Mr. Speaker, I have had many occasions in my years in Parliament to speak in this House, but never at such an auspicious time. Oh my gosh, when I hear that Nelson Mandela just passed away, I want to share a personal experience, if I might.
My family used in live in South Africa, and much of it still does. They are white South Africans, and they lived there through Nelson Mandela's rise to power. He could have been many things, but he was a great humanitarian. He was forgiving when many might not have been. He was compassionate and understanding when others might not have been. As I make my other comments, they almost seem subdued compared to the very real experience of Nelson Mandela's impact on the world. Others will say things more articulately than I, but I will say that if the world could be measured by the quality of what Nelson Mandela brought to humanity, this would be a much better world.
I will speak now to Bill C-475 and its impact on organizations and the public. Of course, I am referring to Canada's private sector privacy law, the Personal Information Protection and Electronic Documents Act, otherwise known as PIPEDA, which the bill looks to amend.
PIPEDA was developed with an important objective in mind, and that is balance. The act is designed to balance an individual's right to privacy with an organization's need to collect, use, or disclose personal information for legitimate business purposes.
I was president of a large company in London, Ontario, when PIPEDA was first introduced. For those who do not know, that is the tenth-largest city in Canada. I would say we invested considerable funds, as did corporations across Canada, to ensure compliance and to do the right thing, because a corporation must be measured in terms of being honourable and doing the right thing. The costs associated with PIPEDA then and now are very real and ongoing, but in a corporation's business it is important to comply, for the sake of the public, which is what we are talking about in terms of this legislation today.
When PIPEDA was first introduced, the government stated that in order for Canada to become a leader in the knowledge-based economy and in electronic commerce, consumers and businesses had to be comfortable with new technologies and the impact that these technologies would have on their lives. I believe that policy objective still stands. However, in order to maintain that important balance in PIPEDA, we must consider the burden imposed by the proposed requirements of this act and always weigh that burden against the corresponding benefit to society.
We all agree that requiring organizations to report certain data breaches is necessary. Data breaches can pose a serious threat to the protection of our personal information and to the security of organizations and individuals. Reporting certain data breaches publicly would allow individuals to protect themselves, and it would also encourage better data security practices by organizations. That is laudable, yet it must said that there are ways to achieve these goals without creating an undue burden on organizations and the Privacy Commissioner.
Data breach notification has the potential to be cost-prohibitive while not providing the kind of information the public requires. For example, in the United States, where this process is tracked closely, the average cost to an organization of a single notification is estimated at $188 per record, and when this figure is multiplied by the number of those potentially affected, any data breach notification could result in substantial cost to companies that must deal with that breach. Based on this data, the total average cost of a data breach to an organization is approximately $5.4 million.
As most states have mandatory reporting of data breaches, there are hundreds of breaches reported every year. According to the Privacy Rights Clearinghouse, an organization that tracks this, there were 592 breaches reported by the private sector in the United States last year. These incidents involved the information of more than 11 million individuals. That number is extraordinary. As organizations south of the border are required to notify so often, notification fatigue among the public can be a serious result.
When notification processes become simply a matter of sending out a form letter to individuals, there is always a deep concern that these letters become increasingly perceived by recipients as junk mail. We have learned from the experience of other jurisdictions. That is why this government believes the best approach to notification is one based on risk, where notification should be required only for those breaches that represent the potential for significant harm to individuals. In this way, consumers would only receive notifications when necessary and would accord them the attention they deserve, instead of seeing these messages as unwanted spam. What we are talking about here is modernization, not overhaul, as proposed Bill C-475 suggests.
The Privacy Commissioner has been a strong advocate for data breach notification. I would like to point out, however, that even she has not asked to be informed of all breaches, nor has she asked for the responsibility to determine the need for notification of when there is a breach. In fact, in her paper on the reform of PIPEDA published earlier this year, the commissioner proposed that organizations be required to report breaches “where warranted”. This suggests that the commissioner understands the burden of overnotification and supports an approach that would minimize that burden. That is modernization, not overhaul.
Unfortunately, this is not the approach taken in Bill C-475. The bill would require organizations to report to the Privacy Commissioner every data breach posing a possible risk of harm. The average organization is risk-averse, and will err on the side of caution. I know that from my own business experience. As a result, it is likely that all breaches would be reported under these circumstances, undoubtedly resulting in notification fatigue among consumers. Under Bill C-475, the commissioner would have to assess each incident reported to her and determine whether it poses an appreciable risk of harm, warranting notification to individuals. This would impose a financial and administrative burden on the commissioner's office and would likely limit its ability to deal with other complaints under the act.
In the province of Alberta, where the data breach reporting has been in place for two years, the office of the Alberta privacy commissioner has estimated that the average time to process a reported breach and determine whether notification is required is 76 days. In the case of more complex data breaches, this could be much longer. This indicates that the risk assessment process is complex, difficult, and ultimately costly.
My colleague, the hon. member for Terrebonne—Blainville, has provided us with much to consider, including some statistics on data breach incidencts. According to my hon. friend, there are 18 privacy breaches every year for every publicly traded company in Canada. We know there are over 3,000 companies traded on the Canadian-based stock exchanges. That would amount to a minimum of 54,000 data breach incidents every year. Given the number of days to assess a single data breach incident, it does not serve the public interest to process each of these 50,000 incidents each year.
Let us remember that the intent is to provide Canadians with timely information about a breach of their personal information so that they can take steps to avoid fraud, identity theft, and misuse of their personal information. I sense the intent of my colleague opposite, but it is not clear to me that my hon. friend has fully considered the administrative and resource implications of dumping this requirement on the Privacy Commissioner's office, and whether it is in the public interest of Canadians to receive so many notifications.
The government is committed to an approach that would require the organization experiencing a breach to conduct the risk assessment based on the sensitivity of the data and the probability that they have been or will be misused. The organization is in the best position to quickly assess the circumstances surrounding a breach of its security safeguards and to determine the risks involved. The government believes that organizations should notify the commissioner and affected individuals of certain breaches, those posing a real risk of significant harm. This allows the commissioner to retain oversight of how organizations are handling the process of risk assessment and notifications to individuals. The commissioner would have the option of initiating an investigation if it were believed that notification did not occur when it was required.
In closing, with appropriate oversight and guidance by the Privacy Commissioner of Canada, the responsibility for determining risk and the need for the notification of individuals should ultimately rest with the organization. I hope I have clarified for members the benefits of a more balanced approach to data breach notification. Again, it is modernization, not overhaul.
I hope colleagues will agree that the approach taken by Bill C-475 would impose unnecessary costs and has the real risk to potentially undermine the primary objective for data breach notification, which is that of providing timely information to individuals when there is truly a risk of harm.
