Sales Practices Survey

FAIR Canada and PIAC Welcome Steps to Ensure Compliance with OBSI Requirements

FAIR Canada and PIAC welcome the CSA, IIROC and MFDA taking a step in the right direction to improve compliance with the OBSI dispute resolution process for securities complaints.
We are pleased to see that the CSA, IIROC and MFDA will:

• Make registered firms comply with their regulatory obligation to notify clients of their right to utilize OBSI’s services upon the earlier of being provided with the firm’s substantive response or after 90 days.
• Not permit registered firms to mislead clients into thinking that they must exercise the option of using an internal “ombudsman” before they can access OBSI’s services.
• Require registered firms to disclose clearly to clients that any internal “ombudsman” is  employed by the firm and, unlike OBSI, is not an independent dispute resolution provider.
• Require registered firms to disclose clearly to clients that they may submit a complaint to OBSI without using an internal “ombudsman” – if either no substantive response is received from the registered firm within 90 days or the client is not satisfied with the response received within 90 days.
• Require registered firms to disclose clearly to clients that OBSI is a free service.
• Require registered firms to disclose clearly to clients that the use of an internal “ombudsman” is voluntary, that statutory limitation periods continue to run while using that process which may impact a client’s ability to commence a civil action (and therefore harm their legal rights).

We are also pleased to see that the CSA, IIROC and MFDA may view refusals or low ball offers as an indication of problems with a registered firm’s complaint handling practices including their obligation to deal fairly, honestly and in good faith with clients, act within the applicable standard of care, or have implemented and maintained effective complaint handling procedures.
Going forward, we urge the CSA, IIROC and the MFDA to:

• Take immediate action against registered firms that have repeatedly ignored their complaint handling obligations and refused to comply with OBSI’s recommendations, from the beginning of the OBSI complaint process. The CSA, MFDA and IIROC should also not simply make refusals and low-ball offers one aspect of what they will consider during their normal risk-based reviews on a going forward basis but review refusals and low ball offers in as close to real time as possible and practicable.
• Require registered firms to cease using the term “ombudsman” as part of their internal complaint handling process.
• Require registered firms to provide a prominent link to OBSI’s complaint handling process on their websites.

Implement binding decision-making for OBSI to prevent low-ball offers and refusals from being a systemic issue so that Canada’s dispute resolution process complies with our international obligations to be “accessible, affordable, independent, fair, accountable, timely and efficient”. Canadians deserve to have a resolution of their complaints when they utilize OBSI’s services.
For more information:
John Lawford
Executive Director & General Counsel
Public Interest Advocacy Centre (PIAC)
(613) 562-4002 ext. 25
jlawford@piac.ca

PIAC Challenges CRTC Advice Regarding Device Unlocking

PIAC has received complaints from the public that service providers are refusing to unlock devices locked to their network for persons who are not current customers of the service provider. PIAC was surprised to find that the Commission staff apparently have been supporting this position through social media, notably through Twitter and Reddit.
To address this issue, PIAC has filed the below application with the CRTC.
PIAC – Part 1 App – Device unlocking and notification of interpretations
This application requests that the CRTC clarify that wireless service providers (WSPs) must unlock all devices locked to their network, not just those associated with ongoing monthly service plans. Should the Commission deem it necessary or appropriate, this application requests that the Commission order WSPs to unlock all devices locked to their network and to make a consequential amendment to the Wireless Code. This application also requests that the Commission direct its staff, and request that the Commission for Complaints for Telecom-television Services (CCTS) request its staff, to formally document and notify the public, regulated parties and regular interveners before the CRTC when they provide interpretation or public advice regarding consumer protections under the Wireless Code.

Douez v. Facebook: Are courts finally tuning into the reality of consumer contracts?

In June, the Supreme Court of Canada issued its decision in Douez v. Facebook, Inc., 2017 SCC 33, an aspiring privacy law class action brought by a British Columbia resident against the social networking service. In the decision, the majority of the Court found that a clause in Facebook’s terms of use, which required that all lawsuits against Facebook take place in California, was unenforceable against Ms. Douez. What does this mean for consumer protection policy? Are Canadian courts finally tuning into the reality of consumer contracts?
The clause in Facebook’s terms of use requiring that legal proceedings against it take place in California courts alone is called a forum selection clause.
PIAC has historically questioned the enforceability of consumer contracts generally – often called contracts of adhesion, or “take-it-or-leave-it” contracts – because consumers don’t get the opportunity to negotiate or modify the contract. Either they take it and receive a product or service, or they leave it and also leave empty-handed. However, PIAC has also recently studied the additional challenges consumers face when they purchase a product or service online.
In a survey commissioned for PIAC’s report, Shopping for Consumer Protection: Current Jurisdictional Issues, Canadian consumers expressed significantly less confidence in their ability to resolve an online purchase dispute with a retailer when the retailer was located in the U.S., and even less confidence when the retailer was located outside Canada or the U.S. While:

