Abandoned in the market: The sad state of Canadian consumer

protection

Michael Janigan

Executive Director and General Counsel

Public Interest Advocacy Centre (PIAC)

Jurisprudence Centre

Carleton University

Ottawa, ON

March 2, 2011

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Perhaps the first comment that might be made about the title and theme of this

lecture is so what? Aren’t there bigger items on Canada’s policy problems table to

be solved? – the future and funding of health care, the national response to climate

change, our continued engagement in Afghanistan, Arctic sovereignty – even the

demise of the long form census loom larger in the national psyche than the

brusque and often one sided treatment that the Canadian consumer receives at the

hands of players in the market. If consumer protection has become an orphan, only

the most flagrant abuses in the orphanage capture public attention. The government

response is usually transient and a band-aid for often systemic problems. It seems

clear that this pervasive ambivalence is a phenomenon that is more than simply a

reflection of the mainstream’s media’s inability to report politics beyond the

dynamics of personalities or scandals.

However, widespread apathy is not always a catalyst for funding indifference and

lack of policy prioritization by the government. Different programs slumber

through periodic government financial crises scarcely meriting much more than a

raised eyebrow outside of high level review.

The apathy is certainly not a by-product of economic insignificance of consumer

transactions. According to Statistics Canada, consumer purchasing accounted for

more than 50% of all economic activity over the two decades that concluded in

2003. Yet the superintendence of the consumer interest in those transactions on the

federal level is largely limited to the activities of one branch of Industry Canada

that in 2008 had a budget of 5.1 million and staff resources of 23 person years.

And for those jurisdictional purists that would point out that consumer protection is

largely a matter of provincial concern, Canada’s largest province, Ontario has a the

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only separate consumer ministry among the provinces, and has a budget of

approximately $60 million, the majority of the same largely consumed by the

funding of the administration of agencies and authorities such as the Liquor and

Gaming Commission.

Now, someone of a more libertarian bent, or perhaps a writer of a Molson

Canadian ad, might cheer the incredible Canadian efficiency associated with such

minimal government spending that produces a quiescent consumer populace.

While acknowledging that Canadians are not in the streets about the lack of

government commitment to a fairer marketplace environment, there are signs that

the several decades of incurious and sometimes willful neglect may not reflect the

future.

But before we catalogue the current deficiencies, it might be more instructive to

figure out how we got to a place where consumer interests seem to be low

priorities both for governments and traditional advocates for programs necessary

for civil society. As I will describe, consumer protection was not only as a casualty

of corporate strategy and government expedience, but also inattention by advocates

of engaged government.

One important hurdle to the championing of public protection in the marketplace

seems to be the word “consumer”. There is a strange dichotomy that has

developed between the consumption of goods and services by Canadians,

sometimes in much greater quantity than several decades ago, and their self

identification as consumers.

The inclusiveness of the term is certainly a problem. As Industry Canada’s

Consumer Trends Report has noted:

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“Consumers are a diverse group and it is difficult to make generalizations

about them. Their wants, needs and capabilities are often dramatically

different, depending on their age, gender, social circumstances, place of

residence and income. As a result, a marketplace opportunity for one group

of consumers may be seen as a problem by another.”

But further, the term “consumer” itself has acquired a negative connotation

associated with unbridled and unsustainable consumption. Consumption and

efforts to curtail consumption, particularly of non- renewable resources or those

products whose manufacture distribution, or use results in harmful effects in terms

of total societal costs of the economic activity. The environmental movement and

advocates for reform of climate change look to ways to reduce consumption often

with

The views of those distressed by the very term “consumer” has been channeled by

advertising copywriter Mark Stiltner writing on the blog site Design Taxi, where

he states

“It is my long‐held opinion that the word “consumer” devalues people. It

strips us down to the lowest common denominator and defines us by our

most basic behavior. Even pond scum can consume.

At a time when many of our nation’s most deadly diseases are self‐inflicted

symptoms of overconsumption, the term also reinforces a negative

relationship between people and the companies that serve them. That’s right;

the companies are there to serve us, not the other way around.

Which brings me to my next point; the term “consumer” places people

squarely at the bottom of the commercial food chain. Thinking of potential

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customers as consumers hinders the way marketers and businesses interact

with people. Because guess what? I’m not a consumer, and neither are you.”

