STANDING COMMITTEE ON CANADIAN HERITAGE

COMITÉ PERMANENT DU PATRIMOINE CANADIEN

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, February 29, 2000

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[English]

The Chair (Mr. Clifford Lincoln (Lac-Saint-Louis, Lib.)): I declare open this meeting of the Standing Committee on Canadian Heritage.

[Translation]

The committee will resume consideration of the Canadian book publishing industry.

[English]

I would like to thank our witnesses very sincerely for their presence. We're sorry for the short delay in starting proceedings.

For adoption of motions we need a quorum of nine people. We're one short. When we get another member, I may interrupt the proceedings, because we have to pass our budget. If it's not passed, we'll have no money to function, and this is outstanding. So it will take a few minutes, unless members want to refuse the budget; then it will take longer. I hope it will go through without any problems.

Oh, there we are. So witnesses, please bear with us.

You've all received a copy of the budget that was sent to you for continuation of the work of the committee between now and 31 March, which is $39,000. You'll recall when we first discussed it Mr. de Savoye suggested I give time to study it. We've had several days now, so I'd like to see if we can get a motion to adopt the budget to 31 March 2000.

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[Translation]

Mr. de Savoye.

Mr. Pierre de Savoye (Portneuf, BQ): Mr. Chairman, I've looked at the budget that's been suggested today and I have a lot of questions. I fear that these would unduly delay hearing our witnesses. I would suggest we discuss the motion after we've heard our witnesses. I know we need a quorum. However, I am ready to stay here and I am making that commitment. I think my colleagues from the Liberal Party could do the same out of deference for our witnesses.

As I have a lot of questions, the committee's work would be unduly delayed if we were to discuss the motion immediately. I am simply advising you beforehand.

The Chair: We can discuss this after hearing our witnesses, Mr. de Savoye. However, I am ordering a vote on that motion today. We can't delay any further. There is no more money in the till.

It's all fine and well to put all kinds of questions, but I think that at some point... The other day, we waited, we heard you and we delayed the vote until later. Today, you are asking us to defer it yet again. I don't mind waiting till our other work is done and I would ask the members of the committee to stay here. However, I can assure you that there will be no further discussion after today. The vote will be taken today.

If you don't agree, then you can vote against the budget, but there is no more money in the till. We have to reimburse the witnesses for their expenses and I can't let that drag on indefinitely.

As you're the one with the questions, it will be done later and I'll ask the members to stay, but I can assure you that we'll put an end to this today. If we don't manage to settle it in an hour, then we'll stay longer to settle it once and for all. It will be done today, no matter what.

If the budget is voted down, then it will be voted down and at that point we will live with the consequences, but it can't be delayed any further. The clerk tells me there is not a penny left in the till as of today. We have to be reasonable. At some point, we have to move, we have to invite people. We must pay for their expenses and there are cheques in abeyance today because we can't pass the budget. I don't think that's reasonable.

[English]

I will defer the budget until after the meeting. I would ask members to stay so that we have a quorum.

[Translation]

I'll begin today's meeting. We'll start with

[English]

McNally Robinson Booksellers, represented by Mrs. Holly McNally, the owner.

We have decided, with our research people, on an order of speaking. As you can see, there are a lot of witnesses here, so could you be concise so that everybody has a chance and the members have a chance to have time to question you?

Mrs. McNally.

Ms. Holly McNally (Owner, McNally Robinson Booksellers): Thank you, Mr. Chairman. I'll do my best.

My partner, Paul McNally, and I would like to address our remarks specifically to culture this morning. Our thesis is that bookstores are good for Canada and good for Canadian culture, and that independent bookstores are linked in a cultural chain, region to region, across this country. Canada is, after all, a culture of regions.

This is a cultural chain offering diversity—hundreds of different bookstores offering diverse cultural choices to Canadians. This chain represents bookstores that are rooted firmly in their communities, where they focus sharply on their own constituencies of readers, writers, and publishers. This is a very different chain from the Chapters mega national chain, which serves up corporate monoculture and is governed by a head office located elsewhere.

We are from the prairies. McNally Robinson has stores in Winnipeg and Saskatoon. We are loud proponents of prairie culture. Our mandate is to vigorously promote prairie writers, and we do this with enthusiasm and conviction. We provide platforms for readings and for book launches in our stores to over 400 writers a year. Fully 99% of these writers are Canadian, and 85% of these writers are from the prairies.

We founded the Manitoba Literary Awards in 1987 and continue to sponsor three major awards each year to Manitoba writers. We provide a weekly bestseller list to the Winnipeg Free Press, a list that is studded with local authors, to their great delight, because these authors would not ordinarily find themselves on any bestseller list, no matter how great their regional sales.

We produce a hot-list catalogue for the local library system, which allows them to avoid American-dominated lists in favour of more Canadian titles and, for the first time, regional titles. We produce monthly newsletters that promote local authors and author events. They go to 17,000 homes. We do the same on our website, which has a permanent segment specifically for own indigenous prairie writers.

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We devote space in our stores to regional books. There's a bookseller in place to look after hundreds of self-published books that flood in when publishers dollars are tight, which always seems to be the case, especially for regional publishing in this country. A whole industry of regional self-publishing emerges and fills the vacuum. These are many voices demanding to be heard, and we are willing partners, often putting these titles on the best-seller list in our city.

We also publish ourselves, and we produced a Winnipeg book when no one else did. We will be updating that this year. We do that as a project of McNally Robinson, not with grants. We do the same with children's books.

My point is, that is what we do. That is what independent booksellers do day by day in their stores across this country. If it appears that we are blowing our own horn, that's good because Canada is a culture of regions, and independent book stores are contributing to their regional cultures and the intellectual fabric of this country in real and important ways. I wanted to point out how.

I will now go to my husband, Paul.

The Chair: Paul.

Mr. Paul McNally (McNally Robinson Booksellers): I saw a copy of the Chapters' brief, and I noticed that one of the major headings in their brief echoes Holly's remarks. It says that bookstores are good for Canada, and good for Canadian culture, although it makes it quite specific that Chapters is good for Canada. That's a note that Chapters has been chiming since they were created. It's had them coming to Ottawa and making very specific requests of the Canadian government, and those requests have generally been granted.

First, they were very strong lobbyists in 1994 to keep Borders Books and Music out of Canadian book retailing. When the Canadian government acceded to that lobbying and that general request, of course that meant Barnes & Noble wasn't going to come, and there was a clear playing field for Canadian booksellers to remain Canadian and continue to source books from Canadian publishers. Chapters, as far and away the biggest book store chain in the country, was the primary beneficiary of that policy and that decision.

When Coles and Smiths merged to become Chapters, the mergers and competition branch determined that they were becoming a dominant player; it looked like they had 50% of the market, in spite of their claim it was only 16% of the market. The Competition Bureau was quite specific in stating that their market share was much higher than that, and in what you might call the danger zone.

Chapters said “We must have a major Canadian bookstore chain, lest we be taken over by major American bookstore chains.” Once again, they claimed that if we didn't put up with Chapters, we were going to have to put up with American booksellers. So with that argument, they've attained a kind of protected market, with freedom from American competition. They've achieved permission to dominate the market, in terms of market share.

This really bugs us and I'd like to explain why, in two separate points. First, we don't think Chapters has been good for Canada because Chapters has been systematically deep-sixing the independent booksellers of this country. Duthie Books in Vancouver has gone from ten stores to one small store. Sandpiper in Calgary is gone. Britnell's in Toronto is gone. There was as a fine little bookstore in Winnipeg called Heaven Book and Music. Here's the metaphor: when Chapters comes to town, Heaven is closed.

Chapters is bad for Canadian culture because it destroys the web that linked the system of independent stores that Holly just alluded to. Chapters, of course, has been claiming that they're replacing that with another strong Canadian cultural emphasis. Just to give one example of how that's not true, when they came to Winnipeg and opened three stores, taking the Winnipeg book market from about 70,000 square feet of bookselling space to well in excess of 120,000, they built 85,000 square feet of space in a market that was previously only 70,000 square feet.

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They ran full-page ads trumpeting the amount of literary programming they would do, book launches and readings. For the first three or four months they did do a lot of that, but as soon as the opening fuss was over, they simply gave up. They've kind of quietly admitted that they don't do well with events.

As Holly says, we do about 400 readings and book launches a year. On the basis of how many I see numbered in the Winnipeg Free Press every week, Chapters is probably going to do 20 or 25 from three major superstores in the city of Winnipeg. They have about 75% of the retail bookselling market in Winnipeg, and they're doing about 10% or less of the literary programming. Their claim to be programming and pushing Canadian culture and Canadian authors is, in Winnipeg at least, so much window dressing.

The Chair: Could you conclude so we can give a chance to the others?

Ms. Holly McNally: We're worried that Canadian prices will rise, because publishers have to recoup from somewhere. We're worried about the lack of diversity in the choice of titles, because it will be determined by fewer and fewer people, and also, even worse, that books will not get published at all if Chapters doesn't choose to order them. We worry about their insatiable demand for shelf allowance and co-op money, because independents will not have a share in that money to form partnerships with publishers to promote these Canadian authors and to have these Canadian author events that we so love.

We're worried that we're going to be forced to buy from our competitor, Pegasus, which is 82% owned by Chapters. We're worried about grandiose expansion plans to build more and more stores in the city of Saskatoon, where we operate one large store and there are five independents. Chapters is looking to build a 40,000-square-foot store, and the population of Saskatoon is 190,000 people.

We worry that Pegasus and their appetite for stock will gobble up new Canadian titles as they're published and hoard them in their warehouse, and we'll be literally forced to buy from them in order to get them.

So we ask you to protect Canadians against rising prices of Canadian books. They are high enough. Don't force us to buy from our major competitor, who is simultaneously beating us up in the marketplace. Don't allow further erosion of this cultural chain by allowing into the marketplace 40,000-square-foot stores that nobody needs.

We ask you to halt the expansion of Chapters-Pegasus for a while. We ask you to stop the exclusive distribution agreement where independent bookstores are affected, and perhaps just put them on hold.

Thank you.

The Chair: Thank you, Ms. McNally.

There are six others to be heard, so if you could be concise in your remarks.... I would like to turn the microphone over to Ms. Sally Hawkes, from The Independents.

Ms. Sally Hawkes (Director, The Independents): Thank you. Mr. Chairman and members, good morning.

I'd like to take a moment to thank the committee for giving the independent booksellers the chance to come before you today to present our concerns directly and to answer any questions you might wish to pose. It's a privilege for us all to have this opportunity.

It's also fitting to know that as we appear before you today, another small independent bookstore is preparing to close its operations. As I speak, Odyssey Books in Kanata, just a few miles from here, and its sister store on Albert Street are winding down their operations. As a member of the Ottawa bookselling community and the past director of The Independents, a marketing group formed by eastern Ontario bookstores five years ago to try to offset the impact of Chapters stores into our marketplace, I am again saddened to witness the loss of another member of our organization.

