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37th PARLIAMENT, 1st SESSION

Standing Committee on Industry, Science and Technology

COMMITTEE EVIDENCE

CONTENTS

Thursday, January 31, 2002

0905

The Vice-Chair (Mr. Walt Lastewka (St. Catharines, Lib.))

Mr. Gaston Jorré (Acting Commissioner of Competition, Competition Bureau, Industry Canada)

0910

0915

The Vice-Chair (Mr. Walt Lastewka)

Mr. Stéphane Bergeron (Verchères--Les-Patriotes, BQ)

Mr. Gaston Jorré

Mr. R.W. McCrone (Assistant Deputy Commissioner of Competition, Criminal Matters Branch, Competition Bureau, Industry Canada)

Mr. André Lafond (Deputy Commissioner of Competition, Civil Matters Branch, Competition Bureau, Industry Canada)

0920

Mr. Stéphane Bergeron

Mr. R.W. McCrone

Mr. Bergeron

Mr. R.W. McCrone

0925

Mr. André Lafond

Mr. Stéphane Bergeron

Mr. André Lafond

The Vice-Chair (Mr. Walt Lastewka)

Mr. Larry Bagnell (Yukon, Lib.)

Mr. Gaston Jorré

Mr. Larry Bagnell

Mr. Gaston Jorré

Mr. Larry Bagnell

0930

Mr. Gaston Jorré

Mr. Larry Bagnell

Mr. Gaston Jorré

Mr. Bagnell

The Vice-Chair (Mr. Walt Lastewka)

Mrs. Bev Desjarlais (Churchill, NDP)

Mr. Gaston Jorré

0935

Mrs. Bev Desjarlais

Mr. Gaston Jorré

Mrs. Bev Desjarlais

Mr. André Lafond

Mrs. Bev Desjarlais

Mr. R.W. McCrone

Mrs. Bev Desjarlais

Mr. R.W. McCrone

Mrs. Bev Desjarlais

Mr. Gaston Jorré

The Vice-Chair (Mr. Walt Lastewka)

Mr. Andy Savoy (Tobique--Mactaquac, Lib.)

Mr. R.W. McCrone

Mr. Andy Savoy

Mr. R.W. McCrone

0940

Mr. Andy Savoy

Mr. R.W. McCrone

Mr. Andy Savoy

Mr. R.W. McCrone

Mr. Savoy

The Vice-Chair (Mr. Walt Lastewka)

Mr. Chuck Strahl (Fraser Valley, PC/DR)

Mr. André Lafond

0945

Mr. Chuck Strahl

Mr. Gaston Jorré

Mr. Chuck Strahl

0950

Mr. Gaston Jorré

Mr. Chuck Strahl

Mr. Gaston Jorré

Mr. Chuck Strahl

Mr. Gaston Jorré

Mr. André Lafond

Mr. Chuck Strahl

Mr. Gaston Jorré

0955

The Vice-Chair (Mr. Walt Lastewka)

Mr. Brent St. Denis (Algoma--Manitoulin, Lib.)

Mr. Gaston Jorré

Mr. Brent St. Denis

Mr. Gaston Jorré

Mr. Brent St. Denis

1000

Mr. Gaston Jorré

Mr. Brent St. Denis

Mr. Gaston Jorré

Mr. Brent St. Denis

Mr. Gaston Jorré

Mr. Brent St. Denis

Mr. Gaston Jorré

Mr. Brent St. Denis

The Vice-Chair (Mr. Walt Lastewka)

Mr. Stéphane Bergeron

1005

Mr. R.W. McCrone

Mr. Stéphane Bergeron

Mr. André Lafond

1010

Mr. Stéphane Bergeron

Mr. André Lafond

Mr. Stéphane Bergeron

Mr. André Lafond

Mr. Stéphane Bergeron

1015

Mr. André Lafond

Mr. Stéphane Bergeron

The Vice-Chair (Mr. Walt Lastewka)

Mr. Stéphane Bergeron

The Vice-Chair (Mr. Walt Lastewka)

Ms. Paddy Torsney (Burlington, Lib.)

