Consumers ask Minister to fix local TV and expensive basic cable-satellite service

(OTTAWA)—The Public Interest Advocacy Centre (PIAC) today called for a review of the Canadian Radio-television and Telecommunications Commission decision which refused over-the-air (OTA) carriage fees.
In a letter to the Minister of Canadian Heritage James Moore, PIAC proposed that cable and satellite service first offer a much reduced package of basic service. The new basic service would be costed by Commission and be subject to a price cap like basic telephone service. Included in basic service, local OTA broadcasters would receive carriage fees in the same way as other channels frequently owned by cable and satellite companies.
“It’s ridiculous that Canadians have been paying higher prices for TV at a time when it is supposed to be competitive. As well, our plan will help the 4 million Canadians who only receive OTA television when analogue OTA is eliminated in 2011,” Michael Janigan PIAC general counsel says.
Janigan also notes both the CBC and the local broadcasters proposed a much reduced basic service package in the CRTC proceeding that decided the issue.
 
—
April 8, 2009
VIA Fax and Mail
Honourable James Moore
819-953-8055 Minister of Canadian Heritage
Les Terrasses de la Chaudiere
1497-25 Eddy Street
Gatineau, Quebec
K1A 1K5
Dear Minister Moore:
Re: Future of Local Broadcasting
The Public Interest Advocacy Centre (PIAC) is a nonprofit NGO based in Ottawa that has, since its inception in 1976, been concerned with the delivery of important public services to ordinary and vulnerable consumers. In particular, PIAC has been engaged in broadcasting issues before and outside the CRTC, with a view to enhancing the value received by Canadians for broadcasting services and to ensure equitable and affordable access to such services enabled by distribution undertakings.
The issue of support for Canadian broadcasting is, of course, currently vexing various broadcasting stakeholders and the government. In PIAC’s view, the current circumstances call into question the wisdom of the determinations made by the CRTC in the course of its October 30, 2009 decision on the regulatory framework for Broadcast Distribution Undertakings (PN 2008-100). In that decision, the CRTC refused PIAC’s request on behalf of consumer groups, and similar requests made by the CBC, and the Canwest Broadcasting CTV Globemedianet. Al. to redefine basic BDU service as a minimum package of channels, local + 3+1, and the must carry stations.
PIAC also requested that basic service then be costed and capped in the same way that basic telephony is capped. This, in our view, would stop the current escalation of basic service fees now running well ahead of inflation, and the cramming of more and more channels (frequently owned by the BDUs themselves) into the basic service package. It would also possibly ease the transition to full digital broadcasting when over the air (OTA) analogue distribution signals go off the air in 2011, and help the 4 million Canadians that currently receive TV signals via OTA get service.(although more may be necessary to deal with this problem).
The decline in local broadcasting advertising revenue has brought this problem to a head and there are real financial issues to confront. But it may well be possible to craft a solution that will not just look to BDU subscribers to fund local broadcasting assistance. Consumers are tired of being the insulation for economic shocks in this industry, and would thoroughly resent the imposition of more charges in these difficult economic times. This is particularly the case where the BDUs are thriving largely because cable/satellite is a duopoly with little meaningful competition.
Our suggestion is that, in the context and as part of a capped regulated basic service product, broadcasters with an OTA signal might be able to recoup a fee for carriage from the distributor. The basic service package would be costed in Commission hearings and priced on a fair and reasonable basis. The price capped basic service offering would be subject to a yearly adjusted price cap in the same way as basic telephone service. The packages that are offered outside of basic service would be left to the market. It might be anticipated that the revenue reduction associated with removal of much current programming from basic service may create incentives for the cable and satellite companies to more aggressively price these packages to continue customer take-up.
In the result, local broadcasters would get the same place in the queue as, for example, the Food Channel in terms of getting paid for getting their channel carried. The government would be responsibly carrying out the objectives of saving local broadcasting and, at the same time, lowering television bills for basic service for Canadians. In addition, this solution would promote a harmonious transition to digital only broadcasting in 2011.
We are strongly of the belief that a much reduced basic service package that also accommodates the needs of current local OTA broadcasters is the best policy fix. We would be pleased to meet with you and/or your staff advisers to discuss the same.
Yours truly,
Michael Janigan
Executive Director/General Counsel

Proposed amendments to the Competition Act represent a fairly balanced take on necessary refinements

Speaking Notes: Presentation to the House of Commons Standing Committee on Finance

February 23, 2009
Dr. Anu Bose
Head, Ottawa Bureau
Options Consommateurs
Michael Janigan
Executive Director and General Counsel
Public Interest Advocacy Centre
Bill C-10, An Act to implement certain provisions of the budget tabled in Parliament on January 27, 2009 and related fiscal measures
Good evening. My name is Anu Bose, the head of the Ottawa Office of Option Consommateurs. With me, is Michael Janigan, Executive Director and General Counsel of the Public Interest Advocacy Centre here in Ottawa. Both organizations have been engaged for over three decades in representing the interests of ordinary consumers in the delivery of goods and services in the market place or subject to a regime of regulation. Mr. Janigan addressed the Industry Committee on the subject of the previous legislation, Bill C-19, that was introduced, but not passed by the previous Liberal government. We are here to speak to you about the proposed amendments to the Competition Act.
We would first note that while the proposed amendments are quite comprehensive, they have certainly been the subject of considerable past discussion among stakeholders and represent a fairly balanced take on necessary refinements to the Act. For example, of the amendments complete the reform of misleading advertising or deceptive marketing that has been the consensus for over two decades. These amendments help the Competition authorities address this abuse in an economic and administrative fashion. By so doing, the intent of the provisions will be more efficiently enforced, and sanction meted out, where necessary, that is appropriate to the conduct of the offending advertiser.
Naturally, there has been an effort to bolster the effectiveness of the non-criminal enforcement procedure to encourage compliance, including more realistic maximums on administrative monetary penalties, and some new rights for complainants. In the view of Option Consommateurs, this package of amendments places appropriate emphasis on the importance of deterring anti-competitive conduct, particularly in the current difficult financial environment that all Canadians are experiencing. Michael Janigan will now give some additional comments on the importance of these amendments.
It is essential that the Committee understand that these amendments are designed to make markets work better, and to protect the legitimate interests of consumers and suppliers in open markets. The practices that are being deterred involve conduct that subverts the operation of a competitive market and prevents the existence of an informed market of customers, as well as the ability of suppliers to challenge dominant players with new products and services. When some of these changes were brought forward in Bill C-19 in 2005, there were some vociferous protests from some of the larger business players concerning the potential burdens that could be imposed upon them.
If a protest occurs again, it is important that these submissions are adjudicated on their merits, not on the basis that they represent the views of all non-governmental stakeholders. For example, you won’t be hearing from the independent business person who has used the family assets to finance a new business only to see it crushed by actions of suppliers of the new business instigated by a market incumbent. You may read about a scam luring shoppers to purchase a wonder product that is misrepresented and misdescribed, but the pensioner who has to cut back on necessities because she fell for the scam won’t be here to tell you that what happened to her is an acceptable risk that allows more creative advertising to take place.
And you won’t hear from the parties complain about increases to maximum penalties that the existence of dollar amounts sufficiently robust to deter the largest of businesses from breaching the Act will probably prevent more Bureau files from being opened because of business self-policing to avoid such sanctions.
But, it is of the highest importance that you understand that deterring anti-competitive conduct as proposed here is not the heavy hand of government in operation; instead it is supportive of open markets and less regulation. The fact is a lot of money can be made by misleading the public or unfairly stacking the deck against competitors. Unless you have the tools at hand to prevent such conduct from being rewarded, you are allowing three unfortunate things to happen:
1. You are preventing informed choice and possible innovation.
2. You are enabling inefficiency in the delivery of that product or service
3. You are ensuring that incumbents have little incentive to become more productive
As a final matter, Dr. Bose will address an issue of some importance, particularly to Quebec consumer organizations.
As the members of the Committee may know, consumer groups including my own are active in ensuring compliance with consumer protection laws by means of class actions. Most of these cases are settled or adjudicated with a provision of a percentage of the funds to consumer or public interest organizations to do education or similar pro-active work around the issues in play in the litigation. It is good public policy by having the wrongdoers pay for attempts to stop other wrongdoers.
It is likely that, in the future, the civil remedies under the new legislation may be pursued in preference to class actions in provincial courts. The former legislation, Bill C-19, recognized this fact and helped ensure that leftover restitution funds would be put to similar usage:
74.1 (1.2) The court may also designate in the order a not-for-profit organization in Canada that benefits persons who have been affected or are likely to be affected by reviewable conduct under this Part — or any other person or organization that the court considers appropriate in the circumstances — to receive any or all of the amount of the payment that remains unclaimed or undistributed in the manner and on the terms set out in the order.
74.1(1.2) Il peut en outre y prévoir que, si tout ou partie de la somme n’a pas été réclamé ou n’a pu être distribué, la somme non réclamée ou non distribuée est versée en tout ou en partie de la manière et aux conditions précisées dans l’ordonnance à un organisme à but non lucrative au Canada qu’il désigne et qui vient en aide aux personnes qui ont souffert ou risquent de souffrir de comportements susceptibles d’examen visés par la présente partie ou à toute personne ou tout organisme qu’il estime indiqués dans les circonstances
While the current wording of 74.1 (8) (g) would not prevent this from happening, for greater certainty, we would suggest that the clause from Bill C-19 be inserted as Section 74.1 (9) and Section 74.1 (9) becomes Section 74.1 (10). This way there will be no diminution in the redress available to Quebec consumers, and it will extend the same benefits to consumers across Canada.
Thank you and we would be pleased to answer any questions that the committee may have.

