Reform of the Copyright Act
PIAC’s submission to the Standing Committee on Canadian Heritage on reform of the Copyright Act
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Clerk of the Committee
Standing Committee on Canadian Heritage
House of Commons
Dear Mr. Bourgault:
In response to the news release of October 6, 2003 indicating that the Standing Committee on Canadian Heritage has been authorized to extend its review of the Copyright Act to 2004 and to receive submissions from individuals and groups, the following is the submission of the Public Interest Advocacy Centre (PIAC), following upon its summary submission of September 15, 2003. PIAC is also a member of the Balanced Copyright Coalition and supports the positions and recommendations made in the Coalition’s submission dated September 15, 2003.
This submission focuses on the relationship between copyright and consumers in light of current federal government initiatives to amend Canada’s copyright legislation, the Copyright Act. PIAC examined the approximately 540 submissions made by individuals in response to the public consultation papers released by Canadian Heritage and Industry Canada in 2001. This analysis forms part of a report it is producing on the consumer’s view of copyright.
The Public Interest Advocacy Centre is a non-profit organisation that provides legal services and research to Canadian consumers and the organizations that represent them. Our work primarily concerns important public services including telecommunications, broadcasting, energy, financial services and public transportation. We represent coalitions of low income or vulnerable consumers before regulatory tribunals such as the Ontario Energy Board and the CRTC. Through the contributions program for non-profit consumer and voluntary organizations of the Office of Consumer Affairs, Industry Canada, we provide research on consumer issues affecting the marketplace, including current research on copyright and consumers.
In our view, assessing copyright reform from the consumer’s perspective is critical because the public’s interest in having access to copyrighted works forms one half of the ‘bargain’ between copyright holders and users.
The consumer’s perspective is also relevant because copyright in the digital era has become an issue that has a direct impact upon consumers. In recent days we have seen copyright holders in the United States file lawsuits against individual personal computer users for copyright infringement as a result of sharing music files on the Internet. Consumers, therefore, have a critical interest in and an important stake in the copyright reforms being considered by the federal government.
The digital age has altered copyright
Copyright law has traditionally focused more on uses by commercial or institutional actors that would affect copyright rather than the way in which individual consumers have used works protected by copyright. The traditional use of copyrighted works by individuals has been ‘consumptive’. Such uses include purchasing a published book or borrowing it from a library, renting a DVD or videocassette of a movie, buying a music compact disc or photocopying an article from a publication for private use or study.
A key change in the relationship between consumers and copyright is the result of the digital era and the ability of consumers to affect the traditional power of copyright over production or reproduction of an original work. Consumers have access to personal computers which give them the ability to access, store and use information in a number of different ways. At the same time, it is the intrinsic nature of the operation of computers that has the potential to alter the traditional relationship in copyright between creators and users.
A computer works by reproducing content in its random access memory. Therefore, any appearance of a work in a computer, could, in theory, be subject to copyright law. As analysts of copyright in the digital era have suggested, using copyright to regulate uses of works by computers marks a fundamental shift in copyright from regulation of multiplication and distribution of works, to regulation of the consumption of a work.
The copyright balance is tilting away from the public interest
Copyright law in Canada as it has developed, has emphasized the need to find an appropriate balance between creators’ rights to benefit from their works and thus be encouraged to create, and the public’s right to have access to those works to encourage the general development of the arts and science. This balancing of rights is described in this often quoted statement from the case of Sayre v. Moore1:
We must take care to guard against two extremes equally prejudicial: the one that men of ability, who have employed their time for the service of the community may not be deprived of their just merits and reward for their ingenuity and labour; the other that the world may not be deprived of improvements nor the progress of the arts be retarded.2
The Supreme Court recently affirmed the importance of this balancing of rights in Canada’s copyright legislation:
The Copyright Act is usually presented as a balance between promoting the public interest in the encouragement and dissemination of works of the arts and intellect and obtaining a just reward for the creator (or, more accurately, to prevent someone other than the creator from appropriating whatever benefits may be generated). 3
Our concern about the reforms that the government is considering and the current protection measures that are employed by copyright holders is that this careful but importance balance is being tipped in favour of copyright owners.
Fair dealing and the U.S. experience
The comparable provision in the U.S. copyright legislation to the Canadian concept of “fair dealing” is the “fair use” provision. The “fair use” and “fair dealing” provisions have become increasingly important and controversial in the digital era. Despite the apparently more expansive definition of “fair use” in the U.S. legislation, the boundaries of what activities may be considered legal “fair use” have been clearly tested in the digital era by recent U.S. copyright legislation and resulting litigation. This debate revolves around copyright owners’ efforts to protect copyrighted materials in the digital age and whether these protections impinge on or even eliminate “fair use”.
In the U.S. this issue has been raised most recently in relation to the Digital Millennium Copyright Act (DMCA), U.S. legislation enacted to enhance copyright protection in the digital arena. Recent litigation under the DMCA has considered both the extent to which the DMCA eliminates fair use of copyrighted materials and the extent to which protection for the electronic measures put in place by copyright owners, provided in the Act, may be unconstitutional under the free speech clause or First Amendment of the U.S. Constitution.
The U.S. case law is significant for what it says about the relationship between technological measures and legal uses under copyright legislation such as fair use. It shows that technological protection measures can eliminate legal uses under copyright legislation such as fair use. It also shows how legal protections such as fair use may be trumped when technological measures are backed up by legal protections such as those found in the DMCA. In our view, it provides an important warning for the Canadian government as it considers enacting any form of anti-circumvention legislation for the protection of technological measures.
The U.S. copyright reform that produced the Digital Millennium Copyright Act has generated an unprecedented public interest in copyright and a significant public concern about the survivability of legal concepts such as ‘fair use’. The debate it has generated goes to the essence of the question of maintaining the balance between protection and access in copyright.
These issues raise important questions for Canada as it considers copyright legislative changes. Should Canada follow the example of the DMCA? How should it fulfill its treaty obligations concerning digital copyright? Where should the balance between protection and access be drawn? Evaluating these questions requires knowing what constitutes the public interest in Canada’s copyright reform. The response of individual Canadians to the copyright consultation process gives some indication of how the larger public, as a key stakeholder in the copyright debate views these issues.
What consumers have said about copyright reform
Approximately 540 individual submissions of the 700 total submissions (by individuals and organizations) indicated opposition to amendments that would augment the rights of copyright holders over the public or the consumer in the digital environment, whether through a “making available right”, legal protection for technical measures, or legal protection for rights management information.
Many of the submissions also stated their opposition to amendments to the Copyright Act that would bring Canada closer to a DMCA legislative model. Only a handful of responses by individuals indicated support for strengthening copyright protections in the digital age.
The respondents generally expressed concern about technological protection measures eliminating legal uses under copyright such as fair use, as exemplified by this submission:
I believe that in a country such as Canada, no law should favour a given party, but be designed to provide equal, mutually beneficial rights to both the consumer, and the copyright holder. Currently, under US law, the DMCA (which you refer to on the site) has been shown to reduce Fair Use and First Sale rights, which is a staple of US copyright law. Similarly, they will prevent Canadian citizens from exerting any control over the software and media they purchase. I do not believe that these laws will protect corporations and small businesses from so-called “pirates” but will instead increase the demands on the average citizen who simply wants to make use of the product he legally purchased.4
They expressed concern about legal protections of technological protection measures upsetting the balance between copyright holders and the public in favour of copyright holders. They also suggested that legal protection of rights management information would produce the same effect in terms of deterring legal uses as technological protection measures.
Strong concerns were expressed about these protections diminishing or eliminating scientific enquiry and free speech values. Some expressed the concern that consumers were left out of the copyright debate:
My suggestion to the Canadian Government is to give more time and exposure to this issue. These changes to the Copyright Act will have a huge impact on consumers. None of the people I talk to are aware that their freedoms and consumer rights are about to undergo a significant change. Many of these changes cater to the needs of digital content publishers, at the expense of consumer interest. I believe that Canada should give digital content some time to mature before attempting to regulate it. When that time comes, it should be through an open forum, equally represented by the copyright stakeholders and consumer advocates. I believe that the voice of the consumer is clearly understated in today’s discussions.5
Finally, some submissions implied that the digital age requires a rethinking of the traditional approach to copyright:
Copyright is a careful balance. The fact that works are easier to copy (both legally and illegally) in the online world does not mean that we should automatically assume everyone an infringer. Rights holders should be looking less towards how to prevent users from making copies that may or may not be infringing, and more towards how to adjust their models in order to thrive in a world where physical distribution is expensive, digital distribution is cheap, and information flows freely between all points on the globe.6
The vigorousness of individual opposition to enhanced protections for copyright holders in the digital age evidenced by the number of submissions made to the federal government in 2001, suggests the extent to which copyright has moved from its former position at the periphery of public knowledge or concern. It also suggests that the concerns of individual consumers and the public interest side of the copyright balance cannot be ignored and must be carefully considered as the federal government considers copyright reform.
Copyright is a consumer issue
As suggested throughout this submission, the digital age has moved copyright from its former position as the purview of copyright lawyers and the copyright owners, to an issue of wider public interest. The reason for this has to do with the changing importance of the content that forms the subject matter of copyright and the changing relationship of the public to that content.
One of the critical factors underlying the resurgence in importance of copyright is the increased importance of information as an economic driver. The shift in the developed world from industrial-based economies to knowledge-driven economies is a well-documented phenomenon. The concept of a knowledge-based economy is rooted in the increasing importance of human capital as a source of economic growth. Some of the factors influencing this change include:globalization, the effect of technological change on production, and the falling cost and rising efficiency in the transmission, retrieval and analysis of information. These forces are creating a global economy in which knowledge is becoming a critical resource.
This central importance of information has a direct relationship with how that information is made available to the public at large. It means that societies must ensure the widest possible access to and availability of works that may be subject to copyright, for creative, academic and educational purposes.
This increased economic value of information or intellectual property also exacerbates the existing tension between protection and access underlying copyright. As information becomes a more valuable economic resource, the desire on the part of the content industries (or the representatives of the creators of content) to reap the benefits from ownership and control of this information intensifies.
The Internet is directly involved in the economic ascendancy of information. It is the location where much information will be concentrated and disseminated. The Internet is becoming an important focal point of economic and social organization as evidenced by the rise of electronic commerce and the Internet as a source for communication, information and cultural content. The government acknowledged this by stating in its consultation document:
The evolution of a network-based economy is desirable and inevitable as a social, cultural and economic engine.
Important measures of the success of this economy will be the amount of creative content available on-line and the use made of it.7
Thus, it is critical that copyright reform addresses digital copyright issues in a way that will ensure the public’s access to and involvement in the network-based economy.
Copyright has also become an issue for consumers because consumers are now directly affected by the legal uncertainties created by the digital age. The digital era has fundamentally altered the relationship between consumers or individual users of ‘content’ and the producers or ‘owners’ of that content:
But as existing works are digitized, with or without authorization, or new works are made available solely in digital format, copyright becomes powerless to cope with the manipulation and movement of intangible electronic streams. Detection and enforcement become difficult, sometimes impossible, and rights that appear on the books are ignored in practice. Access to music, art, literature, and other material in digital form has given users the power to modify these works or data at will, replicate them almost infinitely, and transmit them anywhere in the world to others, who in turn have the same capabilities; and power, once given, will inevitably be used. In this world, every user is a potential re/author and re/distributor of material made available electronically to her.8
This change has also placed users/consumers of digital content at legal risk, in a way that could not have been predicted under the initial copyright ‘bargain’ between copyright holders and users.
Recently, copyright holders in the United States filed lawsuits against individual personal computer users for copyright infringement as a result of sharing music files on the Internet.9This legal action was specifically allowed by U.S. digital copyright legislation, which does not contain a private copying exemption for musical sound recordings found in the Canadian Copyright Act and which grants broad powers to charge users. However, the uncertainties of the application of existing Canadian law to new musical formats such as file swapping, has led the Canadian recording industry to suggest that similar acts in Canada are also illegal:
None of the suits involve Canadians and the Canadian Recording Industry Association, CRIA, says it has no plans to launch similar legal action here…”Obviously we are watching the process in the U.S. with great interest and we will sort of take a look and see the results it may have and we will make some decisions down the line,” said Brian Robertson, president of the recording association. For now the CRIA will continue sending warning messages to people who download music. “It’s a fairly consumer-friendly message,” Mr. Robertson said. “It advises them of the damage that the process does to the music that they enjoy and to the artists and to the creative process. And, that it is illegal.”10
Consumers clearly have a critical interest in and an important economic and legal stake in the copyright reforms being considered by the federal government. As a result, the reforms must take into account what the public has already told the government are their concerns and priorities for copyright reform, which include the importance of maintaining the copyright balance in the digital age. The government must also commence the reform process with a clear understanding of the actual state of the balance between protection and access in copyright.
Recommendations for reform of Copyright Act
Our recommendations are guided by a general view that copyright holders already enjoy a significant level of protection in the digital age. Related to this is our concern that contract law is already replacing copyright law in the digital environment.
It is also guided by the view that Canadian copyright reform takes place in an international trade context. There is a need for Canada to balance the increasing economic value of intellectual property in a globalized world with recognition of the importance of copyright as a tool of cultural protection and cultural growth.
It has been argued that copyright holders have three levels of protection available to them: technology, existing copyright law and contract law. The current use of technological protection measures and digital rights management systems gives the rights holder the ability to restrict access and/or control the uses made of a work.11
Existing copyright law provides a further level of protection. As long as the work underlying a digital work meets the requirements for copyright (originality, fixation and connection to Canada or state with which Canada has national treatment) it is protected under the Act.12
The use of DRMs can facilitate the automatic ‘negotiation’ of contracts between content providers and users. In this environment, the bargaining power between the content providers and users may well be unequal. The combined use of TPMs and contracts in this manner could therefore lead to unconscionable transactions.13
The other concern raised by critics is that these contracts may also override copyright law and important legal uses, such as ‘fair use’:
Where technological constraints substitute for legal constraints, control over the design of information rights is shifted into the hands of private parties, who may or may not honor the public policies that animate public access doctrines such as fair use. Rightsholders can effectively write their own intellectual property statute in computer code.14
To grant legal protection for technological measures, as provided by the DMCA, would arguably create a fourth level of protection for copyright holders. It is highly questionable whether such level of protection is needed, given the existing three levels of protection and the more significant consequence of effectively trumping existing copyright legislation and legal rights such as ‘fair dealing’ that it preserves.
The following recommendations address those issues identified by the federal government as part of its short-term reform agenda.
The Public Interest is not served by the DMCA Approach to Copyright Reform
The public has clearly indicated their concern about any amendments to the Act that would bring Canada closer to the U.S. approach copyright legislation in the digital era. Approximately 540 individual submissions of the 700 total submissions (by individuals and organizations) to the Federal Government’s consultation process in 2001, indicated opposition to amendments that would augment the rights of copyright holders over the public or the consumer in the digital environment, whether through a “making available right”, legal protection for technical measures, or legal protection for rights management information. Many of the submissions also stated their opposition to amendments to the Copyright Act that would bring Canada closer to a DMCA legislative model.
Legal Protection for Technological Measures Threaten Legal Uses
The digital era has also created the opportunity for copyright owners to electronically protect copyright works in ways that may prevent consumers from legal access to those copyrighted works. The U.S. experience under the DMCA suggests that the “fair use” protections of copyright have been severely tested and jeopardized by the legal protection of technological measures outlined in the DMCA.
There is evidence both that legitimate uses have been curtailed by the enactment of the DMCA and of strong public concern about the negative impact of the legislation. The evidence of real constraints upon the scientific community and the vigour of legislative response following enactment of the DMCA provide strong evidence of concern about the ineffectiveness and inability of such legislation to protect legal uses of copyrighted material. It also provides an important warning for the Canadian government as it considers enacting any form of anti-circumvention legislation for the protection of technological measures or rights management information.
We would urge the government not to proceed with any new legislative amendments to protect technological measures at this time. As the studies recently commissioned by the Department of Canadian Heritage concluded, there isn’t enough empirical evidence about the current use and circumvention of technological protection measures to require a legislative response. We would add that there is also considerable evidence from the American experience to suggest that danger to the public interest and to the legal uses under copyright are the direct result of putting such legal protections in place.
