Law Times

Page 6 November 7, 2016 • Law Times www.lawtimesnews.com impressed with both the training program and the candidates. They question ending the pro- gram based on the data available and the emphasis placed on that data, rather than the strength of the program." The stakeholders have spoken. The LPP has bought itself more time, for now. LT COMMENT ©2016 Thomson Reuters Canada Ltd. All rights reserved. No part of this publication may be reprinted or stored in a retrieval system without written per- mission. The opinions expressed in articles are not necessarily those of the publisher. Information presented is compiled from sources believed to be accurate, however, the publisher assumes no responsibility for errors or omissions. Law Times disclaims any warranty as to the accuracy, completeness or currency of the contents of this publication and disclaims all liability in respect of the results of any action taken or not taken in reli- ance upon information in this publication. 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The Law Practice Program has been the subject of much debate since its inception. But news that the Law Society of Upper Canada's Professional De- velopment and Competence Committee was recommending ending the program after it finished its pilot was not met with enthusiasm. It was hardly surprising that a majority of stakeholders stepped forward to decry the move, and the committee switched its tack. "The submissions suggest the need for more time and advocate greater caution in drawing conclusions too soon. They suggest that given the significant shift that the creation of the LPP effected in the transitional training environment, it should not be surprising that the initial limited data reveals concerns," says the report to be pre- sented at Convocation Nov. 9. "Many of the submissions suggest that given that it is agreed that the LPP is, itself, a good transitional training program, more time should be afforded to the program to assess its sustainability." This reversal in the committee's stance is correct. As the report notes, "There are numerous comments from those lawyers who have supervised or mentored LPP candidates and been Private member's bill makes a point T here's nothing like a consumer ripoff to get the blood boiling and draw screaming headlines. Political opportunities quickly follow and Liberal MPP Arthur Potts (Beaches-East York) has seized on the Air Miles expiry debacle to ride the public sentiment wave with his private members' bill 47, protecting rewards points act, 2016. It would treat loyalty points like gift cards, which aren't allowed to expire un- der a 2007 amendment to the Consumer Protection Act, 2002. Kudos. The expiry of collector's air miles has prompted outrage from con- sumers across Canada and triggered a class action lawsuit in Alberta. You're probably familiar with the blue-and-white card that is scanned at retailers. Collectors get a mile in ex- change for their purchases, depending on which sponsor they transact with. (Now, full disclosure: I worked at Air Miles from 2001 through 2004. I have no axe to grind with the company or the people. My time there was pleasant as was my self-driven exit.) This legislation wouldn't be neces- sary, nor would the class action suit, if LoyaltyOne (which owns the Air Miles program) had done some due diligence five years ago. Instead, it has not only dropped the ball, it has kicked it into its own goal. The loyalty business is a giant marketing operation. Companies like Air Miles track the spending patterns, location, times, gender and age of each collector across a spectrum of transactions, over a long period of time, to establish patterns. The data is marketing gold dust and LoyaltyOne and others sell the anonymous infor- mation to their sponsors to use for their own marketing plans. They also assist those sponsors by di- rect marketing to those collectors with special offers. The formula is "earn and burn." Collectors earn miles by loyally shop- ping with sponsors and then burn those miles on trips, hotels, household goods, electronics, show tickets and a host of other things. But here's the other end of the busi- ness: Air Miles charges sponsors for each mile issued and then collects a margin from the rewards for which collectors redeem, so it is double-ending transac- tions. Cha-ching! Air Miles is essentially printing its own money, which means it's extremely profitable. Air Miles used to boast that its miles never expired, but five years ago or so, it changed the rules and set Dec. 31, 2016 as an expiry date for miles older than five years. Why? It was an account- ing nightmare for Loyalty- One owners, Allied Data, a publicly traded company based in Texas. Allied loves Loyalty. In its third-quarter report, it noted that LoyaltyOne's revenues increased 28 per cent to US$384 million for that period. Further, Air Miles revenues were up 43 per cent, "driven by strong redemption growth." Reward miles issued were up six per cent and redemptions were up 74 per cent as collectors scrambled to burn their miles before they expired. But hidden in those numbers is a li- ability issue. In the loyalty game, there's a thing called breakage. It describes the number of points is- sued against those not redeemed and outstanding. Breakage rates of 25 per cent to 35 per cent are not uncommon. The thing is, those points almost never get redeemed. Collectors die, get disillusioned, move or just stop. So, some companies just write them off their books after five to seven years and apply the profit to their bottom line, but in the accounting world where the numbers must resolve, that's a problem. Public companies need to be trans- parent. The problem is, instead of commu- nicating at every step of the way over the last five years with collectors and ex- plaining it in finite detail, Air Miles did the bare minimum. Further, it appears to have concealed reward options to force collectors to re- deem for almost anything out of panic. It's an epic fail. The bill has tri-party support and will likely pass with Oct. 1, 2016 as the retro- active effective date. But what a mess. What a PR night- mare. And to think how easily a little corporate planning and a basic commu- nications plan could have resolved this years ago without necessitating political and legislative action. LT uIan Harvey has been a journalist for more than 40 years writing about a diverse range of issues including legal and political affairs. His email address is ianharvey@rogers.com. Queen's Park Ian Harvey

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