INST Committee Meeting

STANDING COMMITTEE ON INDUSTRY, SCIENCE AND TECHNOLOGY

COMITÉ PERMANENT DE L'INDUSTRIE, DES SCIENCES ET DE LA TECHNOLOGIE

EVIDENCE

[Recorded by Electronic Apparatus]

Wednesday, November 7, 2001

• 1534

[English]

The Vice-Chair (Mr. Walt Lastewka (St. Catharines, Lib.)): Shall we begin? The order of the day is Bill C-23, an act to amend the Competition Act and the Competition Tribunal Act.

We have first the chief executive officer of WestJet Airlines, Clive Beddoe. I would ask that you begin with your opening remarks, and then we'll turn it over to questions.

Mr. Beddoe.

Mr. Clive Beddoe (Chief Executive Officer, WestJet Airlines): Mr. Chairman, thank you very much.

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As you've probably seen in the paper today, the airline industry is yet again going through a major evolution or revolution. We have an industry that has a 97% failure rate in North America, and I believe a lot of this could be avoided, particularly in Canada, if we had a fairer and more appropriate Competition Act that could respond to the concerns of our industry.

Let me start off by saying that, last year, WestJet made a 20% profit margin. We have, on average, gone into communities across Canada and lowered fares by 50% in every market we've gone into, and yet we've been able to make a 20% profit margin, pre-tax, pre-profit-sharing to our employees. That 20% represents a near record, if not a record, in the history of aviation in Canada.

Clearly, we have been a very successful and growing organization. We have grown WestJet by an average of 55% since we started flying, notwithstanding all the attempts to stop us, first by Canadian Airlines, then Air Canada, and then Air Canada and Canadian Airlines combined. So I think I speak with some level of authority when I say that we have had a very difficult time dealing with anti-competitive issues in Canada. We have been able to overcome them; clearly, others haven't.

In the past four years we've lost six airlines in Canada: Greyhound; VistaJet; Royal, recently; CanJet; Canadian Airlines; and RootsAir. I think Canada 3000 was saying today, in the press that I read this morning, that they too are close to bankruptcy and failure. We're down to two airlines, if that happens, us and Air Canada.

Air Canada has, in our estimation, 80% to 85% of the market share in Canada when measured either in revenues or in terms of available seat miles. If you look at the distinction in pricing on Air Canada's routes, where Air Canada flies versus where Air Canada flies against a competitor, against WestJet, you'll see that fares are double elsewhere. I can show you plenty of examples of that.

They use those excess profits to find ways, in my opinion, to drive other people out of business. I think the papers have recognized this, the parliamentarians have recognized this, and the Competition Bureau has recognized this. I don't think there's any doubt about the matter. However, I'm not here to criticize Air Canada, except to say that I think the act has given them the opportunity to do this without restraint.

We filed a complaint against Air Canada for predatory pricing activities in Moncton last year—actually 20 months ago, I think. Since then, we have spent the best part of $750,000. The competition department has spent, obviously, a huge amount of money to pursue this issue also. We've been in front of the tribunal only a matter of about four or five days in total. We're told by our lawyers that the process will probably take another two or three years before we finally end up having some resolution to the process.

At the end of the day, even if we're successful, Air Canada simply gets a slap on the wrist and told to stop—with respect to that route. There's nothing to stop them from doing the same thing on another route over and over again.

The damage that's done to the industry in the process is enormous. CanJet got a cease and desist order, but it didn't work for them. The difficulty with our industry, and one of the reasons our industry has such an enormous failure rate, is that if you look at the profitability on average of the airline sector—and this isn't something I invented; it's just an observation on my part—the margins in the airline industry are nothing much more than 3% or 4%, at the very best. If you take an average airplane with 120 seats on board and a load factor operating at 75% to 80%, you're going to have roughly 80 or 90 people on board that airplane. With a 3% to 4% profit margin, only three to four people on board that airplane are making a profit; everything else is paying the overhead.

So it is relatively easy to eliminate a competitor. Dump capacity on top of the competitor, drain five people from that competitor, and you put the competitor into a negative position. Drain 10, 15, or 20 people from them, and you have killed them in very short order.

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The process is relatively simple for a major carrier to kill start-up carriers or smaller companies. We've been able to resist that because we've been able to win the hearts and minds of the public at large in Canada and persuade them that they should fly us over our competitors, as a result of which we've been successful. But the process involved in filing our complaint has lasted months and with little prospect of solution.

The problem is, if you look at it from the point of view of the major carrier, they have a huge benefit at stake. In the case of Canada 3000, topical as they are today, they generate something between $700 million and $1 billion in revenues. They've lowered fares, similar to us, in every market they've gone into. If they were eliminated, where would the majority of that revenue flow? It would flow to Air Canada, the dominant carrier.

If they're able to double fares as soon as the competitor has been eliminated—which is what has happened in every market where we have seen ourselves pull back or move to different markets and leave Air Canada as the dominant carrier, and Winnipeg is an example where we've seen air fares double as soon as we leave—then the net effect is, does that $700 million grow to $1 billion or $2 billion?

So the benefits to the major carrier are so large, what's the risk? There's no downside risk whatsoever. In our view, the Competition Act has to be modified in order to bring some discipline back to an industry such that the penalty involved has some bearing on the benefit that could flow to the dominant carrier. Better still if the dominant carrier has to pay the penalty to the offended party, maybe even by way of damages.

Capacity is not addressed in the Competition Act. The dumping of capacity, in and of itself, is a highly anti-competitive act in the sense that this capacity is what drains the revenue base for any individual carrier.

There are no consequences to the board of directors in most public service/public interest legislation. There is a liability imposed on the boards of directors of corporations. If I were to allow our company to pollute the atmosphere or the riverway somewhere, our board would be held personally liable. Why not make the same thing true in the Competition Act? If you want to bring discipline to the Competition Act, make sure the individual board members of the corporations have a personal liability. Let me assure you, if their board is anything like my board, they have to make sure those sorts of activities don't happen. They're not going to expose themselves personally to litigation or to damages.

The concept of avoidable costs that's used in the Competition Act presupposes that no sane businessman is going to sell a product below his avoidable costs. The reality in the airline business is if you have a huge benefit in getting rid of a competitor, you'll sell huge quantities of product below your total cost in order to make sure you've eliminated a competitor.

Recently, Air Canada launched Tango, a supposedly low-cost alternative. Tango, in my view, is nothing short of a fighting brand, designed to drive a competitor out of the marketplace. Tango is offering fares right now between Calgary and Toronto for $169 on a walk-up basis. That fare on Air Canada only a few weeks ago, before Tango arrived, would have been nearly $2,400.

We, who have a cost structure 50% less than Air Canada, would just about break even if we filled our entire airplane at $169. There is simply no way that Tango or Air Canada can possibly make money at those fares. That is dumping of capacity. It is purely designed, in my opinion, to make sure that Canada 3000, which is on the edge of bankruptcy, will be destroyed, and I think we're seeing the results of it today.

The use of fighting brand is addressed in the act, but unfortunately, if you have to go to the Competition Tribunal and say you need their help, that you are in desperate shape and will, as Canada 3000 said, run out of cash by Christmas, the moment you say that, you've effectively slit your own throat. In this business, you would cease to have any bookings come in after having made that statement.

So in order to take advantage of provisions such as the cease and desist provisions or protection under the Competition Act, you first have to acknowledge to the world that you're about to fail, and in so doing you will be guaranteed to fail. It is impossible to get out of that conundrum. The Competition Act does not recognize the realities of life today as we know it.

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The cease and desist provisions under the Competition Act were designed to try to prevent this, but again you have to say you're going to be irreparably harmed. The entire process fails the airline industry, no matter how you look at it.

As I mentioned earlier, the “avoidable cost” concept is used throughout the Competition Act as a means of determining whether or not abuse of dominant position or predatory pricing is occurring. In the airline sector, what is your avoidable cost? Air Canada's claim is that they virtually have none, because they have the airplanes and they have to fly them somewhere. They have pilots, they have crews—they have to do something with those airplanes: what's their avoidable cost? We've spent months arguing every component of the cost structure of Air Canada versus WestJet, trying to determine what is avoidable and what isn't.

The solution to the act is to do away with avoidability as a cost component and use fully allocated costs. Every airline in Canada runs route profitability numbers. They know exactly what their route profitability is. If you're going to keep selling product below your cost, then you're clearly doing it for some reason other than to make money.

In my view—

The Vice-Chair (Mr. Walt Lastewka): Could I ask you to slowly wrap up so we could have time for questions?

Mr. Clive Beddoe: As a last point, the cease and desist provisions, in my view, only have any bearing if the applicant has a chance to survive until the tribunal has provided its decision with respect to an application under the Competition Act.

Right now the cease and desist provisions available under the act extend only to 20 days initially and two subsequent appeal periods of 30 days, to a total of 80 days. In my view, that has to be amended to make sure the cease and desist provisions available under the act are not only available because you are in dire straits and desperate but also extend to the point in time when the tribunal has rendered a decision.

In summary, that's my point.

The Vice-Chair (Mr. Walt Lastewka): Thank you very much, Mr. Beddoe. I'll now refer to questions.

Monsieur Bergeron, please.

[Translation]

Mr. Stéphane Bergeron (Verchères—Les-Patriotes, BQ): Thank you, Mr. Chairman.

Good afternoon, Mr. Beddoe. Thank you for being here with the Committee and for the comments you have made. One can safely say that WestJet is a success story for Canada. At this very difficult time, it is probably one of the only airlines, if not the only one, to be still profitable.

That being said, I believe you have correctly identified one of the difficulties or gaps of the Competition Act and I think it is one thing we will have to deal with. Either the Act does not provide for any remedy in some cases—and you mentioned one—or the Commissioner does not intervene. That is the same situation that we faced about the increases of gas prices. So, if you will allow me, I will ask my question on the basis of gas prices.

We know that one of the reasons why WestJet is still profitable is that it is able to keep its prices relatively low, and one of the reasons for that is that WestJet, contrary to other airlines, does not add any surcharge for the high prices of fuel. And if you are able to avoid this type of surcharge, it is because you have negotiated hedging contracts for your gas supplies.