PIAC Wants Canadian Broadcasting to Serve the Consumer Not the Distributors

(OTTAWA Apr. 8/08)—With hearings to consider changes in the way the CRTC regulates cable and satellite television companies or BDUs (Broadcasting Distribution Undertakings) starting today in Gatineau, PIAC called for less attention to the wishes of the industry, and more effort to deliver what the consumer wants.
PIAC is one of more than seventy stakeholders including cable companies, television channels, media professional guilds, scheduled to make oral submissions to the Commission in the upcoming week in the largest regulatory review of Canadian broadcasting since 1997.
“Persistent problems are being experienced by Canadian consumers of cable and satellite BDUs in the areas of: a) price, b) choice and c) level of competition,” said Michael Janigan, Executive Director and General Counsel of PIAC. “Over the last ten years, Canadians have seen substantial price hikes in their basic package of cable television services as a result of the progressive lifting of basic rates controls.”
Conventional over-the-air television signals are being phased out in Canada after August 2011, when Canadian households will need to subscribe to either cable or satellite to have access not only to television signals but to Canadian television signals.
“Because basic television will only be accessible to Canadians through a cable or satellite providers, there should be basic service provided by BDUs subject to some measure of price control to maintain affordability”, Janigan added. PIAC will also tell the CRTC that the greatest threats to the health of the broadcasting system do not come from regulation, but from a concentration of market players with scant competition and regulatory controls.

The Use of Administrative Monetary Penalties in Consumer Protection

EXECUTIVE SUMMARY

The use of “Administrative Monetary Penalties”, otherwise known as “AMPs”, is a unique enforcement scheme that has gained significant attention from international regulators. AMPs are increasingly used to engender compliance and cooperation from the ‘regulated community’, to secure environmental or consumer protection, and to encourage the timely rectification of market problems. Regulators in Canada have used AMPs for some time; however, it is only relatively recently that they have become a favorite tool among regulators.
Generally, AMPs have been heralded by regulators as providing a more flexible and responsive regulatory structure that balances the competing interests of stakeholders. The use of AMPs, however, is not without controversy. Many critics argue that the use of AMPs represents a severe and unjust form of punishment on individuals and businesses that may have, whether intentionally or not, breached the law.
In this report, PIAC examines the use of AMPs in the Canadian regulatory field, with a particular emphasis on the use of AMPs in consumer protection. The Report examines the nature and scope of AMPs, as well as, the various theories that underscore the use of AMPs as a regulatory tool. The Report also addresses the objections to AMPs, as cited by AMP critics, and analyses the use and effectiveness of AMPs in Canada, and other countries that are actively engaged in their use. Finally, the Report draws conclusions, offers warnings, and proposes recommendations that PIAC believes will improve consumer protection regulation in Canada.
The Report finds that there are important constitutional and due process issues associated with the use of administrative penalties. Due to the fact that AMPs operate largely outside of the watchful eye of the courts, they are vulnerable to abuse. However, the Report does not agree with critics who suggest that AMPs are unconstitutional, in and of themselves.
The Report finds that the greater procedural flexibility and range of sanctions make AMPs the preferred mode of social control in situations where persuasion and negotiation can best secure compliance. However, the Report also finds that when it comes to regulating, regardless of the industry or sector, a multi-pronged enforcement approach is best. To be effective and efficient, regulators must rely on the ability to levy the most appropriate sanction or penalty to a particular violation of the law. As such, regulators need an array of enforcement tools, ranging from criminal to administrative, to best enforce the law and deter socially and economically harmful activities.
The use and appropriateness of AMPs will largely depend upon the nature of the unlawful activity and the aim of the regulatory intervention. AMPs may not be a suitable or effective penalty for perpetrators who commit unlawful activities with a malicious or fraudulent intent. Rather, such crimes may best be dealt with under the criminal law. On the other hand, AMPs have shown themselves to be particularly well suited to deal with issues of consumer protection. As such, PIAC advocates an increased use of AMPs in consumer protection. In particular, PIAC advocates for the adoption of an AMPs enforcement scheme for violations of federal privacy laws, such as PIPEDA, as well as the re-introduction of an augmented AMPs system under the Competition Act.
The Report further suggests that AMPs may be an effective enforcement tool in regulating e-commerce and online communications. Additionally, AMPs have the potential to be an effective and efficient means of enforcing Canada’s anti-spam measures.
The Report also examines the issue of enforcement, finding that the issues of jurisdiction and identification present a particularly difficult challenge in the online context. The global nature of the Internet means representations and transactions made online can attract liability under both domestic and foreign jurisdictions. Meanwhile, regulators and law enforcement officials are not always able to ascertain the identity of the violator.
Finally, in order to exploit the full potential and benefits of administrative monetary penalties, as well as ensure their legitimacy in the eyes of businesses and the public, PIAC advocates the adoption of a three-pronged strategy. When administrating an AMP scheme, regulatory agencies need: 1) increased cooperation with counterpart agencies in foreign jurisdictions; 2) more education and clearer guidelines for businesses and consumers; and 3) implementation of consistent and predictable rules.
 