The “Fair Dealing” Provision of the Copyright Act Must be Expanded
Preserving and enhancing existing permitted uses is critical to maintaining and restoring the balance in copyright. The Act should be amended to provide for a general “fair use” right. This would be accomplished by setting out evaluation parameters, similar to the United States “fair use” provision found in the Copyright clause of the U.S. Code, rather than attempting to identify specific uses that should be added to a defined list of permitted uses in Section 29 and 29.1. This would enable a determination by applying consistent principles regardless of the underlying medium at issue or the ongoing technological changes in order to avoid encountering the problem of applicability of “fair dealing” principles to the next generation of transmission technologies.
The Term of Protection for Unpublished Works should not be extended
We urge the government to rescind the provision contained in Bill C-36 that would extend the term of protection for unpublished works.
The Copyright Act contains a provision that sets out the term of copyright for posthumous unpublished works. This provision, based on 1997 amendments to the Act, limits the protection for posthumous unpublished works to 50 years after the death of the author. Where the death of the author occurred more than 50 years prior to the coming into force of this amendment, the Act adds five years to that term of protection. A bill recently introduced by the federal government would extend that term from a period of 14 to 34 years.
The public interest is clearly not served by such an extension. In an information age, there is a need to ensure that works enter the public domain. There is also a significant cultural priority that Canadian works can be easily accessed for research and scholarship. Canadian historians have expressed the concern that extending protection to posthumous works will place significant obstacles upon their work.
Thank you for the opportunity to provide to this committee a fuller elaboration of PIAC’s views regarding reform of the Copyright Act.
Sue Lott Counsel Public Interest Advocacy Centre 1 Nicholas St., Suite 1204 Ottawa, Ontario K1N 7B7 Tel: (613) 562-4002×23 Fax: (613) 562-0007
1 Sayre v. Moore (1785), 1 East. 36ln, 102 E.R. 139n.
2 Ibid. at 140.
3 Théberge v. Galerie d’Art du Petit Champlain inc., 2002 SCC 34 at para. 30, online: Judgements of the SupremeCourt of Canada
4 Submission regarding the consultation papers by Paul Aubin, online at:
5 Ibid. by Itrat Khan.
6 Ibid. by Ian Goldberg.
7 Industry Canada and Canadian Heritage, Consultation Paper on Digital Copyright Issues at 35.
8 D.Vaver, Copyright Law (Toronto: Irwin Law Inc., 2000) at 295.
9 B. McKenna & P. Waldie, “Lawsuits hit Net music downloaders”, The Globe and Mail (9 September 2003), P.Waldie, “Music industry hails $2,000 win over child” (10 September 2003) A1, A. Harmon “261 Lawsuits Filed onInternet Music Sharing” (9 September 2003).
10 B. McKenna & P. Waldie, Ibid.
11 I. Kerr, A. Maurushat, & C. Tacit, Technical Protection Measures: Part II at 19.
12 Ibid. at 19-20.13 Ibid. at 20.14 D.L. Burk and J.L. Cohen “Fair Use Infrastructure for Rights Management Systems,” 15 Harv. J.L. & Tech. 41 at 51.
Newsletter – September 2000, Vol.7, No.2
IN THIS ISSUE
Local Telecommunications: Where’s the Competition?
Consumer Protection in ECommerce
Moving Foward on Privacy
New Report: Banking in Rural Canada: Ensuring Rural Consumers Have Adequate Service
Proposed Rules for Payday Lenders Present a Dilemma for Consumer Advocates
Local Telecommunications: Where’s the Competition?
If you were one of the many who thought that the CRTC’s decision to allow competition in local phone service, as well as long distance, would quickly eliminate the need for a regulator, think again. Regulatory activity in the telecom area is as intense as ever, just trying to help competition along in an industry still characterized by monopoly. It turns out that competition doesn’t just happen because you allow it; there’s a lot of groundwork that needs to be put in place first.
One problem that competitors face, in both the telecom and cableTV fields, is getting access to multi-unit dwellings. In the monopoly era, there was only one company with which landlords had to deal. Now that there are a number of service providers chomping at the bit to get in to these profitable buildings, landlords realize that they have a potential bonanza on their hands. Suddenly, what used to be taken for granted (access to the building) is now a hot item. But if landlords limit access to certain service providers, what happens to consumer choice?
PIAC is working with its consumer group partners to help the CRTC sort out this problem, with a view to maximizing consumer choice while respecting the needs of building owners to maintain the integrity of their properties.
Service Improvements in Rural Areas
A couple of years ago, in the CRTC’s High Cost Area proceeding, PIAC argued strongly for rural/urban equity, in terms of both quality of service and rates. The CRTC subsequently ordered telephone companies across the country to upgrade service in rural areas. But it left open the possibility of further rate increases in order to fund these upgrades. In response to the CRTC, a number of rural telephone companies have now tabled their service improvement plans. While these plans include important extensions and upgrades of service, they rely on local rate increases of up to 50% to fund the improvements. The rubber has hit the road.
PIAC has been representing residential consumer groups in these proceedings, beginning with the Northwestel hearing in Whitehorse, Yukon in June. In that hearing, PIAC, on behalf of CAC/NAPO, argued against the proposed $5/mo. local rate increase (which would have raised basic local rates to over $31/mo.), citing high levels of poverty and unemployment in many outlying communities. We brought in experts on financial matters to show that the company’s request for a 12.25% rate of return on equity was unreasonably high. And we argued for a fair balancing of the cost burden between northerners and southerners. We’re waiting for that decision. We’ve also filed submissions in respect of other rural telco service improvement plans, opposing local rate increases that would require people to pay up to $31/mo. for basic service.
The Price Cap Review
In preparation for next year’s review of the price cap regulatory regime, the CRTC recently asked for input on the agenda of that proceeding. In association with its consumer group partners,.PIAC filed a detailed submission urging the Commission, among other things, to put telco profit levels and quality of service at the top of the agenda. PIAC emphasized the importance of focusing on how consumers have fared in terms of rates and quality of service, in comparison with the pre-price cap regime in Canada.
CONSUMER PROTECTION IN ECOMMERCE
PIAC is working closely with other consumer groups, industry representatives, and governments to develop appropriate Codes of Practice, Trustmark schemes, and online dispute resolution mechanisms for consumers engaging in electronic commerce. We are also working with our colleagues internationally to ensure adequate protection for consumers in the online environment. Ultimately, we hope to see widely adopted international standards of business practice that will provide consumers with the confidence they need in this new global marketplace.
MOVING FORWARD ON PRIVACY
One of the biggest issues facing consumer groups today is privacy, and in particular, informational privacy. PIAC has been a leading advocate of consumer privacy over the past decade, and continues to play a key role in the development of legislation and policy in this fast-moving area. Over the past few months, we have:
- been working and speaking on issues in health privacy;
- appeared before a Senate Committee to address issues of consumer privacy;
- provided input to the federal government on the design of key regulations under Bill C-6 (re: the protection of publicly available data);
- provided input on and publicly supported Senator Sheila Finestone’s proposed Privacy Charter; and
- responded to the Ontario government’s Consultation Paper on a proposed new Ontario Privacy Act.
NEW PIAC REPORT: BANKING IN RURAL CANADA, ENSURING RURAL CONSUMERS HAVE ADEQUATE SERVICE
Bank branches are quite important to rural consumers and businesses, and when the only bank branch closes in a small town, it can be traumatic for the entire community. Unfortunately, many rural communities are facing just this situation. Our survey of sample rural areas found a 45% rate of bank branch closures between 1989 and 1998. In addition, the banks have announced more branch closures in the next year.
PIAC’s new report documents the emerging gap in banking services in rural areas, considers alternatives to bank branches for delivery of financial services and reports on the rural consumers’ opinion on these alternatives based on a public survey commissioned for the study. The report concludes with five key recommendations to the federal government on how to address the problem:
- Renew the Commitment to Rural Consumers: The federal government should take a fresh look at the rural banking issue, and revitalize its commitment to ensuring that rural Canadians have access to adequate banking services. The federal government should not stand by while rural consumers’ access to banking service is reduced to white label ATMs and informal banking with local merchants.
- Monitoring Access to Banking Services in Rural Areas: As the financial service sector changes, there needs to be monitoring of banking services in rural areas, so that rural consumers’ situation regarding access to financial services can be fully understood. At the moment, it is quite difficult to even track rural branch closures. Also, ATMs are very important to rural consumers, and there is currently no public source of information on rural consumers’ access to ATMs.
- Oversight of Branch Closures and Industry Restructuring:To improve banks accountability to consumers, the government should monitor what activities banks have undertaken to maintain service in rural areas. In addition, it should encourage the banking industry, through monitoring and educational activities, to make service commitments to rural Canadians.
- Support for Communities Facing Branch Closures: The government should encourage other types of branches to replace bank branches. The main way to do this is to increase the potential of credit unions to expand their operations, which is already underway. It is also very important that communities with no bank branches have access to expertise on alternatives to bank branches and how to establish these alternatives in rural communities. The government should therefore set up a program to assist communities in restoring or establishing banking services.
- Strategy on Post Office Banking: The government should immediately review the activities of Canada Post in the banking sector, and develop a federal strategy to ensure that Canada Post’s involvement in the banking sector enhances rural consumers’ access to high-quality financial services, and does not further erode access. There should be a moratorium on the placement of white label ATMs in post offices until there has been a public debate about the role of Canada Post in providing banking services.
Banking in Rural Canada: Ensuring that Rural Consumers Have Adequate Service:
Please call PIAC (613) 562-4002 ext. 60 or fax to (613) 562-0007 Coilbound 90 pages $17.
Proposed Rules for Payday Lenders Present a Dilemma for Consumer Advocates
“Need money before pay day?” asks a Money Mart poster. This is an advertisement for a payday loan, which is a small loan (generally $100 to $300) made on the basis of a cheque post-dated to the customer’s pay day. The cost of a payday loan can range between $15-$25 for $100, which calculated in terms of an annual percentage is between 390% and 650%. While the Criminal Code prohibits charging interest rates of over 60%, no payday lender has been prosecuted, and the industry continues to grow.
Should consumer advocates support rules for payday lenders that will secure their foothold in the financial services sector, or argue for an interest rate cap that would force them out of business? PIAC would lean towards disallowing payday loans, except that several anti-poverty activists have pointed out that many poor people rely on these loans as their only source of credit. It would be better for these people if there were another source of small amounts of credit, but at the moment, there are no other realistic alternatives for people without credit cards or overdraft protection. It is therefore perhaps better to allow payday loans rather than leave many poor people with no source of credit (or only underground ones).
Should consumer advocates participate in the development of rules for payday lenders on the basis that payday loans are a necessary evil? Let us know what you think.
Newsletter – April 2000, Vol.7, No.1
IN THIS ISSUE
Privacy Protection on the Way – Bill C-6 Finally Passes!
Keeping Police Powers in Check
Protecting Consumers Online: Standards for ECommerce
Telecommunications Regulation: What’s Up?
Internet “Have” and “Have-nots” in Canada split along Social Class Lines!
PRIVACY PROTECTION ON THE WAY – BILL C-6 FINALLY PASSES!
After 1½ years of Parliamentary review and delay, Bill C-6, the Protection of Personal Information and Electronic Documents Act, was passed on April 4, 2000. It will be made law as of January 1, 2001 and will initially apply to banks, telephone companies, airlines, and other federally regulated industries, as well as to the trade of personal information across borders. As of January 1, 2004, the Bill will apply to all industries, except those already covered by similar provincial legislation such as already exists in Quebec.
This is a tremendous step forward in consumer protection, and one for which PIAC worked hard. Canadians outside of Quebec will now have legal rights to control over their personal information in the private sector, rights that should have been established in law long ago, before consumer data mining developed into the huge business that it now is. Finally, consumers will be able to complain about the unauthorized collection, use or disclosure of their personal information by private sector companies, and to obtain redress where they have suffered as a result of the privacy invasion.
Bill C-6 requires that companies obtain the individual’s consent to any collection, use or disclosure of that individual’s personal information, except in specific instances such as emergencies, criminal investigations, scholarly research, or for artistic, literary or journalistic purposes. Consent may be obtained via negative option (onus on consumer to refuse consent) where the information in question is not sensitive. However, companies cannot require, as a condition of sale or service, that consumers provide personal information (such as SIN) unless that information is actually necessary to provide the good or service requested. The Bill also requires that organizations give individuals access to their information upon request, and that consumers have the ability to correct inaccurate information about them held by the company.
Individuals can make complaints under this Act to the federal Privacy Commissioner, who has the power to investigate, report on, and publicize infractions of the law. Whistleblowers are specifically protected. Unresolved complaints can be taken by the complainant or the Privacy Commissioner to the Federal Court for a binding order. The Court can order the organization to correct its practices, to publish notices of such correction, and/or to pay damages to the complainant.
For more information on the new law, see Industry Canada’s “primer” and “backgrounder” on the privacy provisions of Bill C-6, available online at http://www.strategis.ic.gc.ca/virtual_hosts/e-com/english/privacy/632d1.html#doc
KEEPING POLICE POWERS IN CHECK
At the same time that Bill C-6 was being passed, the federal government was moving forward new legislation to combat money laundering. Bill C-22, the Proceeds of Crime (Money Laundering) Act, is part of an international effort to crack down on organized crime. It establishes a regime under which banks, insurance companies, accountants, lawyers and others must report regularly to a new federal agency (the “Financial Transactions and Reports Analysis Centre of Canada”) on any “suspicious transactions” occurring in the course of their business. The law creates stiff penalties for failure to report, ensuring that companies subject to the Bill will err on the side of reporting more than necessary. As well, it requires secrecy in reporting, so that criminals do not get wind of any investigation. The new Agency collects and analyses the information from these reports, in order to better detect money laundering activities. It then provides the police with information on suspicious activities.
While recognizing that consumer privacy must be compromised in order to achieve law enforcement goals, PIAC expressed concerns about the extent of covert information collection and analysis regarding innocent individuals under this regime, and urged that the Privacy Commissioner be given effective oversight powers to ensure that individual privacy is not unduly infringed in the course of the new Agency’s operations. Our suggestions were welcomed and acted upon.
PROTECTING CONSUMERS ONLINE: STANDARDS FOR ECOMMERCE
With the rise of electronic commerce and the expectation that more consumers will be shopping online, PIAC and others have been working to develop standards for governments and businesses to use when developing laws and self-regulatory schemes for consumer protection in this new medium.
Together with a number of other consumer advocates, government officials, and business representatives, we have developed a set of principles, entitled “Principles of Consumer Protection for Electronic Commerce: A Canadian Framework” (available online at http://strategis.ic.gc.ca/oca). In brief, they require that:
- Consumers be provided with clear and sufficient information to make an informed choice about whether and how to make a purchase;
- Online vendors take reasonable steps to ensure that the consumer’s agreement to contract is fully informed and intentional;
- Online vendors and intermediaries respect the privacy principles set out in the CSA International’s Model Code for the Protection of Personal Information (now law);
- Online vendors and intermediaries take reasonable steps to ensure that transactions in which they are involved are secure;
- Online consumers have access to fair, timely, effective and affordable means for resolving problems with any online transaction;
- Consumers be protected from unreasonable liability in online transactions;
- Online vendors not transmit commercial e-mail without the consent of consumers, unless a vendor has an existing relationship with a consumer; and that
- Government, business and consumer groups promote consumer awareness about the safe use of electronic commerce.
We are now working to expand and operationalize these principles through, perhaps, a “seal of seals” program, under which the proliferating array of private sector trustmarks and seals would be themselves assessed against our criteria for effective consumer protection.
One of the most well known private sector seal programs is that of the Better Business Bureau. PIAC recently completed a detailed analysis of BBBOnline’s draft Code of Online Business Practices, comparing it to a number of other standards and voluntary codes in use. That report is available from PIAC’s website.
TELECOMMUNICATIONS REGULATION: WHAT’S UP?
RATES FOR BASIC SERVICE: THE SAGA CONTINUES
The thorny issue of how to ensure, in a competitive environment, that all Canadians have access to affordable, high quality telecommunications service continues to vex regulators and governments. Without appropriate regulatory intervention and/or government subsidies, competition threatens to result in reduced service and significantly higher rates in rural and remote areas, as well as higher rates for residential customers generally.