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Do you believe this type of contract could be extended to other industries and even, perhaps, to consumers, in order to control any future increases of gas prices and, in this manner, to contribute to economic growth?

[English]

Mr. Clive Beddoe: Thank you for the question.

First of all, I'm afraid I disagree with you that WestJet has been able to avoid putting up fares or adding a fuel surcharge because of our favourable hedging program in purchasing fuel. We do not add, as you say, a surcharge. We do not have an additional charge—a gas surcharge or a fuel surcharge—in Canada.

Part of the reason is.... And you're right, we do have a hedge in place where we contracted to buy fuel in a favourable time; however, if you look at the history of hedging, you can be caught on both sides of that. In fact, for a while we were caught on the wrong side of it. When we hedged initially, we hedged at $16 a barrel, and fuel fell to $12 a barrel. We had to live with that. But let me explain how we have achieved what we've achieved.

We have no fuel surcharge because of innovation within the company. We sell 35%—some days 40%—of our seats on the Internet. One booking made through our reservation centre, exclusive of any commissions paid—just the cost of making one booking in our reservation centre—is $10. The cost of making one reservation through the Internet is 30¢. When our average fare is only $90, you can get some idea of how much of a benefit this has brought to WestJet. As a result of that innovative process that we started two and a half years ago, we've been able to avoid having to actually add a surcharge. If you look at the math involved, our savings, net of any discount to our passengers, is actually as much as the increase in fuel costs we've experienced.

I think there's a big danger for industry as a whole in hedging fuel on a broad basis, because you can get caught on the wrong side of it. We've already seen what happened to fuel in the last few days. It's come down, and headlines today were suggesting fuel could become $10 a barrel again. How does industry cope when it's on the wrong side of that? I think it depends what industry you're in.

We hedged at $16 and then $18 a barrel because we looked at the statistical information that indicated only about 7%, I think it was, of the time in history could you say fuel had ever been less than $16 or $18 a barrel—I forget the exact number. So we just took a gamble. We lost on the first phase of that gamble and made on the second phase of it. I think industry has to be very, very careful about getting into a hedging program.

The Vice-Chair (Mr. Walt Lastewka): Thank you, Mr. Bergeron. It's five minutes. I'm going to switch over.

Mr. McTeague.

Mr. Dan McTeague (Pickering—Ajax—Uxbridge, Lib.): Mr. Beddoe, thank you for being here today. Much as I'm pleased to see you're here today, I can tell you that a fight I began many years ago on the Competition Act unfortunately has required your presence here. We're seeing an increasing domination by several groups throughout the various number of strategic sectors in our economy.

We are proposing very limited changes to the Competition Act, but they are nevertheless a start. Some, like yourself, seem to allude to the fact—and we're getting a large number of people, who aren't obviously the largest of large corporations—or suggest that perhaps it's time to be a little more aggressive with the Competition Act. I think I heard in your summation something with respect to damages.

I too, sir, am interested in the fact that we're now dealing with a number of substantive issues on the Competition Act, which has been largely ignored by the media over the past few years in favour of other issues.

When I presented my Bill C-235 many years ago, it was treated as something directed strictly to gasoline. Of course, it has given rise to the possibility and the prospect of private rights of access to the Competition Tribunal.

As you know from several interventions in the media—particularly one medium—I've been able to actually get the point across with respect to how much time it will take before you're able to get your issue before the Competition Tribunal, notwithstanding the fact that the Competition Bureau has taken the right position with ensuring—notwithstanding the Transportation Act and certainly notwithstanding the beliefs within the Transportation Act—that preserving competition is far more important than protecting a particular competitor.

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My question to you is, given the large failure rate, given what we're seeing with Canada 3000 today, given the litany of those who have lost out or simply folded, what would you expect of this committee? Should we be moving beyond simply the restrained area of private access with respect to refusal to deal, exclusive dealing, market restriction, and tied selling and perhaps provide damages to those who bring applications before the tribunal and have damages awarded based on abusive dominance? I believe you're referring to “fighting brands”, which of course is part of section 78 of the Competition Act.

Mr. Clive Beddoe: I feel that if you are trying to change behaviour, whether it be in adults, corporations, or children, the truth of the matter is you have to make sure there is a reward and a penalty. Unfortunately, the way the act functions today, as I suggested earlier, there is such a huge reward to those who drive others out of business, particularly if you think in terms of the Canadian airline business, for example—an area I'm familiar with—which is a $12-billion-a-year industry: $12 billion and there are only three players left in it.

What a magnificent reward there will be to those who drive one or even two of those players out of business. The capital markets will not come back to support future airlines in Canada.

It seems strange for me, perhaps, to be here saying I'm in favour of modification to the Competition Act, because undoubtedly we are going to be the beneficiary of this. But I really believe if we are going to have a healthy industry that's going to attract capital in Canada, we have to be able to have a viable business base, and that's not going to exist when you have one dominant player with 90%, or 85%, or even 80% market share.

There is a danger, though. The difficulty is—and you talked about access to information—in going through the process we've been through, Air Canada has demanded information from us as to our profitability on every route. Well, guess what happened immediately they got it? Guess where they put their capacity? Guess what they did? It's not too difficult to figure out.

So it is a dilemma. There's no simple solution to some of this stuff. But there's no question we have to take away the risk and the reward process. The reward is far too great, and even if we had a penalty that was $50 million, it would be peanuts in relation to the benefits.

Mr. Dan McTeague: Mr. Beddoe, yesterday your competitor Air Canada, through its lawyers, made the presentation that the Competition Act, if it were to proceed with very limited forms of private access in very restrained areas, would bring about the destruction of the Canadian economy or a chill in investment. Sir, I'm wondering, if your company should decide it can't continue in business and there is only one airline left in this country, what will it mean for consumers large and small and the Canadian economy in general if it's carried into several other industries?

Mr. Clive Beddoe: It's purely speculative on my part, but I can say that every market we've gone into.... Winnipeg was a classic. We went into Winnipeg and lowered fares by 50%. When we pulled out, because we didn't feel, after three or four months, that Winnipeg was responding favourably to us—initially, Air Canada and Canadian lowered their fares to match our fares—as soon as we left that market fares doubled. Greyhound went into that market a little while later; the fares dropped to match Greyhound. Air Canada put more capacity on top of Greyhound; Greyhound failed; the fares went straight back up again. We entered the market; the fares came down again.

Competition is what this country needs, and if its economy is going to be stimulated, we need fair competition. But I think the Competition Act needs to take into account various different industries, and I can only speak really about ours.

The Vice-Chair (Mr. Walt Lastewka): Mr. Strahl.

Mr. Chuck Strahl (Fraser Valley, PC/DR): Thank you, Mr. Beddoe, for being here today. As I mentioned to you before we started, those of us in Abbotsford almost feel you're our airline because of course you put Abbotsford airport on the map by bringing in WestJet—since matched, of course, by Canadian Regional or Air Canada or whatever it is now. But the fact that you were there first and get your service work done at Conair of course, has given you the “homer” status back in Abbotsford. I'm sure you know that, and many of us are happy to fly WestJet because of it.

I have a couple of questions. You mentioned the six airline failures, but just to play the devil's advocate, airline failures are going on right now all over the world. It's not because of the Competition Act. It's because it's a cutthroat business with a bad set of regulatory bodies, and there are all kinds of other reasons. Couldn't an argument be made that it's not really Air Canada, it's just the fact that people are going belly-up, from Swissair to Australian companies to Air New Zealand, you name it? They're all on the ropes. It's not a Canadian phenomenon or a Competition Act problem; it's just a worldwide phenomenon.

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Mr. Clive Beddoe: Since September 11, I would certainly agree with you that the industry has gone through some very radical changes. I'm not suggesting for a second that the Competition Act is going to solve those problems, but long prior to that the problems in the industry were well apparent. Even as much as a year ago we were entering a recession, but rather than cut back, Air Canada increased activity and capacity. Even today, as we speak, Air Canada has said they are going to cut capacity by 20% when in fact what they've done is add 4% more capacity on top of WestJet and added some 60-odd percent—according to Canada 3000—on top of Canada 3000 with Tango.

Yes, I agree with you that the airline industry is in a state of absolute turmoil and change, and there's no question but that it will have to emerge from this era with a much more profitable base to it than it's had in the past. That's even more reason why the Competition Act should be modified, to attract capital to the industry, because no one is going to put any money into this industry, given the state of the industry.

Mr. Chuck Strahl: I do think it's going to take more than just modifications to the Competition Act.

Mr. Clive Beddoe: Absolutely.

Mr. Chuck Strahl: It's going to take an awful big change in patterns of government interference. WestJet has almost been a success in spite of, not because of, government policy, not just on the Competition Bureau's side.

We've spent an awful lot of time talking about the right to private access, and in your particular case the right to private access isn't really an issue because your case was actually taken up. That doesn't happen very often, so it's obviously a very strong case in the sense that the commissioners deemed it to be in the public interest to resolve this thing.

You're suggesting—I take it from your testimony, I don't know what your opinions on private access are, and you're welcome to give an opinion—that the problem with the act is twofold. One is that it just takes way too long; you're talking about two or three years before it's finalized. The way Air Canada is going, you may not have to drive that to resolution. Maybe that will take care of itself, but it takes years.

The other thing is, are you suggesting that penalties should be similar to what they have in the antitrust legislation in the States, where you get double or triple damages, that kind of thing? Or do you have something else here, where it would make the board of directors liable? Are you...?

Mr. Clive Beddoe: Well, we're trying to modify a behaviour. I think the act is there to try to modify a behaviour. The behaviour is going to persist until such time as the risk outweighs the reward, and the only people who can control that, really, are the president of the company and the board of directors.

If the board were made to be personally liable, let me tell you, they'd not let the president continue down a path that would jeopardize their own personal net worth. There's the first or one possible way to modify behaviour.

An alternative is to make sure that if you're making a decision as to whether you do or do not pursue anti-competitive behaviours, you have to weigh the risk. If you're going to be penalized, then part of the fine should be awarded to your competitor. Let me tell you, you'll have to think twice about doing some of those things.