I’m sure you may be thinking that it doesn’t bode well for the entire subject area

when the term “consumer” itself is subject to derision from some of the same

people who may otherwise be inclined to support the elimination of inequities on

the marketplace. And Stiltner is correct that the notion of citizens as clients and

customers has driven much of the happy talk from governments and industry over

the past couple of decades when they are eager to disconnect the objectives of

universality and affordability from their provision of an important product or

service, delivered publically or privately.

So we haven’t got to the depressing part of the lecture yet, and already consumer

protection is MIA from the interventionist barricades. In fact, in some of the most

contentious public issues of the recent past in Canada, involving the negotiation

and terms of multilateral trade agreements, the consumer voice was appropriated,

without consent, by the faction representing exporters and the debate largely

centred on issues not touching upon the position of Canadians as consumers.

The role of language and its use in this field is a wonderful topic for a seminar on

the use of spin. Consumer protection is needless regulation when it is being

eliminated, but important provisions for public safety when it is being

implemented.

However, if this lecture’s theme is abandonment of the consumer, when precisely

did the abandonment take place? Was there ever a moment when governments

were fully engaged in leveling the playing field for Canadians, or, at least, being as

committed to advancing consumer interests as that of producers.

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As we have seen the term consumer can be subject to sufficiently elasticity to

include almost everyone depending on the context, and possesses certain unhelpful

connotations for a segment of the population that fails to self identify. What then

would a commitment to consumer interests consist of?

For American President John F. Kennedy, the appropriate commitment could

be condensed to a statement of consumer rights. In his address to Congress of

March 15, 1962, Kennedy noted:

“Consumers, by definition, include us all. They are the largest economic

group in the economy, affecting and affected by almost every public and

private economic decision. Two-thirds of all spending in the economy is

by consumers, But they are the only important group in the economy who

are not effectively organized, whose views are often not heard.

The Federal Government --by nature the highest spokesman for all the people

-- has a special obligation to be alert to the consumer's needs and to advance

the consumer's interests

For Kennedy, the Federal Government’s obligation included a package of

consumer rights comprised of the following

“(1) The right to safety -- to be protected against the marketing of goods

which are hazardous to health or life.

(2) The right to be informed -- to be protected against fraudulent,

deceitful, or grossly misleading information, advertising, labeling, or

other practices, and to be given the facts he needs to make an informed

choice.

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(3) The right to choose --to be assured, wherever possible, access to a variety

of products and services at competitive prices; and in those industries in

which competition is not workable and Government regulation is substituted,

an assurance of satisfactory quality and service at fair prices.

(4) The right to be heard-- to be assured that consumer interests will receive

full and sympathetic consideration in the formulation of Government policy,

and fair and expeditious treatment in its administrative tribunals”

These rights were selling point for an ambitious package of reforms that included

the passage of a new Food and Drug Act in 1963.

How does Canada stack up in relation to the advancement of these rights in its first

century of existence? While there does exist a perception in some circles that

Canada was once at the forefront of consumer protection and a model for other

nations because of a regulatory commitment to objective public interest principles,

the historical record is decidedly less clear on this point.

Early Canadian initiatives to level the playing field in the marketplace for

consumers largely followed developments in the United Kingdom associated with

the Sale of Goods Act close to the turn of the nineteenth century and the changes

the Uniform Commercial Code in the United States in relation to the rights of

buyers and sellers. There is no discernible body of jurisprudence that stakes out a

special Canadian sensitivity to consumer rights. In fact, it is arguable that there is

ample case law to support a thesis of fairly close adherence to the confines of the

sales contract, written or implied and a trust of existing business.

In relation to issues of public safety, for example, Canadian efforts to regulate

drugs were first confined to insuring no alterations of the drug took place, and not

until 1920 was there legislation to enable the year old federal Department of Health

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to license drugs subject to certain requirements. By 1951, the regulations called for

new submissions from the drug companies before the commencement of initial

marketing. As we shall see, these proved to be wholly inadequate to prevent the

introduction of thalidomide into the Canadian market.

America was a far more industrialized and urbanized society in the latter part of

the nineteenth century, and many of the initial battles to curb the activities of the

important financial and industrial interests of the day occurred initially in the

United States. These included struggles for labour union recognition, antitrust

legislation and enforcement, and efforts to institute public health concerns into the

preparation and manufacture of food and drugs. In this latter area, the strong public

response to Upton Sinclair’s novel The Jungle that depicted the harsh and filthy

environment inside the Chicago stockyards led to the passage of the pure food and

drug legislation containing meat inspection provisions in 1906. In 1938 Congress

added to the 1906 legislation by enacting the Food, Drug and Cosmetic Act, which

required manufacturers to prove the safety of new drugs before being allowed to

put them on the market.