The demise of another good bookstore only serves to underscore the challenges facing Canada's independent retailers. The erosion of the neighbourhood bookstore by Chapters, the deep discounting done by all big-box stores in general, and the vertical integration of Chapters and Pegasus threaten our very existence.

New technologies have caused vast changes in our industry across all levels of our operations from the simple conversion to computer-based inventory control systems to the new e-commerce services being offered by many of our member stores. New technologies have allowed us to provide better customer service, have improved our communications with both our customers and our suppliers, and offer us new challenges for future areas of growth.

But new technology also comes with its own set of problems. Start-up costs and continual maintenance expenses can be prohibitive. And to be perfectly blunt with you, we're booksellers, not electrical engineers, and skill development and training also require substantial funding.

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Further challenges facing the Canadian independent bookselling community have come recently with the continued expansion of Chapters and their vertical integration with the Pegasus wholesale group. As an independent, I have no relationship and no need for a relationship with Chapters. They are, quite simply, my competition.

I shall not be ordering from Pegasus, as this would be completely detrimental to the health of my own small business. By using them, I would be giving them access to proprietary information about my store, a profile of my customer base, and information on how I pay my bills and control my finances. And no matter what Mr. Zook might have said here last Thursday, I can never expect equal and fair treatment from them when they already have a preferential relationship with Chapters.

In the real world governed by supply and demand, what is the likelihood of scarce resources not being allocated to the most important customer first? As a mother of two, I will always feed my hungry children before those of my neighbour.

The very existence of Pegasus and their vast stock requirements might simply prevent me from being able to place a Canadian-authored book into the hands of my customer.

Last week Mr. Stevenson came before you and repeatedly asked for proof of the claim that refusal by Chapters to purchase a book resulted in that title not being published at all. Well, he's asking for you to prove the negative, and this is of course impossible. I can't show you that book. It was, quite simply, never published.

What I can tell you is that perhaps their refusal to place a book in their stores prevented that book from being adequately marketed, and in all likelihood, it caused the book to be higher-priced. Higher pricing and lower print runs mean less readership, a reduced availability of copies in public libraries across our countries, and reduced royalties to the authors.

We look for the Government of Canada to play a significant role in serving the interests of the Canadian independent booksellers. First and foremost, we ask for the timely removal of the GST on books. Surely with the excellent surpluses Mr. Martin announced in his budget just yesterday, we could now expect this tax to be lifted from books.

We also seek enhanced and long-term funding from the Department of Canadian Heritage for such areas as new technologies, marketing of Canadian authors and their books, focused promotion of Canada Book Day, and easily accessible funding for local, in-store marketing plans. This could be accomplished quite easily by the creation of a companion department to the book industry development program. This would be a huge boost to our entire industry, and would serve the needs of Canadians across the country, whether they be our customers, our suppliers, or our authors.

Independent booksellers are willing and able to work together to establish a competitive marketplace. We look to our government to recognize the current imbalance that already exists because of Chapters by providing us with a window of opportunity to bring so many independent business people together. We need time and we need our government to take action before it's too late.

Thank you.

The Chair: Thank you very much, Ms. Hawkes.

Mr. Nicholas Hoare, from Nicholas Hoare Ltée.

Mr. Nicholas Hoare (President, Nicholas Hoare Ltée): Mr. Chairman, I would like to single out an actual live example of the sort of thing that we, as a breed in this country, live with every day—and I think the obvious analogy is very straightforward.

Canada amounts to 7% of the U.S. market. The entire country is basically the same size as the state of California. We are a minnow in a very large pond. In order to actually glean our books, we have to put up or shut up at the time the book is first announced. And in this country, if a print run is 5,000 copies, as opposed to 50,000 forty miles south of where we're sitting, it doesn't take a rocket scientist to appreciate that one giant company, either retail or wholesale, or acting in concert, can wreak havoc on the number of copies available to animals such as myself.

Equally, if the 5,000 copies are to be printed and 3,500 of those are instantly bespoken for by a single customer, it also doesn't take a brain surgeon to figure out that the 1,500 copies remaining have to be splintered among an entire range of customers from one end of the country to the other, with the result that if you don't put up right away, you will not get your book, first of all, or if you do get your book you will get it six months later, if you're lucky.

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Now, perhaps I exaggerate, but perhaps I don't. The obvious example is an illustrious, very long-established Canadian publisher by the name of McClelland and Stewart, who have followed this route for decades and have suddenly run into an extremely difficult situation where their press runs have not changed, but the demands upon them have.

Carrying it one stage further, if those 5,000 copies have been basically bespoken for, and you are, let's say, one month away from Christmas, it is an extremely difficult thing for a trade that relies on one month a year to gain stock in time to sell to their customers, particularly if the publisher in January, after Christmas is over, is whiplashed by Chapters, who promptly cull every copy they have left in every store they have and send it back to the publishers for a refund, when in fact we could have been selling it all the time.

What we are particularly concerned about is not merely ourselves, it is the ripple effect on innocent victims that are dotted all around us. The publishers are being hurt badly, and they have taken steps of their own. The printers have been hurt badly, because they potentially see the horror, the spectre, of a very large customer going under through sheer overexpansion, leaving them holding the bag when publishers can't pay their bills. So we are all in this together. The point I'm making, at the risk of overtaxing your patience, is that we are in an extremely unpalatable situation that is not only sinking the independents, but threatening badly those who are left.

I will round out my remarks by simply saying that if in the past year alone, following the takeovers, shall we say, that have been prevalent in this country lately, big publishers such as Random House have upped their prices from 40% to 55%, Doubleday has gone from 40% to 52%, and General Publishing has gone from 50% to 60%, and all the time our Canadian dollar is steadily, inch by inch, strengthening against the U.S. dollar. I submit that as prices in this country have gone up, our costs, indirectly, have gone down.

It strikes me as significant that because of the incursions of Pegasus, Mr. Chairman—and it is purely Pegasus and Chapters we're talking about here this morning—the publishers have not heretofore been willing to roll with the punches and roll back their prices in direct proportion to the cost of the U.S. dollar in relation to the Canadian. Therefore, I find myself in the year 2000 forced to sell a $9.95 paperback—bought in U.S. dollars from the United States at $9.95—at $16 Canadian a copy, if I'm buying it from General Publishing. This to me is iniquitous, it is absurd, and it is totally unjustifiable.

Thank you, Mr. Chairman.

The Chair: Thank you, Mr. Hoare.

Mrs. Wedler from the Inside Story Bookstore.

Ms. Anne Wedler (Owner, Inside Story Bookstore): Thank you.

Good morning, Mr. Chairman and ladies and gentlemen of the committee on Canadian heritage. I'd like to thank you for inviting me here to speak today.

My name is Anne Wedler and my husband and I own and operate three rural bookstores in Nova Scotia. We've been selling books for over 15 years and investing all of our time, effort, and resources into building our business. We are passionate about what we do. It is our life and our livelihood. We have a store in a community and it is oriented toward its small town. It provides a strong regional section for books on Nova Scotia, and we enjoy promoting all of the regional authors.

I've put my thoughts on paper for you today, which will be distributed after the meeting. These are answers to the questions you've asked us to answer. I have also provided a French translation. It may not be perfect, but we did make an attempt on that. In this paper I've referred to the chains, and that reference is specifically to Chapters, but it also includes Costco.

Canadian independent booksellers face many challenges from pricing and accessibility of stock, distribution terms, GST, deep discounting, public perception, and increased expectations. In Nova Scotia we once again face the possibility of HST on our books, as this will now make us totally uncompetitive within our own country.

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The past five years alone have shown rapid developments in technology with the Internet, e-commerce, and global competition. Change will be synonymous with the future in the book industry and the evolution of e-books and print-on-demand publishing.

You asked what the Government of Canada can do in all of this. Normally I would say that the government shouldn't get involved in business. Business usually takes care of itself. Like nature, business works in cycles. Nature survives floods and fires, and the land comes back. Nature is a balanced unit.

However, there is an imbalance in the book retailing landscape in Canada. There's an imbalance when one player holds market control impacting access to the product and impacting publishing or reprint decisions. There's an imbalance when a Canadian title is out of stock at the publisher and wholesaler, yet stockpiled in the chain. There is an imbalance in the terms of trade within the industry itself. There's a great imbalance when our competitor is not at arm's length with Pegasus. Pegasus as a wholesaler may become the supplier of our stock, and we don't want to be forced to buy from our competitor.

Issues of market dominance and monopoly must be addressed. A healthy environment stimulates competition, and an imbalance in discounts and terms of trade can result in business closures. Without fair competition in the marketplace, prices will rise unchecked. The consumer will ultimately lose. As far as the government is concerned, you could monitor prices, discounts, and terms. The playing field should be level within the country.

Above all, promote Canadian authors. These are the source of all of our revenues. This is the source that will benefit authors, publishers, retailers, and the readers. Encourage the best to be published within the country by setting standards of excellence either by jury or strict selection guidelines. Encourage the regional diversity of this country; it is part of our whole heritage.

Either implement free freight or book rate. Rates should be not Toronto-exempt.

Eliminate the GST on books, and this will benefit the consumer, the students, and the ultimate readers.

Do not force us to buy from our competitor. Bill C-32 has implications that may force us to do so.

Implement the legislation that public funds should be spent within the Canadian borders to stimulate our economy and not be sucked out by the Internet and American and traditional techno-sales. Help to protect and encourage Canadian book retailing. Do not open the doors to the American retail giants.

Do not use our tax dollars or legislation to bail out our competitor when it falls. There has been no bailout given to the Canadian independent victims of the Chapters steamroller.

Thank you.

The Chair: Thank you, Ms. Wedler.

Mr. Christopher Smith.

Mr. Christopher Smith (Owner, Collected Works; The Independents): Mr. Chairman and members of the committee, it's a great privilege to be here today to speak to you all.

I am the owner of a small independent bookstore here in Ottawa that opened only three years ago. My store opened after Chapters arrived on the scene, and in many ways I don't have the same perspective that my colleagues have. Nonetheless, a small community-oriented bookstore is an uphill battle these days. The days of the gravy train are definitely over.

I'm also acting director of The Independents that Sally Hawkes formed with Paul King five years ago.

I agree with all my colleagues that independent bookstores are the backbone of the cultural nature of book publishing and reading in this country. We have in-store events of our own, and we try to focus particularly on Canadian poets and small-press authors. One of the things I would like to see this committee do is ensure that we preserve the cultural diversity of this country at a grassroots level.

One particular issue I'd like to address is the consolidation of suppliers and distributors. For instance, Bantam and Random House have been purchased by Bertelsmann and merged. This creates a trickle-down effect, inasmuch as there are fewer and fewer sales representatives in the field, and part of this has to do with Chapters.

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Chapters is now, de facto, the biggest customer for most of our major suppliers. As well, Chapters has caused the demise of a number of independents. This means that they need to reduce their sales force. In their opinion, it's not necessary to have people out in the field representing their books, because they can have only a national account sales manager who goes to Chapters' head office or to Pegasus and they've already sold over half their print run.

That leaves us in a very inequitable position. We don't have access in the same way to authors who are on tour. We don't get first crack. We often hear about titles after they're out, instead of before. We do not have a face-to-face interaction with our suppliers in the way we used to. I would like to see that issue addressed.