Mr. Chuck Strahl: The counter-argument is that there's been an awful lot of talk about strategic and vexatious litigation, of people just taking you to court just for the heck of it. For example, if you're an upstart with two jets and if a big company just says, well, we'll drive these guys out of business by forcing them into a multi-million-dollar defence of their activities at the embryonic stages, you won't be able to afford it. It's a way of driving you out.

Would you also say that if somebody does launch a strategic litigation, one that's ruled to be strategic or vexatious, the board of directors should be liable for that as well?

Mr. Clive Beddoe: If you want to change behaviour—I'll go back to the point—then make it costly, and it will change behaviours. I think we've seen that in the environmental act; there's no question that our environment has been improved substantially because of it.

I can guarantee what my board would do if they thought we were pursuing things that were illegal. I believe you already have a provision in the act that says it's prohibited to create a fighting brand. What have we got? What's Tango if it isn't a fighting brand?

In order to stop it, look at the process. The process is unbelievable. It might stretch into years, and by the time you get to a solution.... You saw it with CanJet. CanJet is gone. There's something wrong with the process, and it has to be changed.

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The Vice-Chair (Mr. Walt Lastewka): Thank you.

Mr. Bagnell.

Mr. Dan McTeague: On a point of order, Mr. Chair, I think there is substantial interest in this. Perhaps with the indulgence of the next party who's going to be here, we could extend this for a few more minutes. I think there are some excellent questions, particularly from the opposition—

The Vice-Chair (Mr. Walt Lastewka): And that's why I like to start the meetings on time.

Mr. Dan McTeague: I was here, Mr. Chair.

The Vice-Chair (Mr. Walt Lastewka): I've been keeping it to five minutes. I know you're all going to be mad at me, but that's fine.

We'll carry on with Mr. Bagnell.

Mr. Larry Bagnell (Yukon, Lib.): I just have one really quick question. I'm from the Yukon, and our route from Vancouver has been a virtual monopoly for years. Each airline that has held it has said that they can charge more basically because it's a monopoly, and they do so, which annoys people. In fact, yesterday, I think, the airline infuriated the Yukon by making that flight a long haul, meaning you need 25,000 points instead of 15,000, so once again they're furious.

A number of them think the answer is increased competition, and in fact some people are looking to your company. If there's anything you haven't mentioned so far that would facilitate you going into that route, should you decide to do it.... If it's a question of amendments to the Competition Act or any other legislation we would have to do, just let me know so I can lobby for it.

Mr. Clive Beddoe: You mentioned exclusive routes and monopoly routes. I'd just like to point out that we have a monopoly route from Calgary to Comox, and we charge the same fare, fundamentally, on that route as we charge on our competitive routes, where we are up against a competitor. We've done that intentionally because we go back to the belief that we are here for the long haul, making sure we offer fair and inexpensive air transportation in Canada. If we were flying into the north or anywhere, we would be charging rates based upon our costs, what we felt was a reasonable margin to make, and not on what we could get away with.

Mr. Larry Bagnell: Don't forget the Yukon.

Thank you.

The Vice-Chair (Mr. Walt Lastewka): Thank you.

Mr. Strahl, a short question.

Mr. Chuck Strahl: On competition, you mentioned Tango several times. How do you differentiate between that and a company that's starting up, one trying to woo a bunch of new customers, trying to use the Internet, as you are, and promoting a seat sale to let people know they're around, alive, and in competition? It could be a loss leader for a couple of months while they establish a name brand and get their act together. Is that reasonable, or do you just not buy it?

Mr. Clive Beddoe: No. I think we're dealing with two issues here. We're dealing with the question of dominance in the marketplace. If you have a dominant carrier, as we do in our case, they came and were given the right to have an 85% or 90% market share by the Canadian government. With that come some social and practical responsibilities. If you're going to have that kind of dominance, then there are certain things you should and should not be able to do.

I don't see any reason whatsoever...and certainly a seat sale is legitimate, but when it extends ad nauseam.... Take the example of Moncton. Air Canada was charging $605 one way between Moncton and Toronto. They announced they were going to cut 20% of capacity out of the route. We announce we're going in there. Air Canada immediately adds 50% more capacity and drops their walk-up fare because ours was at $350 versus their $605. I'm not suggesting they can't match our fare, but there are two things: adding capacity and undercutting. They turn around and cut their walk-up fare to $250, add 50% more capacity, and add double and triple mileage points on top. For what purpose? Then they have the audacity to suggest they're making money doing it.

The Vice-Chair (Mr. Walt Lastewka): Thank you.

Mr. McTeague.

Mr. Dan McTeague: Mr. Beddoe, I want to be very brief about this.

Air Canada, your competitor, launched Tango after September 11. We've been told as parliamentarians and as a country that this company is going to face a number of problems. It doesn't have the money, and it's looking for a bailout from the federal government. I note that you did not take the requisite amount that was being offered to you. Sir, do you believe that Tango has been established as a fighting brand to destroy your company and to destroy any other company?

Mr. Clive Beddoe: It's my opinion that Tango was launched for one purpose and one purpose only, and that was to destroy Canada 3000 and to inflict some contingent damage upon us.

Mr. Dan McTeague: I think there is a bit of reluctance from time to time, as a result of the weight and scale of some of the more powerful, deeper-pocketed interests in this country, to influence certain outcomes. Do you not believe that a first step towards justice would be to bring about an opportunity to reduce the lag time it takes to bring cases to the tribunal, thereby having someone recognize a case of simple, common justice and ensuring that you remain part of the competitive process in this country?

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Mr. Clive Beddoe: Absolutely. But we've got to get away from such nebulous concepts as “avoidable cost” if there is indeed to be some allocation with respect to fixed cost, which is the purpose behind it. Let's legislate it; let's say it's 80%; let's just put a definable number in there. But we can't get drawn into these nebulous terms that are so subjective that they let litigation drag on for months and months on end.

Mr. Dan McTeague: Mr. Beddoe, if I'm given a split second, I can only say that I hope your testimony here has been compelling for members of Parliament, who have seen this issue occur in other industries and who are very concerned about airlines. It's sort of the issue of the day, particularly with what's happened.

We are trying to propose a very limited process, a limited opportunity, for people to bring their cases before the Competition Tribunal and avoid the lag time it took, for instance, for you and CanJet—which is no longer with us—to bring their cases to the tribunal. We have done it in a very restricted way, with some humility in that there is no provision for any damages.

Can you live with no damages and the fact that it does not apply to the abuse of dominance provisions of the Competition Act? What would you say to those who are making the accusation that this is going to bring industry to a halt?

Mr. Clive Beddoe: It's certainly not going to bring industry to a halt. Quite frankly, we've lived for five and a half years and succeeded in this environment. We can manage without any changes if you get right down to it. But that's not going to help the long-term interests of the industry, which is much more what my concern is.

The Vice-Chair (Mr. Walt Lastewka): Thank you, Mr. McTeague. Thank you, Mr. Beddoe.

Mr. Clive Beddoe: Thank you, Mr. Chair.

Mr. Bergeron, do you have a short question?

[Translation]

Mr. Stéphane Bergeron: I would like to follow on Mr. McTeague's question and, perhaps, play devil's advocate. My question may seem very naïve but, from the point of view of consumers and competition, could we not see the creation of Tango as a benefit? Don't you think that the creation of Tango has made the industry more competitive, which is beneficial to business travellers and for domestic travel?

[English]

Mr. Clive Beddoe: Tango will, in my view, last as long as there is a need. It will be used as an anti-competitive tool until Canada 3000 doesn't exist any more or there's no competition on that routing; then it will disappear or revert to being Air Canada. There's every evidence to suggest that's the case. Look at what's happened in every market where Air Canada has dominance. Look at what happens to the airfares. Whether it's Tango or Air Canada flying a route will be a moot point. The purpose behind it is still, in my view, to drive others out of business.

[Translation]

Mr. Stéphane Bergeron: What I find rather interesting in this discussion, Mr. Beddoe, is that the Competition Act exists to protect consumers and to ensure that there be some healthy competition in the market. However, you are telling us that the Competition Act does not protect properly some industries such as yours, when new companies appear on the market, whereas those new companies should normally increase competition. What you're telling us is absolutely fascinating.

This brings us back to Mr. McTeague's question and to what I was saying earlier, which is that one has the feeling that the Competition Act as it presently exists does not allow us to deal with some situations. Either the Commissioner does not have the powers he should have to promote some healthy competition, or, if he has those powers, he does not use them.

[English]

Mr. Clive Beddoe: Let me take issue with your first point, though. Tango is not a separate company. Tango is Air Canada. It isn't any different. Even if they start a low-cost carrier, it's still owned 100% by Air Canada. This is not competition. Let's decide what is really competition.

Air Canada has matched a lot of our fares wherever we've gone and in some cases undercut them. I'm not sure I really understand, quite frankly, what the purpose of Tango is other than to confuse. True competition will only exist if there's a relatively level playing field, and there has to be some kind of level playing field.

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In the United States, United Airlines tried to buy USAir recently, and the U.S. Department of Justice turned them down on the grounds that the combined entity would have a market share of 24%. They said that was unhealthy and not good for competition.

We have a carrier in Canada with 85% to 90% market share. Air Canada will argue it's only 60% market share, if you measure seats. Seats are not the issue; available seat miles or dollars is the issue. Seats absolutely confuse the issue. So there's no question Air Canada still has 80% to 85% market share, no matter how you cut it.

Mr. Dan McTeague: I note, Mr. Beddoe, that you alluded to the American Airlines situation, where there were of course treble damages. Perhaps you'd like to comment on the problems experienced by Southwest Airlines when they were denied opportunities to compete with their major competitors.

You have two complaints with the Competition Tribunal. It's taken you a year and a half or more to get there, which of course is a symptomatic question of justice delayed is justice denied.

In the case of your request on abusive dominance, it requires a certain threshold to be satisfied on predatory pricing. It requires that you don't just have to be bad, you have to be really bad in order to get the Competition Tribunal or the courts to understand.