One of the largest public health tragedies of the last century, the Thalidomide

crisis, left some 15,000 children adversely affected in 46 countries; 12,000 among

them born with birth defects and another 8,000 dead in their first year of life.

While not the first crisis generated by a pharmaceutical product causing death or

putting consumers’ health and safety at risk since the industrial revolution, the

Thalidomide crisis was a historical landmark in consumer protection. The large

number of victims of the drug caused worldwide prompted strong public reaction,

and forced governments to establish or strengthen legislative and regulatory

protections to discharge their obligation to better protect the safety of their citizens.

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Thalidomide was a sedative developed by Ciba, but put on the market in 1957, by

another German pharmaceutical company, Chemie Grünenthal. It was supposed to

allow patients who had trouble falling asleep to have a quick, natural sleep.

Grünenthal became the new patented maker of the drug and hailed its non-

addictive, non-hangover effects and the fact that it was “completely non-

poisonous”, “completely safe” and harmless “on pregnant women and nursing

mothers. The drug became widely popular under the name Contergan in the

German market and sales volume in Germany averaged 90,000 packets of the drug

every month, all of them over-the-counter. Three years later in 1960, it was sold to

millions in 46 countries around the world, including Europe, North America, Latin

America, Africa and Asia under 37 different names. And although the United

States Food and Drug Administration (FDA) withheld the green light for the drug

to enter the United States market, in Canada the drug was approved for sale to the

public in 1959.

The U.S.-based distributor of Thalidomide, Richardson-Merrell, managed to get

approvals by Canadian authorities to distribute the drug in the country. It was

available in the form of sample tablets in 1959 and, by 1961; it was approved for

medical prescription though medical journals around the world had started to raise

alarm bells about the drug’s possible side effects. When the effects of the drug

around the world became news, it was soon learned that Canada had not escaped

harmless from the tragedy with 125 children with Thalidomide-induced

deformities were reported in this country.

Ironically, the United States was largely spared from its effects thanks to the work

of a Canadian working as an inspector for the Food and Drug Administration

Agency (FDA), Dr. Frances Oldham Kelsey. The omissions of reports concerning

side effects and the lack of scientific evidence included in Richardson-Merrell’s

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repeated applications to have the drug approved raised Dr. Kelsey’s suspicions.

Although Richardson-Merrell’s representative, Dr. Joseph Murray, complained to

FDA officials about Kelsey’s concerns with the drug calling them “unreasonable”,

Dr. Kelsey would still not sign off on the approval of the drug. Doctor Kelsey’s

well-founded suspicions of the drug resulted in the FDA withholding approval to

market the drug in the U.S. This precautionary measure spared the U.S. from the

harms the drug inflicted on consumers around the world, including Canada. At the

end of the crisis, only 17 cases of Thalidomide victims were reported in the U.S.

Kelsey subsequently received the President's Award for Distinguished Federal

Civilian Service by President John F. Kennedy.

However, the fact that compliant Canadian authorities had felt that the drug

companies submission of largely patient testimonials was sufficient for approval,

spurred some action in the form of a complete revision of the regulations to

strengthen the Department's regulatory abilities. The revisions required drug

companies to show that the drug worked without adverse reactions.

The current system for the regulation of drugs in Canada focuses on pre-market

activities and is characterized as point-in-time. A manufacturer can put its drug on

the market once it has received a Notice of Compliance from Health Canada. The

manufacturer must meet a number of obligations, but as long as the drug causes no

adverse reactions or the manufacturer does not need to make changes to the drug, it

may never be subject to review by Health Canada again. Health Canada notes on

its website in a somewhat understated fashion, “Medical and social trends, both

domestic and international, are putting pressures on this system to evolve”

And if we take stock on Canada’s commitment to the “right to choose” by its

approach to the development and enforcement of competition law in our country,

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we can unreservedly say that our achievements on this score have been tepid at

best. This was a nation whose economic policies were rooted in John A.