• 90% of respondents said they were confident they would be able to resolve a problem with a retailer located in the same province, and
• 74% with a retailer located in another province,

only:

• 52% were confident they could resolve a problem with a retailer located in the U.S., and
• 23% with a retailer located outside Canada or the U.S.

Canadian consumers also had more trouble understanding information related to their purchase when retailers were located in another country, as opposed to in Canada. While 82% of respondents found information related to the total price of a product, applicable taxes, shipping costs and customs charges “very” or “somewhat” clear when the retailer was located in Canada, only about 63% found this information clear when the retailer was located in another country.
Finally, consumers were unsure about the laws which would apply if they encountered a problem with an online purchase made from a retailer located outside Canada. About 45% were not sure, while 18% of respondents said the laws in their province should apply and 35% said the law in the retailer’s jurisdiction should apply. While a smaller percentage of frequent online shoppers were unsure about which laws would apply (25%), 51% thought the laws of their province would apply.
This data leads to at least two key conclusions: (1) consumers feel less confident in their ability to resolve an online purchase dispute with a retailer located in another country, and (2) where they may wish to resolve a dispute, they find it more difficult to understand information provided by international retailers, as well as the laws which should apply. This is a double whammy which places consumers seeking remedies for an online purchase at a disadvantage. The additional requirement imposed by a forum selection clause to bring legal action in the retailer’s own jurisdiction, therefore, makes it a triple. As written by Sebastian in PIAC’s report, No Such Thing as a Free Lunch: Consumer Contracts and “Free” Services:

While there are legitimate interests on both sides of this issue, the problem is that this is yet another area where consumers lose out to business interests. A consumer lawsuit against a large corporation is already fought on uneven grounds, as a corporation would have significantly more resources at its disposal than an individual. With the imposition of a forum selection clause, consumers are forced to file their dispute on a corporation’s ‘legal home ground’, creating significant advantages for the corporation and significant inconvenience for the consumer. This inconvenience can easily rise to such a level that it deters consumers from bringing an action at all.[1]

In Douez, the majority of the Supreme Court of Canada appears to be finally willing to take a hard look at the fairness and enforceability of online consumer contracts. While the two concurring judgments, penned by Justices Karakatsanis, Wagner and Gascon on the one hand and Justice Abella on the other, differed on the legal analysis required to find “strong cause” that Facebook’s forum selection clause should not be enforced, they acknowledged similar policy concerns with online consumer contracts and the unequal bargaining power between consumers and corporations. Justices Karakatsanis, Wagner and Gascon write, for instance:

A court has discretion under the strong cause test to deny the enforcement of a contract for reasons of public policy in appropriate circumstances. Generally, such limitations fall into two broad categories: those intended to protect a weaker party or those intended to protect “the social, economic, or political policies of the enacting state in the collective interest”… In this case, both of these categories are implicated. It raises both the reality of unequal bargaining power in consumer contracts of adhesion and the local court’s interest in adjudicating claims involving constitutional or quasi-constitutional rights.

[…]

Relatedly, individual consumers in this context are faced with little choice but to accept Facebook’s terms of use. Facebook asserts that Ms. Douez could have simply rejected Facebook’s terms. But as the academic commentary makes clear, in today’s digital marketplace, transactions between businesses and consumers are generally covered by non-negotiable standard form contracts presented to consumers on a “take-it-or-leave-it” basis…[2]

Justice Abella also writes:

… it is important to put this forum selection clause in its contractual context. We are dealing here with an online consumer contract of adhesion. Unlike Pompey, there is virtually no opportunity on the part of the consumer to negotiate the terms of the clause. To become a member of Facebook, one must accept all the terms stipulated in the terms of use. No bargaining, no choice, no adjustments. Online contracts such as the one in this case put traditional contract principles to the test. What does “consent” mean when the agreement is said to be made by pressing a computer key? Can it realistically be said that the consumer turned his or her mind to all the terms and gave meaningful consent?[3]