CRTC Deferral Account: What Consumers Want

Treatment of Efficiencies in the Competition Act

PIAC comments on the Competition Bureau’s Consultation Paper, “Treatment of Efficiencies in the Competition Act”

PIAC comments on the Competition Bureau’s Consultation Paper
Download File: cb_efficiencies.pdf [size: 0.1 mb]

INTRODUCTION

The Public Interest Advocacy Centre (PIAC) welcomes this opportunity to submit comments in response to the Competition Bureau’s Consultation Paper, “Treatment of Efficiencies in the Competition Act”. PIAC has been representing consumer interests before various regulatory and administrative tribunals for over twenty-five years, in particular as concerns questions of economic regulation. As a result, PIAC can bring a consumer perspective to bear on the questions raised by the Consultation Paper.
Consumers generally benefit greatly from competition. Lower prices, greater product and service innovation, and expanded variety and choice are all benefits of properly working competitive markets. PIAC strongly supports measures to block the prevention or substantial lessening of competition, through mergers and other structural reorganizations.
PIAC recognizes that in some circumstances competition may need to be subordinated to other factors. One such instance may be the potential of significant efficiency gains arising from a merger. However, such situations should be exceptional. Further, “efficiency gains” must be considered in the context of the other objectives stated in s. 1.1 of the Competition Act, and of the welfare of Canadian society in general.
Although the “efficiency defence” is available under provisions of the Act other than s. 96, it has never been invoked there, and, in PIAC’s view, it likely never will be. Accordingly, in what follows, PIAC addresses the “efficiency defence” as it applies to mergers under s. 96.

CHANGES IN THE CANADIAN ECONOMY

As the Competition Bureau’s Consultation Paper states, the present Competition Act was enacted some 17 years ago, when Canada’s economy was very different. It was still making the transition from resource-based to a much more broadly diversified mix that is overwhelmingly services and manufacturing. The Canadian economy was small relative to other national economies, and tariff barriers to exports were high, as were transport and communications costs. As a result, it was believed, Canadian companies were largely limited to a small domestic market and faced a significant challenge in achieving economies of scale. This would hurt the domestic economy. More importantly at the time, it was also expected to keep Canadian companies uncompetitive on the world stage; in turn, this would harm job creation at home.
The “efficiencies defence” in s. 96 was in large part designed to help Canadian companies overcome this disadvantage. Mergers would be allowed if they would likely bring about gains in efficiency that would be greater than, and would offset, anti-competitive effects. Given the relatively small size of the domestic market, and the difficulties of exporting, this was a key measure to help the Canadian economy achieve economies of scale.
Meeting foreign competition was emphasized in s. 96⁽²⁾. Particular attention was to be paid to efficiency gains that would result in a significant increase in exports or a significant substitution of domestic products for imports. The mergers provisions of the Competition Act were to be consistent with an active trade policy for Canada, in a world of protectionism and significant trade barriers.
In PIAC’s view, the Canadian economy has changed since the mid-1980s. Lower transport and communications costs have redefined geographic markets. Decreases in tariffs and non-tariff trade barriers, through bilateral agreements such as NAFTA and multilateral agreements such as the Uruguay Round, have also contributed. As a result, where they were once local and national, markets are now continental and global in scope.
Technological and institutional change has also broadened the definition of product markets. For example, convergence in telecommunications is resulting in the breakdown of the distinction between telephony and cable television. In the financial services sector, consumers in 1987 were obliged to have separate bank accounts, brokerage accounts, and insurance accounts. Increasingly, all of these functions can be supplied by any one of these accounts.
As a result, Canadian firms are in a better position, relative to firms in other countries, to obtain economies of scale and scope without restricting the level of competition in the Canadian economy. As well, encouraging exports and import substitution should have a lower priority than at the time the Act was passed. This has important consequences for the interpretation of the “efficiencies defence”.

THE OBJECTIVES OF THE ACT

S. 1.1 of the Competition Act lists a number of objectives, without however prioritizing them or relating them to each other. The purpose of the Act is “to maintain and encourage competition in Canada”, in order to

• promote the efficiency and adaptability of the Canadian economy
• expand export opportunities while at the same time recognizing the role of foreign competition in Canada
• ensure that small and medium-sized enterprises “have an equitable opportunity to participate in the Canadian economy”
• provide consumers with competitive prices and product choices.

The first objective, promoting the efficiency and adaptability of the Canadian economy, while laudable, cannot be an end in itself. Rather, it is a means to an end.¹ More precisely, efficiency gains are desirable because they allow for a higher level of consumption, now or in the future; or because they make possible more leisure or a more agreeable environment; or because they lead to a higher level of employment in Canada. Thus, “efficiency” must be read in conjunction with the other objectives, and as a means of better attaining them.
The second objective is to improve Canada’s trade balance, encouraging exports and discouraging imports. In the area of mergers, it is reflected explicitly in s. 96⁽²⁾, which contemplates allowing reductions in competitiveness so that Canadian companies could attain critical size relative to world markets. However, as noted in the previous section, with the dramatic expansion of geographic and product markets over the last twenty years, concerns as to market size have abated. It is also interesting that, to PIAC’s knowledge, s. 96(2) has never been used as a defense to allow a merger that would otherwise substantially lessen competition.²
In PIAC’s view, the objective in s. 1.1 of increasing exports and decreasing imports, through favorable treatment of mergers that would otherwise reduce significantly competition, are no longer consonant with Canada’s economic position, and should be reviewed. It is PIAC’s understanding that, in practice, the provisions of s. 96(2) do not guide the Competition Bureau or the Competition Tribunal’s review of a merger. This should continue.
The third objective of the Act is to give small and medium-size businesses “an equitable opportunity to participate in the Canadian economy”. This objective would seem to be grounded in a historic desire to preserve small independent firms, for political and social reasons, and to protect them from “trusts” and large companies.³
PIAC supports the principle of providing equitable opportunities to all businesses, large and small. However, there should be no bias in favour of smaller businesses when considering mergers and the efficiencies defence. Larger firms should not be impeded from realizing economies of scale and other efficiencies, through mergers or otherwise, just to protect smaller firms. Accordingly, the third objective of the Act should not come into play when considering mergers.
The fourth objective, to provide consumers with competitive prices and product choices, is directly linked to a higher standard of living and a better quality of life.4 At the end of the day, the purpose of efficiency gains, a better balance of trade, and higher employment, is to allow individual members of our society to consume more, to enjoy more leisure, to live a healthy life in a sound environment, and to build worthwhile social institutions.
While there are other, more important goals than material consumption, the Competition Act was not designed to address them. Rather, the focus of the Competition Act is on the well-being of members of society as consumers. Lower prices and greater variety should be the first priority of the Competition Act in today’s economy. Increasing efficiency should be seen as a means of attaining this priority objective.5