How successful do you believe you can be if Air Canada is able to use Tango to its advantage to continue to apply pressure to your company in areas where it is clearly perhaps providing product below cost for the specified reasons you've indicated to this committee?

Mr. Clive Beddoe: I take issue with low cost; it's low fare, not low cost. The costs haven't changed.

I think we can survive against competition. We have done so. We've battled it by winning the hearts and minds of the public, as I mentioned earlier. I don't think we are in jeopardy at all. Certainly our growth rate will be slowed. Our ability to continue to do what we do will require more agility on our part, more creativity on our part, tougher campaigns on our part.

We'll still survive, because we have a cost structure that's 40% to 45% less than Air Canada's. I believe they will bleed to death if they carry on with this much longer.

However, I still come back to my point that an industry needs to be healthy. Yes, we will be healthy within a failing industry, but that's not really what I think the industry needs in the end analysis.

Mr. Dan McTeague: Would the introduction of foreign airlines be correct?

The Vice-Chair (Mr. Walt Lastewka): Sorry, Mr. McTeague, I must go to Mr. Rajotte for one last question.

Mr. James Rajotte (Edmonton Southwest, Canadian Alliance): Thank you, Mr. Beddoe. I have a question certainly related to the Competition Act, but a little outside it. Would WestJet and would the industry itself be helped if we did lower or eliminate the foreign ownership restrictions, if we did allow cabotage? Would this prevent, in your particular case, Air Canada from cross-subsidizing Air Tango? Would it help WestJet and would it help the industry as a whole, in your view?

Mr. Clive Beddoe: No. In fact, I would suggest that the contrary is true.

First of all, if you had asked that question before September 11, you might have attracted some interest into Canada.

If you look at what's happened since September 11, there's no carrier in the United States that would have any interest at all, in my view, in pursuing cabotage in Canada.

You have to understand, first of all, that fuel in the United States is two-thirds of the cost of fuel in Canada. So a Canadian carrier is going to be operating at a significant detriment against a U.S. carrier. If you allow a U.S. carrier to come into Canada, all they will do is pick off the primary routes—probably Calgary-Toronto, probably Toronto-Vancouver, perhaps Toronto-Halifax—fly those routes, take the cream right off the top, and actually jeopardize the existing carriers even more.

I would say that cabotage would be the worst thing that possibly could be done for the Canadian industry, particularly because they would be able to come into Canada, load up with fuel in the United States at two-thirds of our cost, fly across Canada, and offer fares a little lower—certainly better for the consumer in the short run—and then exit and go and refill in the States.

So the idea of cabotage working for the benefit of Canadians—absolutely not, it would be detrimental. It's not going to bring competition to Kelowna or Abbotsford or Chilliwack or Cranbrook.

The Vice-Chair (Mr. Walt Lastewka): Mr. Beddoe, I want to really thank you, on behalf of the industry committee, for being very straightforward and right to the point in answering the many questions.

We're going to take a 30-second break and then we'll resume.

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The Vice-Chair (Mr. Walt Lastewka): We'll resume, with the pleasure of the Commissioner of Competition from the Competition Bureau, Mr. Konrad von Finckenstein. He's going to start off with eight to ten minutes of preamble, and then we'll get right into the questions.

Mr. von Finckenstein, please begin.

Mr. Konrad von Finckenstein (Commissioner of Competition, Competition Bureau, Department of Industry): Thank you for inviting me to come again to talk to you about Bill C-23.

We have followed your proceedings with great interest and have listened to the comments. You've obviously done a phenomenal amount of work and you are now well-informed about the issues. It would appear to us that there's a consensus contained in Bill C-23, and we are very much encouraged by the broad support the bill has received.

However, the comments from witnesses that you've heard suggest there may be some small changes needed, where appropriate. I propose to run through those and give you our view on those.

First of all, on deceptive notices, the proposed amendments concerning these were first put forward by Ms. Torsney, and they can be clarified by a technical change to ensure that legitimate contest promoters conducting a draw are not captured by the provision.

Let me draw your attention to proposed section 53 on page 22. That proposed section prohibits the sending of a notice that:

gives the general impression that the recipient has won, will win, or will on meeting a condition win, a prize or other benefit,

Some concern has been expressed that the phrase “will on meeting a condition win” could capture standard legitimate contests such as those that essentially say “You have won on condition that your name is drawn.” Replacing the phrase, “will on meeting a condition win” at line 10 with the phrase “will on doing a particular act win” eliminates such a possibility.

As you may recall, both Mr. Musgrove and Mr. Woolford supported this change and indicated it satisfied their concern.

The bureau would also propose qualifying the term “notice or document” in line 8 with the phrase “in any form”, to ensure that the provision addresses all the forms of deceptive prize notices.

Those two small changes, in our view, should be made to the deceptive notice provision.

[Translation]

International cooperation: evidence gathering in civil competition matters.

Secondly, concerns have been raised in discussions involving the provisions in Bill C-23 relating to:

(a) the absence of specific protection provided under section 29 of the Competition Act for information provided voluntarily;

(b) the possibility that information in the Competition Bureau's possession, at the time it received the request for evidence, could be provided to a foreign competition authority without going through the formal, judicial authorization process outlined in Part III of Bill C-23.

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On the first point, it has always been the Competition Bureau's practice, set out in our information bulletin, not to provide foreign authorities any confidential information that was given to the Bureau voluntarily, save for the exceptions outlined in section 29.

However, even though we do not think any changes to section 29 are required, the Bar, the Business Council on National Issues and many other stakeholders have clearly indicated that they want assurances that this practice would be continued. Accordingly, to reinforce our practice, the Bureau would propose adding to section 29 of the Competition Act which concerns the treatment of confidential information and specifies the type of information to which the section applies, the phrase: “(e) any information provided voluntarily pursuant to the Act.”

Since there are occasions when the parties providing information voluntarily have no objection to that information being provided or discussed with foreign authorities—for example, complainants who are victims of international scams—the Bureau also proposes adding to sub-section 29(2), which currently reads: “This section does not apply in respect of any information that has been made public” the words “or any information the communication of which was authorized by the person who provided the information”.

[English]

With respect to the second point, involving information already in the possession of the bureau at the time it received a request for evidence from a foreign authority, it is our view that the proposed provision of Bill C-23 implicitly requires that this information could only be provided under the judicial authorization process set out in that new part III.

However, out of an abundance of caution, the bureau would suggest making it explicit. It would propose adding a new proposed subsection to part III, after proposed section 30.29 on page 20.

This would read:

For greater certainty, any evidence requested by a foreign state under an agreement may be obtained for the purposes of giving effect to the request only in accordance with the agreement and the procedure set out in this Part, even in the case of records or other things already in the possession of the Commissioner.

These two changes should address the concerns raised by the witnesses. You'd also put in a proposed subsection (2) there, clearly providing that:

This section does not apply in respect of any information that has been made public or any information the communication of which was authorized by the person who provided the information.

With these two changes, I think the issue of concerns raised against the international gathering of evidence would have been addressed.

On interim orders,

[Translation]

a number of witnesses spoke on the subject of the proposed new interim order authority, section 103.1.

One of the concerns raised was the possibility that an interim order could be sought without the Commissioner having reason to believe that grounds for an order by the Tribunal existed. This is the standard for the Commissioner to initiate an inquiry under section 10(1)(b) of the Competition Act, and section 103.1 requires that the Commissioner certifies that an inquiry is being made under section 10. It is however, also possible for an inquiry to be initiated under section 10 if requested by six residents of Canada or the Minister. It was not our intent to be able to ask for an internal order in those circumstances and the Bureau would propose to make this clear by simply changing the phrase “section 10” in section 103.1, on line 20, page 27, to “paragraph 10(1)(b)”.

Concern has also been expressed that section 103.1 does not specifically require it to find that the relevant conduct is of the type described in sub-section 103.1(1), such as refusal to deal, market restriction and abuse of dominance.

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While the Bureau views this as an implicit requirement, it would suggest making it explicit by adding to line 27 on page 27: “order if it finds that the conduct or measures could be of the type described in paragraphs (1)(a) and (b) respectively, and that, in the absence of an...”.

[English]

Those amendments will make the interim order process absolutely clear and will remove any concerns expressed about interim orders.

On consent agreements, concern has also been expressed that proposed subsection 105(2), dealing with the possible terms of a consent agreement between the commissioner and a person against whom an order from the tribunal has or might be sought is too broad.

We do not agree with this view. Our intent was to provide a provision that would allow us to address competition concerns in a flexible manner. Nevertheless, because of the concerns that were raised, the bureau proposes changing proposed subsection 105(2) on page 29 so that it only reads:

The consent agreement shall be based on terms that could be the subject of an order of the Tribunal against that person.

In other words, the rest of the proposed subsection, “and may include other terms, whether or not they could be imposed by the Tribunal” should be taken out.

In order to make the latter change meaningful, the bureau would also suggest changes to proposed section 106, which would make it possible for a third party directly affected by a consent agreement to apply to the tribunal for a change to an agreement, on the grounds that the relevant terms could not have been subject to an order by the tribunal.

This could be done by adding the following to proposed section 106 after line 27 on page 30:

(2) A person directly affected by a consent agreement, other than a party to that agreement, may apply to the Tribunal within 60 days after the registration of the agreement to have one or more of its terms rescinded or varied. The Tribunal may grant the application if it finds that the person has established that the terms could not be the subject of an order of the Tribunal.

This, in my view, would make the consent provisions more streamlined and would eliminate the objection raised before you.

The one issue that remains is private access to the tribunal. As the minister stated, major changes to framework law, such as the Competition Act, require broad support. The bureau continues to believe that some form of private access is necessary in order to round out enforcement of the Competition Act. But whether this is the appropriate time is something the committee must consider.

Should there be a decision to proceed with private access, we would suggest that the amendment proposed by Mr. McTeague would need to be slightly redrafted. While we at the bureau agree with the principles set out in Mr. McTeague's motion, they may need to be redrafted so as to work more harmoniously with the rest of the act.

In conclusion, I would like to thank the committee for this final opportunity to discuss Bill C-23. With the changes we have proposed, as a result of your hearings, we are convinced the Competition Act will be significantly strengthened and improved.