Thank you very much.

The Chair: Thank you, Mr. Smith.

From the Atlantic Provinces Booksellers Association, Mr. Charles Burchell.

Mr. Charles Burchell (Owner, The Book Room; Atlantic Provinces Booksellers Association): Good morning to all members, and I am sincere in saying thank you for inviting me here today.

This round-table discussion is very important. To me, this is an extremely important meeting, where the outcome could be the difference between being forced out of business or being able to continue the tradition of being the oldest bookstore in Canada. The Book Room has just celebrated its 160th birthday.

I am president and manager of the store, and I have worked there for 32 years. I'm a past-president of the Atlantic Provinces Booksellers Association and have served as a director for the Canadian Booksellers Association for 13 years, from the 1960s to the early 1980s. I have just been re-elected as a director of CBA for the next two years.

One of the questions you have asked us is what kind of a role we look for the Government of Canada to play in serving the interests of Canadian authors, readers, and retailers.

One is to break up the overbearing market dominance of Chapters, somehow, to allow independent stores a chance to survive. Offer a marketing or promotional plan to independent bookstores that promote Canadian authors where there is money available to help run such an event. Again, remove the tax on books. Put in place a program where public libraries and institutions must buy their books from accredited bookstores in their region and at fully suggested retail price. As you know, Quebec has done this, and I firmly believe it has been one of the strong points that has kept independent bookstores viable. It should also do the same for the rest of us across the country. We don't like to see our tax dollars going south of the border, and I'm sure you people don't as well.

We'd also like to have a level playing field in all areas, including but not limited to buying terms. Why can't we buy books at the same price?

On payment terms, why do we get a call from an account publisher asking us why our bill isn't paid after 61 days, for example, whereas Chapters and Pegasus will probably get terms of 120 days or longer?

On advertising dollars available, why are local independent bookstores across the country not able to get the same kinds of dollars available from publishers that Chapters does?

On end-aisle payment display fees, many of the Chapters and their related stores charge a publisher a fee just to put the book on an end counter. We have end counters, but we don't do that. It's something the publishers are not free to volunteer to independents. Also, they receive a fee for face-out display within the shelf. As independent bookstores, that is something else that we feel we should be equally compensated for or have made available to us.

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One of the most important things is to have rules against any possibility that my competitors, Pegagus and Chapters, ever become my supplier in any way, shape, or form. If the government allows this, then Bill C-32, which has just recently been passed, must be amended somehow to allow Canadian booksellers to purchase from the States. This is not really what we want to see, but you don't have an option for us.

Many of the non-traditional books that are ordered through independent stores as part of their cultural services will cease to be procurable through the big-box stores, as their ability to access these obscure publishers is very limited. We very often have someone in our store ordering a special-order book, and in a casual conversation they mention that they tried to get a book from Chapters, only to be told that the book is out of print. We look in our database and say yes, it's available, we order it and are able to procure it. That indicates to me that their database is not a total of accessibility to all the books in English that most independent bookstores can get. Therefore, they're looking at a very limited market and are able only to service a very limited market. There are many books out there that people want but are not available, but they are available through independent bookstores that do the research, have the expertise, and have the tools to do it. They can usually acquire these for their customers.

The biggest loss will be in our province of Nova Scotia, in the area of local writers and local publishers. We have an extremely viable writing and publishing program in Nova Scotia. The big-box stores such as Chapters are not geared to deal with these. They don't really want them. They don't want a local author who has written their own book and has two or three copies that they'd like to leave at the store. This is where independent bookstores can fill in. We put those on our shelves, we display them as we do any other book, and we give them an equal chance to sell. Sometimes these people actually turn into very prolific writers, but if the independent bookstore is not willing to take their books and display them in the first hand, these authors are never going to acquire what they really set out to do and really have dreamed of.

Almost every Christmas season there are many big best-sellers across the country. In our store, local books almost always sell the most. We are very pleased to support these authors and to support the publishers to do this. If we are not there, there's not going to be anybody else who is going to go to the trouble to support these authors. They are just never going to be. These books are all rich in history and knowledge, and the chance is that they would never be published by a national publisher if the independent bookseller disappears.

I thank you all for your time. If you have any questions, I would certainly be glad to address them.

The Chair: Thank you, Mr. Burchell.

[Translation]

And now we have the Vice-President of the Association des libraires du Québec, Mr. Ghislain Chouinard.

Mr. Ghislain Chouinard (Vice-President, Association des libraires du Québec): Mr. Chairman, ladies and gentlemen of the Standing Committee, I thank you for the invitation you extended to the Association des libraires du Québec giving us the opportunity to present our point of view on the marketing of books in Canada.

Even though some think that Quebec is another planet because it uses a different language and that the books sold there come from different publishers, I would like to emphasize something very important: our situation is exactly the same as that of the independent English booksellers. We're facing a concentration with distribution: we live in a market taken over by a single mega- chain. It could be said that, in our case, we're dealing with a bipolar market, but it's doubtless just a matter of time before it becomes unipolar. We find ourselves exactly in the same situation. In your case, it's called Chapters; in ours, it's called Renaud- Bray and Champigny. So the situation is just about the same.

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In the last three years, between 1997 and 1999, 38 independent bookstores closed their doors in the province of Quebec. So when you're told that it's different, that's not true. Concentration- wise, some of the effects are the same, especially when it comes to discounts. I'll make mine what Mr. Burchell was saying before.

In Quebec, a decree forces libraries to buy their books from a network of accredited bookstores whether they're independent or not. However, somewhere there is a distributor who is vertically integrating a chain of bookstores which provides the latter with all kinds of advantages including discounts. These advantages definitely are unfair to the independent bookstores.

So there is a concentration and it's exactly the same situation. And that's just while we're waiting for Chapters to show up. It is actually an open secret that they'll surely be interested in the Quebec market and French books. So, in the short term, in our case, we'll have three major chains rather than a single one.

I can tell you that the main concern of the independent bookshore right now is this concentration and the fact that your competitor, right beside you, can know what you bought, what your sales figures are, how you work things and what your market is.

As far as I'm concerned, I live in an area protected by Bill D-8.1. My competitor who's outside that region and is part of that group, knows exactly what the sales to the libraries in my region are. So he doesn't have to wait for the results of any market survey; he only has to consult my sales figures to know exactly when to come and set up shop and where the best place for that store will be.

Then there's also the impact of implementing new technologies. In our case, their impact was beneficial in the sense that we've set up a centralized data bank for Quebec. This central bank collects full bibliographic entries directly from the distributors and makes them available to the accredited bookstores. That facilitates our research enormously and I suppose it's the same thing for the English bookstores.

The appearance of the worldwide web has created a research tool that has simplified bibliographic research. From that point of view, the impact has been beneficial.

As for electronic commerce, North America's French-speaking market is too small for the major actors—I mean Amazon.com or chapters.ca—to come here to do business and be sure of making a profit which means that, in the short term, we have a bit of protection. I emphasize "short term" because it's clear that as soon as data banks develop and become more democratic, those players will have an interest in setting up "e-commerce" in Quebec as they have elsewhere.

On the other hand, at the Association, we have something near completion: a project for a web portal for independent bookstores. This will be a virtual bookstore assembling all the independent bookstores under a single electronic commerce umbrella called La librairie virtuelle du Québec (the Quebec Virtual Bookstore).

I can tell you right now that this virtual bookstore will probably tie in with the CBA portal. In the medium term, the project is to have a bigger umbrella representing all Canadian publishers and booksellers whether French or English speaking. Together with the CBA we'll be able to come up with something really interesting.

As for the relationship our kind of bookstores can have with the major chains, I think I don't have anything to add to what my English-speaking colleagues have already said before. There can't be any real relationship. It's a matter of competition. We'd like them to be fair, that the competition be equitable, that we can all play on the same level playing field.

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Of course, in an atmosphere of concentration where distributors are becoming bigger and bigger and where one is buying out the other and the numbers are always decreasing, it's not a very clear thing. It's not easy. The relationships will have to be very good ones and that's why a single portal, an alliance of booksellers is entirely appropriate.

As for the government of Canada's role, I think it's interesting. In any bookstores fixed costs, some items are very important and transportation is one of them. Transporting books in Quebec costs a fortune. As for my anglophone colleagues, I don't know, but for us this is a very important item.

When the book rate was done away with by Canada Post, the PADP was set up for three years. That allowed us to offset the disappearance of the book rate. For three years, we had subsidies to help us pay carriers to ship our books. However, that was a three-year program that has now been terminated.

I for one, and all our members agree with me, think that the government of Canada is doing very little, in reality, to help booksellers directly and I think that we need programs like the PADP.

Publishers have the BPIDP. A lot is being done for the publishers, but very little for the booksellers. In that area there's a lot of room for financial help for transportation costs, promoting Canadian products, general promotion and everything having to do with bookstores.

In conclusion, a lot was said here, about the GST on books. Yesterday, Mr. Martin tabled a budget that was quite interesting. In my opinion, there was just one little thing missing: the abolition of the tax on books. To paraphrase a slogan we have and that turns out to be a just about untranslatable play-on words unfortunately—and I hope the interpreter back there will forgive me—to tax books is to impose ignorance.

Mr. Chairman, ladies and gentlemen, thank you.

The Chair: Thank you very much, Mr. Chouinard. You mentioned very important things that do give one pause.

We will now finish the presentations with Mr. Peter Woolford, Senior Vice-President, Policy, for the Retail Council of Canada.

[English]

Mr. Peter Woolford (Senior Vice-President, Policy, Retail Council of Canada): Thank you, Mr. Chairman. Again, as all the other witnesses have said this morning, it's a pleasure to have the opportunity to appear. We appreciate the chance to help the committee in its deliberations.

The Retain Council is really the voice of retailing very generally in Canada. We are a member-funded industry association that represents within its membership the full range of general merchandise retailers. What that means is that I come here this morning representing the full range of booksellers, as well. Within our membership, we have large national specialty chains like Chapters. We have independent booksellers. We have regional chains of booksellers. We have retailers who will sell books as part of a broader range of merchandise, either on a mass-merchandise or department-store format. We also have retailers who sell books as an adjunct to the other products they carry in their stores.

It's very difficult for us to do much more than come here to help the committee understand some of the pressures, tensions, and trends that are developing within the retail trade today. That's what I'd like to try to take the committee through. I'll talk initially about the trends we see happening in the retail marketplace, and then a little bit about the trends that are occurring in the supply chain that brings the product up to the retailer to sell to the market.

Let me start by saying the retail marketplace today is a battlefield, and it is a very bloody battlefield. Without question, retailing has become a much tougher, more competitive business in the last ten to fifteen years. There's no question that customers are getting more value for their dollar, but retail costs and margins have been under enormous pressure, there has been heavy investment in new technology, and we've seen that productivity in the industry has improved.

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All of these pressures have arisen from the tough market conditions marked by new entrants, low growth in personal disposable income, and new, more efficient formats emerging onto the marketplace. As well, the power of new technology really has remade the nature of the business from a point of view of productivity. Here we see point-of-sales systems, we see database marketing, and we see logistics chains being managed by machine intelligence.

