Letter to the Minister of Transport

VIA FAX AND MAIL
613-995-0327
Honourable David Collenette
Minister of Transport
Transport Canada
Place de Ville
Tower C
29th floor
330 Sparks Street
Ottawa, ON
K1A 0N5
Dear Mr. Collenette:
Re: Proposed Airline Merger
Canadian Association of Airline Passengers (CAAP)
As a follow-up to our meeting with you in November 1999, we are writing on behalf on the Canadian Association of Airline Passengers (CAAP) to set out some principal concerns associated with the upcoming introduction of legislative amendments to the Canada Transportation Act. We hope that these comments may be of assistance to you and your officials in preparing such amendments.
First of all, we would commend you for your statement of December 21, 1999 concurrent with the approval of the Air Canada transaction to purchase Canadian Airlines. We are pleased that, despite the apparent attempts by Air Canada to water down the consumer safeguards, Canadian airline customers will have some protection against objectionable monopoly practices under the new regime.
There are some important points, however, that should be considered in the drafting of the legislation. Some of these points have been omitted or obliquely referred to in the report of the House of Commons Standing Committee on Transport. These include the following:

Price Regulation Powers

As you have indicated, it is important that the regulator have “a full range of options to ensure it has the power to deal effectively with any price gauging including effective monitoring powers and sanctions as necessary”. We would suggest that the language of the provisions of the Telecommunications Act S.C. 1993 as amended are instructive with respect to the appropriate statutory measures to take to both encourage competition and to mandate consumer protection.
We would recommend that the Canadian Transportation Agency be given the authority to fix ceilings for fares by licensed carriers in much the same fashion as rates are set for carriers under the Telecommunications Act. Such a ceiling should also be based upon the “just and reasonable” standard. In addition, the Agency should have the power to disallow any fare charged by a licensed carrier where the fare charged does not meet the costs of providing the service. Finally, the Agency shall forebear from regulating any fare for services provided by a licensed carrier that are subject to competition sufficient to protect the interests of airline customers.
It should be noted that a “price freeze” is not necessarily the ideal solution to protecting consumers in the airline market. Mr. Schwartz of ONEX believed that joint Canadian Airlines and Air Canada costs could be cut by as much as 20% by operating as a single airline. This “monopoly dividend” will accrue only to Air Canada shareholders in a price freeze situation. Similarly, consumers have a right to expect that the airline industry in Canada will be at least as productive as its foreign counterparts in introducing efficiencies of operation which should result in lower ticket prices. All of these matters should be explored in appropriate proceedings before the Canadian Transportation Agency.
The reasons for empowering the Agency to impose fare ceilings are consistent with the objectives of the Government to prevent price gouging. As well, in order to promote and maintain competitive entry, it is particularly important to prevent the dominant air carrier from charging higher rates for services that are not subject to competition to gain additional revenues to subsidize advertising and price wars in competitive markets. Finally, similar to the jurisdiction exercised by the CRTC in telecommunications, the Agency should be given the power to disallow rates charged by a dominant carrier that are uneconomic. This is a vital measure to swiftly prevent predatory pricing and maintain conditions for market entry and competition.

Quality of Service

It makes little sense to provide protection for ticket prices when the value of what is received for a ticket may be subject to diminution or compromised by a reduction in service by the monopoly provider. For example, a monopoly provider that competes in several markets may chose to increase expenditures to attract customers in the competitive market while reducing expenses to serve customers in the monopoly markets. This may mean a lower quality of service for such matters as on-board services and comfort, ticket handling, cleanliness, complaint resolution and possibly safety. In a monopoly market, customers are not free to chose to go elsewhere when service is reduced. The legislation should provide that the Agency may set standards with appropriate incentives or penalties for quality of service issues for services of a licensed carrier whose fares are subject to regulation as per the above.

Process

It has been acknowledged that a complaint driven process is not sufficient to provide consumers with the appropriate standards for protection with respect to price and quality of service. The Agency must have the power to initiate effective monitoring and action where required to meet the objects of the Act and consumer protection in monopoly circumstances.
It is crucial that airline consumers and the organizations that represent them have access to the Agency for the purpose of public scrutiny and participation in important policy or rate making decisions of the Agency, in a similar fashion to the access afforded in important utility proceedings for telecommunications, energy etc… As well, the Agency should be directed to exercise its cost authority set out in section 25.1 of the Act to awards costs with a view to encouraging public participation. Telecommunications and energy regulators throughout North America have done so with good effect for several decades.