On behalf of Action Réseau Consommateur, the Consumers’ Association of Canada, and the National Anti-Poverty Organization, PIAC continues to press hard for an effective solution which minimizes the burden on consumers. We are active in a number of CRTC proceedings bearing on this issue, providing suggestions for replacement of the current “toll contribution” mechanism with a more sustainable subsidy scheme, and for a fair spreading of the burden among industry, business customers, and residential consumers.
$100 MILLION IN RATE INCREASES PREVENTED!
In a recent proceeding, we successfully prevented the telephone companies from raising the basic residential price cap by app.5% in order to reflect a reduction in the “direct connection” charge they apply to long distance service providers accessing their local facilities. The CRTC agreed with us that such “rate rebalancing” was neither necessary nor appropriate. The overall impact of this rate change amounts to $146m. in Bell Canada territory alone, of which $100 m. would have been applied to the residential price cap (potential rate increases) if Bell had had its way. Other telcos wanted similar price cap adjustments.
DIRECTORY SERVICE CHARGES CONFIRMED
Our appeal of the CRTC decision to permit Bell Canada to charge for directory assistance (at 75¢ per call) even when the operator can’t find the number was denied, but by the slimmest margin – we had a number of Commissioners on our side. We are currently considering an appeal of this ruling to the Minister of Industry.
QUALITY OF TELEPHONE SERVICE: NEW INDICATORS BEING CONSIDERED
One of the results of competition in telecommunications has been that companies focus their attention on high-end customers. This can mean that the quality of basic service, especially that provided to captive, lower-end customers, suffers. On behalf of ARC/CAC/NAPO, PIAC recently made submissions to the CRTC urging adoption of more effective service quality indicators for business office response time, customer complaints response time, and directory assistance.
CRTC PROCESS OF “NEGOTIATED RULE-MAKING”: ENSURING THAT THE PUBLIC INTEREST IS REPRESENTED
For the last few years, the CRTC has relied extensively on a network of industry working groups (the “CISC process”) to develop detailed rules for the implementation of local competition in telecommunications. On behalf of ARC/CAC/NAPO, PIAC was an active member of the group that developed rules for the transfer of customers between local phone companies – with the goal of minimizing disruption of customer service and ensuring that all such transfers are properly authorized.
Our experience made it clear that this process, while public and open in theory, is in practice inaccessible by groups without large resources behind them. Unlike traditional processes, negotiated rule-making through cooperative working groups requires a tremendous amount of time and money, which consumer groups simply do not have at their disposal. PIAC therefore urged the CRTC to ensure that the traditional regulatory process involving public notices and the opportunity for public comment continue to apply to all issues or consensus recommendations arising out of the CISC process, especially on matters of interest to consumers.
Internet “Have” and “Have-nots” in Canada split along Social Class Lines!
A new study, The Dual Digital Divide: the Information Highway in Canada produced by PIAC in collaboration with Ekos Research Associates, clearly documents that while there has been growth with the Internet in Canada over the past three years, at the same time access to, and the use of, the Internet and other new technologies is now highly polarized along social class and generational lines.
The study, based on quantitative and qualitative research of Canadian households and social trends, found that from 1997 through 1999, higher income households were three times more likely than lower income households to have access to the Internet from home. By 1999, about two thirds of upper income households had access as opposed to one in four low income households. The report also found that in addition to a digital divide between those connected and not connected, another divide exists between identifiable non-user groups. One group clearly desires access but faces major cost and literacy barriers. The second group of non-users have little interest or perceive no need for Internet access. The report identifies these two aspects of the digital divide (users and non-users; and segmented non-user groups) as a “Dual Digital Divide”.
These findings have major implications for industry and policy makers. In spite of expectations or assertions that all Canadians will be connected, the reality is that a large number of Canadians are likely to remain unconnected. As well, the study found that both Internet users and non-users desired a choice in the means they use to access information and services. These circumstances will require organizations to ensure that information and services are provided in both electronic and other formats (e.g., paper, in-person, mail, etc.). Moreover, to avoid creating a two-tiered information society (first and second class citizens) information must be of similar high quality regardless of how it is made available and accessed. Other report findings: it will be necessary for governments to devote more resources for the creation of diverse socially and culturally relevant information, both in electronic and other formats; federal government departments will have an ongoing role to provide support for community access and networking services to ensure that Canadians have some form of access available, and to help develop relevant community-based information and communication resources. The report will be available to the public during May.
Newsletter – November, 1999 Vol.6, No.3
IN THIS ISSUE
Skies Wide Shut: Airline Competition on Standby
No Prescription For Privacy: Druggist Misdiagnose Bill C-6
New Report: Utility Shopping – Are Consumers Ready?
Summer Follies: CRTC’s 411 Caper
Skies Wide Shut: Airline Competition on Standby
This fall, while the media was pre-occupied with the storyline of which airline was going to triumph in the takeover wars, PIAC together with Transport 2000 Canada, The Air Passenger Safety Group, The Council of Canadians and Options Consommateurs formed a coalition, The Canadian Association of Airline Passengers (CAAP). The purpose of CAAP is to represent the interests of ordinary airline customers in whatever environment came about as a result of the corporate power struggles.
CAAP noted that the consumer unfriendly conditions that are all too frequent in the North American air market would become exacerbated in a monopoly domestic market without proper consumer protection measures being implemented. To that end, an Airline Passenger Bill of Rights was prepared by the original founding members setting out key standards for safety, quality of service, and pricing. The founding organizations were later joined by the Manitoba Society of Seniors, Canadian Federation of Students, Rural Dignity of Canada, Ontario Coalition of Senior Citizens’ Organizations, lending support to the efforts to secure a customer rather than a industry centered airline market in Canada.
CAAP believes that all passengers in Canada are entitled to reasonable standards of comfort, quality and safety on board any flight. In addition, the price of that flight and the calibre of passenger service either should be the product of a genuinely competitive market or a regulatory regime setting fares on reasonable costs and mandating compliance with reasonable quality of service indicators.
PIAC and CAAP have brought their message to parliamentarians in the House and Senate, Transport Canada, the Competition Bureau, and the Cabinet. We would further like to see the establishment of an Air Transport Users Council that would help speak for consumers concerning the establishment of consumer friendly policies for airlines.
For further information concerning CAAP and the Airline Passenger Bill of Rights see the PIAC web site at www.piac.ca.
No Prescription for Privacy: Druggists Misdiagnose Bill C-6
Last year, the federal government came though on a promise to introduce legislation to protect the personal information of Canadians from abuse in the private sector. Bill C-54, “The Protection of Personal Information and Electronic Documents Act”, combines two separate legislative initiatives. In its reincarnation as Bill C-6, the Act has passed the House of Commons and is now before the Senate.
While very much a compromise from our perspective, the Bill is worthy of support because of the protections that it would give to Canadians who are increasingly concerned about the unauthorized uses of their personal information for commercial gain. The Act would finally give Canadians some degree of privacy protection and control over their personal information that is collected, used and traded in the private sector. (continued pg.2)
However, some special interests—including the Canadian Pharmacists Association, the Ontario Association of Medical Laboratories, and the Ontario Ministry of Health—are lobbying the House and the Senate to have personal health information exempted from the Act. They claim that it is unnecessary to protect health information in the same way as other personal information and that it will be too great a cost for the health care system.
Twenty-five organizations from across the country recently sent a letter to the Prime Minister, the Minister of Health, and all members of the Senate urging them to pass the Bill and to resist the pressure from the health sector to exempt health information from protection under the Act. A copy of the letter together with the names of the supporting organizations is on the PIAC website. www.piac.ca
FACTS ABOUT BILL C-6 AND HEALTH INFORMATION
1. What is the purpose of Bill C-6?
The Bill establishes in law a set of fundamental, widely accepted principles of fair information practice centered around the individual’s right to know and control what is being done with his or her personal information. It is an effort to bring our laws into line with our social expectations, now that technology has transformed the landscape such that we can no longer take our privacy for granted.
Several years in development, Bill C-6 is a finely crafted compromise between the public’s growing demand for privacy protection and business’s demand for minimal regulatory restrictions. The Bill is accepted by a wide range of industry and public interest groups as a reasonable set of rules for protecting informational privacy in the changing marketplace.
2. To whom does Bill C-6 apply?
Bill C-6 applies to private organizations, but only when they collect, use or disclose personal information in the course of commercial activities. It does not apply to governmental bodies. Nor does it cover anonymous information (e.g., for epidemiology studies or monitoring of general health care costs).
Bill C-6 would not apply to provincially regulated entities such as pharmacies, medical clinics and laboratories, until three years after it comes into force. In the meantime, it is expected that provinces will develop similar legislation, which would likely take precedence over Bill C-6.
3. What does Bill C-6 require?
The Bill requires, among other things, that companies obtain the informed consent of individuals to the collection, use and disclosure of their personal information, except in specific instances. The Bill says that this consent should be explicit in the case of personal health information, given the fundamentally private nature of it and the potentially prejudicial uses to which it can be put. However, for uses and disclosures that are reasonably expected by the individual in the context of the transaction (e.g., delivery of the service requested; communication of test results back to the ordering physician), consent can be implied.
Consent need not be obtained at the time of each and every transaction. As long as the individual has been properly informed of the purposes and has consented to them, the consent to those purposes is valid until it is withdrawn.
Bill C-6 does not require consent to disclosures of personal information where “required by law”, or where “requested [by a government institution] for the purpose of administering any law of Canada or a province”.
4. Why should health information be included in this regime?
Health information is among the most sensitive information about individuals. It deserves at least as much protection as other types of information. As noted by the Minister’s Advisory Council on Health Infostructure, patient privacy is an essential component of a successful health care system: “informed consent should be the basis for sharing [personal health] information” (p.11), and “patients should be able to exercise control over what portion of their electronic record is seen by other professionals and providers” (p.3-6).
Bill C-6 provides baseline protection for health information. Health-specific legislation is also needed to address the special sensitivity of medical records and to achieve the goal of effective health care. But under no circumstances should the health sector be exempt from the fundamental principles set out in Bill C-6: people deserve to know what is being done with their personal health information, and to control the subsequent use or disclosure of this very sensitive information.
5. Why not let the provinces take care of this?
First, not all personal health information falls under provincial jurisdiction; some is in the federal sphere. Second, it is unlikely that all ten provinces will legislate to protect health information privacy – yet all Canadians deserve to be protected. Third, the track record of those provinces that have tried to legislate in this area does not bode well for privacy. For example, Ontario’s last proposed Bill on health information was characterized by many as an access bill, not a privacy bill.
6. Won’t Bill C-6 compromise our ability to deliver effective health care?
Patient privacy and effective health care do not conflict; rather, they go hand-in-hand. If patients feel that their personal information may be used for purposes against their wishes, they may refrain from providing full or accurate information, thus compromising the integrity of the health care system. Canadians value their privacy, as well as their health care system. Both are “public goods”.
7. Won’t Bill C-6 lead to higher health care costs?
Bill C-6 requires commercial health care providers to obtain the explicit informed consent of patients to uses of their personal information beyond those necessary to render the service in question. Explicit consent is not needed for uses and disclosures that are clearly expected by the patient as part of service delivery (e.g., communications with insurers or prescribing physicians). Thus, the cost of delivering of primary health care would not be significantly affected.
It is only in respect of other non-necessary purposes, such as drug marketing and medical research, that explicit consent is required. Individuals should have a right to control such secondary uses of their personal information.
New information technologies offer opportunities for tremendous gains in the efficiency and effectiveness of health care through the sharing of patient information among health care providers. Requiring patient consent to such sharing may add to the cost of the “health infoway”, but it is essential if patients are to have control over the uses to which their personal health information is put. New technologies will still offer net savings and improvements in health care.
8. Won’t Bill C-6 limit our ability to conduct medical research?
No medical research using personal information should be permitted without the individual research subject’s knowledge and consent. This is a basic tenet of ethical research. In any case, most research can and should be conducted using anonymous information.
New PIAC Report Utility Shopping: Are Consumers Ready?
Deregulation has taken place in Canadian utilities such as transportation, telephone, natural gas, and is imminent in electricity. Once the market has been deregulated, consumers can switch from the former monopolist to another company. But are residential consumers are actually ready for the utility shopping that is brought by deregulation of utility services?
This report provides an overview of the deregulation debate, which shows that residential consumers have reason to be wary of deregulation. Residential consumers do not automatically benefit from deregulation of a utility market. In some cases, consumer choice is slow to emerge, and when it does emerge choice is limited. Deregulation can lead to price increases and quality decreases in practice, even though competition theory stipulates that the opposite should be true. Some or all of these factors can compromise social values, such as affordability and accessibility.
The report evaluates the level of consumer sovereignty that actually exists in Canadian deregulated markets, by examining the results of a national survey on consumer knowledge and attitudes towards the long distance, natural gas, and future electricity markets.
Key findings of the study include:
- Where natural gas deregulation has taken place, consumers’ ability to understand and make choices about natural gas prices and contracts is so low that real competition is not possible in a large segment of the market;
- In the long distance market, consumer knowledge and confidence has developed since competition was introduced, though there are still significant gaps;
- Abusive practices are rampant in the natural gas market.
The report concludes with recommendations for decision-makers in implementing future deregulation of utility markets, aimed at ensuring that real consumer sovereignty in these markets materializes, and is established early on. The recommendations are:
- “Workable” competition should work for residential consumers as well as business customers;
- Advertising needs provide more information;
- There should be sources of independent information for consumers;
- Just because it is deregulated doesn’t mean it never needs to be monitored.
The report will be available in December 1999.
Please call (613) 562-4002 ext. 60 or fax to (613) 562-0007 Coilbound 78 pages $15.
Summer Follies: Bell Canada’s 411 Caper
In August of this year, consumers in Ontario and Quebec were startled by the news that they would have to start paying for Bell’s Directory Assistance (at 75 per call) even when the operator can’t find the number requested.
The CRTC had accepted arguments from Bell Canada that directory assistance calls for numbers that the operator can’t find are particularly expensive for the company, and that since the company has to bear these costs, it should be permitted to recover them through the regular 75¢ charge.
On behalf of a coalition of consumer groups, PIAC opposed the Bell application and, buoyed by the public outcry, launched an appeal to the CRTC to review and vary the decision. Backing PIAC’s appeal were the results of an informal survey of 100 directory assistance calls conducted by PIAC with a view to testing the accuracy of Bell’s 411 service.
Of the 100 numbers requested, we found an error rate of 24%: Nine of the existing, listed numbers were not found by the Bell operators; nine of the numbers provided were incorrect; in four cases a central switchboard number was provided rather than the specific department requested; in one case an old number was provided; and in one case the number was provided in French even though it was requested in English.
The CRTC decision means that Bell is equally reimbursed for failure and success, such that there is no financial incentive for it to improve its directory assistance service. Moreover, charging for a service even when it isn’t rendered seems contrary to normal business practice.
The CRTC is still considering our appeal.
Competiton Policy, Consumers and the Multi-Lateral Trading System
Public Interest Advocacy Centre (PIAC)
While the objectives of trade liberalization are intimately tied to the potential economic benefits that will be provided to individual consumers in signatory nations, there sometimes appears to be some ambivalence on the part of WTO proponents to the idea of making such consumers a focal point of policy promotion. For example, the recent Canadian government response to the Report of the Standing Committee on Foreign Affairs and International Trade, Canada and the Future of the World Trade Organization(1), concentrated almost exclusively on extolling the national benefits from the producer standpoint, highlighting the development of export markets, entrepreneurial success, and jobs. These are important national goals, but the relentlessly producer perspective of the report tends to obscure other key potential advantages of freer trade that might serve to earn the WTO some increased public standing.
The reluctance to make the WTO mission relevant to the ordinary consumer is puzzling, as public support for and confidence in the WTO is hardly at the high water mark. The desirability of multilateral trade agreements, negotiated through the WTO, is an issue which has taken on a public profile that now cannot be contained within the usual fora for resolution of intergovernmental conflict on commercial issues. The WTO process, as well as the surmised results of that process, has attracted global opposition from a wide variety of public non-commercial interests.