Both sets of reasons also recognize the quasi-constitutional nature of privacy rights provided in British Columbia’s Privacy Act[4] and at stake in Ms. Douez’s case, particularly should Ms. Douez be required to litigate those rights in California.[5]
The dissent, written by Chief Justice McLachlin and Justice Côté, whose legal analysis leads to a different conclusion, focuses on the certainty and predictability provided by forum selection clauses. They write, “Forum selection clauses provide certainty and predictability in cross-border transactions. When parties agree to a jurisdiction for the resolution of disputes, courts will give effect to that agreement, unless the claimant establishes “strong cause” for not doing so.”[6] The dissent, therefore, would have upheld the forum selection clause against Ms. Douez.
The question the dissent appears to stop short of asking, however, is: certainty for whom? The dissent’s hypothetical response to this question appears to emerge later in their reasons when they write:

It is not only large multi-national corporations like Facebook that benefit from emphasizing the need for order in private international law. The intervener, Information Technology Association of Canada, points out that small and medium-sized businesses benefit from the certainty that flows from enforcing forum selection clauses, and that by reducing litigation risk they can generate savings that can be passed on to consumers. Facebook adds that the certainty which comes with enforcement of forum selection clauses allows foreign companies to offer online access to Canadians. In our view, these benefits accrue to online businesses of all sizes, and in all locations.[7]

In other words, forum selection clauses primarily provide certainty and predictability for businesses. Where an online contract is formed between two businesses which truly “agree” on a jurisdiction for dispute resolution, these clauses do provide predictability for both parties. However, in the context of a consumer contract, particularly given the substantial academic research on the average consumer’s ability to read and understand online contracts, forum selection clauses chosen by businesses will tend to increase certainty for the corporation and conversely decrease certainty for the consumer. Therefore, while a corporation is provided certainty that legal proceedings against it will be brought in its home jurisdiction, consumers – who may complete numerous online transactions in one day – are left to grapple with multiple online contracts specifying forums for litigation which may be scattered across the world. Forum selection clauses provide certainty for businesses, not for consumers.
What does the Supreme Court decision mean for consumers? Seen on its own, the Court’s judgment in Douez may have little direct impact on consumers generally (although it certainly makes a difference for Ms. Douez and the other class action members). However, the hope among consumer advocates is that this decision will be a signal to Canadian courts, policy makers, and corporations to scrutinize and consider major changes that are needed to drafting, presenting and enforcing online consumer contracts. While certain elements of standard form contracts may linger for the purposes of efficiency and ease-of-use, significant work remains to be done with respect to the substance, language, structure, presentation, and consumer awareness and understanding of online contracts. Forum selection clauses in online consumer agreements, for instance, inherently tend to favour corporations and place the greater burden on consumers. They provide little benefit in the consumer context.
Consumers are not let off the hook, however. We encourage consumers to continue to review online contracts to the best of their ability, although they admittedly have little choice to reject or amend them. Some product and service providers now summarize the key terms of a contract or underline and emphasize certain provisions. Consumers should pay attention to these.
Meanwhile, PIAC will continue to play its part in advocating for consumer protections and adequate online privacy safeguards for all Canadian consumers. In the digital age, if left unresolved, the enforceability of consumer contracts will only become a growing and increasingly complex problem.
 
[1] Kent Sebastian, No Such Thing as a Free Lunch: Consumer Contracts and “Free” Services (Ottawa: Public Interest Advocacy Centre, 2014) at 37.
[2] Douez v Facebook, Inc, 2017 SCC 33 at paras 52 and 55. [Douez v Facebook]
[3] Ibid at paras 98-99.
[4] SBC 1996, c 373.
[5] See, for instance: Douez v Facebook at paras 59 and 105.
[6] Douez v Facebook at para 124.
[7] Ibid at para 160.

Will Consumers be Side-“Swiped” by Merchant Surcharging?

In what could be described as a very discrete press release, Visa Canada recently announced an agreement allowing merchants to impose checkout fees or surcharges on credit card transactions. A day later, MasterCard Canada made a similar announcement. The decisions were part of settlement agreements to resolve outstanding class action litigation involving a series of Canadian merchants. The implications of these decisions may disturb Canadian consumers and leaves consumer advocates with a series of unanswered questions.
 