One of the key developments that we've seen right across the face of retailing in the last ten years has been a shift to new formats of retailing. The big box, which many of the independents here this morning have talked about, has been a phenomenon we've seen in many segments of retail. We have also seen larger corporate organizations and chains of specialty retailers or other formats emerging as stronger competitors. They get this primarily from what I would call new economies of scale.

The old economies of scale dealt primarily with a production process. If you had a production line in a factory, you could improve your competitiveness if you could run that plant longer with larger volumes. What we're seeing now in retailing are new economies of scale dealing with capital investment, advertising, marketing, the operations in the stores, negotiating power with the suppliers, and consumer preference for a known brand. Through the nineties, in a lot of different sectors of retail, we have seen market share flow from smaller retailers to mid-sized and larger retailers.

This has always been a tough business in which to make a living—and I'm sure all of the independents would agree this morning. Right through to today, retailing is a business with a high portion of companies that are facing financial difficulties.

If members wish to visit our website, www.retailcouncil.org, we have a survey there, a piece of research on the retail industry generally. Part of that is Statistics Canada data on profitability. Across the various sub-sectors of retailing, 30% to 40% of companies have net losses annually. A different 20% to 30% of retailers have negative equity. What we're facing is an industry in which there's a high degree of turnover, and in which many firms are under economic pressure.

This occurs at all size ranges. If you think back over the history of the last ten years, we've seen many independent retailers disappear, we've seen mid-sized chains disappear, and we've seen some very large national names disappear. That is primarily a result of the emergence of new formats and the new competitive pressures I spoke about.

The strategy that appears to have worked in other sectors of retailing for independents is niche marketing. What we've seen is that the independents, faced with this kind of pressure from new formats and new competitors, have turned to a strategy of identifying a small corner of the market where they can be effective. There are some elements that have emerged from looking at those other sub-sectors in retailing: highly tuned specialization in product selection—and I think you've heard some of those strategies from the independents here this morning; location of the store; precise in-depth market knowledge, meaning really knowing your local market very well; and superb, locally specialized service, or the personal touch. Those are some of the strategies retailers are using.

The thing that's coming down the road at us that I'd like to talk about just a little bit is electronic retailing, or the Internet and sales there. In our view, this is going to change the nature of retailing in profound ways that we do not yet understand. Bookselling is one of the leading areas in this respect. It has taken off the fastest largely because of the nature of much of the product that's sold in bookstores or stores that sell books. Canadian consumers are able to shop for the best product and the best prices in the world, and this is placing enormous pressure on traditional bricks-and-mortar retailers of all sizes. That's the case for the large national chains as much as it is for the independents, for the company that specializes in books or for the company that carries books as just part of a line of other merchandise.

The real choice here has been put out by the two co-chairs of the Canadian E-Business Opportunities Roundtable, which was set up by Minister Manley. They said the choice for all Canadian businesses is to lead or lag. I'd just like to quote what David Pecaut and John Roth said in their introduction to the report:

Canada faces a choice. We can capitalize fully and quickly on the e-business opportunity or remain complacent with our modest success and risk falling behind other advanced economies.

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Members of this committee and indeed the retail industry itself should not underestimate the power of this technology in the hands of the consumer to drive where our industry is going to go.

Let me talk a little bit now about trends within the supply chain that retailers get their merchandise through. And again, relationships in this area have changed profoundly over the last 10 to 15 years. Retailers are now in a better position than their suppliers to know what the customer wants, and competition in the retail marketplace has given them the leverage to secure what they need from their suppliers. That's a dramatic change from the past.

Traditionally retailers were sold merchandise by suppliers and essentially told to flog it to the market. What's starting to happen in many segments of retail now is that the retailer is working on a pull basis rather than a push. They're buying agents for the customer. They know their market and they're telling the suppliers what the customer wants. Retailers, no question, have been driving suppliers harder on cost. We see newspaper articles about that all the time.

There was an interesting little piece in one of the papers yesterday saying that the suppliers to the auto industry are feeling themselves under pressure as a result of changes brought on by the Internet where the large national auto companies are forcing suppliers to get much tougher on their pricing and the products they offer. So the retailer is in a position to drive their suppliers harder. They're creating partnerships with their suppliers as well on things like co-op advertising, shelf allowances, end cap allowances, couponing.... There are all kinds of ways in which the retailer now is using this newfound market power to pull the supplier into a longer-term relationship.

As well, business-to-business e-commerce is starting to take retail inventory and cost out of the system for all parties from manufacturers through wholesalers to retailers, but it is also pushing some of those costs back up the chain so that the costs are being carried now more by the supplier than by the retailer.

These technology innovations often start with large companies, but, as Ms. Hawkes pointed out, they do flow down to the independent retailer reasonably quickly, although there are some significant issues for the independent retailer when they're faced with a rapidly changing environment. The costs may be initially low, but getting your head around them, managing them, using them intelligently and competitively is an enormous challenge.

Let me just finish off by saying the whole retail industry is an exciting, fast-paced, but brutally competitive business. It's tough to make a buck. It's driven by hard-nosed, intelligent people who are ruthless in maximizing the value they get from a dollar. The difficulty we face is those people are our customers.

Thank you.

The Chair: Thank you, Mr. Woolford.

I think this has been extremely informative and interesting for the members. So I would like to turn our meeting over to questioning by the members. We'll start with Mr. Mark.

Mr. Inky Mark (Dauphin—Swan River, Ref.): Thank you, Mr. Chairman, and I thank our witnesses for appearing before the committee today.

Let me begin in a positive tone. I agree that independent business is certainly the backbone of this country. As you know, I don't need to tell you, 85% of all jobs are created by independent business. So it is sad any time any sector changes and impacts small business.

Mr. Woolford certainly painted an accurate picture of today's economy in terms of the changes both in technology and marketplace. I know it certainly has had an impact on big outfits like Eaton's this past year.

This morning we've pointed the finger at Chapters and Pegasus, but I wonder whether this phenomenon, these dynamics, would exist even if they weren't the major player, with Amazon and big-box stores like Costco and Wal-Mart.

Is this debate really more about marketing and technology changes and adapting to these changes? Is that what the debate is really about?

The Chair: Who wants to pick it up? Mr. McNally?

Mr. Paul McNally: I think it's fair to make the point that the advantages that have been given to Chapters based at least in part on their claim to be the Canadian white knight against Amazon and against the American big-box stores have really allowed them to dominate the book-selling market in this country to an astonishing degree. And they're back looking for even more dominance through the vertical integration that Pegasus represents.

So the issue here is not whether independent booksellers are willing and able to compete with other booksellers. There are lots of independent big-box stores in the book-selling industry in Canada, and I think they're really very well run. The issue is whether public policy is giving too much scope to one player in the marketplace and allowing them to use a lot of bully tactics.

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The Chair: Does somebody else want to pick it up? Mr. Mark.

Mr. Inky Mark: Thank you.

Mr. Chouinard indicated that your organization is adapting to change by collectively putting together an Internet site. First, let me say that I'm not here to defend Chapters. I'm here, as are all members of the committee, to ensure there is a level playing field so that there is fair competition in the marketplace.

What have you as small independents done to adjust to these business pressures and technological pressures?

The Chair: Are you asking the others about Mr. Chouinard—

Mr. Inky Mark: No, I'm asking all of them what they have done to adjust to the technological changes and to the market changes.

The Chair: Starting from the example Mr. Chouinard gave.

Mr. Inky Mark: Right.

The Chair: In other words, have any of you taken initiatives such as Mr. Chouinard described?

Ms. Sally Hawkes: Maybe I could begin by addressing that.

The Canadian Booksellers Association already has an online e-commerce website that's been operating for over a year. Many of our member stores have their own websites. I know that McNally Robinson.... I was on their website just last night having a look at it. It's quite fantastic, but it requires an incredible amount of start-up costs and, as I mentioned before, maintenance costs as well. So a lot of our members have these websites that serve our customers. It allows us to have a much broader customer base right across the country. Whether my store is in Ottawa, I can certainly get a customer in Taiwan, for instance, which I as a matter of fact have.

[Translation]

The Chair: Mr. Chouinard.

Mr. Ghislain Chouinard: Yes, the Librairie virtuelle du Québec, that I was telling you about before is actually one way of taking this turn and change the way we do things to deal with new technologies.

But, beyond that, we think that the strength of Chapters, Renaud-Bray or Champigny is that they got together and they have political weight in dealing with distribution, in other words in dealing with the people selling us the product. As long as you're a small, independent bookseller, you only carry you own weight which is not very heavy. Why is the Quebec Virtual Bookstore interesting? It's because it assembles under one portal, which is a virtual one—and we emphasize that—and that has no legal identity, independent bookstores who get together and, someday, will be able to have bargaining power with a distributor. It's not true that discounts in Quebec are the same for everybody and that they're 40%. That's absolutely false. You negotiate your discount. When I buy 500 copies of the same book I go to the publisher and tell him that 40% discount isn't enough and that I want 48%. You also have that in Quebec.

More generally, we think that vertical integration the likes of which you have in English Canada and we're getting in French Canada, must be used to our advantage also. My view on that is shared by many of the members of the Association des libraires du Québec or at least by the members of the board, and that is that we should get together and buy an exclusive distributor. What is appearing here is no new commercial phenomenon; it's simply the fact that anybody sells anything at any price. What's being done is simply that the rules of the game are being changed in midstream. That's why we have to react and that kind of reaction can be valid.

[English]

The Chair: I'll get back to you, Mr. Mark.

[Translation]

Mr. de Savoye.

Mr. Pierre de Savoye: Listening to you is extremely interesting because everything you say is full of this love you have for your profession as a bookseller. You have explained how much you want to serve your client and make sure that lesser known authors, beginners, can enjoy some popularity. I think that, from that point of view, what you say goes straight to the heart. But it's not just a matter of heart; it's also a matter of pocketbooks, inventories and supply.

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The problem that you now face has happened in other industries. Just think about the corner drugstore that is no more. Think of all those small grocery stores that were replaced by these big supermarkets. All this transition has had an impact on the consumer and also on certain suppliers. We know that the big stores favour certain suppliers, under certain conditions, which means that the less favoured suppliers become takeover targets for the big ones.

But when we talk about books, we're talking about culture and you can't treat that like drugs, even though drugs are very important, or like potatoes or slabs of meat. What I feel here is that your industry is undergoing a restructuring crisis. If that was all there was, it wouldn't be so bad, but the speed of this restructuring is extremely fast and it is being imposed by chains and you're having problems following at that speed. You're ready for restructuring, you want to restructure, and you can do it as long as enough time is given you to get there. Wouldn't the role we'd have to play, as federal parliamentarians, in a way, be exactly to give you that time and make sure, in the interval, that certain monopoly practices aren't exercised by the chains that are running the game for the time being? Do you have any comments on that, Ms. Hawkes, Ms. Wedler or Ms. McNally?

[English]

Mr. Paul McNally: I would say yes.