MERGERS AND THE EFFICIENCIES DEFENCE: TOTAL SURPLUS STANDARD

Mergers may prevent or substantially lessen competition in a market. S. 92 of the Competition Act gives the Competition Tribunal the power to take appropriate steps to prevent this harm. However, the Act recognizes that mergers may also lead to efficiency gains. S. 96(1) provides that a merger will be allowed if it is likely to bring about gains in efficiency that will be greater than, and will offset, the effects of any prevention or lessening of competition that is likely to result.
The Consultation Paper makes clear that efficiency gains may include allocative, productive, and dynamic efficiency gains. In practice, efficiency gains from a merger may include productive efficiency gains, due to larger production runs and increased economies of scale. Dynamic efficiency gains from a merger, such as innovation and improved use of technologies and information, may also be important, but they are typically extremely hard to quantify.⁶ As to allocative effects, typically a substantial lessening of competition would be expected to lead to a reduction of efficiency as output is reduced below competitive levels, leading to “dead-weight” losses. Such losses are to be netted out against productive and dynamic efficiency gains.
According to the “total surplus standard”, advocated by many economists, as long as the efficiency gains (usually productive and dynamic efficiencies) from a merger outweigh the efficiency losses from any resulting significant lessening of competition (usually allocative efficiency losses), the merger should be permitted.⁷
But the total surplus standard ignores income redistribution consequences of the merger. A substantial lessening of competition is normally accompanied by a significant non-transitory price increase: indeed, this is the measure used by the Competition Bureau and many others. This redistributes income from consumers of the merged firm’s products to the firm itself.8 The total surplus standard assumes that, if efficiency gains are positive, the “winners” of the redistribution could compensate the “losers” and still be better off.⁹
This is consistent with the view that the only objective of competition policy should be maximization of efficiency. However, it is not necessarily consistent with the objectives in the Competition Act.¹⁰
Some observers suggest targeting the Competition Act just to efficiency objectives, leaving to other policy instruments the task of correcting any unwanted side effects such as redistribution of income:
The use of competition policy to achieve not merely efficiency but an equitable distribution of wealth would result in an excessively complex and non-transparent set of legal rules that would be both uncertain and arbitrary – being determined by the opinions or values of whoever was sitting on the tribunal in a particular case. Government instruments such as taxes and social insurance are much better suited for the goal of distributing income equitably.¹¹
However, these other instruments may be very costly, and often may not be politically feasible. As a result, the negative non-efficiency impacts of a merger may never be corrected through taxation, social insurance, and other such measures.12 Indeed, there is a long tradition in the economics literature that claims that adjusting relative prices is one of the more effective means of income redistribution.¹³
In any event, s. 96(1) says that efficiency gains are to be greater than, and offset, “the effects of any prevention or lessening of competition”. While these effects include efficiency losses (typically allocative efficiency losses), the wording does not limit “effects” to these. In particular, a merged firm with increased market power would generally be expected to raise its prices, inter alia redistributing income from purchasers of its products to the merged firm. It is PIAC’s view that this redistribution is an effect of the substantial lessening of competition, and should be included when balancing efficiency gains against anti-competitive effects.
Indeed, it is not possible to separate the efficiency effects of a merger from the redistributive effects, without making strong assumptions as to interpersonal comparisons of individuals’ income utility. For example, the total surplus approach implicitly assumes that redistribution does not affect overall utility, i.e. that one person’s losses can simply be netted out against another’s gains. But that is true only if their marginal utilities of income are equal. This is a questionable assumption.
As an illustration, consider a merger that results in a net efficiency gain of $1 million, accompanied by an increase in prices that transfers $100 million from consumers to the merged firm. While the final incidence of that $100 million may be different from the initial incidence, for simplicity assume that the entire $100 million goes to the firm’s shareholders.¹⁴ The net result is that shareholders as a group are better off by $101 million, while consumers are worse off by $100 million. If a dollar in shareholders hands were valued by consumers at $1.02 or more, society as a whole would be worse off. Approving the merger would be welfare-reducing, even though the “total surplus” test is met.
The standard assumption in the economics literature is that an extra dollar has more value to a person with a lower level of income. It is reasonable to suppose that, on average, shareholders are better off financially than consumers.¹⁵ If so, evaluation of any measure, that redistributes income from consumers to shareholders, must take into account the loss in aggregate welfare it causes. The “total surplus” test in mergers analysis does not. It is incomplete and should not be used.
Three other factors reinforce the proposition that redistribution from consumers to firms and their shareholders is welfare reducing. First, in the typical case, a firm has many more consumers than shareholders. Thus the redistribution concentrates wealth, inflicting a (smaller) loss on the many, and a (larger) gain on the few. Even if consumers and shareholders started at identical income levels, this redistribution would lead to a loss in welfare (due to declining marginal utility of income).
Second, results in the behavioural economics literature systematically suggest that persons feel a loss twice as keenly as they do gain of the same size.¹⁶ This suggests that the weight to be attached to a monetary loss should be about twice that to be attached to a monetary gain.
Third, the total surplus standard assumes that the decrease in consumer surplus (other than the deadweight loss) results in a corresponding increase in producer surplus: the result is a pecuniary transfer from consumers to producers with no consequences for resources and hence no consequences for social welfare. But the merging firms will likely expend significant resources in getting their merger approved, and in defending their increased market power, through collusion with other producers or otherwise. As a result, much of the increased producer surplus may be dissipated in rent-seeking that is wasteful from the point of view of society.¹⁷ These are efficiency losses that are not counted in the total surplus standard.
In PIAC’s view, in light of the above discussion, the “total surplus” approach described in the Consultation Paper is flawed and should be rejected.