MacDonald’s National Policy that encouraged the development of Central

Canadian manufacturing largely protected from American competition. The

country’s small domestic market and reliance on international trade nurtured a

concentration of players in key industries and a tendency to rely on national

champions, domestically-based companies that were leading competitor in its

global market. Companies such Bombardier, Bell Canada, Nortel, Air Canada

Massey Ferguson and CAE, were unofficially anointed in this fashion. Their

wellbeing was important as a national priority and it was thought that they were

required to be dominant players in the domestic market to have a chance

internationally.

In addition, until the relevant SCC decision in 1989, Canada’s constitutional

division of jurisdiction between the province’s role in matters of property and civil

rights and the federal oversight over trade and commerce was thought to present

difficulties associated with implementation of a comprehensive civil regime of

competition law. Early competition legislation was criminal legislation made with

a view of placing it firmly within federal jurisdiction. It was largely without

significant impact in the nation’s economic affairs, however. We lacked a culture

of competition, possibly because it was absent is a real sense in many industries.

Chief Justice Laskin, of the Supreme Court of Canada, could state in 1978 without

reputational injury in the K.C. Irving case that no public detriment under the

existing legislation could be presumed simply by the result of having one owner of

all business in an industry. While subsequent changes in the mid 1970s and in

1986, brought in civil provisions and a review of matters such as abuse of

dominant position and mergers by the Competition Tribunal, it is rather clear that

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the focus of the Competition Bureau was on hard cartel offenses like bid rigging

and price fixing. This left leaving the structure and practices of Canada’s corporate

elite, often dominant in their product market, with little real threat of intervention.

By contrast, in the United States, public and private action under the Sherman and

Clayton Acts were instrumental in mandating divestitures and significantly limiting

the ability of the trusts to control all aspects of an industry. As well, private actions

under those Acts were possible without the consent or support of the competition

authorities, leading to the rise of an engaged bar of anti-trust legal counsel eager to

reap the potential reward of obtaining treble damages for anti-competitive conduct.

In the United States, the thalidomide scare coupled with the emergence of a

dedicated critic of American corporate behavior in Ralph Nader energized the field

of consumer protection. Nader was a Harvard educated lawyer and professor

whose seminal work exposing the lack of concern for driver and passenger safety

led to a wave of consumer oriented legislation not only in automobile safety, but

financial services, environmental and health safety and the passage of a new Food

and Drug Act. His work spurred the enlistment of hundreds of mostly young

activists, dubbed Nader’s Raiders to volunteer or work for minimal salaries in

consumer and public interest organizations such as Public Citizen. The social and

political culture of change of that era in essence swept through the marketplace and

secured support for reform both in the United States and worldwide. Governments

scrambled to keep pace with pressure for attention to consumer issues. Cities such

as New York had their own consumer commissioner

In Canada, the consumer movement up until the mid sixties had been a rather

genteel affair. The Consumers Association of Canada, founded in 1947, led the

way with price comparisons and product warnings largely geared to consumer

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education rather than market reform. However, by the 1960s it had a relatively

large and dedicated membership of some 350,000 and was greatly reliant on

volunteers particularly housewives to assist in CAC’s campaigns.

The Pearson government of the middle sixties was sensitive to the appetite for

change and the curbing of marketplace abuse. The creation of the Department of

Consumer and Corporate Affairs seemed to be an official recognition of the

centrality of the consumer in the Canadian economy. In 1965, Prime Minister

Pearson noted:

“Legislation in these areas, must not merely record commercial rights

but protect the national interest and the rights of individuals and act as

an instrument in the promotion of social and economic goals.”

The Department of Consumer and Corporate Affairs was given a

proactive mandate to initiate, recommend or undertake programs

designed to promote the interests of the Canadian consumer. An

important element of the departmental Act was its use of language that

expressed the unequivocal intention to place the consumer at the

centre of policymaking for the market.By the time of its demise in

1993, the Consumer Affairs Bureau in Consumer and Corporate

Affairs had a budget of over $68 million and 968 person years.

Provincial governments also attempted to bolster efforts with their own programs

and reform of consumer protection statutes to keep pace with questionable

marketing practices. Legal aid clinics, in some provinces, based in law schools

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began to assist low income consumers with a variety of economic needs including

difficulties with consumer purchases and credit.

This boomlet in government and public attention in consumer affairs is a scarcely

remembered episode in Canadian public governance and one that is not celebrated

by annals of business commerce or achievements in government. By 1993, the

Department was gone, absorbed into Industry Canada where its concerns engage

some .4% of the personnel and .5% of the budget of Industry Canada.