Coming Soon: Merchants Ability to Charge Canadians Extra for Using Credit Cards

First, the good news – Canadians will not be subject to the possibility of merchant surcharges on credit cards transactions for at least 18 months. Moreover, the settlement agreements stipulate a merchant cannot impose a surcharge greater than the “maximum surcharge cap” that will effectively be 2.5% per transaction under current conditions.[i] This appears to be an attempt by Visa and MasterCard to prevent excessive surcharging by merchants that has been seen in other jurisdictions.
However, this development leaves PIAC with the following questions:

• Will the cardholder protections imposed by Visa and MasterCard be enough to prevent excessive merchant surcharging in Canadian sectors where payment by credit card is the only option, or the only convenient option?
• Who will enforce what is essentially Visa and MasterCard corporate policy in an effort to protect Canadian credit card users from overzealous merchant surcharging? Where will Canadians go for redress?
• Is there value to prohibiting Canadian merchants from imposing checkout fees on credit card payments before the conditions of the settlement agreements come into effect 18 months from now?

Organizations representing Canadian merchants such as the Canadian Federation of Independent Business (CFIB) and the Canadian Convenience Stores Association have indicated credit card surcharging is not expected to be widely used by smaller merchants.[ii] However, the introduction of surcharging on credit card payments has the potential to place consumers in a vulnerable position. The “trust me” argument does not fly very far given the consumer experience in other places where credit card surcharging by merchants has been allowed.

The Potential Implications of Merchant Surcharging for Credit Card Payments

There are a whole host of goods and services purchased by Canadians daily where payment by credit card is the only option, or the only convenient option. For instance, the majority of online transactions are paid for using a credit card. It is only natural that merchants in market sectors where credit cards are the dominant form of payment, such as airlines, event ticketing, travel agencies, car rental providers, shared economy platforms and online retailers, could recognize the lack of available payment alternatives and use surcharging as a revenue generator to the detriment of Canadian consumers.
In Australia, for example, evidence suggests that for a number of years, until late 2016, airlines were applying flat fee credit card surcharges that failed to reflect the actual cost of processing a credit card payment. According to a 2016 study by CHOICE, a leading consumer advocacy group in Australia, the Qantas $7 card surcharge on a flight was 348% higher than the cost of payment processing to the merchant, and Jetstar’s $8.50 surcharge represented a 1182% mark-up.[iii]
 

Airline mark-ups on credit card fees in Australia

Airline	Ticket cost[2]	Card payment fee	Likely average fee incurred by merchant[3]	Percentage mark-up
QANTAS	$200	$7	$1.54	354.55%
Virgin	$135	$7.70	$1.19	545.16%
Jetstar	$85	$8.50	$0.65	1198.70%
Tiger	$95	$8.50	$0.73	1062.00%

Source: Kate Browne, Crackdown on sky high surcharges, CHOICE (2016)
There is evidence merchants in the United Kingdom also apply surcharges on credit card transactions beyond a regulated cap. UK merchants are regulated by Article 19 of the European Union’s Consumer Rights Directive which states merchants, “must not charge consumers, in respect of a given means of payment, fees that exceed the costs borne by the trader for the use of that means.”[iv]
However, in 2016, Richard Koch, head of policy at the UK Cards Association, indicated airlines, cinemas and travel agents may be charging more than they should to process credit card payments.[v] James Daley, managing director of consumer campaign group Fairer Finance, lamented, “There doesn’t seem to be anyone policing credit card charges. Nobody is stepping up to these companies and asking them why they apply a 3pc surcharge when others process cards transactions for free.”[vi]
As a result of the Australian and UK experience with merchant surcharging, as well as the tendency for Canadian airlines to apply many separate fees, PIAC expects it will only be a matter of time before a surcharge is applied by airlines to Canadians to process a credit card payment. Whether that surcharge respects the “maximum surcharge cap” of 2.5% per transaction imposed by Visa and MasterCard remains an open question. Perhaps the bigger question is if a Canadian airline or other merchant followed their Australian and UK counterparts and disregarded a suggested fee cap, what could or would anyone do to stop it?
 

Do Canadians Need to Live in a World With Merchant Surcharging?