The influential American organization, Public Citizen, describes the WTO process in its Citizens’ Guide to the World Trade Organization as:
“A global system of enforceable rules is being created where corporations have all the rights, governments have all the obligations, and democracy is left behind in the dust.”(2)
This theme echoes no less vociferously in some Canadian non-commercial circles:
“Because of the way trade agreements are negotiated, it is not surprising that the results reflect a myopic preoccupation with the interest of large corporations and the virtual indifference to societal goals such as environmental protection, democratic processes, workers rights or cultural diversity. The WTO purports to be an economic constitution for the planet it is written by and almost entirely for the worlds largest corporations”.(3)
Consumers International (CI) representing 247 organizations in 111 countries has called upon the WTO to reconsider the action needed to achieve its original goals and to ensure that consumer rights are given equal status with business interests.(4) CI went on to recommend that no move be taken to negotiate international competition rules until consultations have been complete with the relevant UN bodies, principally UNCTAD and civil society organizations(5) , and until there is a clear commitment to the paralled commitment to implement effective consumer policy in the process.
However, as we later note, Consumers International is not reticent about making recommendations concerning mechanisms for controlling international anti-competitive and restrictive business practices that must be incorporated into any future multilateral competition agreement. This reflects the usual flexibility that consumer representatives are obliged to demonstrate . If the WTO is, in fact, making “an economic constitution for the planet”, based on a competitive model, it is best that this constitution incorporate the historical lessons learned by consumer advocates as to how to make it work.
It is interesting to observe that the WTO itself has begun to define its identity and its role in a more populist fashion, presumably seeking some distance from the transnational corporate mind set that has been ascribed to it by its opponents. The WTO web site now highlights the benefits of choice to consumers enhanced by free trade, as well as the resultant downward pressure on price:
Look around and consider all the things that would disappear if all our imports were taken away from us. Imports allow us more choice- both more goods and services to choose from, and a wider range of qualities .Even the quality of locally produced goods can improve because of the competition from imports.
…..The WTO’s global system lowers trade barriers through negotiation and applies the principle of non-discrimination. The result is reduced costs of production (because imports used in production are cheaper) and reduced prices of finished goods and services, and ultimately a lower cost of living(6).
Whatever the collateral problems caused by a liberalized multilateral trading process, this uncomplicated prose from the WTO has probably nailed down the important objectives of the free trade process for the ordinary consumer better than a boxcar of testimonials from happy multinationals. If the WTO can’t provide choice and market efficiency for the citizens of its signatory nations, there seems little point in investing political or ideological capital simply to make the world safe for exporters.
However, even the halcyon model of consumer benefits proposed by public relations of the WTO is predicated on the existence of robust competition for the provision of goods and services. Without a workably competitive market in a signatory country, consumers in that country may have their prices and choices fixed or limited by private constraints in the form of anti-competitive business conduct. This conduct may consist of national industries conspiring to shut out a foreign market entrant, or behavior by the market entrant itself that insulates it from the rigors of competition. The latter result might eventuate through abuse of a market dominant position, or, perhaps more likely, through arrangements of comfort with a national government. In the latter case, while the needs of the exporting industry and the government may be met through opening up market access to that industry or business, the consumer benefits of freer trade are effectively sabotaged.
The control of private commercial anti-competitive conduct in the multinational trading context should not be something relegated to the status of a possible trade agreement refinement that is without immediate resonance beyond national borders. For one thing, the decade of the 1990’s has seen the popularization and deployment of a technology, the Internet, with the potential to take the globalization of commerce to the level of the individual consumer. Electronic commerce, enabled by the Internet, allows individual citizens to trade in products and services previously restricted by logistic and regulatory barriers. However, there is no assurance that the technology itself can overcome anti-competitive conduct. As a recent OECD study noted:
“Many e-commerce products benefit from non-rivalry (one person’s consumption does not limit or reduce the value of the product to other consumers), network externalities (each additional user of a product increases its value to other users), and increasing returns to scale (unit costs decrease as sales increase). These factors create an environment where producers may seek to engage in practices that permit them to establish themselves as the, or part of the, de facto standard. This can hinder innovation and competition.”(7)
A recent policy statement by the Trans Atlantic Consumer Dialogue (TACD) was even more specific:
“In the area of data networks, it is essential that policy makers protect consumers against monopolistic and anti-competitive practices. Increasing returns and network effects lead to problems when dominant firms use market power to exclude rivals or limit the ability of rivals to develop products that are interoperable. Practices of bundling products, technological tying of products, or other techniques can reduce competition and lead to high prices, reduced consumer choice or lower quality. There are particular concerns for those elements of networks that provide user interfaces for consumers, including default menus for electronic commerce and selection of editorial content. Policy makers should use appropriate competition policy and regulatory remedies to ensure that consumers have open platforms for network access, and that private control over network bottlenecks are not used to exercise control over essential network navigation tools or content.”(8)
Without a harmonized and cooperative framework of global competition enforcement, the prospect of effective policing of cross-border anti-competitive conduct in electronic commerce is somewhat remote.
In our view, the establishment of international competition policy by multilateral agreement should be an essential objective of any regime of WTO trade arrangements. We would note that the obstacles to the negotiation of such an agreement have been frequently emphasized. In contrast, the principles of consumer welfare in the international marketplace which would be advanced by the same, have been overlooked or brushed aside by the opponents. We would also suggest in the current polarized environment surrounding multilateral trade discussions, that such an agreement may have the effect of polishing the significantly tarnished lustre of multilateral trade agreements with an increasingly hostile public.
In this paper, we will discuss the benefits to consumers of the establishment of international competition policy by agreement. In addition, we will attempt to deal with some of the key issues and concepts associated with the implementation of a multilateral competition policy agreement including common standards and resolution of disputes.
Benefits to Consumers
Consumers International notes that:
“The relationship between competition policy and consumer protection policy is based on two elements:
- The recognition that competition legislation will have direct consequences for consumers.
- The acknowledgment the competition legislation will have an impact on economic development of a country. Competition policy therefore has an indirect effect on consumers.”(9)
An essential purpose of competition policy is to enhance consumer welfare in the aggregate. This goal can be realized by the accomplishment of two objectives:
- to ensure consumers the low prices and high quality that flow from effective competition
- to assure fairness, a level playing field, for entrepreneurs who provide that vital competition.(10)
Notwithstanding frustration with the emphasis by some competition authorities upon the efficiency of markets over consumer protection issues, world consumer organizations have regarded competition law as an important line of defense against objectionable business practices. Accordingly, the establishment of genuinely competitive international trade markets is an ideal that contains initial appeal for consumers in general. As the president of CI recently noted:
”…Both trade and competition, through their ability to promote innovation, choice, high quality and good prices have been welcomed and promoted by consumer groups. Effective open markets give people power through their consumption choices. In addition, economic growth, which provides greater resources for consumers to exercise choice, is also welcomed, though the consumer movement attaches great importance to the broader implications of economic growth particularly its equity (that is all consumers should be able to benefit at least to the extent of being able to meet their basic needs) and sustainability.”(11)
This optimistic outlook towards the benefits of a competitive market drives the consumer enthusiasm for the transplant of domestic competition law into the international trading arena. There is an operative assumption that, in the absence of anti-competitive behavior, competition can encourage product innovation, consumer choice, and efficiency of delivery in a multilateral framework.
It is not an economic cure-all, however. Globally, and domestically, competition seems less able to promote universal access to important products and services or to prevent significant market segmentation. Any agreement on competition policy should not impede national efforts to address those issues provided such efforts are non-discriminatory in effect. For example, in telecommunications, the national subsidization of network access is specifically permitted with a non-discriminatory proviso under the terms of the Reference Paper setting out the Regulatory Principles (adopted by most signatories to the WTO agreement on Basic Telecommunications Services).
As well, a competitive market is not necessarily an end state goal shared by all stakeholders in the multilateral trading system. As Julian Edwards of CI has noted:
”…Consumers believe in and support competition but believe it must be both promoted and regulated – it does not occur naturally in most markets”. (12)
Industry stakeholders are usually more interested in winning any competition rather than seeing it flourish. Some of the very corporate steps lauded by shareholders and grateful employees to increase international market share may be subversive of competition and consumer welfare in general. Thus, it makes little sense to promote free trade between governments by touting the consumer welfare benefits of genuine competition, while the tools are lacking to ensure to enforce private restraints on competition.
Role of Competition Policy in Ensuring Competition
Consumer groups and organizations in countries which have developed extensive consumer protection in competition laws have been largely critical of the lack of efforts to date to enhance consumer rights in the multilateral trading process. The impatience with the WTO process stems both from the lack of competition protection worldwide, (outside of ant-dumping restraints) and the relative silence of trade agreements on issues such as consumer access, product safety, and quality. As discussed elsewhere in this paper, there is a fear that any agreement on competition law would import the lowest common denominator of standards for sanctioning anti-competitive behaviour.
Whatever the level of skepticism that may be present in developed countries concerning harmonization of competition policies, there is perhaps even greater initial inertia working against this idea in the developing countries. This is not surprising. Notwithstanding the acknowledged efficiency gains brought about by the market tool of competition, studies have not shown an empirical link between the presence of competition policy in the law of a country and its development prospects.(13)
Moreover, developing countries may be reluctant to adopt competition policies that may result in the squeezing of the profitability of prominent national businesses by foreign competitors and the attendant affects upon the employment in such businesses.
However, it may well be that the adoption of liberalized trading under the WTO has established an incentive to adopt competition policies. One commentator has noted the following:
“The liberalization of the economies that has taken place in most developing countries may accelerate the process of adoption of competition laws. Most developing countries have dismantled, to a large extent, interventionist measures and are growingly exposed to restrictive practices and the abuse of market power by foreign investors and export suppliers”.(14)
Developing countries must be concerned with the possible development of international cartels in a free trade environment which allocates national markets among participating firms or international export cartels which may conspire to fix prices and output across national markets. In fact, international competition law may be necessary to attain some of the goals which are inherent in the promise of globalization of trade markets. These include:
- ensuring the fair distribution of benefits
- avoiding concentrations of market and political power
- innovation based growth
As well, firm global standards for anti-competitive behaviour, with effective sanctions for their breach, should reduce threats from miscreant industries to relocate to jurisdictions more tolerant of such conduct.
International Competition Law Agreement
While there may be increasing recognition by all countries of the desirability of competition policies, the differing stages of development of such policies and the economies of potential signatory nations must also be recognized. However, the objectives associated with enforcement of global competition laws will not be met by widely differing national competition policies.
An agreement within the WTO on broad principles of competition policy would have to include a commitment to establish a national competition law regime which contains common elements recognized as necessary to both promote the efficient working of markets and to advance consumer welfare.
In his address to the Institute of International Economics in Washington D.C. in November of 1997, entitled Competition Policy and the Trading System: Towards International Rules in the WTO, the Honourable Sir Leon Brittan set out a very useful list set of features which would provide the skeletal structure for the process requirements for any WTO Competition Agreement. These include:
- A commitment by all WTO members to enact effective domestic competition legislation covering monopolies, mergers, and restrictive business practices.
- Minimum procedural provisions, in particular on access to administrative agencies and rights of complainants
- A requirement that illegal agreements should be made unenforceable before national courts.
- Provisions giving the judiciary a clear enforcement role in competition policy.
- Guaranteed access to national courts ensuring thus that there is no discrimination between domestic and foreign firms.
- Basic standards of competition law enforcement such as transparency(15) of domestic proceedings, application of sanctions and effective competition authority.(16)
We would also add to Sir Leon’s summary the following additional process provisions:
- independent competition authority with a right to make interventions before other regulatory or adjudicative bodies concerning competition issues
- reasonable protection of confidential and proprietary information
- co-operation with WTO dispute settlement process
The principle of non-discrimination, referred to by Sir Leon, is, of course, the prism through which all WTO based agreements must shine. According to the previous WTO Director-General :
“It was this core principle of non-discrimination which did much to reduce power politics in trade relations, by guaranteeing members equal access to the security of the rules irrespective of their size and level of development.”(17)
However, even obtaining international consent to the adoption of a common framework or a set of procedures for domestic enforcement of competition in harmony with the above, does not guarantee implementation of a desirable agreement. There are significant issues associated with the establishment of standards that are difficult to resolve.
The setting of standards associated with the competition law regimes that would be required in any multilateral competition agreement is obviously a matter of some importance to consumers. There is concern that current national competition law standards in the negotiations process would migrate to a minimum level. This is buttressed by the fact that potential signatories may not currently possess a competition policy. As Sir Leon Brittan states:
“It is sometimes suggested that this means the speed is set by the slowest train.”(18)
However, it is important to note that over 70 countries have now implemented competition law(19). As well, as the comprehension grows in developing countries that freer trade may not bring benefits without the market discipline of competition law, there is an accompanying realization in developed countries that the effectiveness of their domestic competition policy may be limited by its ability to manage the extra- territorial effects of anti-competitive behavior.
The limitation of competition laws, as a result of their domestic reach, is evident in the case of export cartels where, absent an effect on the exporting country, its competition authority may have no jurisdiction to control such cartels. Developed countries have generally ignored or often even encouraged export cartels whose activities affect other countries. Developing countries “have found it difficult to cope with these, and the cooperation of the developed countries in investigating and discovering such practices have been lacking”.(20)
In the result, many countries have developed bilateral arrangements to enable co-operation in the curtailment of anti-competitive behaviour. The OECD 1995 Revised Recommendations Concerning Cooperation between Member Countries on Anti-Competitive Practices Affecting International Trade calls for member countries to:
- Inform each other of possible violations of the other law.
- Forewarn each other of cases which may effect the other’s interests
- Request the other agency to act against practices which effect the requesting country’s interests
- Collect and share information to the extent permitted under national confidentiality laws
- Co-ordinate investigations and
- Co-ordinate remedial actions
While co-operation and exchange of information have assisted both in the enforcement procedures and acceptance of common definitions of sanctioned conduct, there remains much antipathy to the application of competition law policies of other countries. Several countries have enacted blocking statutes in response to over aggressiveness in the enforcement of anti-trust laws.(21)
It is our view that, although there may be no consensus on competition policy concepts and definitions existing at present, it is difficult to imagine that there is a sovereign interest in maintaining an inability to move against matters such as tied-selling, bid rigging, exclusive dealing, price fixing, and output restraints. In addition, as one commentator has observed:
“The international co-ordination of competition policies in order to act against anti-competitive practices of global suppliers may be one of the most significant achievements for developing countries.”(22)
We would strongly oppose the implementation of an agreement regime that would simply allow a nation to define for itself what the undesirable practices are. We believe it would be preferable to adopt rigorous standards requiring anti-competitive provisions with limited specific case by case exemptions, if need be, rather than a loose web of potential obligations which can easily be circumvented by national legislation and practice. Our views on this point are less influenced by the problems in arriving at consensus definitions of misconduct than by the mischief inherent in creating a patchwork quilt of rules . This latter development would be more likely to bring certainty of evasion than of enforcement.
The delegation of such a critical drafting exercise to the individual signatory nation increases the risk of unequal treatment in a supposedly harmonized regime . It is important to note that, in some WTO matters, problems of treaty application involving settled language are already coming to the fore. A recent academic study has commented on the problems of applying treaty language, found in the WTO Agreement on Basic Telecommunications Services:
“On another view, less often heard, the words of an international treaty do not have the same meaning for all signatories especially when the language of the treaty is the first language for some and a second language for others. The interpretation of the agreement will also be coloured by differing cultural assumptions, about the role of government, its relationship with industry, the importance of national institutions, and the forms of regulation. These assumptions are part of the general political and economic culture, and not specific to telecommunications. However, telecommunications cannot operate outside the culture, any more than manufacturing or transport can do. This could be called a cultural view of the agreement.”(23)
Taking one jump beyond the problems of treaty interpretation of a single set of definitions to rationalizing a process that allows country-specific definitions of standards is a recipe for irrelevancy .
This does not mean that the country specific context would be expunged when the signatory nation crafts its law to comply with a competition treaty standards. It does mean that objectives behind the national statutes must find congruency throughout the competition law regimes of signatory countries.
We would also submit that, within the procedural framework earlier suggested, there must be substantive requirements for prohibited anti-competitive offenses that go beyond issues of nondiscrimination against foreign suppliers used and the so- called “hard-core cartel” offenses.(24)
It is vital that any agreement on competition policy touch upon the entire scope of competition issues, not simply those that are of interest to business. This means conduct such as misleading advertising and abuse of dominant position should also be included to ensure that ordinary citizens of signatory countries obtain the full benefits and protections of competition law.