CAC which suffered through internecine feuds and financial turmoil in the 1980s and 1990s is now a shadow of its former self. Outside of Quebec, most independent organizations engaged in consumer protection work have minimal presence outside of research, policy advice and public advocacy.

When PIAC appears before Parliamentary Committees, politicians seem stunned to learn of the lack of capacity of the consumer movement, our inability to do primary research outside of the parameters grants doled out yearly by the now-eviscerated federal Office of Consumer Affairs. This latter agency is itself constantly attempting to position itself as a provider of useful advice within a government that is largely unaware, and frequently hostile to its existence.

Even modest consumer protection efforts such as the legislation associated with the telemarketing Do Not Call list or C-6 dealing with Consumer Product Safety is subject to dilution or the threat thereof merely on business complaints of highly speculative harm. Consumer protection is often reduced to those rules that producers will tolerate.

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Yet, it is arguable that the need for consumer protection work and organized and resourced pressure on policy makers to decide marketplace issues in the public interest has hardly diminished. Canadians are continually confronted with unsatisfactory results from government attempts to withdraw from effective regulation with the often rapacious practices by the wireless cell phone providers, or compromising food safety with the continued revelations about the policing of the meat and poultry industries. These, as well as examples drawn from a strangely inert and uncompetitive retail market that result in brief flurries of government damage control but little systemic change.

So it may be instructive to review how consumer protection as an issue and a

framework got to its place of uncertainty and ad hoc fixes.

Government economic conditions

The rise of consumer empowerment and the establishment of Consumer and

Corporate Affairs coincided with a period of unprecedented economic growth and

government spending. The large expenditures and commitments to items such as

the Canada Pension Plan, public health care, student loans and post secondary

education occurred at the same time as CCAC was finding its feet. Continuing

deficits and the effects of two severe recessions in the early 1980s and the late

1980s and 1990s, made the climate uncertain for government programs that were

unpopular with business. In particular, the recession that occurred in the late 1980s

exacerbated by the effects of free trade, and the loss of manufacturing and

industrial jobs, instilled fear in government political ranks that regulatory burdens

on business might cause further failure or an exodus. Consumer protection

measures, especially those imposed to level the playing field in the marketplace

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fell out of favour. The Liberal government coming to power in 1993 had a mantra

of “no new regulation” primarily to prevent the kind of business opposition to the

party that had been seen in its days of campaigning against the Mulroney free trade

agreements.

By the 1990s, the political focus on the deficit and the national debt occupied most

of the policy oxygen consumed by the government. Part of the fix for these

problems was strategized as the reduction of regulation of business. This, in turn

was supposed to result in economic expansion that would generate tax revenues

that would pay for social programs and balance the budget. Thus, the ordinary

pressure on the government associated with the necessity to make cutbacks in

difficult financial times was relieved by the new epiphany that reduction of

intervention in the marketplace to secure fairness for consumers would create more

tax revenue that would help solve the deficit. The revenue would meet the tab for

social programs and appease business.

At the same time, governments continually committed themselves to hair shirt and

flagellation exercises under monikers like Red Tape Reduction or Smart

Regulation, where efforts are made to reduce overall government superintendence

of business under the rubric of phasing out the unnecessary or obsolete. For the

most part, little attention in the bureaucracy was given to areas where regulatory

scrutiny isn’t sufficient and perhaps needs more follow up and corrective action.

Industry wide voluntary codes seemed to be the instrument of first choice in

dealing with consumer problems when they surfaced.

In some cases, like Transport Canada, a transition from ineffective, intrusive

regulation to threadbare oversight over airlines fares and policies was accompanied

by a culture of complete indifference to consumer interests in the supply of

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transportation service. Some of this was because the department itself was cut to

the point that it no longer had the capacity to do much more than deal with safety

and security issues. However, here laissez-faire was refined to an art form. Unlike

most international airline authorities, Transport Canada keeps no statistics on

things like on time arrivals, lost bags, cancelled flight and the like. One would

think as that may give rise to informed consumer choice or a public demand for

action. Even a modest recent amendment to its governing Act to force airlines to

show all- in prices in advertising has been stalled in enforcement by a department

apparently determined to prevent consumer protection rules from touching its

flagship Air Canada.

I have described the bureaucratic busywork and other fluffer buffery that has

largely confused efficiency with lethargy, as well as the embrace of neglect,

ostensibly for a worthy cause of leaner governments and eradicating deficits.

