regulations. However, those revisions will substantially increase the amount of information required for long form filing imposing a substantial burden on merging parties.
Clause 31 of Bill C-20 still allows parties to have a choice between filing either a short or long term form. The commissioner, formerly the Director of Investigations and Research, would have the discretion to require a long form filing if the short form filing is considered to be insufficient. The information that is required for these filings would be set out in the regulations rather than the act, as is currently the case.
Due to the information requirements being moved from legislation, which would receive full public review before amendment and being transferred to regulations, there are many parties concerned that the final wording will be decided by the commissioner alone. We have some serious concerns that we will present in the committee stage as amendments to Bill C-20 as we see fit and what has been suggested to us by those outside the Department of Industry.
Everybody is concerned about deceptive telemarketing practices. We recognize that telemarketing is now a $500 billion business in Canada and in the U.S.
In recent years, total telemarketing sales in Canada and the U.S. have exceeded $500 billion per year. While most telemarketing activities are legitimate, unfortunately some are not.
The report of the Canada-U.S. working group on telemarketing fraud highlights that telemarketing has become one of the most pervasive and problematic forms of white collar crime in Canada and the U.S. It is estimated that this form of crime accounts for as much as 10% of the total volume of telemarketing. In Canada that would mean $4 billion annually.
There is no doubt that telemarketing has seen an increase in deceptive marketing practices. However, it must also be recognized that telemarketing has its place in today's competitive marketplace.
There are some specific concerns that members of the marketplace have expressed regarding the wording proposed to define what telemarketing is. Subsection 52.1(1) defines telemarketing as a practice of using interactive telephone communications for the purpose of promoting a product or any business interest. This definition requires either a greater clarification or the addition of exceptions to ensure that the provision is not amenable to an overly broad application to entities whose services are not meant to be targeted by the legislation.
We suggest that it be made clear in the legislation that the provisions be confined to live voice communications. We would like to see the words “live voice” placed before the words “interactive telephone communications” in the wording of section 52.1.
Other changes to the current act will require the disclosure of certain matters either at the outset of the telephone communications or in a fair, reasonable and timely manner.
The item which many want to see expressed outright in the telephone interaction include the identity of the person on behalf of whom the communication is made, the nature of the product or businesses being promoted, the purpose of the communication, and in the case of price of the product being promoted and any material restrictions or conditions applicable to its delivery.
We request that there be a particular exception made with regard to instances where the price of the product cannot be determined at the time of the telephone call. For example, in the case of mutual funds and other securities whose prices may not be known until the end of the day, we ask that the required disclosure be made within a reasonable period of time subsequent to the determination of the item's price.
We recognize that telemarketing fraud is a serious crime and needs to be identified as such. We will not stand by and allow there to be $4 billion in losses a year in Canada because of this type of behaviour.
However, the competition bureau tells us that it intends to seek permission to use wiretapping in cases of egregious behaviour. There is some uncertainty as to how this wiretapping will be used. This is an extremely sensitive area for the business community and yet it has been given no discussion.
The proposal in Bill C-20 which deals specifically with permitting judicially authorized interception or wiretapping concerns many individuals, corporations and members of the retail and commerce groups across the country. This segment of Bill C-20 was never brought before the consultative panel, was never reviewed in discussion papers or made its way into any panel report. The government has decided to slip in this amendment.
Why does it exist in Bill C-20? The proposal in Bill C-20 will amend section 183 of the Criminal Code to allow wiretapping without consent of private communications in connection with investigations under the conspiracy, bid rigging and deceptive telemarketing offences of the act.
The conspiracy provisions in section 45 of the Competition Act set out two points that must be proven to convict of conspiracy. First, there must be an agreement and, second, the agreement must be anti-competitive. Wiretapping only proves the first point of the two necessary to convict under the Competition Act. However, in most cases this point is not the one that makes or breaks a case.
What must be proven for a conviction in most cases is the second point and this is not provable with a wiretap.
Most cases are lost solely on the point of trying to prove that the agreement was anti-competitive. Given the broad definition of telemarketing that currently exists, we are concerned that wiretapping powers could be used in a wide range of situations that most Canadians would not consider to be justifiable.
We need to clarify what situations will warrant wiretapping. There must be stringent administrative filters and strict legal procedures that will limit usage to what is only absolutely and undeniably necessary.
We do not feel a need to push this provision through at this time and would like to have a further round of consultation on this matter.
The amendments to the Competition Act are long overdue. I look forward to reviewing Bill C-20 in committee and working with other members of this House to come up with a bill that is practical, understandable, equitable and fair to all, a bill that does not give unnecessary and overly evasive powers to the government where private ventures are concerned.
Competitiveness is essential to a successful Canadian marketplace and the Competition Act has served all Canadians well for decades. Now we must work to keep it moderate and functional.