I will be pleased to answer any questions you have.

The Vice-Chair (Mr. Walt Lastewka): Thank you, Mr. von Finckenstein.

Mr. Rajotte, I will start with you and give you around seven or eight minutes.

Mr. James Rajotte: Thank you, Mr. Chairman, and thank you very much, Commissioner, for appearing here today.

Just going through your brief here, it seems on first glance there are some very helpful substantive amendments, so I certainly want to thank you for that.

I notice, though, just doing a quick overview, you spend about eight pages on deceptive notices, international cooperation for evidence gathering, interim orders, and consent agreements. You offer some very substantive amendments, which I thank you for. But I think it's fair to say that the biggest controversial issue this committee has faced, in discussing Bill C-23, is private access. You have about half a page here, and then you mention Mr. McTeague's amendment.

I guess I'd like to indulge you and ask you, based on your experience, to maybe talk about that a little more and guide the committee in its deliberations.

On my first question, you say changes to the Competition Act, particularly in private access, will require broad support, but we all know there is a difference of opinion on this—that's the reality. So we either have to go ahead or we don't.

What would you consider to be broad support? If the reality is that a lot of large businesses oppose this, does that stop us from going ahead or not?

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Mr. Konrad von Finckenstein: Obviously not. It's your responsibility as legislators to decide what's in the best interest of the country. That's your job and you do that on the basis of hearings. Obviously you want to have the broadest support for any changes you make, especially framework law changes.

These hearings have been extensive. You've heard from them. There are some people who feel very strongly about private access, both for and against. I guess it's your job to evaluate which are the better-founded arguments and what the consequences of private access to the tribunal will be in the long run. Will they be as negative as people suggest? Will they be as positive? On balance, will they be more positive than negative, or not?

I put my cards on the table quite clearly when I appeared here last time. We feel that changes along the principles of Mr. McTeague's amendments would round out the act. They would deal with essentially private issues that are not of public concern. In our view, they would not produce the negative effect some of the critics have suggested. They would provide an adequate relief for some private parties who feel the Competition Bureau does not address their concerns. But the final judgment is up to you, not me.

Mr. James Rajotte: Thank you for that answer.

Maybe I'm taking Mr. McTeague's fire here, but in terms of his specific amendments, would you feel comfortable highlighting how it would be best to amend Bill C-23?

Mr. Konrad von Finckenstein: Mr. McTeague's amendments are based on what was before the Public Policy Forum, which in turn were based on the position originally advanced by the bill. They suggest that only with regard to sections 75 and 77 would there be access to the tribunal, and it would be limited.

So you'd have to first of all get leave of the tribunal to make sure it was not a vexatious case. You could only get injunctive relief, not damages, so there would be no incentive for strategic litigation. The court would have the power to award costs against a litigant if it should prove this was vexatious litigation or litigation meant to hinder or delay.

The principles of Mr. McTeague's draft basically reflect what was part of the consultations before the Public Policy Forum, which the bureau believes would be useful to round out the act.

As I mentioned in my opening remarks, there are a couple of minor drafting changes that would be needed in order to make it work more harmoniously. But in substance, what's there is exactly what we put out for consultation before the Public Policy FORUM. It's something we would endorse.

Mr. James Rajotte: Thank you again for that clear answer.

Just to switch a little bit, we have Clive Beddoe here, so maybe I can get you to address one of the points he made that the Competition Act, in his view, does not work that well, specifically on predatory pricing.

I want to give you an opportunity to respond to that, first of all, and see whether you think there is a way for the act to work better on predatory pricing.

Mr. Konrad von Finckenstein: Mr. Beddoe was kind enough to send me a copy of his comments about half an hour before I appeared, so I had a quick look at them.

A fully allocated cost test, which he suggests, may in the end be something one should be doing. We have not opted for that. As you know, the legislation talks about an avoidable cost test. We have that issue before the courts right now; we are litigating it very fiercely with Air Canada. Until we have a decision on it, I don't think one should change the test. It may work. If it doesn't work and proves to be too difficult to apply, one might want to look at Mr. Beddoe's suggestion.

Penalties and accountability are big issues. You must have heard from the various witnesses before you how the damages in the U.S., especially the triple damages, have distorted the picture and have led to a lot of strategic litigation.

We have in Canada, so far, not opted for any kind of damages, except in misleading advertising, where we have administrative monetary penalties instead of damages. You can get damages only if there has been a criminal breach of the act.

The issue is clearly one that needs to be addressed. The question is, do you want to go for damages, penalties, or restitution? All of them have pros and cons. It's something that needs to be addressed, and we will want to look at it in the next round of amendments.

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I believe when I appeared before you the first time in October I mentioned that this would perhaps be something for the next round.

I also understand that you want to hold some round tables in future months, and this may very well be a subject of one of those round tables. But it's something that I think has a very long-run effect on the whole act and on the economy. It's something one wants to think through and be sure one does the right thing. It's not something you want to do on the fly at the eleventh hour now.

On fighting brands, well, the provisions are there in the act. They have been used.... Mr. Beddoe suggests that the issue of irreparable harm is difficult, that nobody wants to admit that because it will become a self-fulfilling prophecy. That's true; I don't argue with that. On the other hand, let's face it, we have a free economy. People are entitled to compete as they want, and if they want to establish new brands, I don't think it's the role of the state to prohibit it unless you can establish that the brand is there only for one purpose, to drive your competitor out of business. That's what it does right now.

So, in my view, those provisions would do the trick as they are right now. If you take out the concept of irreparable harm, the question is, what harm do you have to prove? Otherwise just establishing another fighting brand by itself, if it doesn't cause any harm, should not be subject to the Competition Act.

In the fourth point he makes, which is to extend the cease and desist powers, I think he has put his finger on something. In the case where he is actually one of the victims of what we alleged is abuse of dominance by Air Canada, we issued a cease and desist order, which was in force for 80 days. However, during that time, we did not get all the documents. I believe we issued it in late October, and it ran until the end of the year, and then we started our action before the tribunal in February.

There was no provision under the law to extend it. On the other hand, these documents are very difficult to find. Whether by design or whether they are difficult to gather and locate, I make no judgment on it; the fact was, we didn't get all the documents from Air Canada until late January, before we started the action in February.

Amending subsection 104(1) and its companion, section 103 in Bill C-23 so as to provide the possibility to extend those orders until such time as all the documentation has been furnished and, I would say, at a period beyond this for us to come to a decision—let's say 20 days—is actually something that would be very useful. It's a technical amendment that I haven't drafted; we could draft it, obviously. But I think he has an idea that you might want to pick up, if you want to do something to make those cease and desist provisions work better.

The Vice-Chair (Mr. Walt Lastewka): Thank you, Mr. Rajotte.

Mr. Bagnell.

Mr. Larry Bagnell: Thank you.

I think Mr. Rajotte, Mr. McTeague, and I all have the same questions, so I'm going to have to figure a different way to ask them. But before I do, I want to make one statement. I'm not sure anyone else agrees with me, but on the contest, I always felt that there should be a provision that it's impossible for it to cost more to claim the prize than the prize is worth, even with your own free will, because a lot of old people are affected by these.

Going back to the private access, which I think most people said is the key to this, there are only six lines in your paper here. I know you've sort of agreed to the concept, and it's not the yes or no, but in your paper, when you answered Mr. Rajotte's question, the spin is on the time. You've put “whether this is the appropriate time”.

In relation to timing, apparently Australia has had this for 30 years. It seems to work. I think one of the academics who was in here last time said, “Don't let anyone fool you. This is an issue that has been going on for 30 years; this isn't a brand-new thing.”

So when you're suggesting “an appropriate time”, that means there might be another more appropriate time. What would make another time more appropriate? What would make this time not appropriate, and what in a future time would reduce the...? I think less than a majority of submissions we have are against that.

Mr. Konrad von Finckenstein: On private access, you don't have full consensus or near consensus, or something like that. The question is, how much support do you feel is necessary in order to make those changes?

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As legislators, presumably this is a decision you make quite often. You have to judge, is the support broad enough for something to do it, or is it something that is so vital and so necessary for the national interests that you'll do it regardless of whether there's broad support? That's what I was referring to. That is the key decision, and it is really your decision. I have nothing to add to it. It's a judgment call that you have to make as elected officials.

Mr. Larry Bagnell: So by suggesting “at an appropriate time”, in terms of the interveners we had who were against it, is there anything that makes you think that in time they would change their mind, they would change their view?

Mr. Konrad von Finckenstein: No. I believe you heard yesterday from Mr. Rowley, for instance. He has been against this, and the group has, from day one. I've met with them several times. I believe they even gave you a costing study yesterday, something we hadn't seen before. Also, I have encouraged him for over a year now to conduct such a study. It was presented to you in printed format, yet we did not see it until yesterday. Nonetheless, the arguments therein are not convincing and there's nothing new.

Actually, I had an analysis done of his study by a professor, Peter Townley, who's a resident fellow with the bureau from the University of Dalhousie. He's in the audience, and if you want me to, I can call him to the stand and he can give you an analysis of the costing report. But as to will there be a change or not, I can't say.

Mr. Larry Bagnell: Mr. Chair, can we have him come forward and explain that?

The Vice-Chair (Mr. Walt Lastewka): Go for your next question and then we'll see.

Mr. Larry Bagnell: I'll go to my last question.

You referred to the amendments related to Mr. McTeague, and Mr. Rajotte asked about them, and you said there were just a couple of minor amendments. Is there any chance you could use the rest of my time to give us those minor amendments? We have to do a bill and it's not in your written submission.

Mr. Konrad von Finckenstein: You're not doing clause-by-clause yet. As I say, we're talking, really, about drafting refinements.

Mr. Larry Bagnell: So before we do clause-by-clause, you could give us a suggestion?

Mr. Konrad von Finckenstein: If that's what you desire, yes.

The Vice-Chair (Mr. Walt Lastewka): Does the committee request we hear Mr. Townley?

Mr. Dan McTeague: I would ask, Mr. Chairman, with the committee's consent, that we ask Mr. Townley to come forward. It's extremely important. That is, with the consent, of course, of my colleagues here.

