moved that Bill C-20, an act to amend the Competition Act and to make consequential and related amendments to other acts, be read the second time and referred to a committee.
Mr. Speaker, I am particularly glad to have this opportunity to introduce Bill C-20, which will modernize the Competition Act, and make one of our most important economic framework laws more suitable for the information age we live in.
This updating is particularly needed in light of a major problem addressed by these amendments, that of deceptive telemarketing. Telephone scam artists have become a contempory electronic plague. Law enforcement officials conservatively estimate total losses to Canadian victims and lost sales to legitimate business to be in the order of $4 billion per year.
These predators use the anonymity of the telephone and their skills of deception to sound plausible. They persuade their victims to trust what seem like reputable businesses or charities. Sometimes high pressure and abusive sales tactics are used to convince consumers to give up their money or give out their credit card numbers.
And the term consumer includes businesses as well as individuals. Whenever a business purchases goods or services from another firm, it too becomes a consumer. Small and medium sized businesses are frequent targets of telemarketing scams.
All sorts of ingenious tactics and schemes are used. A potential victim might be told that he or she has won a valuable prize or gift, but must pay a fee, or “taxes”, before delivery. Then, the prize turns out to be worthless, or non-existent.
Sometimes a plausible mailing or advertisement pitches an attractive job opportunity. All the victim has to do is call a 900 or 976 number for further details and be kept on hold or listening to a long recorded message while expensive phone charges mount up.
Scam might be piled upon scam. Often con artists call people who have already been victimized once and pose as professionals who can recover their losses, for a fat fee of course, which is never seen again.
Dishonest telemarketers might prey upon businesses and charge inflated bills for minimal, unnecessary or non-existent supplies and services.
Although deceptive telemarketers target all groups in society, they tend to focus on those who are most vulnerable, such as seniors.
The Competition Bureau has prepared a public awareness video which shows one scam artist boasting of cheating mothers and daughters, fathers and sons. This individual is shown outlining an international telephone routing scheme that he used to provide fictitious testimonials for his bogus investment plan. He also described plans to target a family's entire savings, including their paycheque, their pensions and even their children's educational funds.
These despicable cheats are bringing an entire legitimate industry into disrepute.
In addition, given the nature and capabilities of communications media these days, telemarketing scams cross multiple jurisdictions and make cooperative enforcement particularly difficult.
One credit card scam, for example, was run through a corporation in British Columbia, by telemarketers in Ontario who targeted victims in the U.S.. This is why, at the recent meeting of the United States Attorney General and the Solicitor General of Canada, the topic of telemarketing fraud was an important part of their discussions.
Telemarketing fraud also came up at the April 1997 meeting between the Prime Minister and the President of the United States. As a result our two countries established the Canada-U.S. binational working group on telemarketing fraud which delivered its report to the Prime Minister and to the President last November. That report made several recommendations, including that the “governments of both countries and their respective agencies clearly identify telemarketing fraud as a serious crime”.
At present the Competition Act prohibits the use of materially false or misleading representations to promote the supply or use of a product or the promotion of any business interest. The act also contains provisions relating to promotional contests. However it does not specifically forbid certain practices associated with deceptive telemarketing. The current law is also not specific enough to nail con artists who do not actually make any representations over the telephone. These inadequacies needed to be addressed.
The amendments to the Competition Act will create a specific new criminal offence for deceptive telemarketing. It will apply to the use of interactive telephone communications for the purpose of promoting the supply of a product or a business interest.
Persons engaged in telemarketing will be required to disclose certain types of information during their phone calls. The law will also prohibit a number of deceptive practices, such as requiring consumers to pay money as a condition to receive a prize, or to require advance payments for products sold at grossly inflated prices.
Special provisions will expand the responsibility of corporations, their officers and directors, for ensuring compliance with the law. It will become easier for the courts to issue interim injunctions to halt suspicious activities. Penalties will be stiffened. Indicted offenders will face prison for up to five years, and/or a fine at the discretion of the court.
For summary convictions the maximum penalty will be a fine of $200,000 or a year in jail or both.
In certain cases law enforcement officials will be able to intercept private communications without consent after obtaining judicial authorization. This new provision will be used to gather evidence of deceptive telemarketing and will apply to the serious crimes of conspiracy and bid rigging.
While this provision is not expected to be widely used, in some cases it may be the only way to gather evidence effectively. The director would be required to follow the normal procedures of the criminal code to obtain authorization.
These measures against telemarketing fraud are part of a total package of amendments to the Competition Act. To put these changes in context, we should recall that the Competition Act contains both civil and criminal provisions. Criminal offences under the act include price fixing, bid rigging, predatory pricing, retail price maintenance, misleading advertising and other deceptive marketing practices. For these, the crown must prove beyond a reasonable doubt that an offence has been committed, and the new telemarketing provisions will fall into this criminal category.
