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TRANSCRIPT
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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