Public Consultation

It should not take a crisis to stimulate productive discussions on the future of the airline industry in Canada. The Air Transport Users Council of Great Britain provides a useful example of what can be done to ensure effective public feedback. The Air Transport Users Council is a consumer watchdog that advises air travellers on issues touching upon consumer welfare and takes up problems with the industry on both a case by case and a generic basis. Their web site www.auc.org.uk provides considerable information on their operations. We would strongly suggest that efforts be made to implement a similar structure in Canada to assist airline passengers.
Finally, we would commend you and your staff for their openness to receive ideas from CAAP. We would be pleased to meet with you or your officials to follow-up on any of the issues in this correspondence that may be necessary.
Thank you.
Yours truly,
Michael Janigan
Executive Director/
General Counsel
cc: David Peippo, Transport Canada – fax only – 991-6445
CAAP Members – fax only

A Garland For Consumers: Will The Garland Case Provide Safeguards For Vulnerable Consumers?

Download File: garland.pdf [size: 0.18 mb]

Introduction

A Garland For Consumers?
In October of 1998, the Supreme Court of Canada found that the Late Payment Penalties (LPP) charged by Consumers’ Gas may constitute a criminal interest rate contrary to section 347 of the Criminal Code. The decision, in Garland v. Consumers’ Gas, was unexpected insofar as the LPP had been continuously approved by the Ontario Energy Board since its adoption in 1975. It also brings in its wake, however, an important opportunity to revisit the need to provide safeguards for vulnerable consumers.
The decision is an illustration of how consumers, who possess little bargaining power, may be protected from exorbitant usurious penalties and charges for late payment. After all, such punitive transaction costs often catapult the customer into further default. As many consumers simply cannot pay, rising debt threatens their access to commodities which are vital to the maintenance of their standard of living.
Further, the conclusion that the Garland case may have only a limited impact on consumer credit protection, raises a host of ancillary issues concerning the billing practices of utilities. This discussion, therefore, goes beyond the examination of the legal decision and its policy implications. It also attempts to recognize the need for the creation of consumer credit protections, implemented within a comprehensive framework.
Chapter One will assess the scope of section 347 of the Criminal Code by describing the legislative history surrounding its adoption, and the actual construction of the section. Canadian case law will also be detailed, with a particular emphasis on the Supreme Court’s reasoning with respect to the LPP in Garland. Chapter Two will briefly compare and contrast the Canadian experience with how consumers in the United States and the United Kingdom are protected from usurious charges. Chapter Three will focus on the policy implications of Garland, from a consumer standpoint. In turn, Chapter Four will look at industrial implications by examining the policies of specific companies in a variety of industries. In conclusion, the study will recommend actions which may be taken to further protect consumers from exploitive credit arrangements. Although Garland is clearly a step in the right direction, its application is not a sufficient response to the needs of consumers.

Standard Offer By Utilities: Making Competition Work For All

The introduction of competition into the utility industry is intended to afford consumers a right to choose among different suppliers of a utility product such as natural gas or electricity. What happens to those consumers for whom no choice exists, or who are satisfied with their current utility service? How will they receive utility service and the benefits of competition? This study looks at how it might be possible to protect the inert customer market and afford it some of the benefits from competition through the use of a standard offer or standard supply service provided by the utility.
60 pages $15.00