Mr. Gaston Jorré

Ms. Paddy Torsney

Mr. Gaston Jorré

Ms. Paddy Torsney

Mr. Gaston Jorré

1020

Ms. Paddy Torsney

Mr. Gaston Jorré

Ms. Paddy Torsney

Mr. Gaston Jorré

Ms. Paddy Torsney

Mr. Gaston Jorré

Ms. Paddy Torsney

Mr. Gaston Jorré

Ms. Paddy Torsney

Mr. Gaston Jorré

Ms. Paddy Torsney

Mr. Gaston Jorré

Ms. Paddy Torsney

Mr. Gaston Jorré

Ms. Paddy Torsney

1025

The Vice-Chair (Mr. Walt Lastewka)

Mr. Gaston Jorré

Ms. Paddy Torsney

The Vice-Chair (Mr. Walt Lastewka)

Mrs. Bev Desjarlais

Mr. Gaston Jorré

Mrs. Bev Desjarlais

Mr. Gaston Jorré

Mrs. Bev Desjarlais

Mr. Gaston Jorré

Mrs. Bev Desjarlais

Mr. André Lafond

Mrs. Bev Desjarlais

The Vice-Chair (Mr. Walt Lastewka)

Mr. Andy Savoy

1030

Mr. R.W. McCrone

Mr. Andy Savoy

Mr. R.W. McCrone

Mr. Andy Savoy

Mr. R.W. McCrone

Mr. Andy Savoy

Mr. R.W. McCrone

1035

Mr. Andy Savoy

The Vice-Chair (Mr. Walt Lastewka)

Ms. Paddy Torsney

The Vice-Chair (Mr. Walt Lastewka)

Mr. R.W. McCrone

The Vice-Chair (Mr. Walt Lastewka)

Mr. André Lafond

The Vice-Chair (Mr. Walt Lastewka)

Mr. Gaston Jorré

The Vice-Chair (Mr. Walt Lastewka)

CANADA

Standing Committee on Industry, Science and Technology

NUMBER 064

1st SESSION

37th PARLIAMENT

COMMITTEE EVIDENCE

Thursday, January 31, 2002

[Recorded by Electronic Apparatus]

¿ (0905)

[English]

The Vice-Chair (Mr. Walt Lastewka (St. Catharines, Lib.)): I call this meeting to order, pursuant to the committee's mandate under Standing Order 108(2), consideration of the competition law and policy. Today we have visitors from the Department of Industry.

Mr. Jorré, you're acting commissioner of competition. I would ask for your opening statement, and then we'll get on to questions.

Thank you.

Mr. Gaston Jorré (Acting Commissioner of Competition, Competition Bureau, Industry Canada): Thank you very much, monsieur le président, honourable members. Let me first say that the Commissioner of Competition, Mr. von Finckenstein, very much regrets that for personal reasons he was unable to be here today. He would have very much wished to have been here.

Let me also thank the members of this committee for the excellent work that has been done with respect to Bill C-23, and in a broader sense, in raising important competition policy issues.

Over the next few minutes I would like to briefly discuss some of the issues the committee has raised in its interim report and recent round tables. My colleagues and I will then be available to answer your questions.

As you know, several of the committee's preliminary findings are included in Bill C-23. These include interim orders, adding a competition test to the refusal-to-deal provisions, and private access to the Competition Tribunal.

In regard to the committee's concerns with the predatory pricing provisions of the act, the bureau has taken significant steps to clarify its enforcement approach under both the criminal and civil provisions of the act. After extensive consultations with stakeholders, we have issued enforcement guidelines on the abuse-of-dominance provisions that provide comprehensive information on the bureau's approach to the abuse provisions of the act. They explain the wide range of anti-competitive conduct potentially covered by sections 78 and 79, including how these provisions can address predatory conduct. The guidelines outline how the bureau enforces these provisions to ensure a fair and efficient marketplace.

Critical information complements the document, including examples of Competition Tribunal decisions on cases of abuse of dominance. These guidelines have been published and are available on our website. We brought several copies today for your convenience.

The bureau is also preparing draft guidelines dealing with unreasonably low pricing under the criminal provisions of the act. These guidelines will be made available shortly on the bureau website for consultation purposes. They have been designed to clarify for the general public, business people, and their legal and economic advisers the intent of these provisions as well as the general approach taken by the bureau to enforce them.