Ms. Sally Hawkes: I think you've hit the nail right on the head. I think time is absolutely of the essence, and the fact that we haven't been able to keep up with this incredibly rapid expansion across the country of Chapters.... This whole vertical integration with Pegasus came on last May and came on like a lightning bolt in this industry throughout the fall season. They're impacting our day-to-day operations and existence as booksellers.

Yes, we absolutely require the time to get our organization together, to bring the little independents.... We sit before you with rather large successful—touch wood—bookstores, but we need to bring along all the other 230 traditional independent retail booksellers up to speed, get them with the new technologies that are available and help them combat the Chapters that are going across the country and entering their neighbourhoods on a day-to-day basis in this country. Yes, time is absolutely of the essence.

Ms. Anne Wedler: I was going to say I agree with your points completely. We are not selling potatoes; we are selling culture. We are up to speed in our store; we're highly technically advanced. Even though I'm not, my husband is totally a techno-wizard with everything. We have a website. We have e-commerce. We have a 1-800 toll-free number. We have all these different things that can have links to other sites. We've done all this to try to keep pace with the technology, but what we're dealing with right now is even beyond the technological growth in the world right now. We're not only dealing with that. We're dealing with a huge industry change. It's almost a revolution in our industry here, and the players are stacking up and amalgamating to make bigger players. Even the publishers are becoming bigger and bigger.

So it's a changing field, and it's one you can't get your mind around really fast. It's one you have to think about and try to figure out how is it we can best compete. How is it that we can best serve our public with what we are giving them? Yes, it is demanding. And yes, we do need time with that, but the technology's pushing us faster and faster.

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[Translation]

Mr. Peter Woolford: We can use the experience we've had in the other retail trade sectors, as guide. You talked about the drugstores where you now have cooperative groups. I'm thinking of the national chain Pharmasave, which was made up of some 200 small independent pharmacists and that you find in the Atlantic provinces, in Ontario and in the west. This umbrella allows these independent pharmacists to protect their future within a structure that's not a corporate one, like a franchise, but where the shareholders are the pharmacists themselves.

The only comfort for the booksellers is to know that other trades, as you mentioned, went through this situation of change before. The booksellers can learn from their experiences. The only thing we know in the retail sector is that everything is going to change, that all independents face challenges no matter what their size and that we'll have to determine how we will regulate that sector.

The Chair: Mr. Bonwick and Mr. Bélanger.

[English]

Mr. Paul Bonwick (Simcoe—Grey, Lib.): Thank you, Mr. Chair.

I'm just going to pass along some comments based on some of the information I received back in my riding, some of the things that people are telling me, and then perhaps put a couple of questions to you.

I think Mr. Wilfert described it very eloquently insofar as basically what we are dealing with here is rapid change, the implications for those parties that are involved in it, and what role the federal government might play in dealing with this rapid change.

There have been some statements made, and I guess I'm going to take on the role of devil's advocate at this point. I wrote down a couple of comments. Holly made a statement about nobody needing—and I missed the rest of it—Chapters. Paul made the statement that they're not good for Canada. Yet when I talk to people in my riding, they love it. And obviously Canadians all across the country are supporting them, or they wouldn't be in existence. They find it convenient to their lifestyle. They like the idea of being able to go in, sit down and have a cappuccino, and grab the newspaper and read, and there's a huge selection—they love it. And they consider it their right, their choice. So I'm wondering, first of all, how I respond to that.

The second point you made, Mr. McNally, was with regard to bully tactics of Chapters. And having been a business person myself, I know one person's interpretation of “bully practice” is another person's interpretation of what's called “sound business practice”. So where do we...? You're representing independents, and at the end of the day we're here to service the Canadian consumer to ensure that they have Canadian stories, and to decide how we can go about doing that.

I'd like to provide a real short scenario to you, and it would be, I think, a similar situation. If in a smaller region, a rural area in Canada, for example my own, we had an announcement that there was going to be a large art gallery opening up, I think it would be received very positively in the community. It would be seen as an opportunity for local people to experience a wider segment of culture than what they have at present. Yet at the same time, there is a small independent art store that tends to service the local artists, and if that were to take place it would likely have a very adverse effect on their ability to do business.

I'm wondering how you see the federal government playing a role and saying no, you can't come in, because we must protect that local. I'd like input on that one.

Lastly, Mr. de Savoye made a comment that what you're talking about is time, that you need time to adjust to changes within the marketplace. For how long do you suggest the federal government stall off this enormous growth industry in order to accommodate whatever timeline you need to change with it?

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The Chair: I heard four questions there, so if you could divide the time so that we—

Mr. Paul Bonwick: How much do we get per person? That's the question. I don't know. Is it five minutes? Is it ten minutes?

The Chair: Let's say it's ten minutes, but it's including the answer. Who wants to start?

Ms. Holly McNally: Nobody is suggesting that Chapters will not exist if they're put on hold. There are already many Chapters stores across this country, and if people want to enjoy Chapters they can. They're in every community you could possibly want. My feeling is, do we need more right now? Larry Stevenson has said himself that perhaps they have already oversaturated the market. I indicated in Saskatoon, because we are involved in that community, that there are already five independents and ourselves, that's six, and they are looking to build a 40,000-square-foot store, not 15,000 or 25,000, but a 40,000-square-foot store in a community that's 190,000 people. That's absurd.

Mr. Paul McNally: Yes. Their strategy is what they call a cluster strategy, which I believe is a term drawn from 1970s weapons technology having to do with sending a single artillery shell or bomb into a target zone and thereby getting multiple explosions to get the maximum damage out of minimum firepower.

They've gone into markets.... In Winnipeg, within 20 minutes there's 85,000 square feet of new book-selling space. This isn't an incremental change in the amount of book-selling space in Winnipeg; it's more than doubling the book-selling space. The same thing happened in Calgary and Vancouver. And major iconic names in Canadian culture like Duthie's and Sandpiper and Britnells in Toronto have bitten the dust as a consequence.

Their cluster strategy I believe is a euphemism, not a very pretty one, for deliberate oversaturation of the marketplace in order to gain market share and then pull back from that. And, as Holly said, Larry Stevenson has admitted to oversaturation.

In regard to your question about whether Chapters is good for Canada, they conducted a survey of their own customers cited in the current issue of Quill & Quire magazine in which they found that 50% of their customers don't know they're in a Canadian store. They believe they're in an American store. That's how good Chapters is for Canadian culture.

In terms of your question about how long, whether five years or ten years, I think if there were some kind of slowdown, I believe there are precedents for a restraint to growth.... I don't know.

The Chair: Does anybody else want to pick it up briefly? Ms. Wedler.

Ms. Anne Wedler: I want to comment on something you mentioned about the choices for consumers, and I think it is important to have that. In fact I know of an area in the United States next to Harvard, and in that square mile there are more bookstores per capita than anywhere else in the United States. And they all seem to survive. But we're dealing with a different issue here.

I think you can have diversity and opportunity for the public to have that selection and still have a good working relationship between businesses. But what we're dealing with right here is a mega-giant that has undue business terms and resources behind them that are much more magnanimous than any of us individuals could possibly do, so you would then have a swamping of a situation where they have an overkill approach to putting it in. It's not that we don't want competition, because we're up for that. It's just that it's a loaded deck, shall we say. We're not dealing with an entirely full deck when we're dealing with them as a competitor.

Ms. Sally Hawkes: Perhaps I could comment also on your question about timeline. Obviously we can't ask for some indefinite amount of time, but what we would ask is that Chapters be forced to sell off the dominating interests they hold now in Pegasus, which is 82%. That would at least give the appearance of a non-preferential arrangement between Chapters and the Pegasus wholesaling group.

[Translation]

The Chair: Mr. Bélanger.

Mr. Mauril Bélanger (Ottawa—Vanier, Lib.): I'd also like to put a few questions to you, if you don't mind.

[English]

Mr. Woolford, I would like to know if the Retail Council has a position and what it is on the notion of vertical integration and how such vertical integration could be detrimental to the retail end of the spectrum, number one.

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[Translation]

Mr. Chouinard, you mentioned vertical integration several times. Personally, that's my greatest concern. I can understand that from a competition and a retail point of view this theme might not please this group, but I think there is an acceptable legitimacy there as long as the intent to crush the market doesn't take over.

Will your virtual bookstore get into vertical integration? Who's going to distribute the virtual bookstore's books? I'm trying to understand how the industry works. The most serious blame being laid at the Pegasus-Chapters door seems to be that they can unduly influence, because of their strength at the retail sales level, what goes on behind the scenes, in other words distribution and publishing. What Ms. Hawkes and I are trying to find out is how the independent could compete with Chapters.ca or Amazon.com to distribute their books.

According to what we have heard so far, prior to the arrival of Pegasus, it took six to eight weeks, and sometimes several months for an existing distributor to deliver a book to a consumer. If that is the reality, I can understand why a consumer needs faster delivery than that. How are you going to compete without necessarily going through Pegasus?

[English]

There's another question, Mr. Chairman, that perhaps we should pose of the Bureau of Competition—I don't know if we've ever done that—as to whether or not they've looked into the notion of cross-subsidization of certain retail outlets, being presumably rather profitable, and subsidizing those that are not. Is that a practice that can be tolerated or not? Perhaps we want to consider talking to the Bureau of Competition in that regard.

I'll have to stop now, because my time is up. I had a question about

[Translation]

bipolarity as well. Are we experiencing double vertical integration in Quebec? How will French Canada react to that? In passing, I would like to tell Mr. Chouinard that I like his terminology.

[English]

The Chair: We'll start with Mr. Woolford, and then

[Translation]

and then we will go to Mr. Chouinard.

[English]

Mr. Peter Woolford: Thank you, Mr. Chairman.

What is happening today in retailing is what we would call dis-intermediation. What that means is in order to become more efficient and to strip costs out of the system that supplies products to consumers, retailers are going around all of the traditional middle operators.

We did a very, very interesting survey about ten years ago, at the height of the cross-border shopping wars. Members of this committee and others may recall that at that time Canadians were flocking south of the border. We tried to understand the reasons Canadian prices were higher than U.S. prices.

One of the things that became clear is that in the United States, even at that time, retailers of all sizes went directly abroad or directly to the supplier to purchase their product, so it went from the supplier to the retailer. In Canada it wandered around. You'd have an importer or a wholesaler or a distributor or a regional specialist. All of those layers added cost.

Throughout retailing today, the technological changes that have occurred allow the retailer now to simply get rid of all of those middle operators and deal directly with the original supplier.

Mr. Mauril Bélanger: I'm hearing otherwise from the food retailing industry, that they're extremely preoccupied with vertical integration.

Mr. Peter Woolford: Yes, but the retailer is carrying certain functions and is pushing certain functions back to the supplier so that it's a much cleaner process. You have fewer intermediate steps in the process. You're getting direct-to-store delivery right from the supplier. You're getting the supplier in the general merchandise business to price your products for you. An awful lot of it is done directly.

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Mr. Mauril Bélanger: Therefore, if that's the case, are we going to have to determine that the ability of someone to control a market would be dependent on the retail market share?

