Debates of May 7th, 1999

Competition Act

[Nelson Riis, NDP, Kamloops, BC]

Mr. Speaker, I want to say a few words to this bill that my hon. friend has been trying to have passed for some time.

We will all remember that this process started when a lot of Canadians were shocked by the fact that cable television charges had been increased and Canadians had not approved the increase. They were shocked to find that the cable stations had every right to impose a new set of costs and a new range of services. If we do not like what they do, then we have to notify them. This seems to be kind of an odd way to go about business. It is certainly in favour of the cable companies. I remember, and I am sure other members remember the incredible response that we received as elected members: the faxes, the e-mails, the letters and the visits from delegations and all sorts of very disgruntled people in terms of wondering how it was that we were allowing this to occur.

The question is: What do we do about it? I am therefore pleased to speak to today's bill because the hon. member has brought forward a proposal that would make this kind of back door increase impossible.

This is the second time this has moved through the House. The last time it was scuttled in committee. I hope this time it will have a better chance to pass in the House. Today is the last day of debate. In a matter of minutes we will have the final round of discussion and then we will move to a vote on the bill. We in the New Democratic Party who are here will be supporting it.

I realize this is a private member's initiative and not a party initiative. It is being brought forward once again by the hon. member who was quite outraged, as we all were, when he learned about the initiative taken by the cable companies. I am not certain if this applies to other organizations or not, but even if it does, the fact that the cable companies have misused this initiative would probably justify our speaking and voting against it because it certainly is not in the best interests of their subscribers.

This tells us that the cable companies assume that Canadians are not very smart and that they really cannot think for themselves. It is either that or they are able to be manipulated quite easily. I am not sure what the assumption would be. However, I do not think we can accept that. We want to say that Canadians have the right to decide for themselves, as individuals, as families, and so on, as to what combination of programming they would like to have.

[Mauril Bélanger, Liberal, Parliamentary Secretary to Minister of Canadian Heritage]

Mr. Speaker, I will be brief.

The bill before this House is not new. We have seen it in various forms in the past. The government has a number of concerns it will raise in committee, if the House decides to refer this bill to committee. We hope to propose some amendments to the bill at committee stage, and the members will be able to consider them at their leisure.

That said, today the bill is at second reading. So, for the moment, we intend to support the bill. For our colleagues opposite who have expressed certain concerns, which we share, I reiterate that these concerns should be covered by amendments in committee before the bill returns to the House at report stage or third reading.

One of these concerns is the effect the bill may have, in its present form, on the Broadcasting Act. This concern is shared, and we intend to remedy it in committee.

I encourage my colleagues opposite, who expressed the same concerns, to raise them in committee, as the government intends.

[Antoine Dubé, Bloc, Lévis, QC]

Mr. Speaker, as a member of the Standing Committee on Industry, I am pleased to speak in this debate. Bill C-393 is intended to amend the Competition Act, 1998, which concerns industry.

On first examination, the objective of this bill appears to be a praiseworthy one. But we in the Bloc Quebecois see a number of problems in it, particularly the issue of jurisdiction. The bill is intended as an interference in the relationship between commercial operations and consumers, which is clearly an area of provincial jurisdiction.

This bill proposed an amendment to the Competition Act, and is aimed at prohibiting negative option marketing, which means billing consumers for products or services without their express consent.

In fact, it proposes to prohibit such marketing practices by banks, trust companies, credit unions as well as telecommunications and broadcasting companies. When reference is made to credit unions, of course this refers mainly to the caisses populaires, of which there are many in Quebec. Almost all Quebeckers belong to a caisse populaire.

This is the third attempt by the member for Sarnia—Lambton to ban negative option billing. In 1996, the member for Sarnia—Lambton introduced Bill C-216, the purpose of which was to amend the Broadcasting Act.

I would remind members that the Bloc Quebecois was opposed to the bill for three reasons. First, it represented interference in commercial relations between businesses and consumers, a field of provincial jurisdiction. Second, the bill would have required the explicit consent of all subscribers for a new channel to be broadcast. Third, the bill had a particularly unfortunate effect, not only in Quebec, but in our opinion also in other regions with a sizeable francophone population.

The other place was concerned about this, and amended the bill in order to protect francophones. It died on the Order Paper, however, when the election was called.

On November 25, 1997, the hon. member for Sarnia«Lambton introduced Bill C-288. Its goal was similar to that of Bill C-216, and its contents almost identical. But the House did not get to vote on this bill.