[Translation]

Something that is not in Bill C-23 but represents an important part of the Interim Report and a prominent issue in your roundtable discussions last month concerns amendments to the conspiracy provisions or section 45 of the Competition Act. This is an important, core provision of the Act, which addresses conduct such as price fixing and market sharing that is widely recognized as among the worst forms of anti-competitive behaviour.

Various commentators have criticized section 45 on the basis that it is both under-inclusive, because it can allow manifestly anti competitive arrangements to escape condemnation, and over-inclusive, because it subjects all horizontal arrangements to criminal prohibitions, even where these agreements may be pro-competitive. For these reasons, the Bureau started examining the possibility of amending section 45 several years ago.

As you may recall, proposed amendments to section 45 of the Act were part of the extensive national consultation process conducted by the Public Policy Forum, which considered the principles underlying four Private Members' Bills.

The Public Policy Forum concluded in its final report that there was general agreement that section 45 needed to be modernized.

Second, there was substantial support for a two-track approach, under which criminal sanctions would be limited to the most harmful behaviors, and other types of agreements would be subject to review under a civil standard.

Third, because of the importance and complexity of the issues involved, most felt that more discussion, analysis and consultation was required.

¿ (0910)

[English]

Further to the Public Policy Forum suggestion that more analysis and consultation was required, the bureau contracted three independent studies. While they differ on many technical details, they all recommend a two-track approach, with both a civil and a criminal regime. Furthermore, they all agree that hard-core cartel behaviour such as price fixing, market sharing, and output restrictions should be a criminal offence without a competition test. The technical details are, of course, very important, and the authors have all stressed that the issues are complex. These reports are also available on our website.

We strongly support the basic principle of two tracks, as proposed in the committee's interim report and as examined further by the three expert reports. We are mindful that the two-track approach will necessarily have significant consequences for the core provisions of the act. It will thus be crucial for the bureau to study carefully the proposed amendments to section 45 to preserve coherence between the civil and criminal provisions of the act. A dual-track scheme will have to encompass adequate measures for deterrence to anti-competitive conduct and adequate incentives to encourage compliance with the act.

We anticipate that amendments to section 45 will be at the centre of the next round of amendments and look forward to the committee's debate and final report on the subject.

[Translation]

Until section 45 is improved, the Competition Bureau will take steps to help alleviate some of the problems that have been identified. For example, in order to reduce the perceived uncertainty associated with potentially pro-competitive agreements, the Bureau is preparing new draft guidelines for reviewing strategic alliances under the existing law. Bill C-23 also contains a provision that would make written advisory opinion by the Bureau legally binding on the Commissioner so long as the material facts upon which the opinion is based remain substantially unchanged. Should Bill C-23 become law, the provision will be able to provide further certainty for competitors considering strategic alliances or collaborations.

[English]

As you know, the bureau's workload over the past few years has greatly increased. Unfortunately, our resources have not kept pace and we are seeking more resources. In a recent survey involving five comparable competition authorities, our bureau had the second-lowest level of funding on a per-capita basis. Demands on the bureau continue to grow, largely due to globalization and our increased mandate. Ten years ago the great majority of cases examined by the bureau were domestic in nature. Today, not only are there more cases, but a very large number of them have an international dimension. This is demonstrated by an increasing number of multijurisdictional mergers and international cartels. The bureau is now also responsible for the administration and enforcement of standards-based legislation and has significantly increased its advocacy-policy role, both nationally and internationally. All these initiatives have greatly increased pressures on our staff.

[Translation]

As Senior Deputy Commissioner of the Mergers Branch, let me also address a specific issue raised in the recent roundtable discussions concerning an appropriate test for the efficiency defence under the mergers provisions of the Act.

As you may know, the efficiency test outlined in section 96 of the Competition Act has recently come under considerable scrutiny as a result of a Competition Tribunal decision in the Superior Propane case. In this case, the Tribunal initially ruled that the efficiencies resulting from the merger would more than compensate for the creation of a monopoly or near monopoly in many local markets and for national account customers. The Competition Bureau appealed this decision, and the Federal Court ruled last April that the Tribunal had not interpreted the efficiency test correctly. Superior Propane sought leave to appeal this ruling to the Supreme Court of Canada, but the Supreme Court refused the hear the matter.