WTO Dispute Settlement Resolution
While establishing a core of common principles and rules of competition law to be internationally required may be difficult, the mechanism for enforcement of such rules may prove even more troublesome. Competition law usually lies at the heart of a national policy for commerce. An assessment of a country’s competition law regime as inadequate or discriminatory may have profound consequences to the commercial treatment of particular national industries and their political base in the country. Signatories with a long history of enforcement or anti-trust laws such as the United States are also loathe to have their regime potentially picked apart by the WTO dispute settlement body.
There are two ways that may work to resolve this impasse. The first involves the establishment of set of common standards through the negotiation process as discussed earlier. The second acknowledges that there may have to be a transition period prior to full operationality of mandatory enforcement of competition agreement provisions.
To the latter end, the Competition Bureau of Canada has advanced possible policy options that may increase the readiness of signatory countries to attorn to WTO oversight of their obligations under any WTO agreement regarding competition law.
The Bureau has first proposed building on the OECD 1995 Recommendations Concerning Co-operation Between Member Countries on Anti-competitive Practices Affecting International Trade by including the principles of positive comity. This would involve the notification of one signatory country by another of the fact that the complaining country believes anti-competitive practices are being carried out in the other country affecting commercial relations in the complainant. The notification would be accomplished by a request that a remedy be sought by the relevant competition law authorities.
Secondly, the Bureau proposes an approach to potential remedies which is, in effect, a blend of cooperation and pressure for compliance. The latter element is contained in the establishment of a two stage process to deal with disputes as to whether domestic competition law conforms to the obligations of a multilateral agreement on competition. The Bureau has termed this remedies proposal a Competition Policy Review Mechanism (CPRM) which is similar to the existing Trade Policy Review Mechanism (TPRM).
The first stage of the CPRM involves the attempt to resolve problems at a Council which would be responsible for preparing a report on the competition law of the country under review. The Council would also refer any matter which has not been resolved to a panel of experts formed under the direction of the Council. This group of experts would undertake their own analysis and issue a report as to whether the complaint is well founded. The report would only address whether the conduct in question constituted a barrier to market entry and whether the competition law in the offending member country could be used to address the problem. The panel’s decision and any recommendation would not be binding. However, both the Council and the experts report would be published.
We understand and support the rationale behind these suggestions made by the Competition Bureau and believe that some form of the Bureau’s proposal may be implemented to provide a useful transition to full scrutiny and implementation in the same fashion as other WTO Trade Disputes. In our view, the critical consideration in designing a resolution process to deal with complaints concerning the adequacy of a particular signatory country’s competition law regime is that ultimately the enforcement mechanisms are only hortatory. This means that a negative finding against a country will result in change only if the government of the offending nation is convinced of the rectitude of the negative finding, or is concerned with the negative repercussions on bilateral or multilateral relations if the finding is ignored.
To deal with the first element of suasion, we have suggested the establishment of a Competition Commissioner, who would not just play a referee’s role, but would also be engaged in actively informing relevant national officials of possible mechanisms of compliance, as well as attempting to resolve informal and formal complaints. Even in the current WTO process, the priority is to settle disputes, not to make rulings. The presence of a permanent WTO official, with appropriate administrative support, focused on competition issues, could engender more support and confidence in his or her pro-competitive admonitions than those that might emanate from appointed panels. When a dispute cannot be resolved, the Competition Commissioner’s findings are likely to present a more persuasive record of substance for national compliance either before or after second stage confirmation.
Our recommendations for improvements to the suggestions of the Competition Bureau include the following:
- The scope of any complaint and its potential review should take an expanded view of what constitutes a barrier to entry so as to include anti-competitive practices such as misleading advertising, and abuse of market dominance.
- The role of the Council should be replaced by a Commissioner, with the appropriate staff to assemble the requisite materials together with a thorough underlying economic and statistical analysis. The Commissioner would first attempt to mediate the resolution of complaints in the fashion proposed for the Council. In the event that the dispute would not be resolved, the Commissioner would assemble the documentation together with his recommendation and forward the same to the panel of experts. The Commissioner in effect, would prepare the case which the defending country would have to meet before the second stage peer review process.(The full report of the Commissioner would be before the Committee of Experts.)
- In addition to publicizing the Commissioner’s referral report and the Committee of Experts Report, we would suggest that a Commissioner would be responsible for follow-up and monitoring of the progress for compliance with the recommendations.
- This CPRM should be looked upon as a transitional mechanism and that a five year sunset clause should be put in place with the expectation that the signatory countries would be ready to progress to a binding resolution of complaints required concerning implementation of competition law policy.
- An agreement to secure international standards for competition policy is not simply a supplement but a necessary component of any multilateral trading system.
- The procedural standards for competition law authority signatory nations should be rigorous, reflecting significant principles of transparency, non-discrimination, independence, and fairness.
- The substantive standards for anti-competitive behaviour should not be watered down and should reflect more than simply the concerns of prospective foreign market industry entrants. This means that scrutiny of private restraints associated with market dominance and anti-competitive conduct such as misleading advertising should be included.
- A transitional regime of enforcement involving the establishment of a WTO Commissioner of Competition and a peer review panel may assist in the acceptance of a Multilateral Competition law agreement. The transition regime should have a definite term limit, to be followed by the implementation of standard WTO Trade Dispute Settlement Mechanisms.
1. Minister of Public Works and Government Services Canada 1999 Catalogue No. E2-195/1999.
2. ISBN 158231-000-9
A Citizen’s Guide to the World Trade Organization Everything You Need to Know to Fight for Fair Trade, July, 1999
3. CCPA monitor October 1999 page 5
4. Consumer Rights and the Multilateral Trading System – What needs to be done before a Millennium Round? Consumers International June, 1999.
5. In July 1999, a statement from the member organizations of the International Civil Society strongly opposed a millennium round of comprehensive WTO trade negotiations. The statement, contained the following language:
“The Uruguay round agreements have functioned principally to prise open markets for the benefit of transnational corporations at the expense of national economies; workers, farmers, and other people; and the environment. In addition, the WTO system rules and procedures are undemocratic un-transparent non accountable and have operated to marginalize the majority of the world’s people.”
This statement contained a petition calling for moratorium on further negotiations that would expand the scope and power of the WTO it bore the names of over 1,000 non governmental organizations throughout the world.
6. 10 benefits of the WTO trading system http://www.wto.org
7. The Economic and Social Impact of Electronic Commerce OECD 1999 p.21
8. TACD doc no. com1-1999, April 1999
9. Competition and the Consumer – Trade Briefing paper No. 5 August 1999 Consumers International
10. Antitrust Overview – Charles E.. Mueller Antitrust Law and Economics Review
11. Address of Julian Edwards Consumers WTO symposium on Trade and Competitive Voting Geneva September 1999
12. Ibid at 5
13. UNCTAD 1997, Empirical evidence of the benefits from applying competition law and policy principles to economic development in order to attract greater efficiency in international trade and development
14. Carlos Correa, Competition Law and Development Policies Zurich Symposium on Issues of Competition Law – July 1999
15. The requirement for transparency as part of the principles of international competition law policy has two major themes:
- The enforcement of competition by a country’s competition agency authority in an explicable fashion accomplished by way of codified law, specific decisions of the competition or enforcement authority and information concerning enforcement policies and practices. There is precedent for the pursuit of such a similar policy in TRIPS which requires members to publish and notify WTO regarding laws, regulations, and international commitments relevant to the obligations.
- The prevention of corrupt practices by signatory countries.
Dr. Peter Eigen, Chairman of Transparency International, recently noted:
“Corruption in its essence undermines free competition. Grand corruption is all pervasive, in particular in the international arena. It distorts competition, destroys open markets, perverts economic governance and has become one of the most severe barriers to trade and development. In fact, it has to be classified as “restrictive practice” on a par with other competitive practices that are the more customary subject of competition policies”.
To this end, the recent OECD Anti-Corruption Convention is instructive and should be incorporated by reference into any multilateral competition argument. The efforts on the part of the OECD are motivated not only on the basis of serious moral and political concerns, but also with respect to the distortion of international competitive conditions. Corruption free enforcement of competition policy fosters confidence on the part of the international community and would-be investors.
16. Competition Policy and the Trading System: Towards International Rules in the WTO, Institute of International Economics, Washington, DC, November, 1997
17. Address of Renato Ruggiero March 4, 1998 Brooking Institution Forum “The Global Trading System; a GATT 50th Anniversary Forum
18. Ibid at # 10. Brittan does not agree with this characterization of the WTO, however.
19. Competition Policy Public Welfare and the Multilateral Trading System The Quest for Balance, International Centre for Trade and Sustainable Development, address of Miguel Jimenez Pont, WTO/World Bank Symposium on Competition Policy and the Multilateral Trading System: A dialogue with Civil Society, Geneva, September, 1999
20. Ibid at # 9
21. Options for the Internationalization of Competition Policy, Competition Bureau, May 10, 1999
22. Ibid at # 9
23. Implementing the WTO Agreement: Chronological or Cultural Difference, Nico Roehrich, Mark Armstrong, Honolulu, Hawaii, Pacific Telecommunications Council Conference, January 25, 2000
24. See OECD Council Recommendation of March 25, 1998.
Newsletter – August, 1999 Vol.6, No.2
IN THIS ISSUE
Consumers Benefit Through New Federal Banking Policies and Regulation
Consumers Finally to Get a Say in Some Basic Cable TV Prices
New Report: “Consumer Issues in Electronic Commerce”
Legislated Privacy Protection Still in Limbo
Consumers Benefit Through New Federal Banking Policies and Regulation
For years, PIAC and other public interest groups in Canada have advocated greater consumer rights and protection in the financial services sector in Canada. These efforts have met with considerable success with the announcement by the Minister of Finance on June 25 of a new policy and regulatory framework for Canada’s banking system. Key benefits for consumers include:
- legislation guaranteeing consumers access to banking services and a low-cost account. More than 600,000 adult Canadians currently do not have access to a bank account, largely because banks would not provide service to these low income individuals;
- a new independent regulatory agency that will ensure that banks adhere to consumer protection policies and to provide consumer awareness and education about banking services;
- the establishment of an independent ombudsman office that will mediate problems and complaints between individual customers and their bank;
- incentives for the development of more community and national banking services to increase competition in services and choice for consumers.
- new restrictions that prevent banks from requiring customers to buy a second product in order to buy the product or service they want. This ‘tied selling’ strategy will now be prevented through an amendment to the Banking Act.
Traditionally regulation has protected large institutional investors and ensured banks’ dominance of the market place. This is the first time that consumer protection legislation has been introduced to the market.
Earlier this year, PIAC, in a coalition with the consumer groups Action Réseau Consommateur, the National Anti-Poverty Organization and Option Consommateurs, issued a Consumer Charter for Financial Services Reform. The provisions of the Charter were:
1. Creation of a Consumer Protection Bureau.
An independent regulatory agency should be established. The agency’s members should include consumer representatives. The agency’s mandate should include consumer protection rules, regulation and compliance, as well as industry auditing and consumer education initiatives.
2. Federal Legislation Guaranteeing Access to Financial Services.
Legislation is required to ensure that: all Canadian have access to a bank account; minimum standards be created for a minimum level of final services; no fee and no minimum balance bank accounts be available; federal government cheques can be cashed at any bank branch.
3. Support for Research, Industry Oversight and Advocacy for Consumer Organizations.
Adequate funding should be provided by the Federal government to maintain and extend the expertise of consumer organizations in representing the needs of Canadians in the areas of policy, regulation and consumer awareness.
4. Ensure that Bank Closures are Handled Responsibly in the Public Interest.
A federal consumer protection bureau should be mandated to ensure that banks are accountable to the communities and neighborhoods where branches are located. Legislation should ensure that when a branch closes that the bank assists in establishing an alternative financial institution that is acceptable to the community.
5. Improve Disclosure and Transparency.
A new consumer protection agency should have the authority to establish regulation and penalties to ensure that: agreements, contracts, service fee billings and marketing documents are available in understandable language and standardized forms; disclosure is mandatory on fees and commissions to third parties; and unilateral amendments to financial services consumer contracts are prohibited. Mandatory disclosure of service fees should also be required.
PIAC’s input is reflected in the policy changes for the financial sector which I announced on June 25, 1999.
The Department looks forward to working with PIAC during the process of developing legislation on these matters.
The Hon. Paul Martin, letter, July 19, 1999.
We were pleased to see that many of these issues were addressed in the proposed new financial services policy. PIAC will continue to push to have the unresolved matters addressed by the Department of Finance and the new regulatory agency over the next few years. As the proposed legislation is passed and the new consumer protection agencies are established, consumers should begin seeing a fairer set of rules and practices in their everyday dealing with banks.
While many of the changes proposed by Minister Paul Martin on June 25 are important steps in balancing consumer rights with those of the banks, there are still a number of issues that have not been fully addressed. One area is bank branch closures. Many Canadians, both in rural areas and in some neighborhoods in cities, are seeing their local bank branch close. Often these branches provide the only banking service in their area. The new bank policy will require banks to justify a branch closure to communities, and will require some consultation with the community to mitigate the affects of the cessation of service. However, the problem of ensuring that some form of banking service will still exist in a community has not been addressed. Other areas of concern include: the lack of clear rules on how long a bank can ‘hold’ a cheque before the funds are made available to a customer; the need to improve physical access to branches for disabled Canadians; and increasing difficulty of receiving “in-person” service from a teller as opposed to the increasing use of banking machines.
Consumers Finally to Get a Say in Some Basic Cable TV Prices
On July 7, the CRTC issued a decision (Public Notice CRTC 1999-108) whereby cable companies will now be required to obtain approval from CRTC before increasing their basic monthly fee when the fee increase is the result of adding a specialty service to the basic package. Specialty services are those channels which generally offer a special theme such as news, sports, or music, etc.. Consumers have long complained to the CRTC about the cable companies arbitrarily adding channels and raising rates in basic service. The CRTC proposed to amend the Broadcasting Distribution Regulations earlier this year (Public Notice CRTC 1999-56) and asked for public comment. In its submission to the CRTC, PIAC supported the proposed amendments and argued that public participation in CRTC decision making should involve all channels which are included in the basic package, including specialty channels.
Under the new rules, cable subscribers will have to be notified about proposed price increases and will have 30 days to voice their concerns to the CRTC. The cable companies will also be required to file information with the CRTC to justify why a specialty channel should be added to basic service. With these changes, the CRTC will be able to suspend or disallow a proposed fee increase if it determines that such an increase is not justified. This is a good victory for consumers. In spite of the hype about competition, most Canadians do not have a choice of who provides their cable service, and where choice does exist, e.g., satellite tv, it is not a comparable option because it can be more expensive than the traditional wire-line cable service.
New Report: “Consumer Issues in Electronic Commerce”
Five years ago, almost no one imagined that consumer activity would shift to a new electronic medium at the rate that it is doing. Electronic commerce has been used by businesses for many years, but only recently has it caught the attention and interest of individual consumers. People can order books, reserve airline tickets, or transfer funds between bank accounts at any time of the day or night, as long as they have a working computer, modem, and Internet service provider.
But is it all a bed of roses for consumers? PIAC’s new report, “Consumer Issues in Electronic Commerce” examines the implications of buying online, and highlights the risks and potential problems of this new medium.
In particular, electronic commerce provides new opportunities for abuse both by the deliberately dishonest and by the careless or cavalier. How do you judge the reliability and integrity of online merchants? As a now famous cartoon put it, “the great thing about the Internet is that no one knows you’re a dog.” Unscrupulous merchants can disguise their identity, and hide behind sophisticated websites that mislead consumers into a false sense of security.
Previously marginal problems such as pyramid selling become far more serious on the Internet, where millions of consumers worldwide can be accessed at very little cost. Consumers are more vulnerable than ever to false and misleading claims, insecure handling of sensitive data, hidden privacy invasions, and lack of effective cross-border enforcement mechanisms. The need for effective consumer protection laws and mechanisms is therefore greater than ever before.