The Vice-Chair (Mr. Walt Lastewka): Does everybody agree?

Some hon. members: Agreed.

The Vice-Chair (Mr. Walt Lastewka): Mr. Townley.

Mr. Dan McTeague: Thank you, Mr. Chairman.

Mr. Konrad von Finckenstein: Professor Peter Townley from the University of Dalhousie. He's presently—

The Vice-Chair (Mr. Walt Lastewka): Mr. Bagnell, you still have a minute if you wish. Do you want to carry on?

Mr. Larry Bagnell: No. It would be great to listen to the witness.

The Vice-Chair (Mr. Walt Lastewka): Professor Townley, did you want to make some remarks first?

Prof. Peter Townley (Economics Professor, Acadia University): Yes, sir, I could say some things.

The Vice-Chair (Mr. Walt Lastewka): Fine.

Prof. Peter Townley: The commissioner has it a little bit wrong; I'm from Acadia University. But all those Nova Scotian universities are alike.

The Vice-Chair (Mr. Walt Lastewka): He'll pay for that.

Welcome from Acadia.

Prof. Peter Townley: Thank you, sir.

I've had 24 hours with the question, should reviewable practices be turned into competition torts? And I do have some observations that will be short, but not necessarily sweet.

There's one number that drives a lot of the results in that report, and you'll find it on page 13 of the executive summary or page 138 of the report proper, and that is the average annual number of civil branch complaints. That's given as 537. With that number, you turn around and say, based on that number, how many of these do we expect to go to private access? What proportion of those would be non-meritorious? And from that number, what would the costs to the Canadian society be of having private access? So it's 537. Unfortunately, that 537 number is based on all civil actions brought to the bureau, and not just those regarding refusal to deal, exclusive dealing, and tied selling. So it overstates things.

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When you go to the tribunal's website, and go from 1986 up to the present and see the proportion of cases dealt with by the tribunal that are refusal to deal, exclusive dealing, and tied selling, it works out to about 20%. Therefore, you might want to say that the 537 is overstated by a factor of five. So we're down to 107 cases. Then the analysts do a little sensitivity analysis. They say what if 5%, 10% or 20% of these are non-meritorious? It's 5%, 10% or 20% of 107, which is a fairly low number.

The second issue is that there is the allegation that most of the cases that would go to the tribunal via the private access route would be non-meritorious. I'll use that to mean strategic as well. I certainly have some thoughts on that. In fact, we just have to ask the question, would meritorious cases go the private access route? I would assume that time to resolution is important for firms. They want it done quickly. I put it to you that perhaps the one step through the tribunal, via private access, might be quicker than the Competition Tribunal two-step. If you want speed, I would expect meritorious cases to go to private access, at least some of them.

If you have a strategic case and you want to slow things down, I suppose you might argue that we'll go through the bureau and then go through the tribunal. I'm not so sure about that because if you do go to the bureau, there's the chance that your case will be seen as being non-meritorious, as strategic, and that may make any further action a bit more difficult.

Again, on whether meritorious cases will be brought via private access, we're worried about strategic litigation. I think the view we get of strategic litigation is that big firms—big firms that can afford big legal costs—will take small firms through private access. That may be, except I don't think it works in this case. I want you to think of that in the context of refusal to deal.

So we'd have a big firm taking a small firm to the tribunal for refusal to deal. That would be something like a Bill Gates taking a small software company to the tribunal because the small software company won't sell Bill Gates, or license Bill Gates, to use its software. My impression is that the small software company would love to have Bill Gates and Microsoft do this. It's the same with small automobile parts makers and GM. I don't see that this makes sense. The circumstances in which large firms would bring non-meritorious actions against small firms I find difficult to imagine.

Back to the numbers. I started at 537 and I think we were talking about maybe 20% of those. But there's another factor. If we look at the data, about three-quarters of the cases brought to the bureau are deemed to be anti-competitive and are settled. There is some sort of settlement. I think we could infer that, yes, these were meritorious cases; there was a legitimate complaint since we went to settlement. This leaves, at most, 25% of those cases not being meritorious. If we have firms bringing meritorious cases, or having an incentive to bring meritorious cases through private access, what if we're talking about 50-50 going to the tribunal? There's only 25%, and half of 25% we'll call 13%. So I start from 537, I reduce that and multiply it by 20%, then multiply it again by 13%, and I'm down to about 14 or 15 cases.

So I think something is overstated here, slightly. In Nova Scotia, we have small fish and we have big fish.

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I wouldn't be an economist if I didn't talk incentives. I've mentioned the lack of incentives for big firms to bring small firms to the bureau, but this report talks about the propensity to have non-meritorious cases brought. They concede on page 164 that only if damages were allowed would Canada develop a U.S. style of litigation. It's so obvious, there are blatant differences between American and Canadian legal systems.

Treble damages—that's a good incentive to perhaps take on strategic cases. We don't have that, but my understanding is that the bill does not even have damages. The authors say that if there are damages, then you might get it. There aren't any.

I haven't thought this through, but I can see a role for how legal fees are paid on a contingency basis or not. I think these things affect the incentives.

Another matter brought up is whether this will induce chilling. I'll be a true professor for you and relate my confusion, because on page 64 I'm given reason to think there are all sorts of alternatives to private redress. On page 64, the report states:

Thus a wide variety of common law torts may be available to a party which has been injured by the actions of another marketplace participant irrespective of whether the conduct is subject to challenge under the Competition Act.

I read that as saying there are lots of ways to proceed, strategically or anything else. But a hundred pages later on page 164, it says:

Even if damages are left out of the regime, plaintiffs would undoubtedly also attempt to use the establishment of private rights of action under the Competition Act to overturn the well-settled law that reviewable practices do not provide the legal violation needed to invoke common law torts such as conspiracy to injure, interference with economic interests or restraint of trade. This [private access] would likely increase the frequency and breadth of common law tort litigation.

That says to me that these other potential venues for redress lack force; they are not really there. I'd ask the question, are these other legal torts available or not? If they are available, have we observed them being used in some strategic way? I haven't observed it but maybe someone else has.

If these other venues are not available, this means that currently there is no effective recourse. Perhaps private access is needed to correct this lack. A little chilling might be warranted.

One last matter is on the use of data, and I'm afraid I can't be fair to the issue. The people who prepared this report used the data they had available. I understand that. There's a problem here, though. If you use Canadian data, you're using data on cases that the bureau has decided to proceed with. The bureau has certain priorities about which cases have gone forward. A very basic problem is that the data comes from a regime with no private access and you're trying to extrapolate and say, what if there is private access? I think you have to be careful.

On the American side, could you do it there? Yes, they have private access, but you'd also want to correct for the business of potential treble damages, the whole legal system. I really don't mean that as a strong criticism of what people try to do. I just think with the data, you have to be very careful to draw inferences from it.

Mr. Konrad von Finckenstein: I'd like to comment on this last point by Professor Townley. Even if private access is there, the bureau doesn't stop bringing cases, and all the data that was used for the study is based on the cases we brought, which were all of national scope, the most difficult and the most expensive ones to litigate. Private access, if it should be granted, would of course be used most likely by small firms in local or regional markets; the size of those cases might make them smaller and easier to prove, and therefore not so costly.

• 1700

The Vice-Chair (Mr. Walt Lastewka): Thank you very much.

I want to ask the help of the committee. We're going to have five minutes for everybody. I want everybody to have some time for questions. We're going to go just beyond our time limit by a bit, but I want to make sure everybody gets a good five minutes, so keep your preamble short and go right to your questions.

Mr. Bergeron.

[Translation]

Mr. Stéphane Bergeron: Thank you, Mr. Chairman.

I would like to come back to the issue of private access. I believe we've had some extremely interesting discussions about this. Yesterday, when we met with Mr. Fels, the chairman of the Competition Commission of Australia, I mentioned that, among the reservations expressed and the arguments used to oppose introduction of private access in Canada, there was the idea that it would increase frivolous and vexatious actions, at a very high cost, which would probably create bottlenecks in the system. What they have in Australia is a system where all the legal costs have to be paid by the loser.

Do you not believe that, were we to implement a similar system in Canada, this might discourage some small- and medium-sized companies from using the courts to sue major companies on the basis of the Competition Act?

Mr. Konrad von Finckenstein: As you know, the present provisions of the Act allow the Tribunal to provide for costs in cases of frivolous or vexatious matters. If we adopted the Australian system, this might discourage small- and medium-sized companies because, of course, they would not win in all cases. However, in cases of abuse or refusal to deal, we would want to give them a chance. It is not a matter of giving them an advantage but only to give them the chance to be heard objectively. If their case is not frivolous or vexatious, I don't see why they should be penalized.

After all, the Tribunal in Mr. McTeague's proposal would make an initial determination to see if the case should proceed or not, that is to say if there is a prima facie case. This screening, I believe, will get rid of most of the frivolous cases.

Mr. Stéphane Bergeron: But, if the tribunal decides on a prima facie basis that the case is not frivolous or vexatious and that it can go to trial, and if the small company that put the case to trial loses, in the Australian system, were we to apply it here, it would still have to pay the costs. So, if we wanted to introduce a similar system of private access, do you think we should force the loser to pay all the legal costs or would the State cover part of the costs?

Mr. Konrad Von Finckenstein: I believe Mr. McTeague's proposal provides a fair balance between the various points of view. Since my legal counsel is here, he might answer my question.

• 1705

Mr. François-Bernard Côté (General Counsel, Competition Legislation Section, Department of Industry): I would like to explain this better than you did.

Of course, if you established an absolute rule, you would discourage those that you would in fact want to encourage. What is suggested in the bill is a provision that allows the Tribunal to allocate the costs to the losing party when cases are frivolous, useless, inappropriate or abusive. If we were to decide that the loser would always pay the costs, this would be a disincentive for small and medium companies, as the Commissioner suggested. As a matter of fact, it does not exist at the present time. In all other tribunals, but not the Competition Tribunal, the court has the discretion to make a determination on costs.

[English]

The Vice-Chair (Mr. Walt Lastewka): Thank you, Mr. Bergeron.