The Tribunal has just finished rehearing the case in light of the Federal Court's ruling, and we are awaiting their decision.

¿ (0915)

[English]

Before closing, I would like to advise you that the commissioner has informed me that he is available to appear before this committee after February 18, should the committee wish to hear from him.

Again, thank you for this opportunity to discuss proposals for change. As I said at the beginning, Mr. Lafond, Mr. McCrone, and I would be pleased to answer your questions.

Merci.

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

We'll now proceed with questions, beginning with Mr. Bergeron.

[Translation]

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

Thank you, Mr. Jorré, for your presentation. You are well aware of the fact that we have many concerns and hope to be able to continue our in-depth review of the Competition Act.

Personally, I think there are two issues of particular concern. First, there is the term “unduly” in Section 45; the issue is whether of not that term should be removed. In your presentation, you of course referred to changes to Section 45 and to the two-tracks approach, but you didn't say anything about the potential elimination of the term “unduly”. I would like to hear what you have to say about that proposal; it is a suggestion that often comes up to allow for clairer rulings under Section 45.

Another issue of concern to me is the reference to normal market conditions for suppliers, that is, selling a product under normal market conditions. Some small retailers in the oil industry, for example, recommended that we remove the expression “normal market conditions” from the Competition Act. I would also like to hear what you have to say about that, please, Mr. Jorré.

Mr. Gaston Jorré: Thank you. I think I will ask Mr. McCrone to begin answering your question.

[English]

Mr. R.W. McCrone (Assistant Deputy Commissioner of Competition, Criminal Matters Branch, Competition Bureau, Industry Canada): The question of whether to strike “unduly” from section 45 rather than go to a two-track approach has been raised before. The simple response is that it would make the section too inclusive. It would trap many agreements that were innocent. For example, agreements between a franchisor and a franchisee might be captured by section 45 if it simply said any agreement that restricted competition, supply, production, and so on. So the short answer is it would capture too many innocent or pro-competitive agreements.

We would rather use a two-track approach, so blatantly anti-competitive activity like price-fixing and market sharing would be captured per se. Where there were agreements that had pro-competitive or neutral effects, we could assess them in a balanced way, under a civil provision.

On the second question, normal market conditions, I'm not sure which provision of the act you were thinking of, but section 75 is Mr. Lafond's territory.

Mr. André Lafond (Deputy Commissioner of Competition, Civil Matters Branch, Competition Bureau, Industry Canada): This is the section dealing with refusal to supply, under section 75 of the act. The normal market conditions are important in that provision, because otherwise, simple refusal would automatically mean that everyone would be guaranteed to receive whatever product they wished to receive.

In the case of a manufacturer who wished to distribute his product, he could choose his distributors--that's normal practice. If he chose, for example, to distribute his product himself, somebody could come in and say, “I want to be the distributor for your product”. Therefore, he would have to provide him with his product. So I think it's important to maintain the refusal-to-deal provision.

¿ (0920)

[Translation]

Mr. Stéphane Bergeron: With all due respect, I have to say that the answers you have just given to both questions appear to me to reflect a somewhat passive tendency or, at least, some conservatism that seems resistant to any change that would address actual concerns that are brought to our attention.

For example, we have been told a number of times that the term “unduly” often causes the tribunal to construct what constitutes anti-competitive conduct very broadly or, conversely, conduct that would not be anti-competitive.

As a result, your concern that eliminating the term “unduly” might lead to many causes being ruled anti-competitive...The pendulum is now at the other extreme instead. Because of the presence of the term “unduly”, people do not succeed in demonstrating anti-competitive conduct. What term would you propose to replace “unduly”, so that the tribunal would have fuller discretion to determine whether in fact there was anti-competitive conduct?

As for normal market conditions, I do understand your argument, Mr. Lafont, but the problem is that in the oil industry, the big companies control nearly 90% of the market. If the big oil companies plead so-called normal market conditions--which they themselves set, at any rate--for refusing to sell to small dealers, what recourse do small dealers have in order to allege anti-competitive conduct on the part of the big oil companies when, basically, those companies are pleading a section of the act dealing with normal market conditions that they themselves have set?