TIPS FOR E-COMMERCE CUSTOMERS
Online consumers should:
- look for information confirming the vendor’s identity, location, and reliability before making online purchases;
- confirm any claims to membership in a quality assurance program such as BBB (eg. confirm with the program that the organization is indeed a member in good standing – this should be possible by clicking on the program logo);
- navigate carefully through retail websites, so as to avoid unintentional transactions;
- read all contractual information presented online before agreeing to purchase, and be sure to obtain a copy of the contract for your own records;
- take reasonable precautions to keep your credit card and/or PIN number confidential;
- be comfortable with the security features employed by the vendor to safeguard the confidentiality of financial information exchanged (NEVER send confidential information by e-mail!);
- look for the vendor’s policy regarding complaints, returns, cancellations, warranties, etc. before transacting; and
- be aware of potential difficulties obtaining redress across borders, in the event of a dispute.
The report can be obtained from PIAC (firstname.lastname@example.org, or tel: (613)562-4002 x.60, or fax: (613) 562-0007) for a price of $20 plus postage. For French versions contact Action Réseau (email@example.com, tel: (514) 521-6820,fax: (514) 521-0736).
Legislated Privacy Protection Still in Limbo
In our May 1999 Hotwire, we highlighted the problem of personal information abuse in the private sector and the need for legislated rules establishing the right of individuals to control over their personal data.
Bill C-54, the federal government’s proposed legislation to protect personal information in the context of commercial activities, was introduced last fall, but never made it through Parliament before the summer break. The government, however, has promised to push the Bill forward when Parliament reconvenes in the fall, and to fulfil its commitment to passing privacy legislation by the year 2000. We intend to hold the government to its promise.
However, the Bill is still in rough waters. Some business groups and government agencies have expressed opposition to the legislation. The Ontario Ministry of Health is lobbying to have personal health information exempted from the Bill, so that it would be completely unprotected under the federal regime. The insurance industry doesn’t like having to get individual consent to share personal information among themselves for the purpose of detecting fraud. Bankers (and others) don’t want to be subject to spot-audits of their privacy practices.
If you want legislated protection of your personal information in the private sector, make sure that your M.P. knows! Tell our legislators how important it is that they pass effective data protection legislation without any further delay. More background information is available on the PIAC website at http://www.piac.ca
International Trade Negotiations (July 1999)
INTERNATIONAL TRADE NEGOTIATIONS: COMMENTS ON APPROPRIATE POSITIONS AND OBJECTIVES FOR CANADA
Public Interest Advocacy Centre
- The Public Interest Advocacy Centre (PIAC) represents the interests of Canadian residential consumers, with special attention to low income, senior, rural and other vulnerable groups. PIAC has particular expertise in the fields of public utility regulation, telecommunications, banking, consumer protection, and privacy. PIAC has been engaged in national consumer advocacy since its inception in 1976.
- PIAC recognizes the value and importance of international trade to Canada’s economic well-being. We are concerned, however, that overly hasty or overly broad trade agreements will have serious adverse effects on Canada’s economy and society, which could well outweigh their economic benefits for Canadian companies. Recent cases under chapter 11 of the NAFTA(1) highlight the danger of agreeing to trade rules which put corporate interests ahead of the public interest in health, safety and environmental protection.
- At a minimum, it is essential that Canada refrain from agreeing, or rescind its agreement, to any trade rules which jeopardize its ability to protect public health, safety, and the physical environment, to promote and enforce human rights, labour standards, and consumer protections, and to facilitate the achievement of other social objectives. Domestic regulation that is clearly designed to achieve these ends (such as the ban on MMT) should be immune from prosecution as a trade barrier.
- With the increasing globalization of trade, however, such a defensive approach to social concerns will not be sufficient. As long as other countries tolerate business practices which jeopardize consumer health and safety, fair marketplace competition, consumer privacy, the health of the global environment, or generally accepted consumer protection standards, Canadians will be vulnerable to the harm caused by such practices. In addition, where compliance in Canada with reasonable standards has a cost to industry that is not incurred in other jurisdictions, the threat of capital flight may be used by some business interests to justify an otherwise undesirable weakening of Canadian standards.
- Canada should therefore promote the establishment of enforceable international minimum standards (i.e., floors, not ceilings) in key areas such as competition policy, privacy, and consumer protection, in the same way that minimum standards of intellectual property protection have been established internationally.
- This can be done in either of two ways: through the WTO and its existing enforcement mechanism (as was done with intellectual property rules), or through the creation of equally effective enforcement mechanisms under other international agreements and institutions dealing with non-trade issues. In either case, it should occur before we go any further down the road of trade liberalization.
- When promoting and establishing minimum international standards of consumer protection (for example), it is essential that no country be required to lower its standards or refrain from establishing higher standards than the minimum. The objective of such a process is to raise standards in those countries which do not yet meet an internationally agreed-upon baseline; it is not to lower standards in those countries where the minimum standard is exceeded.
- In this respect, it is essential that trade agreements do not take precedence over international environmental, social and human rights agreements. Indeed, the latter should have primacy over trade obligations where conflicts arise. As the recent Report of the Standing Committee on Foreign Affairs and International Trade(2) states,
”…active consideration by WTO members is required to ensure that its rules help to reinforce, rather than trump, international environmental, social, and human rights obligations.”
- Given the obvious risks inherent in proceeding further down the road of trade liberalization without adequate attention to its impact on social, economic, and environmental well-being, it is only prudent to hold back on further trade liberalization until the results of the Uruguay round have been fully evaluated, and until an equally effective regime is in place for the enforcement of minimum standards in such areas as human rights, environmental protection and consumer protection (as well as intellectual property rights).
- PIAC notes with some regret that establishment of international rules for intellectual property protection owes much to the fact that such protections benefit large multinational corporations. It can be expected that corporate interests will continue to push their self-interested agenda in the trade arena, even where it conflicts with the public interest. Canadians expect their government to develop negotiating positions which reflect the broad public interest, rather than the heavily promoted corporate interest. In particular, Canadians expect their government to maintain its ability to regulate effectively in such areas as human rights, culture, health and safety, education, social programs, the environment, labour standards, privacy, consumer protection and the delivery of essential services.
- Attached to this submission is a copy of PIAC’s presentation to the House of Commons Standing Committee on Foreign Affairs and International Trade, dated March 16, 1999. In that brief, PIAC recommends:
- greater consultation by DFAIT with consumer and public interest groups, and with other government departments (both federal and provincial) on trade issues;
- that Canada take care to ensure that the establishment of international trade rules does not undermine the authority of domestic governments to fulfil their mandates, obligations and responsibilities to citizens;
- that Canada’s position in any international trade negotiations recognize the importance of such domestic instruments as subsidies and performance requirements in achieving national objectives;
- that current trade exemptions and reservations claimed by Canada be lifted only on a case-by-case basis, and only after substantial research and consultations on the implications of such a move; and
- that Canada not agree to any “standstill” or “rollback” commitments with respect to domestic legislation, regulation or standards.
The following comments fall under four main headings: Consumer Health and Safety, Electronic Commerce, Intellectual Property, and Competition Policy
Consumer Health and Safety
The record to date of GATT panel reports and WTO rulings on disputes involving consumer health and safety has seriously undermined consumer confidence in the WTO. In each case before it, the WTO has found the impugned environmental or health regulatory measures to be non-conforming. It seems clear that the WTO places higher value on commercial market access than on consumer health or safety. This must change.
As suggested in the Standing Committee’s report (p.12-9),
”….the whole concept of non-discrimination on the basis of national treatment rules needs to be reconsidered and clarified in order to better accommodate valid environmental, health, social and sustainable resource-use concerns about the manner in which tradeable goods are produced for export.”
In particular, the requirement for conclusive scientific evidence of adverse environmental, health or safety consequences in order to justify the adoption of a given standard, import prohibition, or other trade-restraining policy under WTO rules must give way to a precautionary, adaptive approach aimed at preventing damage before it has been caused. It is reckless and irresponsible for any country to put the health and safety of its citizens at risk simply because the scientific evidence of damage is inconclusive. As long as a serious risk to consumer (or environmental) health or safety exists, national measures to contain that risk are appropriate and should not be treated as violations of trade agreements.
Continued adherence to the “scientific justification” standard for sanitary and phytosanitary standards will lead to further erosion of public confidence in the WTO, and to a widespread credibility crisis for the WTO. Indeed, the EU’s refusal to abide by the WTO’s ruling on bovine growth hormone suggests that failure to address this issue may jeopardize the future of the WTO itself.
Despite its status as a complainant in a number of cases involving environmental and health risks, Canada should recognize the inappropriateness of a rigid requirement for conclusive evidence of damage in order to justify trade restrictions, and should advocate new rules based on a precautionary approach which allows for adaptation as new scientific evidence becomes available.(3) The Sanitary and Phytosanitary (SPS) Agreement, in particular, should be modified as necessary to clearly adopt a precautionary, adaptive approach.
The efficient and effective operation of a competitive marketplace is premised on the availability of full information to consumers. Consumers cannot exercise informed choice unless they are properly informed. Product labelling is thus a legitimate, and indeed essential, subject of national regulation. The Technical Barriers to Trade (TBT) Agreement should therefore clearly treat the provision of information to consumers, via labelling or other means, as a legitimate objective of regulation.
PIAC supports Canada’s goal of becoming a world leader in electronic commerce through a multi-pronged strategy centered around the establishment of a solid regulatory framework designed to cultivate consumer trust and confidence in this new medium (and especially in Canadian companies doing business on the Internet), and so to create an electronic marketplace environment in which small, upstart businesses – not just large corporations with brand name incumbency (and thus residual consumer trust) – can thrive.
Two key elements of this strategy are the protection of personal information in the marketplace, and the protection of consumers from deceptive business practices online as well as offline. It is critical that Canada avoid any trade-related obligations which compromise its ability set high standards of consumer protection and to regulate effectively in these areas. Otherwise, electronic commerce will fail to achieve its potential due to lack of consumer confidence. Or, consumers will continue to flock to well-known and trusted brands which are dominated by US corporations. (In this respect, Canada’s interest is clearly different from that of the USA.)
Electronic commerce is part of a broader trend toward globalization of trade. As vendors and consumers go online, the number of cross-border consumer transactions can be expected to increase substantially. With the increase in distance transactions will come an increase in problems associated with distance transactions: lack of full information, misunderstandings, and obstacles to consumer redress across borders.
In addition, the electronic medium raises new problems of its own, such as the risk of keystroke or clicking error, the vulnerability of personal data, cost shifting in electronic marketing (“spam”), corporate control of navigation tools, and new opportunities for fraudulent and unscrupulous actors.
For global retail electronic commerce to reach its potential, we will need more than a defensive approach to consumer protection and trade. We will need international cooperation on the establishment of a consumer-friendly global marketplace, in which consumers are able to:
- assess the legitimacy and reliability of merchants;
- distinguish between promotional gimmicks and binding contracts;
- control the collection, use and disclosure of their personal information;
- avoid liability in respect of unfair contract terms;
- avoid liability in the event of vendor failure to authenticate consumer identity, to provide significantly relevant information to the consumer prior to contracting, or to provide the consumer with a reasonable opportunity to correct any errors in an online order;
- prevent the receipt of unsolicited commercial email;
- obtain redress without unreasonable effort;
- rely upon the consumer protection laws of their own jurisdiction, where they engaged in a transaction while in that jurisdiction;
- have recourse to the courts of their own jurisdiction in respect of transactions conducted by them while in that jurisdiction.
To this end, not only must reasonable, relevant domestic regulation be insulated from trade disputes. In addition, minimum standards of consumer protection are needed worldwide so as to provide more certainty for business, more reassurance for consumers, and a more level playing field for countries. In particular, an international agreement on minimum standards of consumer protection is needed to avoid the creation of “consumer fraud havens”. Canada should take a leadership role in promoting such an agreement.
Such an agreement would be based on a recognition that consumer transactions in competitive markets suffer from persistent, pervasive market failures (e.g., severe information asymmetries, unequal bargaining power, and barriers to collective action by consumers), and that government has an important role to play in correcting these failures. It could be combined with an agreement on competition policy, the rationale for which is similar (see below).
It is important that international agreement on consumer protection proceed simultaneously with international agreements on other aspects of electronic commerce (e.g., authentication, Internet protocol, domain names, general commercial law). Otherwise, there is a real danger that retail electronic commerce, at least, will never reach its potential.
The Trans-Atlantic Consumer Dialogue has produced a set of recommendations on Electronic Commerce which closely reflect the position of PIAC as set out in this submission. While not a member of the TACD (because it is restricted to EU and US organizations), PIAC is generally supportive of these recommendations, which we attach for your information.
Finally, Canada must not allow trade agreements to get in the way of another key element of its electronic commerce agenda: “Connecting Canadians”. Under this policy pillar, Canada has committed itself to a number of national programs designed to improve public access to the Internet. If universal access to the Internet in Canada is to be achieved, much more effort will be required in the form of financial subsidies and other government support for such programs as SchoolNet, LibraryNet, VolNet, Community Access, and Smart Communities. Mandatory industry contributions for the purpose of universal service will also continue to be required if Canada is to maintain its current level of telephone subscribership, let alone Internet access. Under no circumstances should Canada risk allowing such programs to be the subject of complaints or lawsuits under trade agreements.
Canada’s positions on rules regarding intellectual property must reflect the underlying public interest rationale for such rules. We create and protect rights in intellectual property not because we believe that all labour deserves to be rewarded or because of some inherent private right to reward, but rather because we perceive a public interest (the advancement of science and the arts) in rewarding certain kinds of labour. Before creating new property rights or expanding existing ones, it is essential that a full analysis of the public interest implications of any such proposal be conducted. Only where it is conclusively shown that the granting of such exclusive privileges will have net social, environmental and economic benefits, should Canada agree to any expansion of intellectual property rights.
As noted above, it is no coincidence that intellectual property is the only area under the WTO regime in which countries have agreed to minimum standards of domestic legislation. Large multinational corporations accountable to no one but their shareholders have an enormous private interest in expanding their property rights. They have been remarkably successful to date in having their interests promoted through the WTO. Yet trade would be facilitated by the establishment of minimum standards in many other areas as well. Canada should work toward correcting this imbalance within the WTO.
Given the tremendous implications of intellectual property protection for Canadians, and for the public interest at large, Canada should take a cautious approach to future WTO negotiations in this area. Before agreeing to any expansion of intellectual property rights, it is especially important that Canada develop a clear national policy based on widespread public consultations that include a balanced representation of private and public interests.
Article 13 of TRIPS requires member countries to limit copyright exceptions “to certain cases which do not conflict with a normal exploitation of the work and do not unreasonably prejudice the legitimate interests of the right holder”. Unlike Article 30 of TRIPS (dealing with patents), this wording allows for no consideration of the public interest, or the interests of third parties. Indeed, by linking legitimate exceptions to “the legitimate interests of the right holder”, the clause is effectively circular. Yet, as noted above, the purpose of copyright is not to protect some pre-existing private right. Rather, it is to advance the overall public interest.
For example, copyright laws should not unduly restrict the ability of educators to share information with students in ways that are equivalent to current practices involving more conventional teaching methods. They should not unduly limit the ability of competitors and others to develop interoperable computer products (through reverse engineering, for example). They should permit exemptions for “fair use” or “innocent use”. And they should avoid the creation of rights that lead to anti-competitive or monopolistic market behaviour.
Canada should therefore call for the addition of language in Article 13 of TRIPS to acknowledge the appropriate role of public interest considerations in copyright protection.
Electronic commerce and the rise of the Internet as a communications medium have led to new concerns about the ability of copyright holders to enforce their rights online. Yet, methods used to protect copyright online may run up against individual privacy, the protection of which is equally important for the development of electronic commerce. For example, software copyright holders may wish to surreptitiously track usage by consumers in order to be able to identify copyright violations. It is essential that any such conflicts between copyright protection and privacy protection be minimized. In this respect, Canada should promote the inclusion of a clause in TRIPS establishing the principle that governments and private actors should avoid copyright protection mechanisms that unreasonably intrude upon personal privacy, particularly when less intrusive mechanisms are technologically feasible.
The issue of database protection raises serious concerns for consumers. Proposals currently before WIPO to create a sui generis right in non-original databases remain unacceptably vague in key respects and risk creating a seriously anti-competitive marketplace. This issue continues to be actively debated. Meanwhile, the market in databases continues to thrive, despite the fact that copyright provides limited protection for database compilers. It is therefore premature for the WTO to take any steps toward recognizing or encouraging a property right in databases. In any case, Canada needs to have a much fuller public debate on this issue before formulating a Canadian position.