He is now coming back with this legislation. We can attest to the tenacity and perseverance of the hon. member for Sarnia—Lambton, who insists on presenting a bill, which he feels targets broadcasting companies. But this time, the hon. member does not seek to amend the Broadcasting Act but, rather, the Competition Act. However, the fundamental purpose of the Competition Act is not to regulate relations between consumers and businesses, but to monitor deceptive practices used by competing companies.

As regards deceptive practices, the Bureau of Competition must of course receive complaints. When it is established that a company or a business is resorting to deceptive practices, it can be subject to stiff penalties.

But, in this case, this clearly does not come under the Competition Act. The objective is different, that is to deal with relations between consumers and companies. This, in our opinion, comes under the CRTC, which is accountable to the Minister of Industry, and the issue should be dealt with at that level.

There is a major flaw in that the proposed change is not aimed at the proper act, but at another one, whose objective does not have to do with this type of relations.

In spite of the laudable goal pursued by the hon. member, the Bloc Quebecois will nevertheless oppose this bill, primarily because trade and consumer protection come under the jurisdiction of the provinces.

We believe that this issue should be dealt with by the CRTC, which already has the powers to prohibit negative option marketing if it deems that it is appropriate and in the public interest to do so.

This bill would reduce the powers of the CRTC and give the Bureau of Competition powers that could adversely affect the Canadian broadcasting policy, limit consumers' options, increase their bills and kill the development of French language broadcasting in Quebec and Canada, in regions where francophones are present.

I will stop here and conclude by saying that we will oppose this bill.

[Gerald Keddy, Progressive Conservative, South Shore, NS]

Mr. Speaker, I am pleased to speak today to second reading of Bill C-393, an act to amend the Competition Act which deals specifically with negative option billing. My caucus colleague, the member for Markham, has already spoken as PC Party industry critic on the bill at second reading.

As most members have noted, Bill C-393 had a previous life in the 35th parliament. In that parliament the member for Sarnia—Lambton introduced Bill C-216, which would have amended the Broadcasting Act. The legislation was sparked by public outrage at the cable companies imposing negative option billing through the addition of specialty channels at the beginning of 1995. As such, Bill C-216 dealt solely with cable television and passed the House despite opposition from many powerful interests.

Unfortunately for the member's efforts Bill C-216 was still under review by the Senate when the Prime Minister called the 1997 federal election. The bill was effectively killed by the member's own government, which was not under any pressure to go to the polls only 3.5 years into its first mandate. There may be some, perhaps even the member himself, who would blame the Senate for the death of Bill C-216. This is a misguided view because the Senate was playing its constitutionally mandated role to review legislation from the House.

There may have been many occasions in the past several years where the Senate has undeniably improved legislation. Correcting errors not addressed on the House side in the Liberal government's so-called Pearson airport legislation and more recent amendments to the Judges Act are but two examples. Until the Senate is either reformed or abolished we should stop attacking its members for trying to perform their mandate.

Bill C-216 is history. We are now debating Bill C-393. As previously mentioned, the bill would amend the Competition Act to ban negative option billing in a whole host of sectors, including certain financial institutions, broadcasting undertakings, telecommunications firms and insurance companies. In particular, Bill C-393 protects the basic consumer right to express consent before purchasing a new product or service. In plain language this means consumers cannot be billed for a product or service without their clear consent.

The member for Sarnia—Lambton and organizations such as the Consumers' Association of Canada make a compelling case against negative option marketing practices. Indeed I think many of us will agree that this type of marketing reverses the traditional buyer-seller relationship. With negative option billing customers are offered new products or services and are required to opt out or expressly decline these new offerings to avoid being charged for them.

From a legal standpoint negative option billing relies upon the concept of implied consent. By not responding to a solicitation the consumer is deemed to have given his or her consent. Indeed it is fair to say that negative option schemes rely on market inertia to sell new products or services to an existing client base. It is therefore a justifiable claim that negative option billing further concentrates market share with the dominant industry players instead of fostering competition in an open marketplace.

Bill C-393 applies to federally regulated businesses such as banks and cable and telephone companies. Under the law selected financial, insurance, cable and broadcasting companies would not be allowed to use a lack of consumer response to negative option billing inquiries as consent to buy. The bill wisely allows provincial governments to prohibit negative option marketing within their jurisdictions. Provinces such as Quebec have already taken steps in this direction.

While provincial governments have progressed somewhat in addressing these dubious marketing efforts, there is a noticeable lack of such consumer protection at the federal level. Cable providers are still using negative option billing in regional markets despite previous assurances to the contrary.

In August 1996 Industry Canada's office of consumer affairs warned that negative option marketing had the potential to be an important tool in the financial services sector. Examples cited in the report included the sending of unsolicited credit cards and changes in account structure made without the consent of consumers.

