The Globe & Mail
Tuesday, June 15, 1999

Canada fails E-commerce test

by Eric Reguly,

Canada has once again shown the world it is willing to follow instead of lead. Last week, the start of the House of Commons summer recess deftly pushed Bill C-54 off the political agenda. Bills vanish all the time and their loss is rarely mourned, but this one was different. It was to be the centrepiece of the legislation governing electronic commerce, the world's biggest growth industry.

With C-54 on the legislative scrap heap, Canada trails behind huge chunks of the planet in implementing E-commerce rules. Its absence can only impede an industry that was supposed to thrive in Canada.

The bill was a two-headed beast. The first part provided the nuts and bolts of E-commerce law. Specifically, it would have recognized the legality of electronic signatures, giving electronic documents the validity of paper documents with handwritten signatures. The second, and more important, part governed privacy. It was designed to protect the reams of personal information that is amassed by companies, governments, organizations and Internet service providers. If the bill had become law, personal data, ranging from health records to shopping habits, could not be disclosed without the consent of the person it was collected from.

Although there were problems with the definition of "consent," and grumblings from marketing companies, which argued that the bill put too many restrictions on the use of personal data, C-54 was generally considered a good start and absolutely essential to the smooth development of E-commerce in Canada. The consensus was that E-commerce was becoming the biggest thing since the invention of the production line, and the faster the ground rules were laid out, the better. In a recent speech, John Cleghorn, chairman of Royal Bank, said: "Early in the next decade, goods and services produced in the electronic economy will probably account for a larger proportion of the U.S. gross domestic product than goods produced in the traditional, industrial economy."

The irony about C-54's failure is that the government in general and Industry Minister John Manley in particular had made privacy and E-commerce legislation a priority. Last year, at the E-commerce conference of the Organization for Economic Development and Co-operation (OECD), the government established a series of goals that would make Canada a leader in the field. Bill C-54 was to emerge at the heart of the agenda. There was a tremendous amount of interest in the bill, as the lengthy hearing process can attest, and as late as last month, Don Boudria, the government House Leader, said he intended to move C-54 through the House by the end of May and the Senate by the end of June.

The excuse is that C-54 fizzled because other pieces of legislation, such as C-55, the magazine protection bill, ate up too much of Parliament's time. The bill could be revived in the autumn, but advocates fear it could face more delays, or even die, if the next Cabinet shuffle removes Mr. Manley from his post.

Meanwhile, the world of E-commerce blazes forward, leaving Canada in its wake. Michael Geist, a University of Ottawa Internet law professor, says C-54's disappearance means that Canada "finds itself following the rest of the world on these critical E-commerce issues and in danger of becoming isolated from the fastest-growing economic engine in recent memory."

The European Union and Australia, for example, have been busy putting together legal frameworks for E-commerce. The EU recently passed a directive that insists on tough protection for consumers, to the point that data cannot be "exported" unless privacy rights are respected. It has also passed a directive on electronic signatures. Even the United States, which has no comprehensive privacy rules, is now considering a range of legislative initiatives that would speed up the development of E-commerce. The United States is also negotiating to set up a "safe harbour" agreement with the EU to ensure unhindered data exports.

Canada needs legislation, especially privacy legislation, to spur E-commerce. Surveys have shown that consumers are less likely to embrace on-line services if they feel their privacy is being compromised every time they log on.

Three widely publicized privacy fiascos made a lot of Internet users paranoid. In the United States, Intel developed a chip that allowed Internet sites to monitor users without their consent. At Home, an Internet service provider amended its service policy to allow anything delivered on its system, including personal E-mails, to be published. Outrage forced both companies to back down. In Canada, an electronic back door was left open on the Air Miles Web site, exposing the supposedly confidential consumer information of the thousands of Canadians who are members of the customer loyalty program.

Until C-54, or something akin to it, is passed, Canada will find itself taking a back seat as E-commerce expands. The Canadian government has failed to recognize that the industry is moving too fast for it to sit idle.

Copyright © 1999 by The Globe & Mail. All Rights Reserved. Reprinted with permission.