It is essential that any international rules regarding patent protection be made subservient to multilateral agreements on environmental and public health protection, and in particular to the need to protect biodiversity. Canada should promote the inclusion of a clause in TRIPS to this effect. Corporate interests must not be allowed to dominate the agenda in this respect; the global public interest in biodiversity and public health must be paramount.
(c) Business Practice Patents
Research in the USA indicates that patents are increasingly being issued for business practices (especially in the context of electronic commerce), rather than for technological innovations.(4) This creative use of patents by businesses in order to obtain competitive advantage should be of concern to patent authorities and competition watchdogs worldwide, especially as it could have a stifling effect on the development of electronic commerce. To the extent that such patents are unnecessary, anti-competitive, and socially wasteful, they should not be granted.
In light of the disturbing trend in the USA toward patenting of business practices, PIAC urges the Canadian government to review this issue domestically, and to initiate a public discussion of the policy issues associated with granting patents on business practices. Given its potential effect on global trade, this issue should also be examined internationally.
(d) Parallel Importation
Parallel importation can be an important way in which consumers avoid price discrimination, and achieve the promises of free trade. Where essential drugs are involved, the ability to import at a lower price may mean the difference between life and death. In any case, attempts to restrict parallel imports are destined to be subverted as electronic commerce grows. Canada should therefore resist any attempt to renegotiate Article 6 of TRIPS so as to restrict parallel importation. Instead, consumers worldwide should benefit from the free flow of goods through the international exhaustion of intellectual property rights.
PIAC supports the Canadian government’s emerging position in favour of an international agreement on minimum standards of competition law and policy.
In general terms, the focus of multilateral trade negotiations and agreements has centered around the liberalization of the investment policies for individual countries, allowing improved access by international capital in key commercial markets. Accompanying liberalized trade has been a trend towards lessening government regulation of the delivery of goods and services and a corresponding reliance on market forces to protect consumers. It is obvious that consumers will be denied the benefits of such a strategy if industry conduct inhibits or sabotages real competition. As the Centre for Trade Policy and Law of Carleton University noted in a report prepared for the Office of Consumer Affairs of Industry Canada:
“As a competitive marketplace is important for consumers, the effectiveness of competition law in maintaining competition and in eliminating anti-competitive behavior is an important matter for consumers”(5)
PIAC acknowledges the difficulties inherent in “multilateralizing” competition policy and especially in using WTO dispute settlement mechanisms to obtain compliance with such policy standards. A number of issues will have to be addressed, including the standard of review, the appropriate economic and statistical analysis to be used in any review, the level of deference to be accorded to domestic expert tribunals; choice of applicable remedy, and compatibility with national export policies.
In addition to the above, however, there is considerable trepidation that the establishment of minimum standards of competition policy could degenerate into a harmonization process under which Canadian competition law is watered down in order to achieve international consensus. If the multilateralization of competition policy leads to a weakening of existing standards, we do not support it. However, we do support the development of minimum standards, above which domestic policy is permitted to rise.
There are also concerns that effective enforcement measures would abrogate national control over commercially sensitive areas of business standards, should national competition authorities be provided with the opportunity to submit decisions to the WTO for oversight and review.
However, the challenges to international rulemaking and enforcement in this area should not induce lethargy. The process of ensuring that increased globalization of trade does not bring with it a patchwork quilt of differing competitive standards with attendant negative results for consumers requires examination of all relevant competition issues, not just those which are of immediate interest to business.
For one thing, there can be little sovereign interest in preserving the ability of certain industry players to commit what the Competition Bureau’s discussion paper has termed “hard core cartel” offences. These include such matters as tied selling, bid rigging, exclusive dealing, price fixing, and output restraints. PIAC would also add to this list anti-competitive offences that impact directly upon the customer, such as misleading advertising and other deceptive business practices.
PIAC is also of the view that conduct associated with abuse of dominant position, or the use of market power in a way which inhibits competition, is an issue of critical importance in an era of liberalized trade. The interest of industries seeking access to foreign markets in putting in place market dominance provisions may be motivated by the desire to restrict the powers of state-owned industries. However, consumers and competition itself may be menaced in the long term by the ability of multinational corporations to squeeze out domestic competition.
Any agreement on competition policy must be enforced in a matter consistent with the principles of transparency, open access to effective remedies, and independence of competition authorities. The existence of appropriate laws and policies is meaningless if such laws and policies are not enforced, or if consumers have no means to effect redress.
PIAC is, in general, supportive of the “peer review” proposal put forward by DFAIT in its discussion paper on Competition Policy. However, PIAC believes that such a peer review process must result in more effective sanctions than negative publicity for the offending nation. Given that the benefits of liberalized trade depend upon common approaches to anti-competitive behaviour, failure to comply with agreed-upon competition rules should have serious consequences, such as affecting the offending nation’s status in the WTO.
PIAC is therefore strongly of the view that competition policy is a matter which should be pursued in WTO negotiations in lockstep with any agreed further trade-liberalizing agreements. Minimum standards should include both hard core cartel offences as well as abuse of dominant position and deceptive business practices that are well known to North American competition authorities.
July 12, 1999
1. e.g., Ethyl Corporation’s successful lawsuit against Canada over the MMT gasoline additive ban; Methanex’s proposed lawsuit against the US government over California’s phase-out of another gasoline additive.
2. “Canada and the Future of the World Trade Organization: Advancing a Millennium Agenda in the Public Interest”, June 1999.
3. See, for example, the International Institute for Sustainable Development (IISD)’s “Principles for Trade and Sustainable Development”, http://iisd1.iisd.ca/trade/princip2.htm .
4. See, for example, http://www.public-domain.org/patent/business/ .
5. ” p.25 International Trade Negotiations, Canadian Trade Policy and the Role of the Consumers”, Centre for Trade Policy and Law, 1998
Newsletter – May 1999 Vol.6, No.1
IN THIS ISSUE
Action Alert: Personal Information Privacy in Peril!
CRTC Holds New Media Hearing
PIAC Working with Industry to Develop Code of Practice for E-Commerce
Benefits of Long Distance Competition in Question
Action Alert: Personal Information Privacy in Peril!
You are undoubtedly aware of the increasing loss of control that we are all experiencing in respect of our personal information. Commercial entities are collecting, trading and using our detailed personal information, without our knowledge or consent. It’s time to reclaim the right to control over our personal information.
Bill C-54, The Personal Information Protection Act, is now before the House of Commons, and once passed, will be sent to the Senate Committee on Trade and Commerce for review. It is imperative that our legislators hear from the public on the need for legislated privacy protection – you can bet that they will be hearing the other side of the story from industry lobbies. Please tell your MP, and the Senate Committee, how important it is that they pass effective data protection legislation for Canadians without delay. A sample letter with addresses can be found at the PIAC website: http://www.piac.ca
The following is an excerpt from a letter recently sent to all MPs and Senators by nation-wide coalition of groups campaigning to save Bill C-54. Together with PIAC, these groups include the B.C. Freedom of Information and Privacy Association, Canada’s Coalition for Public Information, the Canadian Health Coalition, the Consumers’ Association of Canada, Electronic Frontier Canada, Democracy Watch, the National Privacy Coalition, and the University of Ottawa Human Rights Research and Education Centre.
“Legislation governing private sector collection and use of personal information is long overdue. The technology for data collection and distribution, and market pressure to exploit that technology, have developed far more rapidly than legal protections against unauthorized use of our personal information. It’s time to bring our laws into line with our technological capabilities and market realities.
Computer technologies now make it possible to compile, store, match and trade personal data at minimal cost. Although it is the desire and expectation of Canadians that their personal data will be used only with their knowledge and consent, this is generally not reflected in business practice. Private companies are routinely collecting, using, and disclosing personal information for their own benefit, without regard to the individual’s right to privacy.
Evidence of this growing trade in personal information abounds, as Canadians are increasingly bombarded with unsolicited, often highly targeted marketing via phone, fax, mail, and now, e-mail. We are finding our confidential information published in print directories and available on-line to anyone with elementary computer hacking skills. Employees are being surreptitiously monitored. Many people are denied services on the basis of inaccurate information about them held by private companies. Most of the unauthorized data collection and trading goes on behind our backs, but the evidence of it is everywhere. It’s time to act.
Control over one’s personal information is a fundamental element of the broader right to privacy. Privacy is a fundamental element of free speech and democracy. Without privacy, individuals are stripped of their autonomy, dignity, and self-determination. It is critical that we establish now a comprehensive legal framework for privacy protection in this country. Bill C-54 is a key element of that broader framework.
Many of us would like to see stronger and more specific data protection rules than those set out in Bill C-54. However, we recognize that political and constitutional realities require compromise, and it is on this basis that we are urging you to see that the Bill is passed without any additional exceptions for certain business sectors or investigative agencies.
We are particularly concerned about proposed new clause 7(3)(c.1). This amendment would place an organization in the untenable position of having to choose between safeguarding the privacy of its clients/employees (which is the thrust of Bill C-54) and being a good corporate citizen by cooperating with law enforcement agencies. Police do not need this leeway – they can always access personal information through the use of warrant procedures.
Given the hidden nature of most privacy invasions, it is essential that the Privacy Commissioner be empowered to conduct random audits of private organizations. If anything, para.18(1) of the Bill should be strengthened by permitting spot checks. It certainly should not be weakened.
We are also very concerned about the suggestion from some quarters that Bill C-54 creates too onerous a regime for personal health records. Indeed, health records need stronger protections than those in Bill C-54. Until we have those stronger protections, health records should not be excluded from Bill C-54.
The urgency of the need for private sector data protection laws for consumers and employees cannot be overstated. Quebec is the only Canadian jurisdiction to have enacted such legislation – other Canadians deserve similar protections.
It is no coincidence that Bill C-54 has received wide-ranging support from responsible industry associations, independent experts, consumer advocates, and civil liberties groups. Effective data protection laws will level the playing field for responsible businesses vis-a-vis their non-compliant counterparts, will improve consumer confidence in electronic commerce, and will enhance trade opportunities with Europe. It is in everyone’s long term interest that reasonable ground rules for the management of personal data are set out now. Those rules must be based on the fundamental right of individuals to exercise control over their personal information.”
For more information on Bill C-54, see the PIAC website at http://www.piac.ca. You can access the Bill at the Parliamentary website http://www.parl.gc.ca, under “Parliamentary Business”, and then “Government Bills”.
CRTC Holds New Media Hearing
During the Fall of 1998 and into the early part of this year, the CRTC held a public proceeding on New Media. The CRTC held the proceeding to consider: 1) how new media may affect the regulation of traditional broadcasting undertakings; 2) the degree to which new media may be broadcasting or telecommunications activities, and, if they do, how they should be treated with respect to the objectives of the respective Acts; and, 3) to identify broader policy issues to the federal government. PIAC and the Action Réseau Consommateur of Montreal jointly intervened in this proceeding (PIAC/ARC). PIAC/ARC argued that new media should not develop in a wholly unregulated environment. Decision making by companies about new product development and availability will be informed by their own interests. Broader economic, social and cultural goals, as in the past, will require some degree of government policy or regulation to ensure their realization with new media products and services. Many intervenors argued that new services, such as the Internet, should or could not be regulated. PIAC/ARC argued that while this may be the case in the near term, there may be occasion in the future for some selective regulatory interventions, such as dealing with the issues of market power and concentration of ownership. PIAC/ARC also argued the need for policy clarification by the federal government about whether the Internet and some aspects of content, such as public information and services, are to be considered essential services, like basic telephone, or optional services. Such clarification is becoming increasingly important if the intent of government is that Canadians’ will need to be able to access and use up-to-date communications, such as the Internet, in order to be full participants in an information-based society. PIAC/ARC argued that as part of this policy vacuum, issues relating to the means and cost universal access from the home, and the creation of a diversity of commercial and non-commercial content to meet economic, social and cultural needs must be addressed. Specific recommendations by PIAC/ARC included:
– the CRTC should conduct periodic reviews (3 years) to determine which services and content are essential;
– the government of Canada should clarify its policy position on whether the Internet and some forms of new media are essential services;
– telecommunications service providers should be required to make contributions of up to 5% of gross annual revenues to create a fund. In priority, the purposes of the fund would include: facilitating technical access to basic telecommunications services in high cost areas and individual affordability; to sustain not-for-profit community-based Internet access services; to develop not-for-profit Canadian local, regional and national content; and to augment other Canadian content new media funds.
It is expected that the CRTC will issue a report on the New Media proceeding in June of this year.
PIAC Working with Industry to Develop Code of Practice for E-Commerce
Over the past several months, PIAC has been actively working with industry representatives, through a multi-stakeholder group chaired by the Office of Consumer Affairs, Industry Canada, to develop guidelines for the conduct of on-line commerce. We are close to finalizing a set of consumer protection principles that will include:
- Provision of full, accurate and timely information by on-line vendors, in respect of their products and services, as well as their location and identity;
- Consumer control over contract formation (via a triple-click confirmation process, for example);
- Consumer control over the collection, use and disclosure of their personal information (including control of spam, or unsolicited commercial e-mail);
- Security of electronic transactions and electronically stored data;
- Protection against consumer liability for unauthorized transactions;
- Consumer access to inexpensive, accessible, effective dispute resolution mechanisms; and
- Improving consumer awareness of the risks in electronic commerce and of ways in which to minimize those risks.
Given the global nature of electronic commerce, the effectiveness of domestic regulation is limited. That is why we are working with the Canadian government as well as consumer groups in Canada and other countries to develop international standards for consumer protection. Efforts are currently underway within the Organization for Economic Cooperation and Development (OECD) to develop a set of principles for consumer protection in electronic commerce, similar to those in Canada, for use by all OECD member countries. International cooperation in this area is essential in order that global commerce benefits consumers as well as businesses.
Benefits of Long Distance Competition in Question
When it comes to savings on long distance, residential consumers have been the poor cousins of big business users, according to a new study by the Public Interest Advocacy Centre (PIAC).
Big business long distance rates have plummeted between 1992 and 1996. In contrast, the study shows that many residential consumers, as much as half the population in some regions of the country, were still paying the same high rates in 1996 as they were in 1992. Less than a quarter of Canadians have reaped the full price benefits of competition by subscribing to an alternative service provider. When basic local service is taken into account, the situation is even worse, since most Canadians’ phone bills have actually gone up since long distance competition started.
PIAC’s study suggests that the recent price war may not make long distance savings available to many more residential consumers. In a market in transition from monopoly to competition, consumers have trouble benefitting from the discounts offered. The study points to low levels of consumer knowledge, aggravated by complexity and lack of comparability of long distance pricing, as key factors in consumer inertia. PIAC is calling upon the CRTC, and the Ministers of Industry and Heritage to take measures to ensure that residential consumer benefit more over the next five years of long distance competition than they did over the last five years. Public information programs, and better tracking of market indicators, are among the measures that PIAC is advocating. Copies of the report in English (100 pages) are available at $20 each.
Presentation to the Committee on Foreign Affairs and International Trade
Public Interest Advocacy Centre (PIAC)
Presentation to the Standing Committee on Foreign Affairs and International Trade
1. PIAC would like to thank the committee for inviting us to present comments and recommendations which will help shape Canadian policies and priority objectives for the prospective World Trade Organization (WTO) negotiations.
2. PIAC is a national not-for-profit organization that advocates on behalf of the interests of traditionally under-represented citizens, including low income, senior and rural Canadians. However, many of the issues of which we are involved are relevant to other Canadians. PIAC’s core regulatory and policy activities involve telecommunications and broadcasting, energy utilities, banking, as well as matters relating to privacy and electronic commerce. PIAC’s member organizations represent over 1.5 million Canadians.
3. Many of our comments today will be related to issues involving telecommunications. However, the issues and principles which we will be addressing, have the same relevancy for other sectors of Canada’s economy and social activities. Our comments are presented in two sections. The first section deals with comments and principles we believe are important for Canada’s general approach to international trade. The second part offers some specific recommendations.
4. International trade is extremely important for Canada and we have seen a rapid expansion in this in both the traditional goods sector and more recently services. While the benefits of trade have been given much attention, the implications and costs of liberalization as it is extended to more types of services and socio-economic activities needs to be more closely evaluated.