Mr. Peter Woolford: I'm not sure—

Mr. Mauril Bélanger: If there's nothing between the producer and the retailer—if it's direct, as you say—then how do we determine that someone has an unwarranted position to control the market? Do we just determine, “All right; you have so much of the retail”? It doesn't matter, because there's nothing else in between. It's an automatic pipeline from the supplier to the retailer. Therefore how do we arrive at determining if there is a vertical integration and what level is acceptable and what is not?

Mr. Peter Woolford: I guess the way you'd come at that would be to look at the portion of the final retail market that a vertically integrated operator has and the degree of competition it would face from other suppliers.

Mr. Mauril Bélanger: Okay. Thank you.

Mr. Peter Woolford: Just to go back to that, we are finding that, to our surprise, even independent retailers now are going directly abroad and ordering directly that way. So it certainly is a trend.

The Chair: Thank you.

[Translation]

Before turning to Mr. Chouinard, I would like to ask Mr. Woolford if he has written to the publishers of the Oxford Dictionary to ask them to add the word "dis-intermediation".

Mr. Peter Woolford: Yes, Mr. Chairman.

[English]

Voices: Oh, oh!

The Chair: Wow! That's something.

[Translation]

Mr. Chouinard.

Mr. Ghislain Chouinard: Mr. Bélanger, your question is two-fold. It is probably a bipolar issue. When I talked about bipolarity, I was saying that we had been experiencing vertical integration in Quebec for several years.

On one side is the Sogides group, which represents Messageries ADP and which owns the Garneau bookstore chain. What happened recently? We have witnessed the integration of Havas, the second largest European publishing group. Havas, which has a stake in the Agence de distribution populaire, shows up, and the Agence de distribution populaire acquires the Renaud-Bray bookstores and merges Garneau and Champigny. So we end up with 22 bookstores that are directly in line with a distributor and a publisher, because Sogides also encompasses the Groupe Ville-Marie. I would even go as far as to say that it is author on demand. That is total vertical integration.

On the other side is the Quebecor group, a name that everyone here is familiar with. Several years ago, Quebecor acquired a group called Archambault. Archambault is a very important player in Quebec, a player in the killer category, that offers systematic discounts on several items. One weekend a month, there is a 25% discount on every item in the store. They are involved for the sake of being involved, like Chapters. The market is simply oversaturated.

The market is simply unable to absorb everything there is in terms of bookstores. Why settle there? To crush the others. Moreover, it is vertical integration. So there are two big poles of vertical integration and nothing says—there is talk about it—that these two poles won't, at some point, merge. We do not know which one will buy the other, but that is the threat we are facing. The day it occurs, we will simply end up in the same situation as the bookstores in English Canada.

You also mentioned the Quebec virtual bookstore, and you said that there was no vertical integration whatsoever. This virtual bookstore is designed more or less along the same lines as cbabook.org, since it is a centralized virtual bookstore. The Internet user consults a database using a single portal and can go to the site of his preferred bookstore, because all bookstores are listed there, something like the third floor of cbabook.org. The Internet user orders from the virtual bookstore which, although it is centralized, redistributes order management to independent bookstores. So if I do not have a book in stock, the order is transmitted to the database, then it is sent on to another bookstore that is a member of the Quebec virtual bookstore, and so on. So we have a virtual bookstore that is centralized, but that is decentralized with respect to deliveries.

The Chair: We still have some time.

[English]

We have twenty minutes, time for three questions, so we'll hear from Mrs. Lill, Mr. Muise, and Mr. Limoges.

• 1240

Ms. Wendy Lill (Dartmouth, NDP): Thank you very much for coming. I must say I'm very worried about the state of the Canadian book industry after listening to you and the other people who have been here. I hear it's a battlefield out there, and I would say that you're very eloquent warriors.

I have some questions about this industry. We hear about it being an enormous growth industry. I've heard about the fish industry being the same, and we all know where fish are right now off our banks. I want to ask a question about who's buying books out there right now. Is this an enormous growth industry? The figures seem to show that possibly the majority of the sales increases for Chapters have come from retail business being cannibalized from the other independents and that now the level of profits is halting or slowing down.

On October 29, 1999, The Globe and Mail published an article about the fall of Chapters' shares. It talks about the fact that there's a decline in share prices and says it doesn't surprise them that the stock is doing what it's doing and they expect it to go lower. I'm just paraphrasing this, but the bottom line of this article, which scared the hell out of me, really, was the fact that the chief financial officer at Chapters said that they don't really have to worry too much about this because inventory is returnable.

I think to myself, where are we if we have these monolithic companies that are over-buying and over-building, with huge shelf space and huge expectations for profits, but at the end of the day it comes down to something so simple as, well, if we can't sell these suckers, we will send them back to the publishers? That is just a very scary thought in terms of the publishers in this country. It has to be a scary thought in terms of the whole ecosystem of this business.

So the question is, how healthy are we in this industry if the major player at the end of the day is really simply saying that they'll just send them back? They're saying they're not taking responsibility in this industry, they're really not part of this industry, if in fact they will simply send back the inventory.

So could anybody tell me if are we in an enormous growth industry? Is the growth being done at the expense of the independents? You could also tell me what role the writer is playing on this battlefield. Are we losing ground at that level as well?

Mr. Charles Burchell: I'll try to answer at least part of that and my colleagues can kick in as well.

Books are bought and paid for, but they do have a returnability to them within certain timeframes. They're sold to us basically on future promotions down the road, some of which happen and some of which don't. All of a sudden we find that there's a whole new flock of books coming out, so we're, at the moment, looking at all the fall books and saying that what we really don't need we're going to return because we need the space. So we do return them.

At the moment, the rollout of the Chapters stores has left the books that they are returning as a very low percentage, because they're reordering hundreds more than they're actually returning. If you were to stop the scenario and wait six months, you would probably see disaster knocking at the door. Where they have such a huge, high volume of books in their store, they're not selling through, and a lot of them aren't doing the total business that they are supposed to be doing, so the returns are quite high.

Ms. Sally Hawkes: You also mentioned that Mr. Stevenson said that Chapters is showing enormous growth. Well, as long as you roll out a new store every month, you're going to see growth. In my opinion, that is where the growth is predominantly coming from in his business.

As far as authors go, they should be widely concerned with the discounting of books through the Chapters chain. I don't know exactly what the numbers are, but that must affect the royalties. You're an author, Ms. Lill, so you must know, perhaps better than I.

Also, someone like Jane Urquhart, in her 1998 Governor General's award acceptance speech, thanked the independent booksellers for making her the author, the winner of the award that day. Without independent booksellers, where will the new Governor General's award winner come from, an award that was built in this country, from coast to coast, by the independent booksellers?

Mr. Christopher Smith: If I may add this as well, one of the things that Chapters is doing is wallpapering their stores with inventory. Ultimately what this does is that.... As it has been said earlier, set numbers of books are printed by Canadian publishers. If they're primarily in the Chapters stores but not moving in the Chapters stores, that denies us access to copies of those books.

• 1245

I have a very concrete example from this past fall. A book of local interest, called Sisters in the Wilderness, was published by Penguin Books Canada, and they ran out. There was a lot of stock in western Canada, where the book proved to be of less interest, but because Penguin was fearful of returns from Chapters, they decided not to reprint the book. That meant that an item that would have been a bestseller for Sally and myself and other Ottawa retailers—

Mr. Nicholas Hoare: And Montreal—

Mr. Christopher Smith: And Montreal retailers, thank you. It was denied to us. We did not generate revenue from that because we just did not have the books. What's happening is that publishers are trying to second-guess Chapters as to how many books they are going to actually return. They actually have pretty good rules of thumb as to what they can expect to come back, but books are basically being denied to Canadians because of that.

The Chair: All right, Mrs. McNally, quickly.

Ms. Holly McNally: They may be wallpapering their stores with books, but often they're not the Canadian books that people would like. I know this because we get a constant stream of Canadian authors on tour going through our stores. They come to us and say, well, Chapters doesn't have my book, I'm so glad you do. That happened on Friday. This is a constant thing. I just wanted to address that about book diversity, which you were discussing earlier.

Mr. Peter Woolford: Mr. Chair, could I just add a bit of context?

The Canadian retail market is not growing. The last 10 years have just been horrible for the industry. Personal disposable income, the money you and I have to spend on whatever our needs are, has just gone nowhere. The average consumer coming into the store has probably a little less money than they did going into the store—whatever kind of store it was—in 1989. That has forced the industry to cannibalize itself, and we have seen exactly the savage battles for market share that I talked about. For one company to grow, somebody else has to shrink.

There is a very small amount of growth as a result of increase in population, but Canadians today have very little...pardon me, Canadians up until yesterday had very little extra money in their pockets. The tax cuts will put a very small amount of money back in their pockets, but the fact of the matter is that the ordinary Canadian family has not seen any increase in their personal circumstances. That means that in the retail trade, where growth equals profitability.... For reasons that I frankly don't fully understand, in retail, if you're not growing, you're not making money. There's a terrible pressure to grow in retail, and that means they have to eat each other.

The Chair: Mr. Muise.

Mr. Mark Muise (West Nova, PC): Thank you, Mr. Chairman.

Thank you to our guests. I found this session very informative, and I'd like to say that I really recognize the role of independent booksellers and publishers towards the promotion of Canadian culture and how important that is to us.

I also would like to echo what Monsieur Bélanger said earlier, Mr. Chairman. I don't think we're able to truly assess the degree of competition that exists here. I'd like to see an opinion from the Competition Bureau in order to see that and to see if there's anything that should be done there to help rectify this problem.

Taking the lead from other colleagues who have asked four or five questions, I'll try not to do that. I'll just ask two.

Mr. Smith, you made a comment that really made me curious. You said you opened your business after the arrival of Chapters. Knowing what you've told us about the business, and with you obviously getting into it knowing full well the challenge you were facing, I'm really curious to hear why you would have done that. There has to be something more than just the dollar driving you. There probably is something in your heart and in your belief—off my opening comment—in the promotion of Canadian culture. I'd like you to address that from a couple of angles, if you would.

Mr. Woolford, you mentioned earlier that the Retail Council represents not just the independents but Chapters and Pegasus and these people as well. I'd like to get your opinion because you seem to be involved in both. How do you see us solving the problem that exists for the independent retail booksellers on the one hand and dealing with Pegasus and Chapters on the other? You seem to be in a situation in which you're sitting on the fence, and I'm curious to see how you'd deal with that.

• 1250

That's it, Mr. Chairman.

Mr. Christopher Smith: I got into this business because I love books. That is the driving force behind it. But I also want to make money at this. It is my livelihood. I consider it a great privilege to be a bookseller in this country.

In terms of matching good Canadian authors, one of my goals in my particular store is to emphasize Canadian literature into the hands of my customers. It's what I consider to be a great responsibility.

I also worked for family based bookstores for a number of years, actually since 1981. I worked for Prospero here in Ottawa, which was bought by Coles and ultimately became folded into what is now Chapters. That disturbed me a great deal, because I saw a great independent store slowly but surely cannibalized and ground down into something that was rather generic. Prior to its acquisition by a corporation, the latitude and freedom that we had at Prospero was one of the joys of working there. That's what I wanted to recapture in opening my own store, and I'm pleased to say it has been a great success.