In 1997 the Toronto-Dominion Bank employed a negative option technique to deprive bank customers of their privacy. The National Bank reportedly used a similar scheme to sell travellers health insurance to existing customers by debiting their accounts $9.95 per month.

I am pleased that Bill C-393 recognizes that there are situations in which a consumer benefits from a negative option billing arrangement. However, for this to be the case, consumers must be able to make informed decisions and give express consent. The bill proposes certain steps to be taken for a negative option scheme to be legal and fines for those who contravene the act.

The bill has received the support of the Consumers' Association of Canada, the Public Interest Advocacy Centre and the Insurance Brokers Association of Canada. Although Bill C-393 is strong on consumer protection, the PC caucus would like to know the views of such organizations as the Canadian Federation of Independent Business, the Insurance Bureau of Canada and the Canadian Petroleum Products Institute among others.

We must always be prudent as parliamentarians not to impose an excessive amount of laws and regulations on the private sector. Our caucus has already brought forward the concerns of the private sector regarding punitive measures in the federal cost recovery program, which was expanded greatly by the Liberal government in 1994.

Although the move to more user fees for the private sector was initially welcomed by businesses of all shapes and sizes, the government's chosen structure has proven to be ineffective, incompatible and costly. As a result this program cost the Canadian economy over $1.3 billion from our GDP and 23,000 jobs, according to the 1990 report by the Blair Consulting Group. Let us always be careful in bringing in government intervention no matter how well intentioned it may seem to be at the time.

Our caucus would also like to verify that Bill C-393 would not hinder French language broadcasting in Canada. This was raised in 1997 by the chairwoman of the CRTC. I am sure all members of the House, especially bilingualism's newest friends in the Reform Party, would want to ensure that Bill C-393 does not pose a threat to French language broadcasting.

I reiterate on behalf of the Progressive Conservative Party of Canada the qualified support of Bill C-393 at second reading. The overall intent is extremely positive. The legislation would significantly increase the level of consumer protection in the country.

I urge all members of the House to put aside partisan interests and support moving the bill along to the industry committee where it can be given closer scrutiny on issues of concern.

[David Pratt, Liberal, Nepean—Carleton, ON]

Mr. Speaker, it is my pleasure to speak today to Bill C-393, an act to amend the Competition Act which relates specifically to negative option marketing. I commend the hon. member for Sarnia—Lambton for introducing the legislation once again. It seeks to protect consumers and offer consumers greater choice in the marketplace.

Bill C-393 deals with the business practice known as negative option sales and marketing. The practice is also known as unsolicited marketing and marketing by inertia. Related concepts include the following: bundling, tied selling, automatic renewal contracts and misleading advertising and/or deceptive marketing.

Regardless of the term or concept, this practice is a perversion of the normally accepted rules of contract or sales. The law of contracts insists that a form of offer and acceptance is required to make an agreement binding. It could be argued that negative option marketing, in the absence of independent consent, undermines the fundamental principles necessary for a valid commercial contract.

Negative option marketing involves a consumer receiving a product and a payment request because the consumer failed to say no to the offer. Normally in the context of the rules of contract or sales, an offer is made, acceptance is given, the service is delivered and payment is required.

The framework employed under negative option sales is inverted. An offer is sometimes made, sometimes hidden and sometimes there is no choice at all. The consumer accepts the offer not because the individual necessarily wants the product but because they do not specifically say “No, I do not want this service”.

Why is this practice employed? It is obvious. The assumption that the consumer desires the product is made in the absence of refusal in order to increase revenue. Practitioners of this type of marketing or sales do not seek to meet the demands of the marketplace but create what can be termed as a false demand. This sleight of hand technique violates consumers' right to choice. Moreover approving sales where there is no market is synonymous with forcing sales where there is no demand. It is unreasonable to allow the creation of both market and demand where neither exist.

Bill C-393 would amend the Competition Act to force federally regulated companies to obtain the permission of customers for any new service. Why is it unreasonable to suggest that a consumer has the right to say “I know what is offered. I know the cost. I want what is offered”. It is not unreasonable to expect federally regulated companies to obtain a definite and positive response before supplying and charging for services.

This bill protects a basic consumer right, the right to express consent before purchasing a new product. Negative option marketing or billing relies on implied consent. In other words, by not responding to solicitation the consumer is deemed to have given his or her consent. Rather than foster competition, negative option marketing concentrates market share with the dominant players in a particular sector. Any anti-competitive practice limits choice for consumers and acts contrary to the foundation of the Canadian marketplace.

