On the same day that I wrote about the overwhelming volume of hearings, notices, and consultations on digital policy, I also appeared before the House of Commons Standing Committee on International Trade to discuss the role of government policy in fostering the growth of e-commerce. The panel included eBay Canada’s Andrea Stairs (who argued for an increase in the de minimis threshold for consumer imports) and Peter Simons, the CEO of the Simons department store chain (who argued for no de minimis and the application of sales taxes on all purchases regardless of the size or location of the seller). My opening remarks centered on five areas for government action on e-commerce: access to affordable broadband, fostering consumer trust, intermediary liability, intellectual property, and e-commerce in trade agreements.
Appearance before the House of Commons Standing Committee on International Trade, October 25, 2017
Good afternoon. My name is Michael Geist. I am a law professor at the University of Ottawa, where I hold the Canada Research Chair in Internet and E-commerce Law. As I always, I appear today in a personal capacity representing only my own views.
While there are many Canadian e-commerce success stories – everything from e-commerce platforms like Shopify, services like Hootsuite, and retailers like Clearly Contacts – there are also many smaller businesses that use a combination of e-commerce, social media, and online platforms to raise awareness and foster customer loyalty.
In my view, the question for this committee, is what, if anything, should government be doing to help further facilitate e-commerce in Canada. Are there currently regulatory or legal barriers? Are there opportunities for government to help support e-commerce growth? Are there instances of an uneven playing field that disadvantages Canadian online businesses?
I believe the answer is yes and I’d like to focus quickly on five.
It may be stating the obvious, but universal, affordable Internet access is the foundation for e-commerce. If Canadians are not online, they are not buying online. ISED Minister Navdeep Bains was right when he said:
We need every Canadian to be innovation ready- ready to spot opportunities, imagine possibilities, discover new ideas, start new businesses and create new jobs. All Canadians need access to high-speed Internet, regardless of their income level or postal code. Until we bridge this digital divide, Canadians will not reach their full potential.
There is still much work to be done to bridge this digital divide. Too many Canadians do not have affordable access and our pricing – particularly for wireless services – remains among the highest in the developed world. We need public investment to support universal, affordable access and policy measures designed to foster enhanced mobile competition. Moreover, proposals such as those the committee heard earlier this week calling for an ISP tax – which by the advocates’ own estimates would add over $100 million a year to the costs of consumer Internet access – should be rejected.
2. Consumer Trust and Confidence
Even if Canadians are online, their willingness to engage depends on trust. Trust that their information will be used appropriately and trust that online sellers will deliver what is promised. The need to foster trust has a government policy dimension. For example, concerns associated with fraudulent spam undermines the potential success of all e-commerce activities. The Industry Committee is currently reviewing CASL, the anti-spam legislation. There are business groups that have criticized the law as overbroad, yet it is having an impact with one study finding 29% less email in Canadians’ inboxes and a 37% reduction in spam originating from Canada. It is essential that Canada have a tough anti-spam law to help facilitate online trust. Further, ensuring that long overdue security breach disclosure rules come into effect as quickly as possible is critical as ensuring our privacy legislation keeps pace with global standards.
3. Intermediary Liability
If you were to canvass many emerging digital first businesses – social media companies and other online services – about the relative legal risks in Canada vs. the United States, many would likely to point to the absence of safe harbour rules for the content and contributions of third parties.
While the issue is hidden to the general public, in the U.S., Internet giants such as Google, Facebook, and Amazon – as well as small companies that invite feedback, comments, and user participation – are protected from liability for the content of third parties through a statute known as the Communications Decency Act, which provides that an intermediary is not liable for the third party content it hosts but does not actively review. The standard makes sense – in a world where platforms may have millions or even billions of users – placing editorial responsibility on the site is a recipe for disaster, with users going elsewhere.
Canada does not have a statutory equivalent. In practice, that means that sites will either relocate to the U.S. or simply remove content for fear of liability. If Canada wants to compete on the global e-commerce stage, it needs laws that do not place Canadian companies at a disadvantage.
4. Intellectual Property Laws
As I mentioned in my last appearance before this committee on NAFTA, Canadian companies, particularly those active in the digital environment, may be at a disadvantage with our restrictive IP laws when compared to the more flexible rules in the U.S. For example, the availability fair use in copyright in the U.S. represents a significant competitive advantage for U.S. businesses and creators. Similarly, Canada’s anti-circumvention provisions – also known as digital lock rules – are among the most restrictive in the world creating unnecessary limits on innovation.
5. Digital Trade/E-commerce Chapters in Trade Agreements
The committee has heard about the need for an e-commerce or digital trade chapter in our trade agreements. Canada should be wary of provisions that undermine legitimate public policy interests, including privacy and security.
The U.S. has identified restrictions against local data storage – often called data localization – as one of its objectives. The Canadian government should resist efforts within NAFTA to limit the ability of federal or provincial governments to establish legitimate privacy and security safeguards through data localization requirements.
Limitations on data transfer restrictions, which mandate the free flow of information on networks across borders, raises similar concerns. While the U.S. is seeking a ban on data transfer restrictions, Canada should ensure that privacy and security laws will not be superseded by NAFTA restrictions.
In sum, Canada is succeeding in e-commerce but we can do better and there is a role for the federal government to help make it happen.
I welcome your questions.