Introduction

Since the 1980s, there has been a general trend towards deregulation and privatization in North America. Canadian public utilities such as telecommunications, energy and transportation have been greatly affected by this trend. Change has been brought about through both legislation and regulation. Regardless of the source of change, the introduction of competition into historically regulated areas will continue to have a significant impact on Canadian consumers. Changes made now will determine how consumers are supplied with commodities which are essential to sustaining their standard of living in the future.
The experience with natural gas deregulation in North America shows that once competition is introduced into one sector of the industry, it almost inevitably flows into other sectors. Once competition is introduced at the wholesale level, plans are made for a transition to retail customer choice. Electricity restructuring has exhibited the same trend. In many jurisdictions, energy marketers have been, or will be, permitted to sell natural gas and electricity directly to retail consumers.
All energy industry players and types of consumers will encounter changing circumstances. Both low income residential and large industrial energy consumers will be faced with choice concerning who to buy their energy from, and under what terms. The number of players involved in the industry will increase, with potentially confusing results. Regulators will need to change how they regulate in accordance with the altered environment. Existing utilities will have to come to terms with a changed role, and in many instances, new corporate structures.
Deregulation is premised on the notion that competition will provide consumers with a wider variety of ‘unbundled’ energy options at lower prices than exist under regulation. Only monopoly functions will remain regulated. Competing energy marketers will supply consumers with energy, and utilities will simply transmit and distribute the commodity. Thus, following a transition period, utilities will exit the ‘merchant’ function; they will no longer sell energy directly to the end user. Monopoly and competitive services will be separated, thereby decreasing the potential for market power abuse. The utilities’ traditional obligation to serve must therefore be redefined, as system supply will be largely dismantled.
The assumption that all consumers will benefit by making choices within the competitive marketplace itself assumes that consumers will make choices. This line of thinking does not recognize that consumers may choose not to choose a competitive supplier. Preliminary study in energy, (and in other deregulated industries), illustrate that consumers often do not want to ‘switch’ to competitive suppliers, especially in the short term. They are satisfied with traditional regulated service and unsure of how the new environment operates. A “wait and see” attitude is adopted.
Given the restructuring agenda, the question then becomes: who should supply consumers who have not chosen an energy supplier, and how? The following discussion proposes to answer such questions. In doing so, an emphasis is placed on ensuring that the positive benefits of competition are passed on to all users, including the low volume residential consumer.
Chapter One discusses the existence of consumer inertia, its potential explanations, and why an inert market is problematic. Chapter Two describes alternative means of dealing with consumer inertia through the facilitation of consumer mobility. In this respect the Ontario Standard Supply Draft Code will be examined and the implementation of a standard offer supplied by a competitive bidding process will be recommended. Chapter Three will compare and contrast the competitive bidding processes envisioned and implemented in Maine, Ohio, and Massachusetts. Chapter Four will discuss insights which may be drawn from the case studies, as well as from competitive bidding in other industries and the traditional activities of municipal governments. The study will conclude with ‘best priority’ recommendations for the design and implementation of a standard offer supplied through a competitive bidding process.

Financial Service Sector Reform

Letter to the Minister of Finance about Financial Service Sector Refrom (December 15, 1999)

Hon. P. Martin P.C., M.P.
Minister of Finance,
Department of Finance,
21st floor,
140 O’Connor Street,
Ottawa, Ontario, K1A 0G5
Dear Minister Martin,

Re: Reform of the Financial Services Sector

This letter is to urge you to take action to ensure that the financial sector reform is in fact a true reform for Canadian consumers.
When your paper, Reforming Canada’s Financial Service Sector: A Framework for the Future, was released, we were optimistic about the prospects for major advances to be made in consumer protection for financial services consumers, even though not all of our recommendations were acted upon. We felt the tone of the paper indicated that you take the public interest seriously, which reflected the principles laid out by the MacKay Task Force.
Our recent discussions with your officials, however, indicate that the Bill will actually be the minimum possible interpretation the paper in terms of consumer-oriented provisions. We urge you to take the following steps to ensure that your reform is meaningful:

1. Give the FCA a broader mandate:

Your officials have told us that the new Financial Consumer Agency (FCA) will have a strictly limited mandate. Monitoring and compliance activities are very important, but it would be most unfortunate if the FCA’s hands were tied with respect to emerging consumer issues in the sector. You chose not to legislate many of the MacKay Task Force recommendations on issues that are important to Canadians, and that were also endorsed by the House and Senate committees that studied the Task Force report. But just because they are not legislated does not mean that the issues should be completely forgotten.
The FCA could play an important role in monitoring these issues, and working with stakeholders towards non-legislated solutions such as voluntary codes and commitments, national strategies as well as educational activities. We would like to see the FCA lead a national strategy on ensuring access to banking services in poor urban areas, and rural and remote locations. This type of strategy would address an issue of great importance to Canadians, and may well be supported by the industry. Why prevent the FCA from engaging in such projects?