MERGERS AND THE EFFICIENCIES DEFENCE: BALANCING WEIGHTS STANDARD

Currently, the Canadian approach to the efficiencies defence in mergers uses “balancing weights”, as required by the Federal Court of Appeal.18 Essentially, income redistribution effects will be considered in the efficiencies defence. The weight to be given to a dollar of income distribution, relative to a dollar of efficiency gain, is to be determined on the circumstances of the situation, and may depend on the different socio-economic status of customers and shareholders. Indeed, it is possible that different weights should apply to different classes of customers.
Attempts to attach different weights to impacts on different socio-economic groups have a long history. For example, the issue has long been debated in performing developmental project appraisals in developing countries.19 In theory, this approach is attractive, allowing the flexibility and discretion to take into consideration the circumstances of each case. In practice, however, this very flexibility and discretion leads to significant disadvantages.²⁰
First, how are the different classes of affected customers and shareholders to be determined? If weights are to vary according to income levels or socio-economic status, how many categories should there be, and what are the cut-off levels? Should other factors, such as geographic location, be important, e.g. if the losses are to customers in Canada but the gains largely to shareholders in another country? To the degree that some of the costs or benefits flow to employees, rather than to customers or shareholders, should these be identified and weighted separately?
Second, should losses and gains be weighted differently? This suggestion follows from the finding in behavioural economics that on average people are more concerned by a loss than by a gain of equal magnitude.
Third, once the categories are chosen, how are the weights to be selected? Should benefits to one category receive one and a half times the weight of those to another category? twice the weight? three times the weight? Is there a risk that the process to choose weights would become highly politicized?
Fourth, before the weights can be applied, gains and losses must be measured by category. Presumably it is the final incidence of these gains and losses that is important. But such measurements require large quantities of information that might be very difficult to obtain.
These considerations lead PIAC to conclude that, while the balancing weights approach has many attractive features in theory, in practice it would be extremely difficult and controversial to implement. Further, it would cause considerable uncertainty among parties contemplating a merger. Since the weights might vary from case to case, the case law would be of limited use in reducing this uncertainty.
Over and above the practical difficulties of implementation, PIAC has some reservations about the moral justification for the balancing weights approach. Essentially, its underpinning is a utilitarian one, whereby it is acceptable for certain members of society to lose, as long as others gain enough to be able to more than make them whole.²¹ Note however that the approach does not require the winners to actually compensate the losers, only to have the potential to do so. The losers remain losers.
It is not clear to PIAC why, in the context of a merger that prevents or substantially lessens competition, it is acceptable for shareholders to obtain benefits that exceed the magnitude of the efficiency gains generated, where the surplus comes at the expense of losses to customers.
In this context, PIAC notes that the present wording of s. 96(1) requires efficiency gains that will be greater than, and will offset, anticompetitive effects. PIAC reads these words to mean that the offset must actually occur; it is not good enough to demonstrate a hypothetical offset that could happen.

MERGERS AND THE EFFICIENCIES DEFENCE: CONSUMER SURPLUS STANDARD

A third approach would require that, for the efficiencies defence to succeed, customers should not lose because of the merger. In particular, prices should not substantially increase, relative to what they would be, absent the merger.²² Equivalently, consumer surplus should not decrease.²³
This approach has the advantage of limiting the efficiency defence to mergers that are Pareto-improving: nobody in society is worse off, and at least some (presumably the shareholders) are better off.
PIAC finds this approach attractive.²⁴ Shareholders would be free to enjoy the efficiency gains generated by their firms through the merger. At the same time, customers would be no worse off, and may be better off, in terms of the prices they pay. There would be no uncompensated transfer of wealth from one group to the other.
This approach is also relatively simple to implement. The focus, from the customer end, is on the level of prices. For ease of administration, a price index for the firm could be constructed, as a weighted average for all the products sold by the pre-merger firms. For the efficiencies defence to be successful, a requirement might be that it be likely that this price index not increase for a given period of time post-merger.²⁵
A critique of the consumer surplus standard is that it is too stringent: relatively few mergers would be saved under it. The difficulty is that, absent a combination of high price elasticity of demand and low incremental costs, it is commercially rational for a merged firm with newly increased market power to raise prices.
In such a case, the merger might nevertheless be permitted to take place if the merged firm were to commit not to increase prices, as measured by a price index, for a given period, say three to five years. Such a commitment could easily be monitored by the Bureau or an independent third party, with civil liability for breach.
Ongoing monitoring would run counter to the traditional approach found in competition policy, and resembles some elements of price cap regulation.26 However, the Competition Act now contains provisions for the continuing monitoring of a specific industry, air transport, e.g. ss. 4.1 and 104.1.²⁷ Monitoring of an undertaking not to raise prices for a well-defined period of time after a merger would be much less intrusive and much easier to carry out than the air transport provisions in the Act. Indeed, such monitoring could be left to an independent third party.
Finally, PIAC notes that, as reported in the Consultation Paper, the consumer surplus standard is used in the four other jurisdictions surveyed at page 30: the United States, European Union, United Kingdom, and Australia.²⁸ Adoption of a consumer surplus standard by Canada would be a step toward harmonization with these countries.

CONCLUSION

PIAC concludes that the efficiency defence found in s. 96 should be retained. However, to justify a merger, efficiency gains must satisfy the “consumer surplus” standard, i.e. they must not result, or be likely to result, in significantly higher prices to customers.
Some parties might consider this standard to be too stringent, in that it might block mergers that would otherwise generate efficiency gains large enough to more than compensate customers for redistributive losses. PIAC recommends that, in such situations, the merged firm undertake to not increase its average price for a reasonable period of time, say three to five years. In this way, society will benefit from the efficiency gains, shareholders will profit and hence be motivated to seek out such efficiency gains, and customers will not be made worse off.
26 Competition law authorities have traditionally been reluctant to take on ongoing surveillance of a firm or an industry. See for example Posner, op. cit., at footnote one on page 2: “It might be possible to have one’s cake and eat it by limiting the price charged by the efficient monopolist. That is the premise of public utility regulation, but, as I believe all competent students of antitrust agree, it is not a feasible project for antitrust law.” However, there have been counterexamples in the U.S., the best known being Mr. Justice Harold Greene’s ongoing oversight of the Bell System divestiture and accompanying constraints in the 1980s and early 1990s.