In today's marketplace consumers are inundated with communication through various mediums. It is unreasonable to sanction the onerous task of requiring consumers to examine the endless amount of communications from customer dealings in search of negative option marketing. Consumer arrangements resulting in new products or services being offered that obligate additional consumer expenditure should require expressed consent.

Several points should be made clear. Bill C-393 applies to federally regulated businesses such as banks, cable and telephone companies. The provinces are free to prohibit negative option marketing within their jurisdictions. Several have already taken steps in this direction. The time has arrived to enact measures at the federal level in order to protect consumers. Bill C-393 provides the appropriate measures.

Bill C-393 also proposes that steps be taken in order for specific negative option programs to be legal. Why? Because the bill recognizes that situations may exist where a consumer would benefit from a negative option billing arrangement. This is supported by a document produced by Industry Canada entitled “Negative Option Marketing: A Discussion Paper” wherein it is stated “Negative option marketing takes many forms and in some circumstances may benefit consumers as well as industry”.

This bill does not seek to impede successful industry in Canada. It does however ensure that consumers are able to make informed decisions and express consent before entering into an agreement with additional charges. Moreover, Bill C-393 recognizes or provides for exemptions in order that specific enterprises remain competitive in their sector of activity while maintaining consumer protection.

The bill in section 128(1.1) states:

The Governor in Council may, by regulation, exempt from the definition of “service” in section 53 any service that, in the opinion of the Governor in Council, should be exempted in order to allow enterprises to which this section applies to remain competitive in their sector of activity, provided that the exemption does not deprive consumers of their right to competitive prices and product choices.

This provision would allow any minister or department to express concern for services under their purview that might be effected. For example, Heritage Canada could propose justification for exemption based on concerns relating to heritage.

Bill C-393 provides for warranted protection of certain services against unfair competition which in turn protects consumers and, as in the example given, possible cultural or heritage issues as well. This provision however does not exclude consumer protection. In fact, it specifies clearly that the exemption must not deprive consumers of their right to competitive prices and product choices.

Recently the Consumers Association of Canada issued a statement with respect to Bill C-393: “It is timely that private member's Bill C-393 is being debated in parliament this week prior to world consumers rights day. World consumers rights day celebrates eight fundamental consumer rights of which the right of choice is paramount. A piece of legislation that bans abusive negative option marketing is a positive step in the promotion of consumers' right to choice”.

In this era of deregulation and government downsizing, it is important that we establish a regulatory framework which is consumer oriented. It is my contention that Bill C-393 addresses the inconsistency between negative option marketing and accepted contract norms. In doing so, this bill protects consumers by offering them a choice of which products they desire while increasing the competitiveness of the marketplace.

[Derrek Konrad, Reform, Prince Albert, SK]

Mr. Speaker, I am pleased to speak to Bill C-393, an act to amend the Competition Act with respect to the prohibition of negative option billing.

I would like to recognize the work of my colleague from Sarnia—Lambton on this issue. I know that he has worked tirelessly in the interests of consumers. I respect any member of the House who is prepared to champion an issue despite pressure coming from within his own caucus to be a quiet and dutiful backbencher.

This bill is designed to prohibit the practice of implied consent billing by federally regulated businesses such as banks, cable and telephone companies. It would restore the traditional buyer-seller relationship that relies on the consumer's explicit consent before they can be billed for a product or service that will prohibit default billing of consumers who do not expressly decline a product or service. In other words, it would put an end to what has been called negative option billing.

Before making a decision about supporting this legislation, I considered the views of many Canadians about this billing practice. It is clear that this bill has broad support among consumers who are frustrated by negative option billing.

In particular, there is frustration with cable providers that bill for new programs automatically unless the consumer expressly rejects the service. Consumer groups have cited senior citizens as an example of a group who are often unaware that they have the choice of opting out of the new service and are consequently billed for a program they do not want and cannot afford. This is a source of frustration not simply because of the financial costs, but because it is deemed to be a violation of an age old relationship between buyers and sellers.

It is clear that consumers are looking for protection from negative option billing. The question is simply how do we provide that protection? Should it come in the form of Bill C-393 or can this be achieved through market based reforms? I think a balance must be struck.

Bill C-393 had its origins as Bill C-288 which would have amended the Broadcasting Act to restrict negative option billing by cable companies. These companies can currently act with relative impunity as they are federally regulated regional monopolies which are free from the normal constraints of the competitive market. This new version of the bill is broader and instead amends competition laws that apply to all federally regulated industries.