Chapters is not all things to all people. In many ways, their existence is driving people back to the independent bookstores, but unfortunately not in the numbers that we need to survive. One of the great concerns I have is that we have this beautiful fabric of independent bookstore across the country and Chapters is rending humongous holes in that fabric. My big concern is what happens should Chapters disappear. What happens if they implode? What happens if an American corporation is allowed to buy them out because it's no longer profitable for them to grow on their own? If there are not independent bookstores, if there's not that fabric in place, we are—excuse my blunt language—screwed culturally.

Mr. Mark Muise: Thank you.

Mr. Christopher Smith: You're welcome.

Mr. Peter Woolford: I'm not going to thank you for your question, Mr. Muise, because it was exactly the one I was afraid of. The short answer is that I don't know. I don't know how you deal with this in the context of an industry.

As the folks here have made clear this morning, they want to compete. They want to have a marketplace that's lively. On the other hand, how do you deal with large players who are emerging and are clearly serving the customer in a way that sees the customer rewarding them with their business? I genuinely do not know how you solve that.

What I can tell you is that the experience in other parts of the industry indicates that, after what is a very bloody business of bankruptcies, failures, and exits from the business, you do see exactly what Mr. Smith was talking about a moment ago. That is, you do get new independent entrants who respond to the new dynamic and who find a way of competing.

It's cold comfort for those who go through the process of structural change, but if you look at the pharmacy business, as I mentioned to Mr. de Savoye a few moments ago, or if you look south of the border, clearly the independent retail business right across the face of retailing—and I'm not just simply talking about books here—is surviving and thriving and doing very well competitively. There are companies out there that have succeeded at different niches in the marketplace, high-end, middle, and low-end. But living through that change is a very painful process, and I simply do not know how you can facilitate that. I wish I had some answers, but I don't.

The Chair: Mr. Limoges.

[Translation]

Mr. Rick Limoges (Windsor—St. Clair, Lib.): Thank you, Mr. Chairman.

[English]

I'm very pleased to see Mr. Woolford here to give a different perspective from a larger retail context, although I was a little disappointed when he digressed to the selective use of some statistics. Frankly, I believe personal income growth in Canada has done very well. In fact, millions of people, and more people, are working, so we have therefore spread out wealth and are sharing the prosperity. Just quoting average incomes and so on is not really useful. In any case, I digress.

• 1255

I believe we have to be able to separate some of the issues that are general across retailing fields into those that will allow us to bring up some suggestions in order to be able to protect Canadian culture, Canadian content, and Canadian creators. Frankly, to say we'd like to stop the world for five or ten years is absurd. I've yet to meet anybody who didn't request some sort of favoured tax status for their particular group. That's not likely going to happen either.

I come from a retailing background. My parents were retailers. Until a year ago, my wife was. I guess you might say she gave up the battle. But Canadian retail has been structurally inefficient historically, and the trend to fewer intermediaries is a positive one for the consumer, frankly. As Mr. Woolford has said as well, for those who go through the battle, that's cold comfort, but those who survive will be the ones who are creative and able to compete in creative ways.

I'm wondering if we might be able to get some comments from some of the people here specifically with regard to what we can do to protect Canadian culture and content. For the moment, because we don't have much time left, let's try to stay away from those things that are protectionist in terms of their own self-interest. Mr. Woolford, do you have any comments? Perhaps Mrs. Hawkes might be able to make some as well.

Mr. Peter Woolford: I'm not sure I know enough about book retailing itself to be able to help you much on the cultural side. All I've tried to do here this morning is give you a feel for what's happening in retail generally. I would defer to the people around this table who live it every day in order to give you some insight on that.

Mr. Rick Limoges: Having said that, your earlier comments have been quite useful in putting things into context.

Mr. Peter Woolford: Thank you.

Mr. Rick Limoges: Ms. Hawkes, if you will, or maybe someone else could—

Ms. Sally Hawkes: I'd be glad to.

In my opening statement, I mentioned the creation of the eastern Ontario booksellers' association, of which I am the past director. We formed in 1995 because we heard at that point that the very first Chapters store was coming to Ottawa. Since then, through some very advantageous contacts in the Department of Canadian Heritage, we have qualified for and been granted over $100,000 in grant money from Heritage.

With this money we've done a number of different things, like providing promotional materials to our membership. For the last four years, we've done a significant marketing campaign with the Ottawa Citizen, supported by the Canadian publishing industry. We've promoted Canada Book Day. For the last four years, we've operated the national capital reading series, which has brought prominent Canadian authors to Ottawa. We would never have had the opportunity to do that before, because we would never have been offered them by the publishing community in this country. We have also supported and funded the Word on the Street campaign, which, for the last two years, has operated in Ottawa. All these things have been done by independent retailers to promote Canadian books and Canadian culture to our customers.

I ask for a continued funding of this kind of operation, which should be available to bookstores at a grassroots level rather than having those stores be part of an organization. If a really good proposal is put forward by an individual bookstore to promote Canadian books and Canadian culture, it would be wonderful if the government could see fit to fund that kind of project.

Mr. Christopher Smith: If I can just add something, we do not just get money from Heritage, so don't be left with the impression that we're solely looking for a handout. We solicit money, dollar for dollar, from our publishers and suppliers as well, so one reinforces the other. We are able to use this money from Heritage to say to Bantam, Penguin, or whatever that we can do this thing together and can promote their books and Canadian culture at the same time. We're simply looking for that support to get the infrastructure in place.

The Chair: Mr. Mark has asked me for time to ask a quick question.

Mr. Inky Mark: Thank you, Mr. Chairman. It's just a short question to Mr. Woolford.

• 1300

In light of the comments made by the independent operators who want more time to adjust to the changes, do you think that's a good request? Do you think government should intervene? And how will that affect other members of your retail membership?

Mr. Peter Woolford: I'm not sure how you buy time in a marketplace that is changing the way this one is. As I said in my concluding remarks, the Canadian consumer is absolutely ruthless. They have no loyalty. They have no respect for the vendor whatsoever. They will go where they get the best value for their dollar.

The real challenge for booksellers of all sizes today is that their competition now is international. Retailing always used to be a national or a local business. It's not any more. If I'm unhappy with what I can get in my local marketplace, I just go on the Internet and get it there. I don't know how you stop that. The bits and bytes that flow across the border to amazon.com or barnesandnoble.com don't look any different from the bits and bytes of my telephone conversation, so you really don't have any way of preventing Canadians from shopping exactly where they want to.

Believe me, I have independent members who are booksellers, and I feel in my heart for the challenges they face. I felt in my heart, as we all do, for the other parts of the sector that went through this. If anything, it's even tougher today than it was ten or fifteen years ago, when the independent grocer or the independent pharmacist or the independent hardware store went through this process. They at least did not have to face large multinational companies working from a low cost base in the United States, out of a warehouse in an industrial suburb. These folks today do. They're going head to head with amazon.com every day.

I don't think you can buy time for them. I don't know how that's possible.

Mr. Inky Mark: Thank you, Mr. Chair.

The Chair: Thank you.

I would like to thank the witnesses very sincerely for coming. Your input has been extremely valuable to us.

Mr. Shepherd, you wanted a quick question? There's hardly any time left, so please be very concise.

Mr. Alex Shepherd (Durham, Lib.): I'm sorry. I apologize for being late. I may have missed out on some of this, but I did want to focus on Pegasus.

Since we're shooting at a moving target here, I want to know, whether anecdotally or otherwise, what that relationship is doing to you people in the sense of possible predatory pricing. In other words, are your costs actually going up from where they were before, if, today or in the future, you're forced to buy from Pegasus?

Also I'm interested in the import market. We've heard that retailers buy directly from foreign wholesalers, but if Pegasus in fact is the choice—and we've heard from them that they're into volume discounts and so forth—if this is the only place you can get imported books into Canada, how is that going to affect the independent retailers?

Mr. Nicholas Hoare: Perhaps I can respond to that.

I realize our clock is our mortal enemy, but perhaps I should just say this. We are deeply concerned, as a group, about monopolistic practices, of whatever nature they are, as they pertain to the book industry. The intense damage that has been wrought by one particular entrant into the marketplace is disproportionately high, in our view. It's been occasioned largely by the fact that they do exert the power necessary to either close or otherwise restrict our access to their market, which is just as much theirs as ours but which is nonetheless in jeopardy.

I would like to single out the example of one long-suffering and extremely old friend of mine who is a publisher based in Toronto. Last year at about this time, he was greeted with the unpalatable fact that his books were not going to be able to be sold to Pegasus on the wholesale side at anything remotely approaching the terms that they, Pegasus, required. I don't think it would be untoward, and indeed it would be backed by my colleagues, to say that the tactics—harking back to the bully tactics mentioned earlier by one of our colleagues—came out in force, with knobs on, to the extent that the principal participant came at them with virtually a baseball bat, in metaphoric terms, and made it abundantly plain to him that if they did not toe the line, the books that were in the stores and the warehouse would go back, pronto. The bluff was called, and the result was that less than a fortnight later, 56 skids of books, representing every single copy of every book in the chain, were summarily sent back, with no notice whatsoever, to this poor publisher's warehouse.

• 1305

Now if that is not an indication of where I'm coming from and where we collectively are, then I'm a monkey's uncle. I would also like to say, as a classic example of what this represents to us, it simply means that if the dog barks, they're going to be listened to very loudly and very clearly by a complete succession of people, whether they are based physically in Canada or based with their principal in New York and London.

My deep and abiding concern is that if the Canadian Pegasus-cum-Chapters-cum...call it what you will, if it does not obtain satisfaction locally north of the border, they are going to bypass, through virtue of their sheer clout, anything and everything to do with Canadian distribution and go straight to the horse's mouth for supply.

I recognize I'm mixing my metaphors, but the point is nonetheless serious. If they can't get the books north of the border at terms that suit them, they will go south of the border and buy around us. That is muscle. It is clout and cultural blackmail, and as far as I'm concerned, it is a major threat for all of us here because of the sheer clout these people exert.

I'm not sure whether I've addressed your question, in anything other than a roundabout fashion, but I would like to submit that what we are looking at now is the tip of an extremely difficult iceberg. I'm here today—and I have plenty of other things to do, just as you have—to put my finger on something that doesn't scare me—God knows, we are in a niche market and we've survived for 31 years—but it scares the living bejesus, to mix my metaphors still further, out of the industry as a whole, which is ill-equipped to compete.

We're here because we want to be able to compete, hence level playing fields, hence equitable terms, hence no baseball bats and small publishers who are suddenly faced with ruin because everything that's in their largest customer is sent back to them at the drop of a hat.

Thank you, Mr. Chairman.

The Chair: Thank you very much.

Mr. Mauril Bélanger: It would be very useful if the circumstances of your friend, the publisher, could be detailed for either this committee or the Competition Bureau, because one of the difficulties we've faced so far is that publishers, by and large, have not been prepared to openly say what they are alleged to have been exposed to, for fear of reprisals.