However, these occurrences would never have effected the incredible shrinking of

official commitment and loss of public and political profile for consumer

protection the following factors that greased the decline:

1. The rise of neo-liberal economics and the subversion of public interest

regulation

Starting in the 1960s, led by neoclassical economists of the Chicago school of

economics, there was a concerted attempt by some academics to argue that the

effect of government regulation was contrary to the consumer interest and

largely inefficient. Milton Friedman and other monetarist economists urged

attention to price stability by reducing the government’s proportion of the

money supply. George Stigler, Richard Posner and others were particularly

critical of efforts to maintain and regulate so-called natural monopolies such as

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telephony and electricity arguing that traditional regulation simply rewarded

inefficiency, and ultimately served the interest of the regulated industry itself.

Others tried to debunk the need for regulation at all arguing that the mere threat

of entry into the market would deter dominant players.

All of this might have simply been the basis for food fights in University

faculty clubs but that the economic crisis in the 1970s in the United States

helped to form a convergence between academic theorists, large corporate

interests and politically conservative politicians. Corporate producers and

suppliers, of course, are happy at any time to be relieved of any potential

barriers between themselves and the customer’s wallets, while corporate users

also saw an advantage for themselves in deregulation. In large utility industries

such as telecommunications, the introduction of competition would enable

better rates for high volume users, and an ability to negotiate rates and create

their own systems for supply of digitally based telecom services. In turn,

conservative politicians, opposed to the expansion of a government role in the

market, now had an intellectual basis to attack government and regulation and

to assist a key constituency in business.

In the United States and in most of the commonwealth countries, these ideas,

coupled with the rise of politicians such as Ronald Reagan and Margaret

Thatcher, sparked a sea change in the post war governmental approaches.

Government was portrayed as the enemy to economic growth through taxes and

regulation and the free market as the panacea for consumer problems with price,

quality, availability and disputes. Add to the cacophony of market reform, the

regulated industries that saw an opportunity to escape universal service

obligations, and to price in accordance with demand, there were powerful

lobbies contending against a role for government in the marketplace.

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By the mid 1990s, OECD reports were chattering about minimizing regulatory

inflation as an unquestioned barometer of good governance, and the

liberalization of markets had taken on a religious fervor with WTO efforts to

secure sector specific agreements. The conservative revolution had succeeded

in demonizing regulation for mainstream governmental stakeholders.

2. Problems with Regulatory Authority and Public Ownership

The ironic aspect of any study of the dismantling of consumer protection by

reliance on market forces is that the political and policy impetus for the same

was provided, in part, from the successful manipulation of both the regulatory

content and the regulatory bodies themselves. According to James Q. Wilson, in

the Politics of Regulation, this is done by direct influence, inserting friendly

people into agencies, or isolating those agencies in the political process. George

Stigler, the economist discussed earlier, created a whole theory of supply and

demand of regulation as any other commodity with the demand created by the

economic interests of the regulated company. In Stigler’s view because the

regulated company was the player with the most at stake, it ended up as the

beneficiary of most regulatory decisions.

As well, public owned companies delivering government services such as

provincially owned utilities were often subject to pressures from their political

masters to generate more income or build more capacity depending on the

political exigencies of the time. Ontario Hydro careened from ill-advised

decisions on nuclear power to neglect of infrastructure to flatten rates in

attempts to avoid politically unpopular results. Even seemingly populist

provinces like Saskatchewan disdained formal regulation of the crown owned

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provincial utilities arrogating to the government itself the application of a

standard of prudence in evaluation of performance and the setting of rates.

As a consequence, advocates of competitive markets had frequently easy

pickings with members of the consuming public. For example, it was difficult

to defend the role of the CRTC in ensuring basic service, affordability and just

and reasonable rates when the authority itself viewed as the equivalent of a

bossy vice-principal telling Canadians what to watch, and seemingly in the

tank for Canada’s cable companies. Many Canadians liked the introduction of

competition to monopoly services like telephony, television distribution, energy

commodity etc. because of the prospect of seeing the incumbent disciplined for

previous indifference. Of course, for the most part, the incumbents, both here

and internationally, proved as adept at managing the transition to competitive

markets as they were in finessing the regulatory system to their advantage. The

winners in regulated services became the winners in competitive services with

mixed results largely dependent on the volume of use.