The conditions of the class-action settlement agreements allowing merchant surcharges on credit card payments come into effect 18 months from now. Given the negative effect merchant surcharging on credit card payments has had for consumers in other jurisdictions, it may be prudent for the federal government to use that time to bring together relevant stakeholders, including consumer groups, to find a policy solution that avoids leaving Canadians subject to merchant surcharging.
Alternatively, the 18-month window provides provincial and federal governments time to weigh the merits of simply prohibiting Canadian merchants from imposing checkout fees on credit card payments. This would allow Canadian consumers to avoid the overcharging experiences of their UK and Australian counterparts.
The passage of legislation banning the application of a surcharge to credit card payments is not without precedent. As of March 2017, ten U.S. States had legislation in place that effectively prevents merchants from applying credit card surcharges to consumers.[vii] The passage of such legislation would allow the government brave enough to pass it an opportunity to present itself as a proactive defender of the pocketbook of its citizens.
Failure to act on behalf of Canadian consumers and allowing Canadian merchants to steal from the playbook of their UK and Australian counterparts in an unacceptable option. Albert Einstein once noted the definition of insanity was doing the same thing over and over again and expecting different results. PIAC implores policymakers to prevent the insanity of some merchants overcharging Canadians for credit card payments before it becomes a reality.
 
Jonathan Bishop has been a Research Analyst with the Public Interest Advocacy Centre (PIAC) since 2012.
 
[i] MasterCard International Incorporated, Canadian Credit Card Fees Class Action National Settlement Agreement, Schedule C, para. (e). See also Visa Canada Corporation, Canadian Credit Card Fees Class Action National Settlement Agreement, Schedule C, para. (e).
[ii] CFIB, CFIB commends Visa and Mastercard decision to allow merchants limited surcharging powers, (14 June 2017) Media Release. See Also Satinder Chera, “Is It Time To Cap Credit Card Fees?,” (27 June 2017) Huffington Post.
[iii] Browne, Kate, “Crackdown on Sky High Surcharges,” (22 February 2016) CHOICE.
[iv] United Kingdom (2013), Guidance on the Consumer Protection (Payment Surcharges) Regulations 2012, Department for Business, Innovation and Skills, page 6.
[v] Murray, Amelia, “E.U. ban on credit cards fees backfires – you’ll still pay 2.5 pc to spend,” (24 April 2016) The Telegraph.
[vi] Murray, Amelia, “E.U. ban on credit cards fees backfires – you’ll still pay 2.5 pc to spend,” (24 April 2016) The Telegraph.
[vii] Liptak, Adam, “Justices Side With Free-Speech Challenge to Credit Card Fees,” (29 March 2017) New York Times.

Wireless Code Now Stronger for Consumers

CRTC outlaws phone locking; clarifies shared data plan charges
OTTAWA, June 15, 2017 – The Public Interest Advocacy Centre (PIAC) today welcomed the Canadian Radio-television and Telecommunications Commission’s (CRTC) decision on its Review of the Wireless Code, saying it will help Canadian cell phone users avoid unnecessary costs for cellphone unlocking and overage fees incurred by children and teens.  PIAC was part of a coalition arguing for these changes at the CRTC.  Other members of the Coalition were the Consumers’ Association of Canada (CAC); Council of Senior Citizens’ Organizations of British Columbia (COSCO) and the National Pensioners Federation (NPF).
“The CRTC said that the wireless companies must read the Wireless Code in favour of consumers not in favour of their bottom lines”, said John Lawford, Executive Director and General Counsel at PIAC. “We also welcome removal of the annoyance and expense of cellphone locking, which limits competition between cell phone companies.”
According to the Decision, cellphones now must be offered in Canada unlocked as of 1 December 2017. Customers with contracts entered into prior to 1 December 2017 may still be charged an unlocking fee; however, even those customers may wait until December and then ask the company to unlock their phone free at that time.
“The CRTC decision to prohibit unlocking fees is a bold effort to help consumers with an unnecessary cost and a barrier to choice” said Alysia Lau, Counsel to the Coalition. “The new unlocking rules should help seniors and other consumers who wish to take their phone with them when shopping for a better plan,” she added.
The CRTC decision also tackled uncertainty over “family share plans” and similar offers from wireless companies that pool voice and data allowances but have been interpreted by the companies, until now, as permitting them to ask minors for permission to go over data limits and to calculate the Wireless Code caps on overage per user, not per account. The Coalition argued that only the adult account holder should be permitted to authorize overages on shared data plans and that data overage fees should be suspended at $50 for all devices cumulatively on the account, although the account holder may authorize other users to accept overages. The Commission ultimately agreed with the Coalition and adopted both of these positions.
 