Mr. Nicholas Hoare: Precisely.

Mr. Mauril Bélanger: If someone is not prepared to come forward at some point to give exact information as to what may or may not have happened, I'm afraid that's not going to be very helpful for this committee, as work.

The Chair: Thank you very much for coming. We really appreciate it. You have added to our information a lot. I think I express the view of all the members that we are extremely grateful to you.

Thank you for coming.

I would like to ask the members of the committee to please stay. We have an item of business to conduct.

• 1307

• 1310

The Chair: On the item of business before us, there's a supplementary budget for $39,000, which the clerk has circulated to all members. I'd like to get your approval to accept the budget today.

[Translation]

Mr. de Savoye.

Mr. Pierre de Savoye: Mr. Chairman, has anyone moved and seconded this motion? After that, I will take the floor, as permitted by the Standing Orders.

The Chair: A motion does not need to be seconded in committee.

Mr. Pierre de Savoye: Mr. Chairman, at the start of the meeting, you seemed a bit disconcerted by the fact that I wanted to speak to this motion. However, as you know, all members around this table can speak to the motion. I have a number of questions, on the budget motion among others. Since I have several questions, I thought it would be preferable to ask them after we had heard from the witnesses.

The Chair: I apologize. Okay.

Mr. Pierre de Savoye: Earlier on, I asked the clerk to obtain a copy of the original budget that dates, as we know, back to before the first meetings held by this committee in October, since it was a residual budget, I believe, that was left over from the previous session.

We are being asked to approve a $40,000 amount. I asked myself what we have produced with the money that we have been granted since we have been sitting. I have had the pleasure of sitting on this committee since Thursday October 28; that was our first meeting.

• 1315

I took a quick look at the meetings we have held, the witnesses we have met, the people we have invited, starting with the minister, and I wondered what we were going to deliver for that money. We can ask for money, but we also have to deliver the goods. But to date, as far as I know, the committee has not bothered preparing a report, an update or recommendations for either the House, or the department, or one of the organizations we have met. We have asked questions, held discussions, that were sometimes shortened due to circumstances, but we have not yet been able to draw conclusions that would have enabled us to feel useful.

In other words, I am learning and we are all learning. I think our discussion is very enlightening. We enable our witnesses to inform the observers who come from the department or various organizations. We facilitate a process that can undoubtedly lead to results, but we have never put on paper the conclusions we have reached nor the general thrust that we want to focus on. We have never written about what we feel should be done for the various organizations that come either directly or indirectly under the Department of Canadian Heritage. So Mr. Chairman, I find that we are lagging a bit behind.

It is almost the end of February—we did start sitting in October—and we have several projects on our agenda, such as meeting with a number of witnesses and a study of a number of topics, and we all agree that the topics we plan to study are important ones. I agree that they are important topics. Everything this committee does is important. The problem is that the importance is not identified in the thrust of the committee's work, the recommendations, or a reflection that is directed in a certain direction. This committee cannot and must not simply be a committee that listens and asks questions. We are not sitting here as if we were in university, although the wealth of the information being presented is undoubtedly equivalent to anything we could learn from a university course.

No, we are here to do more than that. We are here as parliamentarians to gather together the best of what witnesses have to give and then to offer the department, the various organizations and the House the fruit of our reflections, our conclusions and our recommendations.

Mr. Chairman, we have never taken even a couple of minutes to reflect on these issues. I think that what I am doing here today is being done for the first time. We are collectively addressing the issue, and it is an addition to the budget that gives me an opportunity to touch on this crucial matter. Mr. Bélanger is looking at me, and I think he understands what I am saying.

Mr. Mauril Bélanger: Pierre, do not think that I understand you; I do not understand you at all.

Mr. Pierre de Savoye: Mr. Chairman, perhaps I should explain what I mean to Mr. Bélanger. What I am saying is very simple: if, on one hand, there are rules that make it possible to prevent parliamentarians from speaking on certain topics, there are, on the other hand, and it is a good thing, rules that enable parliamentarians to express themselves in other circumstances.

The majority, under the Standing Orders of the House, does not always take precedence. It takes precedence in a number of cases, particularly in the case of votes on time allocation, but in other cases, the majority cannot prevent a member, particularly in committee, from speaking on a topic for as long as he so desires. In fact, the majority cannot prevent any member from speaking on a given topic.

In the case of this budget, Mr. Chairman, I see that an additional expense has been added to the amounts already spent. I was simply wondering what we have done with the amount already spent. Can we account for the money that has already been spent? Do we have a deliverable to show for the money that has already been spent?

• 1320

Before committing new amounts, I think that it is legitimate to want to make sure that the money already spent has served some purpose, that we have contributed to enriching the parliamentary work we are responsible for.

We must admit that if, on one hand, we have worked hard to bring in witnesses, listen to them, question them including the Minister of Heritage first and foremost, to ask relevant questions and obtain answers, that have brought clarification in some cases but not others, on the other hand, we have never put together the fruit of our reflections, because we have not taken the time to do so as a committee.

It is unpleasant to have to make such a comment at this point in time, believe me, colleagues, I hold each of you in high esteem. Moreover, I know that you have a lot of consideration for the procedures that we are subjected to.

Mr. Chairman, since we are talking about the budget, I thought to myself that we have, in examining the committee's future business, put a significant number of topics on the agenda. I added some myself, and I hope that we will at some point have the time to study them.

Other topics have been added to the agenda, namely the issue of the distribution of books—it is an important topic and we addressed it today—, but Mr. Chairman, in discussing the committee's future business, we have never established when we would discuss the progress of this work or when we would reach some conclusions.

I will give you an example from testimony provided by the Honourable Hedy Fry, Secretary of State for Multiculturalism and the Status of Women, who spoke to us about the status of women on Thursday, December 2. We heard from Ms. Fry, who spent a bit of time explaining her vision for action in the part of the department for which she is responsible. She said:

Accommodation of cultures. Recognition of diversity. A partnership between citizens and State. A balance that promotes individual freedom and economic prosperity while, at the same time, sharing risks and benefits.

Mr. Chairman, as you can see, Ms. Fry is giving us some direction. She has given us an indication of how she sees the situation. We have not had an opportunity to verify among ourselves if we share that perception. We do not have to share the opinion of a secretary of State, as competent as she is—and the Lord knows that I have a lot of respect for Ms. Fry. Before spending any additional money to hear additional witnesses on new topics, it seems to me that we should take an in-depth look at the topics we have already discussed and draw some conclusions. Unfortunately, that is not what we are doing. We are moving on without ever wrapping up the topics we are discussing.

It is a little bit like a university student taking a number of courses successively, without ever taking the exams or obtaining his diploma. As a result, we are accumulating an incredible—"immeasurable" would perhaps be overstating it—amount of knowledge and information, which is very dense, but we aren't doing anything with it. And that is where the shoe pinches. Why spend more money to bring in more witnesses to discuss with us highly interesting new topics and undoubtedly necessary topics, if we can't among ourselves reach some conclusions on the topics we have already begun to study?

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Mr. Chairman, it seems to me that we are very active, but that we are working in a very incomplete way. We call in people. We pay for their travel. We pay for their accommodation. We pay their expenses, and it is worth it, because they enrich our knowledge, our perception of reality by sharing their experiences with us. The people who have appeared before us are very knowledgeable and highly competent. The money we have invested to bring them here has been well invested, but it is up to us to make some use of this investment, and we are not doing that. We are just leaving the investment where it is. We are leaving the investment on the shelf, where it is going to gather dust.

Mr. Chairman, I have here the blues from the meetings we have held. They contain a lot of information, but unfortunately, the information is simply gathering dust. And I must admit that if it weren't for these comments I am making today, and the time I am taking to make them, perhaps we would have never taken the time to know that despite our efforts on a daily basis here in committee, all we have to show for it is paper and no action.

As a parliamentarian, I do not believe that anyone around this table simply wants to push paper and create archives. We also want to create action. We want to get results. We also want things to change. We want situations to improve. We want to play our role as responsible politicians. Unfortunately, Mr. Chairman, that is not what we are doing.

All in all, the budget before us is modest, when you consider expenses that committees can incur. We have allocated $5,000 in this budget for reports. Mention is made of reports in Braille, and I agree with that. It is good for this information and the debates that we have to be available to people who must use Braille to read them.

We talk about reports in the form of CDROMs, which is an excellent technology that allows for a very broad and complete dissemination of the information available to us. We also talk about cassettes. We also want our reports to be on Internet. That is excellent. Five thousand dollars, Mr. Chairman, is a steal. But if this information just stays on the Internet, on cassettes, on CDROMs and in Braille format, we will not have accomplished our mandate: we will not have done what we are being paid to do. We are paid to make recommendations which, eventually, can be turned into legislative measures, by the will of the House of Commons and the Senate.

Mr. Chairman, we do not only ask questions and—

The Chair: One minute, please.

Mr. Pierre de Savoye: Yes, Mr. Chairman.

The Chair: It is a point of order.

[English]

Mr. Paul Bonwick: Excuse me, Mr. de Savoye.

Mr. de Savoye has made some excellent comments with respect to the budget and the budgetary process, and it is in that regard that I would propose to the committee that, first of all, I withdraw my motion in supporting the budget and allow us the necessary time to review Mr. de Savoye's information, as well as collectively come up with a response for Thursday. So on that note, I would ask for consent to withdraw my motion in support of the budget.

[Translation]

Mr. Pierre de Savoye: Mr. Chairman...

[English]

Mr. Paul Bonwick: In order to allow, Mr. Chairman, the necessary time for all of us to review the information provided and have a higher comfort level in supporting the budget—

Mr. Rick Limoges: Perhaps Mr. de Savoye can stay here and talk until we come back on Thursday.

[Translation]

Mr. Pierre de Savoye: Mr. Chairman, let me say two things. First of all the subject is an important one. The motion has been before us for a week. If I've had time to prepare, others have also had time. Second—

The Chair: Just a second, Mr. de Savoye. It has been before us since this morning. You were the one who mentioned that this motion had not been presented earlier. It was tabled this morning. It has been before us for a week because you asked for a delay. Not because someone else asked for this. So the motion has been before the committee since this morning. We have a request that the motion be withdrawn and the mover...

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[English]

Mr. Paul Bonwick: As mover of the motion, I ask—

Mr. Pierre de Savoye: That requires unanimous consent, and I don't agree with it.

An hon. member: So we break for it?

[Translation]

The Chair: Yes.

Mr. Pierre de Savoye: Mr. Chairman, my colleague Limoges says that I could keep on speaking until Thursday and that he would come back. I will have to stop speaking when there is no longer a quorum, but I intend to start again as soon as we have quorum.

Mr. Chairman, I shall continue then unless you tell me that we no longer have quorum.

The Chair: We no longer have quorum.

Mr. Pierre de Savoye: In that case, I shall resume the next time. Thank you, Mr. Chairman.

The Chair: Thank you.

This meeting of the Standing Committee on Canadian Heritage is adjourned.