2. Commit to an approach based on openness and partnership:

The way to ensure that the public interest is part of government decision-making is to involve the public in the decision-making process. This means involving representatives of the public in deliberations, and keeping them informed, not just asking them what they think from time to time. Multistakeholder processes, such as CSA committees, can result in rules that both industry and public interest advocates endorse. For instance there was broad agreement to the CSA Model Privacy Code, which is now the basis of the new privacy law.
Why has this approach not been used for important issues in the financial services sector? Take for instance, the issue that has been at the top of our agenda for financial sector reform for years: the basic bank account. Reforming Canada’s Financial Service Sector committed to 12 transaction for $3 to $4 per month. We have heard that the banking industry is dead-set against the 12 transactions. Apparently, the industry has provided your officials with statistics to prove their point. We do not have access to the industry’s arguments on this point, or their statistics. If there were appropriate sharing of information, we would have a chance to promote the public interest on this important matter. Unfortunately, we are not going to get this chance.
Even on issues such as the basic bank account, consumer advocates are still kept outside the policy-making community. All we can do now is hope that the final arrangement on the basic account, that has been or will be developed in secret, will meet the needs of vulnerable consumers. Of course, we are very concerned that it will not.
On a different yet related issue, we were very disappointed to see one of your officials before the House of Commons Committee on Industry defending the practice of negative option marketing by banks. This is totally out of touch with the needs and opinions of Canadians, and runs contrary to your own expressed intentions to make the banks more accountable to the public interest. It appears that the department decided to simply repeat the banks’ position, and not to bother consulting representatives of the public at all. This incident underscores the need for a complete change in approach, if the financial sector reforms are to have any credibility with consumers.
We hope that you will take decisive action to save your reform process from becoming closed and narrow, and consider the interests of ordinary Canadians in having true reform of the financial services sector.
Yours sincerely,
Michael Janigan
Executive Director
Public Interest Advocacy Centre
cc. Frank Swedlove
Executive Director, Financial Sector Review Group
Department of Finance

Negative Option Marketing

SPEAKING NOTES BEFORE THE HOUSE OF COMMONS STANDING COMMITTEE ON INDUSTRY – BILL C-276

BY: Michael Janigan
Executive Director/General Counsel
of the Public Interest Advocacy Centre (PIAC)
We would first like to extend our thanks to the chair and members of this committee for extending an invitation to speak to this issue which has long tried the patience of consumer advocates. We commend the efforts of the honourable member from Sarnia-Lambton for his efforts in sponsoring this legislation to address this problem.
The Public Interest Advocacy Centre (PIAC) is a non-profit corporation which provides legal services and research to vulnerable consumers and the organizations that represent them. This work primarily concerns issues involving important public services including telecommunications, broadcasting, energy, financial services and public transportation. PIAC’s members include individuals, groups and organisations representing 2.5 million Canadians.
The concern associated with the practice of negative option billing has its origins in the nature of a contract of purchase and sale, as recognized in common law. As every first year law student learns, such a contract consists of an offer and an acceptance. The history of consumer protection statutes is a chronicle of legislators attempting to ensure that the offer is conveyed without misrepresentation by the vendor to a purchaser who has an opportunity to make an informed choice to accept or refuse the offer. This is because a contract that is made with a consumer who is unaware of key elements of the contract such as price, quantity and quality of the goods to be delivered is subversive of the efficiency of the market as a whole.
We thus have seen the gradual implementation of such statutory measures as cooling off periods, penalties for misleading advertising, and contract recission for misrepresentation. Many consumer protection statutes have also tackled the problem of unsolicited goods, some barring legal remedies for collection where there has been no consent by the consumer to receipt of the goods. It is important to recognize that the intent of such measures is not simply to protect consumers, but also to eliminate any competitive advantage conferred on an unscrupulous seller by engaging in these practices.
I want to address the implied notion of the opponents of this Bill that this Bill attacks industry practices which would otherwise be unassailable in law. Whatever the requirement’s that are currently being met by these industries under the standards set out in the various governing acts and regulations, there is nothing that I’m aware of that imparts contractual status to circumstances which amount to the receipt of unsolicited goods. In effect, large industries such as cable or banking have frequently turned a common sense protection afforded to them in law into an aggressive and disreputable marketing tactic.
Common law has always recognized a “course of dealing” exception to the requirement associated with offer and acceptance. For example, a hardware or grocery store may periodically receive shipments of goods to be retailed in the store from its supplier. There is no specific consent to the delivery of individual items, but an understanding exists that the store will pay the supplier for all shipments received within some kind of reasonable limit of business custom. Similarly, no specific consent is required for deliveries of natural gas or fuel oil to the homeowner even though the quantities and time of delivery (ordinarily fundamental terms of a contract) have not been agreed to.
What’s important to note here is that the parties are delivering and paying for goods which were pretty much foreseeable under the terms of their initial agreement. In the first example I gave, depending upon the bargaining power of the retailer, he might also be able to ship back the unsold items to the supplier. In business arrangements where parties are of close to equal bargaining power, one will frequently find arrangements to deal with problems arising from an initial lack of detail.
This is a very dissimilar circumstance than that which presents itself in industries that wish to market products or services which are different in significant ways then those that were initially contracted for. Consent to the changes is not simply inferred in law because it might be difficult for the supplier to obtain the same or because a guaranteed percentage of customers must pay for the changes to make them financially viable. Whether the reason is the promotion of cultural content, or maximizing return to the shareholder, there is no blessing of contractual validity that is conferred upon such changes in contractual arrangements. What I am saying is simply this: individual consumers may still retain the legal right to demand their money back for services they did not order in the industries that are affected by this Bill regardless of this Bill’s passage or failure. It happens all the time now. It is easier for these industries to quietly give a complaining customer his or her money back and to continue to reap the rewards from the inattentative as a result of negative option practices. What this Bill seeks to do is to enlist the assistance of the Competition Act in making negative option billing review able conduct unless it conforms to the exceptions set out therein. These practices may still be subject to contractual remedies by customers misled by the practice who choose to seek a civil contractual remedy. This Bill provides a statutory means to attempt to reduce the use of this practice and the numbers of customers that may be misled by the same.
For whatever the high flown objections to statutory prohibition of this practice, two important conclusions are inescapable:

The practice has meant that large numbers of consumers in these industries don’t know what they are paying for.
The practice has been enormously lucrative for the industries that use it.

The cable industry, of course, is a rather obvious example of the benefits to industry of the use of negative option marketing.
In the 80’s and the earlier part of this decade, cable companies were able to add many new subscribers for additional tiers of service, many of whom were decidedly confused as to what they were getting. In 1993, for example, 66% of Canadian cable customers reported that they obtained only basic service while in actual fact only 8% subscribed to the lowest level of service. We are entering an era of provision of service through multi-media and other digital outlets where proponents will be are competing aggressively for market share. It will be possibly fatally injurious to competition if key players using their existing customer base engage in negative option marketing to artificially make demand fit the expense of supply. There will be a whole range of arguments to justify ignoring the requirement for consent in order to establish commercially viable Canadian services.
We would suggest that all of these arguments essentially amount to the supposition that the interests of the industry should be preferred to that of the right of the individual customer to consent to a contract for goods and services. The marketing principle “what consumers don’t know, cant hurt them” is very much alive and well in the submissions of the opponents to this Bill.
Bill c-276 seeks to empower Canadian’s by insisting that their right to chose be respected and that the historic relationship of vendor and purchaser be restored to industries whose products are important public services. We think this Bill is both overdue and farsighted, a unique combination that commends its passage.

Negative Option Marketing

SPEAKING NOTES BEFORE THE HOUSE OF COMMONS STANDING COMMITTEE ON INDUSTRY – BILL C-276

The practice has meant that large numbers of consumers in these industries don’t know what they are paying for.
The practice has been enormously lucrative for the industries that use it.

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.

Airline Passenger’s Bill of Rights

House of Commons Committee on Transport

Utility Shopping: Are Consumers Ready?

While competition promises many benefits in utility markets, in practice consumers have to be knowledgeable to do well in deregulated markets. The report evaluates the level of consumer sovereignty that exists in Canadian deregulated utility markets by examining the results of a national survey on consumer knowledge and attitudes towards the long distance, natural gas, and future electricity markets. The report concludes with five key recommendations about making utility deregulation more friendly for consumers.
78 pages $15.00

Executive Summary

The introduction of competition into formerly regulated utility markets is a double-edged sword for residential consumers. While competition promises important benefits, it often fails to live up to its promises, and delivers mixed results instead. Lower prices may be accessible to only part of the market; questionable marketing strategies may be used; confusing pricing structures may make informed choice difficult. Consumers must be aware and knowledgeable to manage in this environment. Yet, as this study shows, not all consumers are actually knowledgeable enough to function well, even in well-established utility markets.
Deregulation has taken place in Canadian utilities such as transportation, telecommunications, and natural gas, and is imminent in electricity. Generally, utility deregulation means the relaxation of government oversight of prices and performance, and the entry of one or more competitors into the market. Once the market is functioning, consumers can switch from the former monopolist to another company. But are residential consumers actually ready for the utility shopping that is brought about by deregulation of utility services?
This report provide 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.
This report also contains a discussion of “workable” competition, the type of competition that residential consumers usually encounter in real deregulated markets. The examples of airline and long distance telephone deregulation show that workable competition may offer some benefits for consumers, but market flaws, such as market segmentation and inadequate consumer knowledge levels, may also impose disadvantages. Typically, market flaws arise when there is single firm dominance, which is often the case in deregulated markets.
The report then 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 include:

91% of respondents correctly believe that they have a choice between competing companies for long distance service, while only 50% of respondents in Ontario and Alberta correctly believe that they have a choice in natural gas suppliers;
20% of respondents do not find it easy to compare long distance prices (while 79% find it easy), and 50% of Ontarians and Albertans do not find it easy to compare natural gas prices (while 50% find it easy);
Canadian consumers clearly favour receiving marketplace information from the competing companies, supplemented by information from consumer organizations, and, to a lesser extent, from regulatory agencies (46% wanted to receive information from companies, 23% wanted to receive information from consumer organizations, and 15% wanted to receive information from regulatory agencies).

In the long distance market, the survey shows that consumer knowledge and confidence has developed over the seven years since competition was introduced. There is still a significant inert segment of the residential long distance market, but it is quite a bit smaller than it was three years ago. From a consumer perspective, it is not acceptable that there be such a long lag in the development of consumers’ ability to participate in a deregulated market. Utility services are essential, and it is important that consumers be able to make informed decisions about new options as soon as the regulatory protections are removed.
Local telephone competition is beginning to emerge. There could be the same lag in consumer knowledge and confidence in dealing with the new local market, unless public education is taken more seriously. As with residential long distance, this consumer inertia will limit competition, and mean that the market is less responsive to consumers than it should be.
Consumer knowledge and confidence is still low in the residential natural gas markets of Ontario and Alberta. In fact, consumers’ ability to understand and make choices about natural gas is so low that real competition is not possible in a large segment of the market. In addition, ancedotal evidence suggests that abusive marketing practices have been widespread in Ontario, further discouraging consumers from participating in this 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.

Summary of Recommendations

“Workable” competition should work for residential consumers: Problems with market structure, such as single firm dominance, need to be carefully considered by regulators, and addressed in deregulation strategies. If necessary, deregulation needs to be slowed down in the residential portion of the market, to lay the groundwork for robust competition in the future. A standard offer should be seriously considered in any utility deregulation where there is apt to be significant consumer inertia in the residential market.
Advertising needs to be more than just celebrity spots: Regulators should develop strategies to increase the information content of advertising as competition is getting underway in deregulated markets.
There should be sources of independent information: When there are low levels of consumer knowledge about a new utility market, regulators should take steps to actively promote consumer education. Since the public would like consumer organizations to be involved in information dissemination, consumer organizations should be involved in public education strategies. For on-going information needs, regulators should consider developing, or foster the development of tools by consumer organizations for consumers to compare prices and quality of services in deregulated environments. Also, Canadian regulators should collect more information about service quality, and share this information more openly with consumers.
Basic consumer protections are still needed in a deregulated environment: Codes of conduct for companies in newly competitive markets should be developed before competition starts; consumers should not have to experience widespread deceptive and borderline marketing practices before such codes are introduced. Rules on disclosure need to be in place before competition begins, particularly with respect to price. The way price will be disclosed should be tested with focus groups to ensure that most consumers readily understand it.
Just because it is deregulated doesn’t mean it never needs to be monitored: Canadian decision-makers should ensure that monitoring of deregulated utility markets is undertaken while the market is in transition from monopoly to competition, to ensure that the deregulation strategy is meeting its original goals. Also, any self-regulatory initiative should include monitoring and full public reporting before government endorses it.

Utility Shopping Resources

As a result of our findings in this study, PIAC decided to launch a Utility Shopping Webpage, which is available on the PIAC site at www.piac.ca The page contains charts comparing long distance telephone prices by province, an update on local telephone competition, and links to resources on comparing Internet service providers, natural gas companies, and financial services.
This information is also available on paper for free from PIAC; send us a stamped self-addressed envelope or fax number with your request. If you do not have access to the Internet, and would like to, call 1-800-268-6608 to see if there is an Internet public access point in a library, community centre or school near you.