For more information, please contact:
John Lawford
Executive Director & General Counsel
Public Interest Advocacy Centre (PIAC)
tel: (613) 562-4002 ×25
cell: (613) 447-8125
lawford@piac.ca
www.piac.ca
Alysia Lau
Counsel, Regulatory and Public Policy
Counsel to the Coalition
(613) 562-4002 x38
alau@piac.ca

Media Advisory, PIAC and ACORN Canada will Comment on Government’s proposed low-income broadband announcement at the Canadian Telecom Summit 2017

(TORONTO) At 8:45 AM EDT June 5, The Honourable Navdeep Bains, Minister of Innovation, Science and Economic Development, will deliver remarks at the Canadian Telecom Summit. Minister Bains will talk about “how the Government of Canada is ensuring that telecommunications services for Canadians are more affordable, accessible and of higher quality.”
Public Interest Advocacy Centre (PIAC) Executive Director and General Counsel John Lawford and Donna Bordan, ACORN leader, ACORN Canada will be at the Conference analyzing the announcement and are available for comment on-site (just outside the conference area) at approximately 9:00 AM.
PIAC acted as counsel for ACORN Canada (ACORN), the Consumers’ Association of Canada (CAC), the Council for Senior Citizens’ Organizations of British Columbia (COSCO), the National Pensioners Federation (NPF) and the British Columbia Public Interest Advocacy Centre (BCPIAC) in the CRTC’s review of Basic Telecommunications Service, where the coalition argued for a subsidy for low-income Canadians to make broadband Internet and other telecommunications services more affordable.
For more information:
 
John Lawford
Executive Director and General Counsel
Public Interest Advocacy Centre
Mobile: 1-613-447-8125
Office: 1-613-562-4002 ext. 25
jlawford@piac.ca
 
Judy Duncan
Head Organizer
ACORN Canada
www.acorncanada.org
Mobile: 1-416 996 6401
Office: 1-416 461 5322

Minister Sousa Needs to Legislate a Best Interest Standard to Put Investors Interest First. Now.

PIAC asks, Can We Afford More Naval-Gazing?

Enough is enough.
In 2017, Canadians should be confident the person being paid to provide them financial advice is legally obligated to act in their best interest. It should not matter what their title is or who employs them. Bottom line, if you are legally entitled and being paid to provide financial advice, the client should come first, and that obligation should be backed up by the law.
Guess what? That is not the reality in 2017. In fact, the latest news is that a number of securities regulators in Canada are backing away from discussions to introduce a regulatory best interest standard, expressing strong concerns about the benefits of introducing such a standard.[1]  British Columbia and Québec securities regulators contend introducing a regulatory best interest standard could exacerbate a sense of misplaced trust and overreliance by clients on their registrants.
Yes, heaven forbid any investor trust the person they are paying to ensure a successful financial future for them and their families. If securities regulators were in charge of the roofing industry, I would be investing in bucket makers, because Canadian roofs would have more holes than a cheese grater.

“If securities regulators were in charge of the roofing industry, I would be investing in bucket makers…”

To their credit, Ontario Securities Commission and Financial and Consumer Services Commission in New Brunswick expressed their support for a regulatory best interest standard. However, one can argue this continued commitment is little more than an exercise in navel-gazing. Literally decades have passed since securities regulators began discussing the need for an enhanced best interest standard. Meanwhile, countless Canadians have continued to mistakenly believe their financial advisor is legally compelled to work in their best interest. After a period of time, virtues associated with leadership such as the collection of evidence and consideration of arguments slide into cowardice. Most Canadians would consider a decade long enough to for securities regulators to provide the leadership necessary to improve the regulatory underpinnings of the advisor-investor relationship.
It is time for a more deliberate approach.

Minister Sousa to the Rescue?

On March 31, 2017, the Ontario Minister of Finance, Charles Sousa, presented a speech where he outlined his intention to address a series of challenges facing the financial services industry. The issues the Government of Ontario intends to address include examining the feasibility of a statutory best interest duty in Ontario.
This issue was brought to the Minister’s attention by an Expert Committee to Consider Financial Advisory and Financial Planning Policy Alternatives, established under his authority in 2015. The Expert Committee, chaired by Malcom Heins, the former CEO of the Law Society of Upper Canada, held consultations in 2015 and 2016. This process resulted in a final report that was tabled with the Minister in November 2016.
PIAC indicated Ontario consumers would benefit from a limitation in the use of titles in the financial services industry as well as an enhanced standard of care. (Photo courtesy of Skitterphoto)

What Did PIAC Have to Say?