3. Media Interest

In addition to being influenced by the same strong wave of neoliberal political

and economic pressure on governments, the mainstream media soon drifted

from an interest in consumer protection to an interest in individual

consumerism. The media also became weary of reform and more wary of

treading on advertisers toes. Media giants in Canada, owned by interests such as

Conrad Black, Bell Canada, Ted Rogers, Pierre Peladeau, often had a dog in the

fight, as it were, when it came to issues of regulation and consumer protection

because of investments in the delivery of important services.

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As Trudy Lieberman notes in the article “In the Beginning” from the Columbia

Journalism Review, after Nader’s initial successes, editors soon became

entranced by articles giving advice on personal finance and beating the market.

In fact, she notes that not only did the media not work to clean up the lending

industry; it worked in many cases, to make the purveyors of the now discredited

financial instruments seem reasonable.

As Lieberman notes, the general trend to pass along advice rather than looking

at the root causes of marketplace problems. And when industry abuses are

covered, the stories ignore the efforts of behind-the-scenes lobbyists to make

sure that the government action is what they want.

The consumer affairs journalistic beat once considered sexy in the sixties and

seventies, is often handed to the most junior reporter. Just as the learning curve

is complete, the individual gravitated to another beat like national politics and

the cycle of education started again. Consumer affairs were, and still is largely a

part of the business news division of any media outlet. As a consequence, well-

resourced corporate interests can impart a spin on consumer protection issues

through their constant presence, and care and feeding of the business news

journalist’s need for copy.

And for most of the period of deregulation and resort to market forces, a

positive spin was imparted to stories of the government cutting regulation and

the accompanying loss of consumer protection.

4. The weakness of the consumer movement, the Canadian culture of

advocacy support and the economic approach of civil society groups

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While Canada seemingly has a vibrant set of civil society interests outside the

confines of official government and commerce, the reality on the ground for most

organizations is very different. Outside of issue specific oppositional advocacy-

things like free trade, HST, and internet usage based billing. Canadians have

largely been reluctant to support forms of representative advocacy though

individual donation or other means of support. Canadian charitable foundations

are resolutely committed to funding non-controversial arts programs or medical

facilities, with an occasional nod to social issues of a motherhood nature. In a

country where the political parties themselves are given government support, the

expectation is that government looks after consumer protection issues. When

governments lose interest in funding both their own consumer protection

operations, and providing money to independent consumer and public interest

organizations for research and advocacy, there is little push back on the recurrent

themes of deregulation and reliance on market forces to solve consumer problems

that can be accomplished by NGOs in the field.

As well, the overall emphasis of most civil society NGOs has been on government

funding for major social programs that have been under continuous threat because

of government fiscal arrangements, political ideology and interest group pressure.

The preoccupation, particularly in the last two decades, has been with the

government raising and transfer of revenue to deal with health, social assistance

and education. The need to interpolate principles of sustainable development into

the operation of Canadian industry and the marketplace in general has

understandably also been at the forefront of issues that have engaged third sector

advocacy. There have been few public across the board forays into marketplace

issues by civil society groups save for issues of free trade and foreign ownership.

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On the latter score, Canadian industry has hardly ever failed to disappoint

nationalist expectations in its adoption of the multinational playbook for

conducting business when unencumbered by regulation. The big incumbent

telephone companies, for example, wasted little time outsourcing as much of their

operations as they could out of the country as soon as they were given an incentive

to do so under the price cap. Worse still, Canadian ownership has frequently been

used as sole requirement for meeting the public interest by governments crafting

industry regulation and usurping more pressing marketplace concerns.

But it is more than simply the need to maintain the social safety net that has fueled

the retreat from policing the marketplace activity in the private sector. Because

Canada’s economic traditions were not grounded in competitive markets and

preventing dominant players from exploiting the market, most of the intellectual

underpinnings of civil society advocacy has been directed to issues associated on

the government involvement in providing programs and services rather than a

public interest regime of marketplace oversight that provides a transparent, fair and

competitive marketplace for Canadians.

So at the same time that Canadians were subject to the well orchestrated retreat

from consumer protection, there was little ability on the part of the defenders of a

significant role for government in securing economic security and full societal

participation to engage in a debate on whether market forces provided meaningful

consumer protection and whether the competition worked.