The decision by the hon. member for Sarnia—Lambton to use the Competition Act as a means by which to prohibit negative option billing instead of making changes to the legislation which deals directly with the perpetrators of this practice is troubling. Competition laws can profoundly restrict economic freedom and market efficiency and a general move toward strengthening these laws should be approached with caution.

This bill should not be seen as a mechanism by which to restrict attempts by companies wishing to expand their market share. We must not allow our competition laws to grow steadily more intrusive. We must act vigilantly to create competition through deregulation of our industries in the interest of every Canadian consumer.

The original purpose of this draft legislation in the form of Bill C-288 was to amend the Broadcasting Act. This dealt much more directly with the source of the problem and would be the preferable course by which to protect consumers against negative option billing.

Negative option billing is a practice common to federally regulated industries because they enjoy market protection such that they restrict or limit the consumer's ability to seek out alternate providers of a product or a service. Therefore the deregulation of federally legislated industries should be the first step to eliminating negative option billing and other practices that do not properly serve consumers.

I would have been much more supportive of an initiative that worked to limit government and increase consumer choice rather than an initiative which extends the scope of government further into the private sector.

The Reform Party supports limited government and free enterprise but recognizes the important role of government in creating an economic environment with fair and transparent rules which protect both consumers and businesses. However we differ from the governing party in that we believe that markets serve consumers well as long as competition is permitted.

Bill C-393 is a band-aid solution made necessary by the Liberals' resolve to maintain protectionist policies and regional monopolies in federally regulated industries such as cable, telecommunications and banking despite the fact that these policies hurt consumers. But sometimes a band-aid is needed until a disinfectant can be found.

Before I conclude I want to provide an example that illustrates the power of competition to end negative option billing in case my colleagues across the way have their doubts. I am sure we are all familiar with Columbia House Records. This is a company that makes its money through negative option billing. After signing up with the bulk music distributor, consumers are sent cassettes and CDs on a monthly basis. If they do not send the selections back to the company, they are billed for the merchandise.

This is not a pure example of negative option billing because the consumer agreed to these billing terms by signing up with the company. However the point that is relevant is that consumers were so hostile to this form of billing that Columbia House sales began to decline. Soon a competitor entered the market and advertised that it would not engage in negative option billing at all. When faced with this competition, Columbia House very quickly reversed its negative option billing practices.

In other words, the drive for profits in a competitive and deregulated industry will give more power to consumers to seek favourable terms. It is the invisible hand of capitalism at work.

To conclude, it is clear that the Liberal mismanagement of federally regulated industries has created an economic environment in which consumers suffer the ill effects of limited competition. While this bill regrettably increases the power and scope of the Competition Act and restricts private sector decision making, it should receive the qualified support of the Reform caucus until such time as these industries can be deregulated. After this deregulation, competition itself will ferret out those businesses that conduct their affairs in a manner inconsistent with consumer interests.

[The Deputy Speaker]

I am prepared to call the hon. member for Sarnia—Lambton and I advise the House that if he speaks now, he will close the debate.

[Roger Gallaway, Liberal, Sarnia—Lambton, ON]

Mr. Speaker, I want to take this brief period to reply.

This marks the end of the third hour of debate at second reading of Bill C-393. We have had a number of speakers on the topic. It is clear that this is a business practice that is used not just by cable companies. I want to emphasize that. It is also used by telephone companies and it is used by banks.

Members have recognized that this is a perverse way of doing business. This is a twisting of the normal rules. The time has arrived that we recognize it is a widespread problem in federally regulated industries, it is a widespread problem in that it takes advantage of consumers in the country, and it is a widespread problem in that it reverses the normal rules of business practice.

For those reasons the bill should pass second reading and go to a committee so the committee can pass judgment upon the propriety of the bill. Then the bill should return to the House so that we may legislate in this place for the first time a degree of protection, a degree of fairness for consumers in the country, something that we have failed to do in this place, particularly in the realm of those industries that are federally regulated.

[The Deputy Speaker]

The question is on the motion. Is it the pleasure of the House to adopt the motion?

[Some hon. members]

Yes.

[Some hon. members]

No.

[The Deputy Speaker]

All those in favour of the motion will please say yea.

[Some hon. members]

Yea.

[The Deputy Speaker]

All those opposed will please say nay.

[Some hon. members]

Nay.

[The Deputy Speaker]

In my opinion the yeas have it.

And more than five members having risen:

[The Deputy Speaker]

Pursuant to Standing Order 45, the recorded division stands deferred until Monday, May 10, 1999, at the ordinary hour of daily adjournment.

It being after 1.45 p.m., the House stands adjourned until Monday next at 11 a.m., pursuant to Standing Order 24(1).

(The House adjourned at 1.46 p.m.)