PIAC participated in each round of this consultation and participated in multiple public hearings held by the Expert Committee. PIAC’s initial submission stated the following:
“If the Expert Committee could articulate and propose an improved standard of care to better align the expectations of many Ontario consumers with the current “suitability” standard, PIAC feels this would be a positive outcome for consumers.”
This was the polite way of saying, “please fix this misconception.” However, given the continued “ragging of the puck” by provincial securities regulators on this issue, it is now apparent securities regulators need to be scolded and told how to ensure an investment professional is acting in your best interest by provincial legislators. A new source of leadership is needed.
Minister Sousa can, and should, be that initial source. Ontario is home to over 400,000 jobs in the financial services industry. Ontarians should be able to trust their financial advisor with their retirement savings and planning without any misconceptions. In fact, a 2013 survey of over 2,000 Ontario investors found 93 per cent of respondents support the introduction of a best interest duty.[2] If an improved standard of care is instituted in Ontario, other jurisdictions would hard pressed to allow the current “suitability” standard to continue.

PIAC encourages the people of Ontario to contact their M.P.P. to ensure Finance Minister Sousa follows through on needed reform for the financial advice industry. (Photo courtesy of Negative Space)

What Can I Do?

Do you want the person being paid to provide you financial advice to be legally obligated to act in your best interest? Do you want your provincial government to provide the leadership that your securities regulator is failing to deliver on this issue?
If so, contact your local member of your respective provincial Parliament, Legislature or Assembly.
If you are from Ontario, encourage your Member of Provincial Parliament (M.P.P.) to speak up for you and ensure Minister Sousa not only examines the feasibility of a statutory best interest duty, but displays the leadership necessary to propose and implement a best interest duty for the benefit of Ontario investors.
You can find your Ontario M.P.P. at the following link.
 
Jonathan Bishop has been a Research Analyst with the Public Interest Advocacy Centre (PIAC) since 2012. He is the co-author of PIAC’s 2013 study of the financial planning industry entitled, Purse Strings Attached: Towards a Financial Planning Regulatory Framework. He also was an active participant in the consultations of the Ontario Ministry of Finance Expert Committee to Consider Financial Advisory and Financial Planning Policy Alternatives. PIAC’s September 2015 submission to the Expert Committee can be found here.
[1] Canadian Securities Administrators, CSA Staff Notice 33-319: Status Report on CSA Consultation Paper 33-404 Proposals to Enhance the Obligations of Advisers, Dealers, and Representatives Toward Their Clients. May 11, 2017. Page 7. Online: http://www.osc.gov.on.ca/documents/en/Securities-Category3/csa_20170511_33-319_proposals-enhance-obligations-advisers.pdf.
[2] Investor Advisory Panel, “Strengthening Investor Protection in Ontario-Speaking with Ontarians,” Ontario Securities Commission, January 2013, page 27. Online: <http://www.osc.gov.on.ca/documents/en/Investors/iap_20130318_strengthening-investor-protection.pdf>.

Internet Freedom Commentary: Why the CRTC’s zero-rating decision was the right thing to do