Footnotes

1 Considering efficiency as a goal in itself is analogous to accumulating gold and other forms of money for their own sake, as the seventeenth-century French mercantilists advocated. We no longer believe money is intrinsically desirable; what is desirable is the goods and services the money will buy.
2 In addition, it is not clear whether or not s. 96(2) runs counter to Canada’s obligations under the WTO.
3 This thrust was especially strong in the United States. See for example Richard A. Posner, Antitrust Law, 2nd Ed. (Chicago: University of Chicago Press, 2001) at 25. Protection of smaller firms seems to have played a much lesser role, if any, in enforcement of competition laws in Canada, which is as it should be.
4 Following the usage of the Consultation Paper, PIAC uses the term “price” to include non-price attributes of a product, such as quality.
5 Many economists hold that increasing efficiency should be the only goal of competition policy. Other goals, according to them, should be pursued through other policy instruments. See for example Michael Trebilcock et. al., The Law and Economics of Canadian Competition Policy (Toronto: University of Toronto Press, 2002) at 39. However, these other policy instruments are not always available, or may be very costly to use. In a second-best world, it is important that competition policy, even if it should not be the primary tool to resolve problems such as income redistribution, at least should not aggravate them.
6 All of the efficiency gains expected from a merger are very hard to quantify. Indeed, some observers believe that the uncertainty in measuring efficiency gains and losses is so massive that “there should be no general defense of efficiency”: Posner, op. cit., at 133
7 Significant lessening of competition may also result in reduced incentives for productive and dynamic efficiency gains.
8 In turn, the increased revenues will be passed on, in part to employees through higher salaries and benefits, and in part to shareholders through an increase in earnings that is translated into increased share prices. The magnitude of the final incidence is an empirical matter. To simplify the discussion, we refer to shareholder effects and do not discuss employee effects. This has no impact on the arguments advanced.
9 This is the well-known Kaldor-Hicks criterion for welfare maximization. See Richard A. Posner, op. cit., at 23.
10 “The purely legal arguments for total surplus as a criterion to be read directly in section 96 of the Competition Act are not persuasive… Section 96 of the Act is ambiguous.” Trebilcock et. al., op. cit., at 149.
11 Trebilcock et. al., op. cit., at 40.
12 For example, it is difficult to imagine a tax limited to producers of propane, and tax credits or subsidies targeted just to consumers of propane.
13 For example, see J de V. Graaff, Theoretical Welfare Economics (Cambridge: Cambridge University Press, 1957) at 155 and 171: “By far the simplest way of securing the distribution of wealth we desire is through the price system… [T]inkering with the price system is one of the more feasible and generally satisfactory ways of securing whatever division of wealth is desired.”
14 As pointed out above, some of the $100 million will likely also be captured by employees, depending on various elasticities of substitution and the demand for and supply of the kind of labour used by the firm.
15 Some economists question this assumption. They point to the increasingly broad ownership of common stock, both directly and through mutual funds and pension plans (Posner, op. cit., at 24). In cases of luxury goods , such as the Whistler Mountain ski resort, the consumers may be wealthier than the shareholders (Trebilcock et. al., op. cit., at 150). However, recent statistics show that dividend income is heavily concentrated in the upper income levels of Canadians. Thus, for returns reporting income of less than $20,000, 9.6% reported receiving dividends, while for returns reporting income of more than $100,000, 52.3% reported receiving dividends. Put another way, grossed-up dividends made up 0.6% of the income of those with income below $20,000, but 6.8% of the income of those with income above $100,000. Put yet a third way, of the total amount of dividends reported, 0.9% were reported by taxpayers with incomes of less than $20,000, while 56.8% were reported by taxpayers with income of more than $100,000. (Calculated from Canada Revenue Agency, Income Statistics 2002 – 2000 tax year, Final Basic Table 2). This calculation does not reflect dividends received within RRSPs or pension plans. Nevertheless, using receipt of dividends as a proxy for share ownership, clearly share ownership is concentrated at upper income levels, where the marginal utility of money is less.
16 Tversky, A. and D. Kahneman (1992), “Advances in prospect theory: cumulative representation of uncertainty”, 5 J. Risk and Uncertainty 297. See also Barberis, N. and R. Thaler, “A Survey of Behavioral Finance”, Chapter 18 in Constantinides, G.M., M. Harris and R. Stultz, eds., Handbook of the Economics of Finance (Elsevier Science, 2003) at 1080.
17 See Herbert Hovenkamp, Federal Antitrust Policy: The Law of Competition and its Practice, 2nd Ed. (St. Paul, Minn: West Publishers, 1999) at 502: “A profit-maximizing firm will be willing to spend substantial resources in an effort to acquire or retain a certain amount of monopoly power.” See also Posner, op. cit., at 13: ”[A]n opportunity to obtain a lucrative transfer payment in the form of monopoly profits will attract real resources into efforts by sellers to monopolize and by consumers to avoid being charged monopoly prices.”
18 Commissioner of Competition v. Superior Propane Inc. (2001), 11 C.P.R. (4th) 289 (April 4, 2001)
19 “The use of variable weights on gains and losses to different income groups has been the most controversial issue in cost-benefit analysis in recent years. Many considerations have been raised in discussions of this issue, ranging from practical and procedural questions to moral values and political process.” Anandarup Ray, Cost-Benefit Analysis: Issues and Methodologies (Baltimore: Johns Hopkins Press for the World Bank, 1984) at 22.
20 Trebilcock et. al., op. cit., at 150; Posner, op. cit., at 24
21 This is the Hicks-Kaldor criterion for welfare-enhancing changes.
22 The reader is reminded that here “price” is intended to include non-price attributes, such as quality.
23 The Federal Court of Appeals has rejected this approach in Commissioner of Competition v. Superior Propane Inc., [2003] F.C.A. 53. Thus, a legislative amendment may be required to implement it.
24 As do many observers. See, e.g., Hovenkamp, op. cit., at 503. Furthermore, the consumer surplus standard is more consistent than the total surplus standard with the objectives of the Competition Act.
25 The details of constructing such a price index have been explored in depth in a number of industries in Canada, such as telecommunications and energy, that are subject to price cap regulation. A number of industries in Canada, such as telecommunications and energy, are subject to price caps regulation. Simplifying greatly, an average price index is calculated each year for firms that have market power. The firms must obey the constraint that this index cannot exceed a cap determined by the rate of inflation and by the productivity gains that can reasonably be expected in that industry.
27 Bill C-19 proposes removing industry-specific measures from the Act.
28 According to Massimo Motta, Competition Policy: Theory and Practice (New York: Cambridge University Press, 2004) at 274: “So far, the EC in its decisions has not explicitly ruled out the possibility of using an efficiency defence, but it has not showed much sympathy for this argument either. Whenever cost reductions have been claimed by the merging parties, the EC has dismissed those claims on various grounds.”

APPENDIX

In its Consultation Paper, the Competition Bureau invites parties to comment on a set of specific questions. The following are PIAC’s observations.
1. At present efficiencies gains constitute a defence under s. 96. The Consultation Paper suggests that instead of a defence, efficiency gains could be one of a list of factors, found at s. 93, that inform the Competition Tribunal whether or not a merger is likely to substantially lessen competition.
In PIAC’s view, the presence or absence of efficiency gains does not affect any lessening of competition. Rather, it is a balancing factor in deciding whether a merger should be allowed, despite its anti-competitive effects. Thus, efficiency gains are not a factor on a par with the other factors in s. 93, and should not be confounded with them.
2. As explained above, PIAC favours the continuation of an efficiencies defence. However, the defence should employ a “consumer surplus” standard, i.e. it should be available only if the merged firm undertakes not to increase prices for a reasonable period of time.
3. The principal lesson to be learned from other jurisdictions, in PIAC’s opinion, is the desirability of a consumer surplus standard in the efficiencies defence.
4. Savings from a reduction in output and gains that are redistributive in nature should never be counted as part of efficiency gains. Redistributive effects do enter the consumer surplus standard, however, in that redistribution from customers to shareholders as a result of a merger would not be permitted. Efficiency gains that are likely to be attained by another means should, in principle, also be excluded. However, if there are extra costs associated with “another means”, avoidance of those extra costs could be counted as an efficiency gain attributable to the merger.
5. If efficiencies were to be treated as a factor in determining whether a merger significantly lessens competition, it is not clear what weight should be given to it. If efficiencies are a defence, either the standard is met or it is not. There may be some comfort in larger efficiencies gains, in that measurement is imprecise and a larger measured gain is less likely to reflect a true gain that is zero or negative, but otherwise the size of the gain should not matter. By contrast, if efficiency gains are one factor to be balanced against others, the size of the efficiency gains do matter. Thus, in the face of relatively modest efficiency gains, a merger may nevertheless be blocked.
6. PIAC agrees that any assessment of efficiencies is highly complex and requires elaborate evidence. PIAC notes that use of a balancing-weights standard would make this burden even heavier, whereas use of a consumer surplus standard would not. Incorporation of efficiency gains as a factor under s. 93 would require the complexity of developing appropriate weights, explicitly or implicitly, for that factor.
7. In today’s economy, increases in exports and in import substitution are no longer relevant and should not be the subject of special attention. S. 96(2) should be repealed.
8. Efficiency gains in all markets, whether the one in which the merger is taking place or another, should be counted. It is total welfare of society that should be maximized. PIAC recognizes, however, that evidence on efficiency gains in other markets may be difficult to obtain.
 