But the Competition Act also contains civil provisions, whose benchmark is the civil law's less demanding requirement for proof on a balance of probabilities. In civil matters, the Director of Investigation and Research has the option of applying to the Competition Tribunal of Canada for remedial orders to deal with the anti-competitive conduct in question.
Misleading advertising and deceptive marketing practices are criminal offences because they can have serious economic consequences; consequences that can merit a criminal sanction. They hurt both consumers and competitors who are engaged in honest promotional efforts.
However, studies since the mid-1970s show that criminal sanctions alone are an incomplete response to misleading advertising. Criminal prosecution has a number of drawbacks. It is not an effective way to stop misleading advertising quickly, and the criminal law process is expensive and intensely consumptive of time and resources.
The changes before us will create a combination criminal-civil regime to address misleading advertising and deceptive marketing practices. They will foster quick and efficient compliance through a series of measures that allow a great deal of flexibility. This flexibility will enable the competitive bureau to tailor its approach and use the tools that are most effective for each different situation. Criminal sanctions will remain in place but only for the most serious cases of misleading advertising.
Most existing misleading advertising and deceptive marketing offences will fall under the less cumbersome provisions of the civil law as reviewable matters. Remedial orders could be granted by a judicial member of the competition tribunal, by the Federal Court of Canada or by a provincial superior court.
Remedies available to the court would include cease and desist orders, interim cease and desist orders, administrative monetary penalties, information notices and consent orders.
Taken together, and combined with the Competition Bureau's existing and strong education program, these measures will permit the Competition Bureau to take a pro-active and preventive approach to anti-competitive practices which go against fairness in the Canadian marketplace. They will expedite decision making and ensure that it is done consistently.
Most of these types of cases would be brought before the Competition Tribunal, rather than the criminal courts.
These amendments would also change the title of the Head of the Competition Bureau from Director of Investigation and Research to Commissioner of Competition.
This new title of commissioner will better reflect the responsibilities of the position, putting it on a par with those, for example, of the commissioner of the Royal Canadian Mounted Police.
Its other most important changes concern prenotification of mergers, regular price claims and prohibition orders. For mergers an effective prenotification process is essential to allow the competition bureau to determine in advance whether a transaction would have a negative effect on competition. The proposed amendments will make the prenotification process more efficient and clarify the law concerning certain types of acquisition.
Information requirements would be revised and outlined in the regulations instead of in the act. There would be greater flexibility to waive the requirement for prenotification or for some of the information required under certain circumstances. Longer waiting periods will provide sufficient time to review proposed transactions thoroughly. Conditions for obtaining interim orders will be relaxed so that the commissioner will be able to delay the closing of a merger that raises competition issues until an inquiry can be completed.
The regular price claims provisions of the act will be amended for greater clarity and to better reflect what consumers and retailers understand by them. The legitimacy of regular price claims would be determined by an objective standard, a test based either on sales volume or the pricing of an article over time.
Consumers will benefit from this clarification of the rules and merchants will have more freedom of choice in selecting pricing strategies and will be encouraged to innovate in ways beneficial to consumers and retailers alike.
The other major area of impact of these amendments concerns prohibition orders. Courts will be given more tools to address criminal conduct. They will be able to issue orders to require those accused to take certain steps, or engage in certain conduct to prevent the commission, continuation or repetition of an offence.
The amendments will establish a more cost-effective, enforceable instrument for alternative case resolution, in matters where there is no need for criminal penalties, and where the parties can agree on the terms of an order.
Let me emphasize as strongly as I can that these amendments do not mean more leniency for those who engage in serious anti-competitive behaviour. When a reasonable solution cannot be reached for civil matters, be it consent orders or other means, the commissioner has stated that he will not hesitate to take the matters to the tribunal.
He has further stated that in cases where there are egregious and serious violations of criminal proceedings or provisions, he will not hesitate to refer cases to the attorney general and recommend prosecution with the full rigour of the law.
The amendments before us today will give the bureau an expanded range of tools to ensure full conformity with the law. Its continuum of measures begins with education and goes up the scale to guidelines, advisory opinions, information contacts, voluntary codes, settlements, consent orders, charges and fines all the way to imprisonment.
These amendments are based upon partnership and consensus among stakeholders—often, stakeholders whose positions might vary widely. The last major revisions to the Competition Act were made in 1986, an age ago, given the pace of modern business. The changes we are making are long overdue.
They will modernize the Competition Act in ways that have been recognized as needed by consumers and by their representatives, by the business and legal communities, and by academia and law enforcement agencies.
They will help protect Canadian consumers from telemarketing fraud. They will help the competition bureau foster the fair, efficient and competitive functioning of the Canadian marketplace for the benefit of all of society.
In light of these changes I hope they will find swift passage in parliament.