5. Over the past few years, and even the past few weeks, there have been numerous examples that our national and international affairs are not unfolding according to some of the assumptions made by international trade and economic theory. For example, we have seen threats to the stability of our system emerge from the Asian flu and calls for improved controls of the international financial system; a cause being championed by Canada’s finance minister. Contrary to assumptions about the implications of our trade commitments, we have seen the challenge to Canada’s authority on environmental issues with the MMT gasoline additive ban, and the need for the creation of Bill C-55 in attempt to preserve the presumed autonomy of an aspect of our cultural industries. And in the past few weeks, contrary to assumptions about what Canada was actually agreeing to, we find that elements of an important industrial initiative, Canada’s Technology Partnerships Program, contravenes WTO rules. And of course, last year there was the MAI, of which I am sure you are familiar.
6. The point is that there are important lessons we can learn from recent and more historical experiences.
7. One of these lessons was described in the invitation to appear this committee sent to us and others. That is that the global trade regime has implications far beyond inter-corporate dealings. These extend to Canadian’s everyday activities whether those be economic, social, environment, cultural, educational, health and safety, among others. As well, the increasing complexity of trade, and its intended and unintended consequences are likely to exceed the estimates of government, industry and public groups. These could have tremendous positive, but also negative impacts on our domestic economic, social and cultural relations and activities.
8. As part of this, a second lesson is the need for much more detailed consideration, research and analysis on the rules and conditions of trade of which Canada is contemplating agreement on. This should involve several activities. One is greater consultation with industry, consumer and public interest groups, different levels of governments, academics and others, about these issues. The work of this committee is a very useful step in this direction and we would like to complement you on these efforts. A better understanding by our trade negotiators of the real everyday activities and needs of our citizens and businesses, and how these are likely to evolve in future, will greatly inform understanding about the implications of how rules should be written, what may be agreed to or what Canada may choose not to agree to at the WTO.
9. We feel that there should also be much more consultation between those in International Trade and Foreign Affairs and those in other government departments at both the federal and provincial levels which have direct responsibility and expertise in matters relating to socio-economic issues and services, programs and initiatives. An improved understanding of current programs and initiatives and how these relate to Canadians’ needs, will help to avoid problems such as those mentioned earlier.
10. Another important lesson is that Canada is a mid-size trading country. Our successful development as a country has featured a mixed public/private role in the development and ongoing operation of our economic activities, and a substantive government role in our social and cultural initiatives. At the same time, we have balanced this with a fairly open international trading relationship with other countries. As we move forward, we need to position the WTO as a fair trade mechanism that serves the needs of countries, but at the same time does not undermine or negate the authority of our national government, or other governments or agencies to fulfil their mandates, obligations and responsibilities to Canadians.
11. This means that the Canadian government must continue to have access to the policy and regulatory mechanisms necessary to maintain our economic and social relations and practices, and to have the flexibility to adapt or change these in future, in response to the changing needs of our society.
12. Some of the principles that we believe should inform Canada’s approach at the WTO negotiations in relation to these matters are:
- the recognition that instruments such as subsidies, exemptions and reservations, and performance requirements will continue to be important tools to achieve governance objectives in Canada.
- the possible abandonment of any of these should only be done sparingly, on a case-by-case basis or for a specific activity as opposed to blanket application, and only after substantial research and consultation on the possible implications of such a commitment.
- given the essential nature and quality of life importance of a number of services to Canadians, Canada should exempt or maintain considerable flexibility in some sectors or activities in any WTO agreement. These would include: health and safety, environment, culture, and the universality of public services, including basic communications. As a matter of policy, Canada should also be able to evolve the definitions, meanings and scope of application of these as our needs and practices change.
Canada should not agree to Standstill or Roll-back provisions on legislation or programs except under exceptional circumstances. We cannot predict the future, and we will likely need the flexibility in governance to meet our changing economic, social and cultural needs.
Performance requirements have been an essential policy tool in realizing economic and social objectives. These should not be downgraded or removed through any WTO agreement. For example, performance requirements have been used in broadcasting to meet economic, cultural and social objectives through such things as production funds, and content and programming requirements. In telecommunications, requirements in the form of contributions are used to ensure the universality and affordability of service. As the Internet continues to evolve, some aspects of this new service may come to be considered essential. The ability to require contributions by companies to facilitate universality or other goals, may be required. Performance requirements also include consumer protection laws, privacy laws, standards, among other rules frameworks.
Similarly, the importance of the use of subsidies to facilitate economic and socio-cultural development and activities in Canada needs to be maintained. The reality of trade is that some subsidies will have to disappear. However, again this should be done on an exceptional basis and after proper research and assessment on each issue has been undertaken. The recent WTO decision on the Technologies Partnership Program suggests the importance of this issue for Canada. Unlike the Americans, we don’t hide everything under national security. Both performance requirements and subsidies have been essential policy tools in Canada and will have continued relevance for our national development. For example, the federal government’s Connected Agenda features a number of programs which contribute to economic, social and cultural policy objectives – the Community Access Program, SchoolNet, Smart Communities, among others. At the moment these are funded through programs or subsidies. It may very well be in the future that some or all funding for these may include industry contributions through regulation. If we don’t take care in how we approach the question of subsidies, performance requirements and related provisions in a WTO agreement, we may hamper or end our ability to undertake such initiatives in many sectors, not just communications. We need to ensure that options remain open to us in future.
13. There are a number of specific issues we would like to raise. First, we do not feel that it is appropriate at this time to change the levels of foreign ownership permitted in the communications sector. There are several reasons for this: it would be premature to undertake this while we are still introducing competition and restructuring the sector; we have yet to resolve existing and pending social and cultural obligations as required by the communications Acts; current investment levels have demonstrated that Canadians already benefit from new and innovative technologies developed elsewhere; and the sector has realized significant foreign investment and participation. There is no compelling evidence to suggest that an increase in foreign ownership levels would accrue further benefits to any party other than the shareholders of such foreign concerns.
14. Moreover, there is a real question about whether majority foreign ownership in this sector would realize the same benefits, such as R&D, employment and social contributions as exists under the current regime.
15. There are several matters which relate to consumer interests and protection which we believe should be closely coordinated with any WTO initiatives. The WTO has been mainly focused on creating rules and privileges that benefit industry. To create a fair and effective market, it is important the some balance is brought about through the maintenance and extension of rules which benefit and protect consumers in dealing with companies in Canada and those operating from other jurisdictions.
16. Canada, like many of our major trading partners, is in the midst of developing rules and regulations as these apply to privacy and security of information. As well, consumer protection legislation is being revisited in the context of international trade and online transactions. These rules or performance requirements need to be well established and included as part of any trade agreement. Canada is working in conjunction with our major trading partners in the development of some of these rules. Similar initiatives are being undertaken by other governments. For example, the European Commission is pushing for an international charter for global communication policy to address the technical, legal and commercial aspects of e-commerce.
17. In respect of such activities, there should be greater coordination between the WTO and other institutions and initiatives. As a general observation, to realize some symmetry in policy, we believe that the WTO should be working in closer collaboration with other international organizations that are involved in rules making, such as the OECD and International Telecommunications Union.
18. An important part of such processes is the need to increase the participation of consumer organizations. Such organizations in each country have developed significant levels of expertise in different sectors, such as communications, the environment, health, and so forth. We believe that the Canadian government should not only undertake a greater degree of consultation with such groups on trade issues, but also provide support to allow Canadian groups to consult and work more closely with their counterparts in other countries. Such collaboration will be to the benefit of consumers, as well as governments and industry, through the creation of a fairer market place.
19. Another important issue for consumers is that of standards. Standards and regulation provide important protections for consumers. Canadians standards must be maintained and not downgraded as part of our international agreements. Until there is a harmonization of standards of acceptable level, a system of assessing the equivalency of standards should be included in any trade agreements. A similar equivalency test should also be applied to privacy, data protection and consumer protection measures.
20. As a final point, we believe as part of any WTO negotiation process, the Canadian government should publish and seek public comment on specific proposals being made by Canada and other countries. Trade negotiation is a dynamic process, and such an initiative would provide interests in Canada with occasion to comment on opportunities and oversights as they may emerge in negotiations.
21. We thank you again for this opportunity to participate in these hearings and would be pleased to answer any questions.
Newsletter- December 1998 Vol.5 No.2
IN THIS ISSUE
Banking Mergers: Consumers Safe From Mergers For Now But Continued Vigilance Needed!
New PIAC Study Calls for Federal Funding, Better Co-ordination for Public Access to the Internet.
Benefits of long distance competition in question.
Tips to Save Money on Long Distance!
Tips for Shopping On-Line!
Banking Mergers: Consumers Safe From Mergers For Now But Continued Vigilance Needed!
Consumers could breathe a collective sigh of relief when the Finance Minister recently announced that the two bank mergers would not be allowed. We were pleasantly surprised that both the Competition Bureau and the Office of the Superintendent of Financial Institutions issued reports warning that increased concentration in the banking sector would certainly harm consumers. This stands in contrast to the situation a year ago when we published our report on consumer issues and banking; then our concerns about the level of concentration and weakness in competition in the banking market were met with incredulity. One of the benefits of this bank merger controversy is that it will be difficult to brush concerns about concentration in banking under the carpet in the future.
But what have consumers really gained? On the ground, we are stuck with the same old big banks and weak consumer protection measures. Major outstanding consumer issues in the banking sector are numerous, including: information disclosure, fair selling practices, comprehensible contracts, use of personal information, access to basic services for all, responsibility in cases of fraud, the need for independent advice for consumers and scrutiny of the costs of banking services.
However, there are indications that the upcoming overhaul of the financial services legislation offers some promise for consumers. The independent task force appointed by the federal government to study financial services sector reform made wide-ranging recommendations to increase consumer protection measures and empower consumers. Following the task force’s lead, the Finance Minister has taken on the mantle of “Public Interest Paul” (so-called by the Globe and Mail because he used the phrase “public interest” so often in his announcement about the bank mergers).
It is hard to say if this newly incarnated Public Interest Paul will come through for Canadians with substantial consumer protection measures. He will be confronting an industry ferociously opposed to consumer protection, and angry over the merger rejection. Once the mergers are out of the public eye, it will be tempting for the government to water down the reform package so as to achieve peace with the powerful banking industry.
Active vigilance is needed. This is where PIAC comes in; we will continue to promote consumers’ interest in the banking sector. We have some success with advisory bodies such as the independent task force, and the House of Commons Committee on Finance. But unfortunately, we have had less success where it really counts – with the decision-makers. While the Minister’s officials have not been completely unfriendly (we have seen photocopies of our reports floating around the Department of Finance), the doors are mostly closed to consumer representatives and the public. Until the doors open more than a crack, we can not be sure that there will be any progress at all in consumer protection in banking.
New PIAC Study Calls for Federal Funding, Better Co-ordination for Public Access to the Internet
Over the past two years, PIAC has been working in partnership with a number of other public interest and consumer organizations to develop models for sustainable community-based non-profit organizations which would provide affordable access to the Internet and, develop public content services, such as community, health, government, job and employment training, and education information. During the same period, PIAC has also been working closely with Industry Canada’s Community Access Program and the federal department Human Resources Development (HRDC), to help design access and content programs for the Internet which meet the everyday communication needs of Canadians. Much of this work, as well as other research undertaken by PIAC has now been incorporated into a new study which analyzes the public’s Internet needs and the successful models of development and funding necessary to ensure that Canadian’s everyday communication needs are included as an important component of Canada’s Information Highway. The report entitled Community Networking and Access Initiatives in Canada will be available from PIAC by mid January.
Recent research undertaken by PIAC in partnership with Ekos Research Associates found that three in ten households currently access the Internet from home. The majority of those who do not have access either have no interest or need for this service, or can’t afford it. In the past, PIAC has maintained in its arguments to government and the CRTC that new services such as the Internet should be optional services for Canadians and forced on them. Moreover, we also argued that those who actually used the new services should pay for. However, while the Internet is still not an essential communication service like local telephone, this is likely to change over the next few years as both government and companies increasingly only make information and services available on the Internet.
The report found that a large number of Canadians, particularly those in the lower income brackets, will be not be able to afford Internet and other new digital services. Research also showed that there is a widening gulf between a class of information ‘haves’ and ‘have-nots’. The report therefore concluded that until the Internet is affordable for all Canadians from the home, community-based access initiatives, such as Industry Canada’s Community Access Program and HRDC’s Community Learning Network program, among others, are vital to ensure that all Canadians have some level of access in the near term, and that for the longer term, a diverse and substantive set of information resources relating to the public’s community, education, health and related needs are also developed and made widely available on a not-for-profit basis. Among a number of recommendations intended to help government and public organizations achieve these goals, the report identifies a need for the federal government to provide at least 50 per cent of the required operating costs of not-for-profit community access organizations in order that they are able to continue providing on an ongoing basis.
The report will be available from PIAC in January 1999.
Benefits of Long Distance Competition in Question
Once the dust has settled from the recent price war in long distance service, will long distance savings be available to many more consumers than before? A recent PIAC study suggests that the answer might be “No”. In a market in transition from monopoly to competition, such as long distance, consumers have trouble benefitting from the discounts offered. The study points to low levels of consumer knowledge, aggravated by complexity and lack of comparability of long distance pricing, as key factors in the wide-spread consumer inertia found in the residential market.
When it comes to savings on long distance, residential consumers have been the poor cousins of big business users. Big-business long distance rates have plummeted between 1992 and 1996. In contrast, the study shows that many residential consumers, as much as half the population in some regions of the country, were still paying the same high rates in 1996 as they were in 1992. Less than a quarter of Canadians have reaped the full price benefits of competition by subscribing to an alternative service provider. If basic local service is taken into account, the situation is even worse, since most Canadians’ phone bills have actually gone up since long distance competition started.
This study serves as an important reminder that the transition to competition in the long distance market is not yet complete. The market is still dominated by the former monopolies, and exhibits some serious market flaws, such as consumer inertia and market segmentation. PIAC is calling upon the CRTC, and the Ministers of Industry and Heritage to take measures to ensure that residential consumer benefit more over the next five years of long distance competition than they did over the last five years. Public information programs, and better tracking of market indicators, are among the measures that PIAC is advocating.
Still A Long Distance To Go: Residential Consumers and the Transition to Competition in the Long Distance Market is available from PIAC (cost $20). To order a copy by phone, call (613) 562-4002 ext. 60.
Tips to Save Money on Long Distance!
If you are with your regional telephone company, you probably have to subscribe in order to get any discount plan at all. Many of the new discount plans will save you money even if you do not use much long distance. It is worth checking what the telephone company is offering. Also, check out the competitors; they generally try to underprice the regional telephone companies.
If you subscribe to one of the plans that offers calling unlimited calling for $20 per month, remember that the plan may only apply to evenings and weekends, which means that calls on weekdays will be an extra charge on top of the $20. Also, remember to check your old bills, to make sure the $20 flat rate actually saves you money compared to what you used to spend!
If you subscribe to one of the plans that offers 10 cents per minute (some of these are combined with the $20 flat rate plans), remember that the 10 cent rate may not offer you an advantage over other discount plans if you make a lot of short-haul calls.
The bottom line is that saving money in long distance takes some effort. Keep your eye on your long distance bill, and if it has not gone down in the past 6 months, consider trying a new discount plan.
Tips for Shopping On-Line!
Shopping on the Internet can be convenient and satisfying. But the risks are greater than with regular commerce, since anyone can establish a fancy-looking web site. You need to be sure that you are dealing with a reputable merchant who will honour the contract of sale. Here are some questions to ask if you are considering an Internet purchase:
Does the merchant tell you enough about who they are, where they are located, and how to contact them?
Is there enough information about the products or services to account for the fact that you cannot inspect the merchandise or talk to the merchant in person?
Does the merchant have a process in place which allows you to confirm, prior to payment, all aspects of your agreement to purchase, including the full price, terms and conditions, method of payment and delivery arrangements?
Can you obtain a printed record of the terms and conditions of sale at the time of purchase?
Does the merchant ask for your consent prior to collection, using or disclosing your personal information?
Does the merchant have a satisfactory policy regarding its treatment of your personal information?
Is the online payment system at the merchant’s web site secure? Can anyone, other than intended parties have access to your credit card number or other financial information?
Is there an easy and clear procedure for addressing any complaints or problems?