So what protection can be offered to smaller businesses against larger ones in a case like that?

And, as I asked Mr. McCrone, do you have any suggestion for better protection of smaller businesses?

[English]

Mr. R.W. McCrone: I think there has been some misunderstanding. “Undueness” is a term that applies to section 45 under normal market conditions or normal terms and conditions, and it relates to section 5, refusal to supply.

[Translation]

Mr. Stéphane Bergeron: I got that.

[English]

Mr. R.W. McCrone: One problem that people have identified with undueness now is that it will capture too many desirable agreements, strategic alliances, joint ventures, and so on. It has a chilling effect in that, whether or not we actually attack certain joint ventures or strategic alliances, business persons fearing prosecution under section 45 will not enter into these beneficial agreements. On the other hand, our jurisprudence has shown that undueness prevents us from attacking many agreements that are clearly anti-competitive and may relate to price.

The two-track approach that we're proposing and everyone agrees to will make the price-fixing and market-sharing aspects of it per se offences. This approach will in fact capture many of those agreements we now have trouble pursuing. It will be much more effective as a law under those circumstances, but it will not retain the chilling effect that business persons now see in section 45, because we will not be assessing those arrangements under a criminal provision. We will be dealing with those under a civil provision, with possibly just a remedial order rather than fines or prison terms as a resolution.

In that sense, section 45 will become a more effective section with a two-track approach, rather than simply dropping undueness as it now, as you were suggesting would be possible.

¿ (0925)

[Translation]

Mr. André Lafond: As for section 75, in answer to your question, I think that currently, the provisions of the act do provide the necessary flexibility to protect business people like the ones you just mentioned. Indeed, companies are able to cite normal market conditions as a reason, but this does not prevent the Competition Bureau from assessing the submitted complaint with a view to identifying the reasons put forward as justification for their refusal to deliver. If it is deemed that a company is in the wrong, even if it does base its complaint on normal market conditions, nothing prevents us from taking the particular case before the Competition Tribunal. I believe that the Bureau does have sufficient flexibility in terms of interpretation of the act, and that the act itself does indeed enable us to assess what is happening in the market.

Not only does it enable us to see what is going on in Quebec, if the particular case is in Quebec, but it also enables us to look at practices in other provinces. When a particular company tells us that a competitor is unable to meet standard market requirements, we do not necessarily take it as read that the plaintiff is correct. I believe that we do have all the necessary flexibility to take a particular case in hand, if the reasons which are provided to us warrant such action.

Mr. Stéphane Bergeron: We can't necessarily take it for granted that the Tribunal will hand down the same ruling as you.

Mr. André Lafond: Not necessarily.

[English]

The Vice-Chair (Mr. Walt Lastewka): I'm sure we'll have more discussion on this. Thank you, Mr. Bergeron.

Mr. Bagnell.

Mr. Larry Bagnell (Yukon, Lib.): Thank you.

I agree on the problem Mr. Bergeron raised. If you've got the solution, that's fine. I don't see a problem with taking out “unduly”, and we can create new special provisions for strategic alliances, so there's not a chilling effect. But there are so many questions.

My first question is related to resources. I've been asking a lot of witnesses about this over the last months. I always thought you needed more, because I really want to make sure competition works in our society. So I'd just like to add another opinion to that, although it was interesting to hear in your statement that you were very busy in asking for more. I think we heard at our last meeting a couple of days ago that you weren't very busy, so I'd be interested in that.

I'm interested also to know whether, under the present circumstances or with the new provisions, you are going to be busier or less busy and will still need more resources.

Mr. Gaston Jorré: Generally, as you know, the trend has been for us to be much busier. I guess over five or six years, since the mid 1990s, there's been a steady buildup. In one area at least, post-September in mergers, in the short run we've seen a bit of a drop. Presumably, if the economy recovers, we'll go back to the high levels we've been seeing. Last year was a record year. In our other areas we've become very active and taken on more. So the need for resources is, I think, quite evident, at least from my perspective.