Mandatory Arbitration and Consumer Contracts

Full Report can be downloaded here. [pdf file: 0.73mb]

Executive Summary

This report examines the use of mandatory arbitration clauses in consumer contracts. A mandatory arbitration clause is a clause in a contract that requires two parties (a service provider and a consumer) to arbitrate any dispute that may arise from the contract instead of taking the dispute to court. Arbitration is a form of dispute resolution, which is viewed as an alternative to traditional court processes. It involves two or more parties agreeing, through an arbitration agreement, to submit their dispute before a neutral decision maker who will make a decision that will be binding upon both parties. Arbitration clauses in consumer contracts usually appear in the form of a mandatory requirement written into a standard form contract, which the consumer is not able to negotiate or change.
In the commercial context, arbitration has been heralded by some as being superior to court processes in terms of reduced cost, speedier and more effective resolution of disputes, fairness to both parties and reduced complexity of proceedings. The authors examine these claims in the context of consumer to business disputes. Research from other jurisdictions where mandatory arbitration clauses are much more predominant, such as the United States suggests that claims about the superiority of arbitration over court processes do not hold up and that may in fact result in increased costs, with no discernable reduction in time taken to resolve the dispute or reduce the complexity of the proceeding. The negative impacts may also include: lack of transparency, lack of protection for class proceedings, limits on damages, risk of inconsistent results, lack of impartiality on the part of the adjudicator, and imbalance between the parties due to businesses being able to take advantage of repeat appearances before arbitrators. The report assesses the U.S. experience with mandatory arbitration and contrasts it with other jurisdictions. The European Union (where consumer protection is now generally addressed) has taken a stronger stand against mandatory arbitration clauses in consumer contracts. It issued a directive on unfair terms in consumer contracts, which includes mandatory arbitration clauses. The United Kingdom and France have generally prohibited pre-dispute arbitration clauses in consumer contracts. New Zealand has extended its statutory protection against mandatory arbitration clauses to all consumer contracts. Australia has no arbitration legislation. The reason would appear to be a function of its widely privatized utility industry characterized by the prevalence of private ADR, mitigating the need for business to employ mandatory arbitration clauses in consumer contracts.
In Canada the use of mandatory arbitration clauses in consumer contracts is a relatively recent phenomenon. Our research suggests that they are not yet extensively used by Canadian businesses. Recent jurisprudence in Ontario has upheld mandatory arbitration clause in a consumer Internet service provider contract. This caused the Ontario government to adopt provisions in its consumer protection legislation to counter this decision. The legislation states that any term in a consumer agreement that requires disputes arising out of the agreement be submitted to arbitration is invalid insofar as it prevents a consumer from exercising a right to commence an action in the court. The legislation also specifically protects a consumer’s right to commence a class proceeding.
Ontario is the only province with legislation that specifically addresses mandatory arbitration clauses. Other provinces have general provisions about unconscionable trade practices but they may not be strong enough to withstand judicial scrutiny in the face of an arbitration provision. Consumer protection acts that have created statutory rights of action but have not supplemented these with a non-derogation clause will not protect consumers from mandatory arbitration clauses.
Quebec’s treatment of mandatory arbitration clauses is examined in the final section of the report. Quebec does not have any legislation that specifically prohibits the use of mandatory arbitration clauses. Arbitration agreements are defined in the Civil Code of Quebec and the courts have upheld their authority. However, the Civil Code also specifically recognizes and defines consumer agreements and contracts of adhesion. Under both contracts, a clause can be declared null or the obligation under it can be limited if a court finds that it is abusive (a clause which is excessively and unreasonably detrimental to the consumer or the adhering party and is therefore not in good faith). Mandatory arbitration clauses may also be limited by the application of the rules of public order. The rules of public order are rooted in the legislative powers of the province and describes two types of laws: 1) moral laws which protect the institutions that form the basis of social order and 2) the social and economic laws that characterize the desire of the state to regulate economic exchanges. The Quebec Consumer Protection Act and the Civil Code rules governing contracts of adhesion and consumer contracts are examples of this second category of public laws. The courts have held that an arbitration award is not contrary to the public order. An arbitrator may dispose of a question relating to rules of public order since they may be the subject matter of an arbitration agreement. However, under the Code of Civil Procedure, a court may assess an arbitration award to determine whether the decision itself violates principles that are matters of public order. The report describes a case in which a class action was upheld in the face of a mandatory arbitration clause on the basis that it would have frustrated the authority of the Quebec government to adjudicate an action founded on a consumer contract. This decision is being appealed.
The report calls on provinces to introduce legislative changes that will prohibit the use of mandatory arbitration clauses and protect consumers’ right to voluntarily choose a range of dispute settlement mechanisms in their dealings with businesses, whether arbitration, small claims court or class actions.

Corporate Retaliation Against Consumers

Report: Corporate Retaliation Against Consumers: The Status of Strategic Lawsuits Against Public Participation (SLAPPs) in Canada

The Full report is available as a PDF
Download File: slapps.pdf [size: 0.45 mb]

Executive Summary

This report examines the phenomenon of Strategic Lawsuits Against Public Participation (SLAPPs) in Canada. SLAPPs are lawsuits or the threat of a lawsuit, directed against consumers or individual citizens when they publicly criticize products or services or advocate for change. The lawsuit usually takes the form of an action for defamation.
The purpose of a SLAPP is to intimidate the target of the lawsuit into silence. By moving a dispute into the legal arena, the consumer is immediately placed on the defensive for exercising a right to complain and faced with the prospect of legal costs as well as potential liability if the suit is lost. As a result, many SLAPPs may fly under the public radar, as the threat of a SLAPP may intimidate its target into withdrawing the public complaint or criticism.
The report describes a number of lawsuits or threats of a lawsuit in Canada that fit the definition of a SLAPP. This evidence suggests that SLAPPs are very much a Canadian phenomenon and have been initiated against consumers for public criticism of products or services as well as against individuals for advocating on environmental issues.
The report briefly analyses the constitutional questions raised by SLAPPs and draws comparisons to the constitutional and judicial treatment of SLAPPs in the United States. Targets of SLAPPs and some legal analysts have suggested that SLAPPs infringe on the freedom of expression rights outlined the Canadian Charter of Rights and Freedoms. Unlike the United States, legal actions between non-governmental parties (which is the form of most SLAPPs) have not had the protection of the Charter. The report examines two cases that have made strong statements about the consumer’s right of free speech, suggesting that there may be a widening of the application of the Charter to cases involving consumer free speech.
Finally the report examines legislative responses to SLAPPs in Canada and the United States. A number of U.S. states have enacted anti-SLAPP legislation. Canada has a much more limited experience with anti-SLAPP legislation. British Columbia is the only province to have enacted anti-SLAPP legislation, which is was in force only for a short period before repeal by an incoming provincial government.
The report concludes by suggesting that SLAPPs require a legislative response. The evidence suggests that the SLAPP phenomenon is very much alive in Canada. An understanding of the purpose behind SLAPPs and the nature of the legal process indicate that judicial responses are not adequate to protect consumers from the damaging effects of SLAPPs. Because SLAPPs ultimately engage the critically important right of freedom of expression, a legislative response is warranted.
The report offers some analysis of what the components of anti-SLAPP legislation in Canada should contain. Such components would include: mechanisms for early dismissal of a SLAPP, a mandatory cost provision for successful defendants of SLAPP suits on a solicitor and client basis, providing a defence to defamation actions and defining a right of public participation.