Mr. McTeague.

Mr. Dan McTeague: Gentlemen, thank you for being here—and, Mr. Townley, thank you also.

As you can probably imagine, it was difficult for a committee to be caught flat-footed, as it was yesterday when that one group presented its document, a document that has a number of very interesting people behind it. This is one of the reasons, of course, we are concerned as a group here, because such a small step has engendered such huge opposition, strategically, from a very, very limited group of individuals.

What you've just given us is a point-by-point refutation of that document from Deloitte & Touche. We have heard from others, and I must say, with the help of many of the members on the committee, we've pretty well been able to fend off the rather frivolous and vexatious comments made by those opposed to this limited private right of access proposal, basically because none of them addressed the safeguards. They refused to touch on the safeguards.

To the commissioner and to your lawyer, you have both heard some of those arguments, in particular those from the Canadian Chamber of Commerce, the Canadian Real Estate Association, and the one that was recycled from the Canadian Chamber of Commerce—I'm trying to think of the name—the CCIB. Has there been anything in the arguments you have heard, in their effectiveness and accuracy, to concern you that it would bring about the kind of chill we've heard so often?

Is there anything in those arguments you've heard that merit these concerns? Since you're going to be in part involved with this in one way or another, they may be a reflection on whether you're doing your jobs or not, but are you concerned with any of this? Or are you, like many on the committee, satisfied that this very limited but very strategic proposal meets the test of ensuring a Competition Act that changes with changing times?

Mr. Konrad von Finckenstein: You know this chill argument cuts both ways. The purpose of the Competition Act is to be a framework law, to make sure we have a well-functioning marketplace where things are transparent and people have an ability to prosper. And we have a market where, if you enter into it, you can be subject to anti-competitive behaviour without any recourse; this has a chilling effect too. You may think twice whether you want to invest in this country or start a business if one of the key factors is to get supply from some company that can refuse to supply you and therefore prevents you getting off the ground.

In terms of the arguments we've heard, the way this proposal is phrased, it only deals with sections 75 and 77; it's not opening the floodgates by bringing in 79, which is abuse of dominance, refusal to deal, exclusivity, and tied selling, and a fourth one, which I always forget.

A witness: Market restriction.

Mr. Konrad von Finckenstein: Market restriction. Thank you.

Those are really issues primarily of private dispute between companies. Then on top of it you have the leave of the tribunal, and this tribunal is not likely to give the leave if there's any suspicion of a case not being meritorious. Last, there are no damages; therefore I can see no incentive for bringing these cases.

As Professor Townley pointed out so rightly, the abuse of these provisions by large-scale competitors trying to hurt each other or trying to drive smaller ones out of business really can't work. I need to use his example that Bill Gates doesn't buy from a small software company, or if he does, he certainly will be supplied; no one is going to refuse to supply him. I have not heard anything to suggest this proposal would have the detrimental effects its critics have suggested.

• 1710

Mr. Dan McTeague: Commissioner, there may be some on this committee who are tempted to ignore the fact that this has been kicked around for 30 years and that our Commonwealth cousin, Australia—an example we have used to bounce a lot of ideas off—has been doing this without much reservation for much of that time. There may be some on this committee—and I don't presume to preclude what their thinking will be in a day or so—who say maybe we should study this for another 30 years.

We've heard from people who have said enough is enough. From your experienced perspective, and from that of those who are at this table, is there any advantage to us continuing to exhaust this question? We may be whipping the proverbial dead horse here. But is there any reason you believe we should keep trying to find more people who recycle themselves under different names to come forward and say why they don't like it, or is it time to fish or cut bait, to use Professor Townley's his analogy?

Mr. Konrad von Finckenstein: Well, this question is certainly well studied. As you know, we have done three major studies, which are all on our website. One of them is an international comparison with jurisdictions that have private access.

If you'd heard from my colleague, Professor Fels, he would have told you that in Australia not only do you have private access, but you also have damages. And it isn't restricted to those four sections; it's across the board, and the sky hasn't fallen in in Australia yet.

I don't know whether any more time or more studies are required. What is required is a decision to see whether what is proposed here works. Should it be broader, should it be narrower, and should it be implemented or not? Further studies won't give you any more elucidation. You have all the facts before you.

The Vice-Chair (Mr. Walt Lastewka): Thank you, Commissioner.

Mr. Martin, you're next.

Mr. Pat Martin (Winnipeg Centre, NDP): Thank you very much, and thank you for the representations made.

I have one question. Yesterday one of the groups presenting a brief was the Association of Canadian Travel Agents. I presume you have a copy of their brief. They put forward a technical amendment I'd like your opinion on. It's dealing with sections 78 and 79, the abuse of dominance. You may have the language there and I don't, but as I remember it, the burden is that persons filing complaints would have to demonstrate that those accused of the abuse of dominance are acting for the purposes of dominating, with an intent to dominate.

Proving intentions was felt to be difficult, so if an amendment was made to make it about proving that a party acted in a way that would have the likely effect of showing dominance, this would be an easier thing to do. Perhaps you could comment on this.

Mr. Konrad von Finckenstein: Yes, my general counsel can tell you best. There's case law to the effect of what “for the purpose” means, and it actually doesn't mean you have to prove intention.

Francois, do you want to explain?

Mr. Francois-Bernard Côté: Yes, the way to prove the purpose is to prove the facts, and the purpose flows from the facts. Whether the test is for the purpose or intended to or designed to or destined to...finding the right word might be more difficult than actually doing the case.

If you come up with facts leading to the conclusion that there's only one explanation, that it was done “for the purpose of”.... All of section 78 is built around doing something “for the purpose of” having an anti-competitive effect on your competitor.

• 1715

So I don't know what the change would bring about. You would still have to rely on facts, from which you might have to deduce what the purpose or intent or design was. I guess it would be to find the right word to describe what they really want to do, but they all come down to the same issue: do the facts show they were made for an anti-competitive purpose?

Mr. Konrad von Finckenstein: You infer the purpose from the facts. If you said “has the effect of”, it's the same thing: you'd have the facts and draw inference from them. So I really think it's a semantic difference rather than a conceptual difference.

Mr. Pat Martin: The way they explained it was it stems from the point in law that a person can be presumed to have intended the probable consequences of his or her actions. Maybe that exists already in the current act.

Okay, if I have a moment left—

The Vice-Chair (Mr. Walt Lastewka): Hurry up.

Mr. Pat Martin: —Professor Townley, the numbers and the stats you put forward are interesting. I was wondering if you can take that line any further.

You started with 537 civil branch complaints, of which 107 were dealing with tied selling or refusal to deal. How many of those 107 were actually settled, maybe by mediation, how many were withdrawn, and how many, ultimately, went all the way and were ruled on? And of those, do you know how many succeeded and how many failed? If you take the 107 all the way to finished products that went all the way through the system and were ruled on by the—

Mr. Konrad von Finckenstein: Before he answers, a “finished product”, if we settle through an alternate case resolution, it means the company has changed its behaviour as a result of our action. We see that as a finished product too. You don't have to go—

Mr. Pat Martin: Right, I agree.

Mr. Konrad von Finckenstein: Okay, Professor Townley.

Prof. Peter Townley: What the numbers were concerned with was what number of cases would go to private access that were deemed non-meritorious. And just working it all the way through and—

Mr. Pat Martin: Work, but who would tell us how many were deemed non-meritorious and might give us an indication—

Prof. Peter Townley: They're looking for an expectation. The figure I gave was, of the civil cases brought, three-quarters ended up in some sort of settlement. In a sense we're assuming they must have been meritorious, since there was a basis for settlement. We're saying there's a maximum of 25% of the cases that were brought to the bureau that could have been non-meritorious. From then on we're basically trying to get at how many non-meritorious cases would be brought through private access. At that point you're into a guesstimate. We said there are incentives to bring meritorious cases. So, of the whole, we're down to about 14 or 15 cases. It's a long road.

Mr. Pat Martin: Okay. That's where you come to.

[Translation]

The Vice-Chair (Mr. Walt Lastewka): Mr. Drouin.

Mr. Claude Drouin (Beauce, Lib.): Thank you, Mr. Chairman. I want to thank you also, Mr. Commissioner, for your testimony this afternoon.

You've already answered part of the question I wanted to ask, Mr. von Finckenstein, but I would like to go into it in more detail.

Referring to private access in Australia, you stated that it might be a disincentive for small companies. Considering yesterday's testimonies, it seems that this system has been in existence in Australia for 30 years. If it is true that we have some problems in our Competition Tribunal and that there is a backlog in the Bureau of the Commissioner, would that not be part of the solution? We would not have to deal with frivolous requests since those companies that might be tempted to put a frivolous complaint would know that they would risk having to pay the costs and so they would not waste their time with frivolous issues. At the very least, this might get rid of some bottlenecks.

Secondly, as you mentioned, major corporations would not risk complaining about smaller corporations, even though there would always be the risk of strategic complaints from major corporations with deep pockets. If making such a change might be a disincentive for smaller companies, this might be an important issue. I don't know if you have thought about this but I would like to know your point of view.

The Vice-Chair (Mr. Walt Lastewka): François.

Mr. François-Bernard Côté: If you would allow me, Mr. Drouin, I will answer your question.

• 1720

Indeed, if I understood the Commissioner's position, implementing a private access provision in Canada would indeed get rid of the bottlenecks insofar as local or regional matters, rather than national matters, would find their way to the Tribunal.

Furthermore, as far as the risk of strategic complaints is concerned, this risk will always exist. Someone referred a while ago to common law provinces. In Quebec, as you know, one may lay a complaint about tort actions but you do not find more strategic complaints there than in the other provinces. So, the risk exists but we believe that the regime we have established would be sufficient to make sure that only proper cases go to the Tribunal.

Mr. Claude Drouin: In other words, it is worth taking the risk in order to protect the consumer.

Mr. François-Bernard Côté: I think the facts would allow for such a conclusion, but it is not up to me to make that conclusion.

Mr. Claude Drouin: Thank you.

[English]

The Vice-Chair (Mr. Walt Lastewka): Mr. Strahl.