I'm sorry, I think I missed part of your question.

Mr. Larry Bagnell: The first one was on resources only. So you still need more with the new provisions.

Mr. Gaston Jorré: Yes. As I said, we had a survey done for us, and we come out fourth of the five countries on a per capita basis. Those countries ahead of us are Australia, the United States, and the United Kingdom. We are ahead of Germany.

Mr. Larry Bagnell: My only other question is related to thinking outside the box a little. I come from a rural area, from the Yukon. Most of the communities have fewer than 2,000 people, so I don't imagine a lot of the cases you would deal with have to do with a lot of those places. But it's no less important in our society that the theory of fair competition exists there.

I don't know all the provisions, but I know in mergers, for instance, there's a size limit. In fact, some people are even suggesting increasing the size. I'm wondering, thinking outside the box, why there is a size limit at all. Look at other offences in society. If someone steals a bottle of shampoo from a drug store, they go through the whole public system in Canada, which happens to be a court system, at great expense, far more than the cost of a bottle of shampoo, because there's a principle. Similarly, if someone embezzles $10 million from a bank, you're not doing it on a cost-benefit analysis. So to the extent that we would like all our citizens to feel they're getting a fair shake in not being unduly competed against, why would we have a limit in mergers or anything else? Obviously, you wouldn't want to go through the whole existing procedure, so you may do what the courts do, have something much cheaper, like small claims court and justices of the peace, which are much cheaper than your full-blown procedure. I know it's thinking outside the box a bit, but I have to make sure my constituents are well served. I can say one thing. They're very well served by the propane merger, because it was very harmful to us.

¿ (0930)

Mr. Gaston Jorré: I'm glad you mentioned propane, because I was going to mention it, among others. The Yukon is one area where there's a monopoly as a result of the case.

I think it may be useful if I point out that we can review any merger, no matter what the size. Where size comes in is whether you have to notify us. And the underlying idea behind that is, of course, the smaller the transaction or the smaller the party is, the greater the burden caused by triggering this process. But even where there is not notification, we have the power to review any merger for up to three years after it closes. And there are some matters that come to our attention that are not matters that have been notified.

I guess the point is--it's a trade-off--if the world were cost-free, it would be nice to look at every merger and have notification. But given the costs imposed, there has to be some level before you create a notification process, and that's why there is a threshold for notification. Yet we can certainly look at anything. Sometimes people bring transactions to our attention and we look at them.

Mr. Larry Bagnell: I realize there's a $25,000 fee or something, but if we have a small community of several hundred people, usually there's only one... Actually, there happens to be only one provider of any service there, if any. There may be only one food store, or one gas station, and that's about it for the whole town. But assuming there were two gas stations or two food stores and we enforced notification--you're not going to know about it if we don't enforce notification--obviously, we wouldn't ask them to pay $25,000. Maybe there should be a $100 filing fee or something. But it might make the message pervasive, through a society that doesn't know anything about the Competition Bureau, that there is a process and people are looking at these things to protect the consumer.

Mr. Gaston Jorré: It's not just the filing fee. When you notify, you have to retain counsel; you have to provide the information; you need a good adviser. If two middle-size food stores were merging, it would be a tremendous burden to say you automatically have to notify. On the other hand, if a complaint were made to us, we would look to see whether there is an issue there or not. So the system can be triggered.

Mr. Larry Bagnell: As I said, it would be a whole different process. You wouldn't get a lawyer and all these kinds of things. You would have to set up a much cheaper process for these people. Anyway, this is just to start discussion on that topic.

The Vice-Chair (Mr. Walt Lastewka): Okay. Ms. Desjarlais.

Mrs. Bev Desjarlais (Churchill, NDP): Following along on Mr. Bagnell's questioning, do you see the need to increase the threshold? There's been an indication it hasn't changed for some 15 years. Do you see the need to increase, and if so, to what level would you increase it?

Mr. Gaston Jorré: Yes. There are two thresholds: there's the transaction size and there's the party size. We think it would be appropriate to increase the transaction size threshold, which currently is $35 million. The party size threshold, which is $400 million, is much higher. We see increasing the first but not the latter, roughly in line with inflation for the period since the act came in, which takes you to about $50 million.