(This article originally appeared on Cartt.ca on May 4, 2017)
MUCH INK ALREADY HAS been spilled over the CRTC’s decision to disallow Vidéotron’s “Unlimited Music” offer (and effectively most similar “differential pricing”) because it was unjustly discriminatory. More will be said, even opposite this column, by Canada’s biggest telcos.
Why the sturm und drang over a regulatory decision that effectively preserves the prior status quo? Quite simply, it is money. There is huge money to be made operating a network in a discriminatory manner. One can charge those not just at the receiving end but at the sending end. One can design pricing to match consumer and producer willingness to pay. One can achieve mutually beneficial advertising and other benefits between the service that is favoured and the network owner.
Money, money, money. And all on top of what you already earn from just running a network. Sweet.
Critics of the CRTC decision say that discriminatory pricing is simply rational economic behaviour on the part of the telco. Such pricing is allowed in other fields and indeed is a textbook example, in economics, of rational pricing. This is a logic so perfect, one Trump-transition leader says, that consumers are actually missing out on considerable economic benefits. As noted by the CRTC in answer to our complaint about Vidéotron, however, this is untrue.
Advantageous offers are consistently made instead to the well-heeled, or most desired demographic. There will never be an offer to low-volume, low-income consumers, who will indirectly subsidize the advantages of the few, the proud, the rich.
Yet what lets me take this seemingly socialist position? Why has the CRTC acted “irrationally” according to the critics? The answer is quite simply: it’s the law.
The Telecommunications Act, in black and white, says that there shall be no unjust discrimination nor undue preference allowed to the telcos: not in relation to any other competitor, nor between customers, nor even between those affected by their actions. There is an unbroken line of CRTC and court rulings upholding them from Challenge Communications to the Zero-Rating decision that all have said, “thou shalt not discriminate simply to make money”. In other words, not only does law trump economics, there is a special section of our telecommunications law that specifically says not to do what Vidéotron did. All the CRTC did, therefore, was uphold the law; in doing so, they simply wrote the latest chapter in the book of prohibiting unjust discrimination.
The law has been called an ass, and unclear, and unknowable, but here it is crystal clear. It has been so for over 700 years. The principle underlying our unjust discrimination law is “common carriage” and it is deliberately at odds with “pure” economics for several reasons. First, the law quickly understood that operation of an essential service, like cartage, or today telecommunications, is relied upon by all of the public and so should treat them all as equals. Why? Because the network function of the service is quickly undermined by “special deals” favouring certain customers. It leads network operators to choose inefficient transmission methods. It incents them to cover up slow service that is the consequence of making more resources available to the favoured customers. It makes them, eventually, not be of service to society at all, but only to themselves and thus to destroy their own essence.
Favouritism also means that the economic activity enabled by the network service is limited. Only those making a deal with the network operator get their product to market. Consumers only get a limited palette of choice and cannot use their demand to drive the market. It is here that the unjust discrimination principle intersects with more recent expressions of the concept coming from the engineering side, the so-called “net neutrality” arguments. Net neutrality emphasizes this loss of “edge innovation” and provides compelling arguments for rules very like common carriage non-discrimination. After all, would the telcos now let a new Netflix come online if they could nip it in the bud? You can bet they wouldn’t. And you can no longer Netflix and chill.
So until Canadian law is changed, all of this discussion of economics and telecom is misplaced. What is being proposed is against the law.
John Lawford is Executive Director and General Counsel of the Public Interest Advocacy Centre (PIAC).

Michael Janigan named a full-time member of the Ontario Energy Board

The Public Interest Advocacy Centre (PIAC) is very pleased to announce that Michael Janigan, former Executive Director and General Counsel of PIAC and most recently, Special Counsel, Regulatory and Consumer Affairs for PIAC, has been named as a full-time member of the Ontario Energy Board, effective April 26, 2017, for a fixed term of two years.
PIAC is grateful for the nearly 30 years that Mr. Janigan served this organization in leadership roles. We have no doubt that he will diligently serve the residents of Ontario in this new appointment from a strong public interest viewpoint.  We wish him all the best and thank him for his unstinting dedication to PIAC.
Short Biography of Michael Janigan
Michael Janigan has been appointed as a full-time member of the Ontario Energy Board, for a fixed two year term, effective April 26, 2017.
Mr. Janigan was until recently the Special Counsel, Regulatory and Consumer Affairs of the Public Interest Advocacy Centre (PIAC) located in Ottawa, Canada. The Centre provides legal services and research on behalf of Canadian consumers and the organizations that represent them. The work of the Centre primarily involves issues concerned with the delivery of telecommunications, energy, broadcasting, banking, transportation and other important public services.  The Centre has been in existence since 1976, and has a small staff of lawyers, researchers and administrative personnel located in Ottawa and Toronto.
Mr. Janigan was the Executive Director of PIAC from 1992 until September of 2012, when he assumed a role concentrating on energy regulation and general consumer protection. Prior to his engagement by the Centre, Mr. Janigan was a city and regional councillor representing a downtown ward in the City of Ottawa. He was elected to that position in the community where he carried on a busy litigation practice. Mr. Janigan was born in Ottawa, and attended the University of Western Ontario, in London, Ontario where he obtained both his undergraduate degree in science and his LLB degree. He has also completed an LLM in Competition Law at the University of London. He has been called to the Bar of the Law Society of Upper Canada and is also a member of the State Bar of California. Mr. Janigan was formerly “of counsel” to the Washington D.C. law firm, Scott Hempling and Associates, which provided legal advice to regulatory commissions across the United States. Mr. Janigan, also served as Board member of the Travel Industry Council of Ontario (TICO), a provincial regulatory agency, as an Ontario-government appointee for over 10 years. He was the first non-industry chair of TICO for five years.
Mr. Janigan has taught courses and seminars in consumer protection law and regulation at Carleton University and in the LLM program of Osgoode Hall. He is the author of publications in the telecommunications, energy and other consumer utility field. He has been a featured speaker at Canadian and international conferences on public utilities and a frequent guest on radio and television programs covering those issues.