Sommaire

Ce rapport a pour objet le phénomène des actions stratégiques contre la participation aux affaires publiques (ASPAP) au Canada. Les ASPAP sont des procès ou des menaces de procès, dirigés contre des consommateurs ou des citoyens qui critiquent publiquement des produits ou des services ou plaident pour un changement. Le procès prend généralement la forme d’une action en diffamation.
L’objectif d’une ASPAP consiste à intimider la(les) personne(s) visées par le procès et à la(les) réduire au silence. Le litige étant transféré devant les tribunaux, le consommateur est tout de suite sur la défensive pour faire valoir ses droits et déposer une plainte. Il doit s’attendre à assumer non seulement des frais de justice mais aussi une éventuelle responsabilité s’il perd son procès. Par conséquent, de nombreuses ASPAP peuvent passer inaperçues, étant donné que la menace d’une ASPAP peut intimider la(les) personne(s) visée(s) et la(les) contraindre à retirer sa(leur) plainte ou critique.
Le rapport décrit plusieurs procès ou menaces de procès au Canada qui répondent à la définition d’une ASPAP. Ces différents témoignages semblent suggérer que les ASPAP constituent un véritable phénomène canadien et ont été mises en œuvre non seulement contre les consommateurs afin de les dissuader de critiquer publiquement des produits ou des services, mais aussi contre les particuliers afin de les interdire de défendre l’environnement.
Le rapport analyse brièvement les questions constitutionnelles que soulèvent les ASPAP et dresse des comparaisons avec le traitement constitutionnel et juridique des ASPAP aux États-Unis. Les personnes concernées par les ASPAP et quelques analystes juridiques estiment que les ASPAP transgressent le droit à la liberté d’expression tel qu’il est mentionné dans la Charte canadienne des droits et libertés. Contrairement aux États-Unis, les poursuites entre les parties non gouvernementales (qui constituent la majorité des ASPAP) ne sont pas régies par la Charte. Le rapport examine deux cas dans lesquels le droit à la liberté d’expression du consommateur a revêtu une part importance dans le procès et semble suggérer qu’il soit possible que l’application de la Charte puisse s’appliquer aux affaires touchant à la liberté d’expression du consommateur.
Enfin le rapport examine les solutions législatives aux ASPAP au Canada et aux États-Unis. Plusieurs États américains ont promulgué des lois anti-ASPAP. Le Canada ne dispose que d’une expérience limitée en matière de législation anti- ASPAP. La Colombie-Britannique est la seule province à avoir édicté une loi anti- ASPAP. Celle-ci n’a été en vigueur que pour une courte durée seulement avant son annulation par un nouveau gouvernement provincial.
En guise de conclusion, le rapport suggère la création d’une solution législative visant les ASPAP. Les témoignages aboutissent à la même conclusion : le phénomène des ASPAP est très présent au Canada. Les objectifs des ASPAP et la nature des procédures judiciaires indiquent que les solutions juridiques ne sont pas suffisantes pour protéger les consommateurs des effets dévastateurs causés par les ASPAP. Étant donné que les ASPAP enfreignent de toute évidence le droit, essentiel, à la liberté d’expression, une réponse législative est justifiée.
Le rapport offre une analyse des éléments devant figurer dans une loi anti-ASPAP au Canada. Ces éléments sont les suivants : des mécanismes pour le rejet précoce d’une ASPAP, des dispositions obligatoires quant aux honoraires pour les défendeurs qui ont gagné leur procès selon une base avocat-client, la possibilité d’assurer une défense contre toute diffamation et la définition du droit à la participation aux affaires publiques.

Regulation of Internet Services – Media Release

Canadians Want Increased Consumer Protection For Internet Services

A new study released today by the Public Interest Advocacy Centre (PIAC) highlights problems with consumer protection for customers of internet services. According to Michael Janigan, PIAC Executive Director and General Counsel, “Canadian internet customers are not being well served by the current hands-off approach to regulation of the Internet”. Janigan also noted “Our survey found that almost two thirds of consumers think that the government should develop and enforce consumer protection rules. In particular, sixty-two percent of customers thought it was very important for the government to develop rules with respect to quality of service.”
PIAC’s study, conducted with the financial assistance of Industry Canada, reviewed the current mechanisms for self regulation and the handling of customer complaints and found them wanting. Currently consumer problems such as spam, service outages and delays, and billing complaints are handled by individual internet service providers (ISPs) in ways which are frequently not transparent or standardized. ISP practices may create an imbalance in service arrangements to the customer’s disadvantage. The PIAC report also warns that the high level of concentration in the high speed Internet market, dominated by two suppliers cable and local telephone companies, bodes ill for future internet consumer welfare.
The report recommends action first by the ISPs themselves to more effectively deal with consumer problems by implementing more effective self regulation through a number of models currently available. Failing such initiative, the report finds public support for appropriate regulatory intervention.
For more information please contact:
Michael Janigan
Executive Director/General Counsel
Public Interest Advocacy Centre (PIAC)
(613) 562-4002 ext. 26
mjanigan@piac.ca
You may download this publication free of charge from our web-site www.piac.ca or if you prefer a hard copy please contact our office at (613) 562-4002 or at piac@piac.ca and we will send you a copy for a charge of $10.00 plus postage which will cover our publication costs.
 

Spam

The Task Force on SPAM, announced by the Minister of Industry on May 11, 2004, wants to hear your views. Please refer to the notice in the Canada Gazette, Vol. 138, No. 27 – July 3, 2004, seeking public comment on An Anti-Spam Action Plan for Canada at http://canadagazette.gc.ca/partI/2004/20040703/html/notice-e.html
You can also actively take part in the debate through the SPAM Task Force Online Public Consultation Forum at http://strategis.ic.gc.ca/sitt/spamforum/index.jspa?language=engPlease make your views known on this important issue.
Le groupe de travail sur le pourriel, dont la mise sur pied a été annoncée par la ministre de l’Industrie le 11 mai 2004, désire connaître votre opinion. Veuillez consulter l’avis publié dans la Gazette du Canada, vol. 138, no 27 – le 3 juillet 2004, qui visait à inviter le public à soumettre des commentaires sur un plan d’action anti-pourriel pour le Canada, à l’adresse suivante : http://canadagazette.gc.ca/partI/2004/20040703/html/notice-f.html
Vous pouvez aussi prendre une part active au débat grâce au forum en ligne de consultation publique du groupe de travail sur le pourriel à l’adresse suivante :http://strategis.ic.gc.ca/sitt/spamforum/index.jspa?language=fre Nous vous invitons à exprimer votre opinion sur cette question importante.