Mr. Chuck Strahl: Thank you, Mr. Chair.

I thought maybe the next time we get a big thick thing like this at the last moment—a book like this—we'll just get the professor to give us a grade on it and then we'll all take it.... I'm afraid to get the grade on it, actually, but we'll leave it at that.

Mr. von Finckenstein, I have quite a few specific questions as we're kind of wrapping this whole thing up. Can we write to you or your officials over the next few days to get you to comment on some of the specifics, if we don't have time to get them out here today?

Mr. Konrad von Finckenstein: Absolutely.

Mr. Chuck Strahl: That's good, because we're getting to that nitty-gritty stage. I think, barring a real bombshell here, there's been an awful lot of chatter among committee members suggesting we're going to want to proceed with the private access issue. That means we're going to need to fine-tune that process if it's what the committee decides to do.

I'll deal with just a couple of things in the time we have then. One is, you're proposing an amendment on consent orders that would give a 60-day period to allow people, if they're affected, to ask that the order or the terms be varied.

Now, Mr. Addy in his testimony equated that to the Tunney Act, but he also suggested the Government of the U.S. gives an impact statement at the same time—I guess to allow people to decide whether they want to make representations. Is that important, do you think, or is it just a...?

Mr. Konrad von Finckenstein: The U.S. Tunney Act is based essentially on the public interest. That's not the amendment we are suggesting here. We are suggesting the consent decree, which would be something the commissioner agreed with the respondent. But it has to be something that is within the four corners of the tribunal's authority. It's something the tribunal could have done, but we can save ourselves the necessity of going through a trial if both parties agree, “Yes, this is a fair resolution.” We do it, we sign it, we register it, it becomes effective.

Now if it affects a third party and somebody gets sideswiped by it whom we didn't think of—unlikely, but it's this kind of...that third party should have in our view a right to have a term rescinded of right, if we did something the tribunal couldn't have done.

If the tribunal could have done the same thing, then the case is exactly what we have here: we have something that is within the power of the tribunal to do. Before we would agree to consent orders, we'd go through an exhaustive process of examination, of hearing witnesses, of listening to other parties, etc. We try to do what is in the public interest. There is actually jurisprudence to the effect that the commissioner is deemed to be acting in the public interest. So we don't really think you need to bring in the whole public interest.

What you want to have here is control. If there's something that's being done that is really outside the purview of the Competition Tribunal, then it shouldn't be done by consent decree either, because the whole idea is to substitute a consent decree for a full trial. But the outcome should be something that could have been ordered by the tribunal.

Mr. Chuck Strahl: Okay. On the right to private access, some people have suggested that if we proceed with some form of it—Mr. McTeague's amendments, or some form like it—the Competition Bureau, or your role even, is going to be bypassed, that there's going to be frivolous stuff. There's going to be stuff hitting the scenes without anybody having taken a first look at it to see if there's any validity to it whatsoever. And I believe there has been.

• 1725

Some people suggest we should actually require the commissioner—and maybe you can comment on this—to state your support or opposition to the allegations being made at the earliest stage. In other words, you get into it and say that in your opinion it's frivolous, or not detailed enough, or something. Do you think you should be mandated or be compelled to do that, or not?

Mr. Konrad von Finckenstein: No. I don't think so.

Our role is to investigate and bring forward a case where we feel the facts warrant it and there has been anti-competitive behaviour that should be stopped.

If you establish private access, the party has the option of coming to us and saying “I'm a victim of this anti-competitive behaviour, please investigate”, or, if they want, they can go forward. Obviously, coming to us is a lot cheaper. We will do it. Also we get at the evidence much easier than they do, because we have judicial powers. We can search and seize. We can order production of documents, etc.

On the other hand, it may be that we won't take the case because we don't feel the competitive impact is that large; it's not something that warrants it; or maybe, because of resource constraints, it's something that comes very low on our priority assessment. Or we may have a very honest difference of opinion and say it doesn't fall under the act, or the facts won't allow them to establish it.

Now, if you disagree, that's fine. You should have the option, in my view, to try it on your own. I shouldn't prejudice your case by giving a ruling on it. It seems to me it's your case. If you want to proceed with it, you do. If you want to avail yourself of the bureau, you come, and we'll tell you whether we think there's a case to go forward or not. But I don't think it's the role of the bureau, in any way, to pass judgment on your claim and to somehow prejudice or enhance your claim going forward on its own.

Mr. Chuck Strahl: So then basically what will happen, if we proceed with the right to private access, is that people who want to avail themselves of that will have to make that choice in the very initial stages. They'll have to say they'll give it to the commissioner and hopefully he'll take it to the tribunal, or not. Because once you start down a path with the bureau, or on your own, your right to private access is no longer there.

Mr. Konrad von Finckenstein: No, it's not an either/or position. You can do both.

Mr. Chuck Strahl: You can do both.

Mr. Konrad von Finckenstein: You may come to us and feel dissatisfied. You may feel we're doing a sloppy job. We're not doing it fast enough, etc. If you want to go on your own, be my guest.

Mr. Chuck Strahl: But they also would not have to come to you. They could just start it and take it on themselves?

Mr. Konrad von Finckenstein: Precisely.

Mr. Chuck Strahl: Okay, and you feel that's—

Mr. Konrad von Finckenstein: I would think the overwhelming majority of people would come to us, but it's a free country, and if they want to do it on their own, I don't see why they should be stopped.

Mr. Chuck Strahl: Of course, it's not a free country now, because they can't go out on their own.

Mr. Konrad von Finckenstein: That's the problem. But I'm going on your assumption that the private access has been established.

Mr. Chuck Strahl: Right. And so—

The Vice-Chair (Mr. Walt Lastewka): I think you'd better end your questioning at this point.

Mr. Chuck Strahl: I'll do that. Thank you.

The Vice-Chair (Mr. Walt Lastewka): In regard to your suggestion concerning questions to the commissioner, was it your intention also to circulate the answers to the committee, so everybody—

Mr. Chuck Strahl: Well, they're of interest to me. Whether they're of interest to the committee.... But they're not going to be very secretive.

The Vice-Chair (Mr. Walt Lastewka): There may be some questions and answers you might want to put together between now and next Friday.

Mr. Chuck Strahl: Okay.

Mr. Konrad von Finckenstein: I might suggest what we could do is answer Mr. Strahl with a copy to you as chairman.

The Vice-Chair (Mr. Walt Lastewka): You have one question on this side.

Mr. Dan McTeague: I would give Mr. Strahl a few of my five minutes, if you wish.

The Vice-Chair (Mr. Walt Lastewka): You have one minute.

Mr. Dan McTeague: I have one minute. Thirty seconds, Chuck?

Mr. Chuck Strahl: No, go ahead.

Mr. Dan McTeague: I'm convinced.

We've heard from witnesses, your predecessor, Mr. Wetston, and others, that there currently may be a number of anti-competitive occurrences that do not wind up on the broad public interest radar screen and are missed. We may be missing a few things here, and I think some of the comments that were made by the professor may corroborate the necessity of underlining the point.

Commissioner, you suggested at the outset, although it wasn't in the written brief, that you would like to ensure the amendments I've put forward with respect to private access be fashioned in a way that dovetails more harmoniously with the act. I'm paraphrasing, of course.

Could you give this committee a few of those ideas, or is it simply the wording you're concerned about? Obviously words mean a lot, but the themes are nevertheless intact. Are you proposing an overhaul, suggesting to the committee it put different wording there, or is it the structure? I think it would be helpful for the committee to know before it takes up the clause-by-clause. We may be off for a week, and I have no doubt there will be a lot of lobbying by certain groups telling us not to do this. We need that for precision reasons. Is there anything in there that we should know?

• 1730

Mr. Konrad von Finckenstein: I said should there be a decision to proceed with this private access, I believe the amendments proposed by you in principle are correct and workable.

There are some small drafting changes; we're talking about purely technical drafting so the interrelation between sections works harmoniously and cannot be misread. You'll appreciate when you draft, your first aim is to make sure it's clear and people understand it, but your second aim, which is just as important, is to make sure nobody can purposely misunderstand or misinterpret it, and that's what I'm talking about.

The fine-tuning is all I'm talking about.

Mr. Dan McTeague: Thank you.

The Vice-Chair (Mr. Walt Lastewka): Thank you.

Mr. Rajotte, it's your question. Please get right to the point.

Mr. James Rajotte: Thank you, Mr. Chairman.

Mr. von Finckenstein, one of the witnesses yesterday, one of the lawyers, talked about section 8 in the Competition Tribunal Act and the part about “frivolous” and “vexatious”, and in a response to me he argued we should not have that standard. He thought that standard was too high. He was a practising lawyer from Ontario. He felt they should just use normal cost tools as they do, for instance, in Ontario. I just wanted to get your feedback on that issue.

Mr. Konrad von Finckenstein: It's not just frivolous and vexatious. That's really a short form. If you look at page 32, proposed subsection 8.1(1), it's frivolous, vexatious, or that any step in the proceedings is taken to hinder or delay the progress, and that's really what the issue is—hinder or delay.

If you are involved in strategic litigation you try to stretch things out as long as possible. That's why. What we're saying is the tribunal has the power to deal with it, but you don't have to go as far as loser pay, because we think the nature of the proceedings, given that you're not talking about damages here, doesn't warrant it.

But there should be a power within the tribunal to control its process. As I mentioned, in some instances we've had motion after motion, and there's no penalty, because right now the tribunal doesn't have the power to award the cost. If they had the power to award costs when there's a step taken to hinder or delay proceedings, they could say that motion has no effect, and bang, they could award costs on whatever basis they see fit. So I think it serves the right middle ground that has been chosen here.

The Vice-Chair (Mr. Walt Lastewka): Seeing no further questions, I would like to thank the committee and thank the witnesses, Professor Townley, Commissioner von Finckenstein, and the expert lawyers.

I just want to remind the committee that clause-by-clause will begin on November 20, and any amendments should be submitted to the clerk by next Friday, November 16 at 5 p.m. Is everybody clear on that?

You can take the next number of days to submit your amendments.

Thank you very much. The meeting is adjourned.