The fact is that, for the greater part of the last twenty or so years, government

policy has been in support of greater reliance on market forces. Whether such

reliance is prudent depends to a great deal on competition law and its enforcement,

the fundamentals of which are largely obscure to non-practitioners. The

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practitioners, I might add are primarily Bay Street lawyers for the most part

dedicated to ensure that the status quo in the marketplace is preserved for their

clients - more like an anti-competition bar than a competition bar. When have you

seen an article by civil society or public interest economists critiquing the content

and application of the Competition Act? Is it any wonder that most industries

would prefer to be policed by the Competition Bureau rather than sector specific

regulation that may have objectives that go beyond the prevention of anti-

competitive behavior? The media also have a difficult time with these issues often

confusing the appearance of a competitor at a shopping mall with the fact of actual

working competition, which generally requires about 4-5 competitors of more or

less equal size.

The result is general public confusion about what a competition authority is

designed to do, and by and large an abdication of the public discussion of

competition issues to the stakeholders who desire it to be as ineffectual as possible.

Until there is full engagement by the full range of public and consumer interests in

the competition issues, I suspect that the confusion will work to the benefit of

dominant industry players.

The Way Ahead

I’m sorry if this speech has been a litany of no money, no citizen engagement, and

no government interest in consumer protection. I have also noted the lining up of

powerful corporate stakeholders behind the position that market forces are the

equivalent of pixie dust that can be sprinkled on every market with splendid

results. Well, as British Prime Minister Harold MacMillan once said, “After a long

life, I have come to the conclusion that when the entire Establishment is united it is

always wrong”

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Notwithstanding the tea party shenanigans in the United States, it seems to me that

the failures of the grand deregulated world sold to us by the aggregation of neo-

classical economists, big corporations and their political allies, and deficit

conscious governments are unraveling this anti-government consensus that was

responsible for much of the agenda of governments associated with consumer

protection in the last two decades. The American financial crisis precipitated by

deregulation of financial services products and the mediocre performance of

competition in energy, transportation, telecommunications and broadcasting has

not escaped the notice of voters used to the refrain that government is the problem.

Our Conservative government is not inclined to rest its political fortunes on market

outcomes either. They quickly jumped into the fray on issues like copyright and

usage based billings to quell public outcry about results that have allowed greater

latitude to suppliers of content and internet.

The Internet and social networks are clearly playing larger roles in the successful

presentation of consumer issues and generating public response. What is needed is

a method to bridge the gap between the ability to organize around a particular

issue, and the need for a continuous, resourced consumer presence on marketplace

issues that is capable of taking on the formidable armada of lobbyists, flak-

catchers, CEOs and media shills that impede efforts to provide redress for

consumers.

Ideally this funding would be independent of political machinations and ostracism

on the basis of positions that differ from the government. It would be reasonable if

a portion of the fines and administrative monetary penalties from marketplace

misconduct, or public education funds in consumer based class action awards went

to independent NGOs dedicated to consumer protection. By having the source of

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the funds separated from the general government budgeting process, there is less

opportunity for the rigging of the process by the government to avoid

embarrassment or a particular result.

Secondly, much of the deregulation and withdrawal of black letter regulation or

enforcement has taken place without an empirical review to confirm or debunk

positive results for consumers. PIAC’s recent telecom review study has shown that

the restructuring of the telecommunications industry has had very mixed results yet

the decision to forbear from regulation has never been subsequently challenged.

Where forbearance takes place, it should be subject to periodic review.

Thirdly, Canada needs a Consumer Protection Commissioner to act in the same

fashion as the Competition Commissioner in studying industries, encouraging

public engagement as well the enforcement of applicable consumer protection as

warranted.

Finally, we need an approach to marketplace issues that relies on actual results not

simply the intent to please the best resourced stakeholders in the hope that their

success will rub off on our economy and political party bank accounts. There is an

ongoing and rather desperate attempt in some quarters to link national productivity

and innovation with the lack of government regulation. Interestingly, the negative

effect of concentration and market dominance on these economic criteria is seldom

given the same scrutiny notwithstanding a far more logical link. The consumer

pocketbook served on a platter is not always the best recipe for productivity. Even

Industry Minister Tony Clement might suspect as much as he moaned to the Globe

and Mail in November of last year,

“Governments are doing their part. Universities are doing their part. Where’s

business?”

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We think that much of the reason for its absence lies in the current consumer

protection framework that insufficiently rewards efficiency and insufficiently

punishes misconduct. We look forward to the comprehension of that fact by all

stakeholders in the marketplace and action in accordance with the same.

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