The other threshold seems pretty high. It's high relative even to the United States right now, and we're a much smaller economy. A smaller transaction has more of an impact here than in the United States' economy.

¿ (0935)

Mrs. Bev Desjarlais: This would just increase the transaction level and not the party level?

Mr. Gaston Jorré: The party size, yes.

Mrs. Bev Desjarlais: Okay.

You indicated in commenting on “unduly” there have been a number of concerns raised as a result of that one term.

Mr. McCrone, you indicated it would possibly bring in many--was it “allegiances”? Is that the word that was used?

Mr. André Lafond: “Strategic alliances”.

Mrs. Bev Desjarlais: --that it might bring too many strategic alliances into it. Is there not a way of getting rid of that word “unduly” but still, where recognizing there is blatant, obviously anti-competitive behaviour, to deal with it? Is there not some way to do that and still address the concerns raised by the terminology “unduly”?

Mr. R.W. McCrone: Well, our current process of looking at amendments for section 45 is designed to do this. Everyone recognizes that the section has to change. There seems to be consensus on a two-track approach, one track that would make blatantly anti-competitive agreements on price fixing and market sharing illegal per se, so you wouldn't have to deal with the whole “undueness” question. The other, civil track would allow you to assess these strategic alliances and joint ventures in a more balanced fashion. Business people tell us they're now afraid to enter into these arrangements as often as they should for the benefit of the economy.

Mrs. Bev Desjarlais: One comment that came up was how would a business still know for sure they're not going to fall into this category? Would they still be able to form those alliances without the threat of possibly being perceived as being blatantly anti-competitive?

Mr. R.W. McCrone: Some of the provisions being considered would allow a pre-clearance process where one could approach the director for advice on whether or not we would consider it problematic under section 45. This would provide a protection for those parties for as long as the fact base didn't change.

Also, we're currently drafting a strategic alliances bulletin to give some guidance to people. We are indicating in this bulletin, which is not yet public, that unless a matter deals with the setting of prices or market sharing, it will be reviewed under the civil provisions of the act. Again, this is designed to give some comfort, as an interim measure before section 45 is amended, to business people.

Mrs. Bev Desjarlais: Okay.

Again, this question follows from Mr. Bagnell's in regard to the anti-competitive action, say, of even smaller or medium-sized businesses, or what might be perceived as a merger that doesn't leave any competition out there. Do you deal with these individual types of town concerns, or do you deal with anti-competitive behaviour on a more regional or national level?

Mr. Gaston Jorré: The act applies generally. If we're in the civil provisions, generally the question is whether you have anti-competitive behaviour in the relevant market. If the relevant market is a smaller market, then you apply the act that way, whether it's merger or another provision.

The Vice-Chair (Mr. Walt Lastewka): Are there any more questions?

Mr. Savoy.

Mr. Andy Savoy (Tobique--Mactaquac, Lib.): Thank you very much, Mr. Chairman.

I have a couple of questions. Initially I'd like to talk about the new two-track approach. Specifically, we understand that we're looking at the cost-benefits of eliminating the word “unduly” and adopting the two-track approach, where we look at the civil section for review of strategic alliances. If you look at the cost-benefits, what would the cost of this new two-track approach be as a deterrent to strategic alliances in fact?

Mr. R.W. McCrone: Are you thinking of the cost to the bureau?

Mr. Andy Savoy: No, I'm talking of the cost to industry. The downside, let's say.

Mr. R.W. McCrone: The downside? It's hard to see a real downside. Business people are indicating to us that there are productive things they could be doing now that they do not do because they fear being attacked under section 45. Presumably, when that fear is gone, they will engage in these productive activities.

At the same time, the per se provision we are thinking of should make pursuit of blatantly anti-competitive agreements easier. Both of these are pluses to me, and I don't think anyone has indicated a clear argument that would suggest there will be substantial costs.

The greatest fear some have identified is the possibility of capturing too many innocent agreements. They argue we should stay with undueness because it protects those innocent agreements. We're trying to deal with this concern by having a civil track to deal with all agreements except those fixing prices or dividing up markets.

¿ (0940)

Mr. Andy Savoy: Okay, thank you.

My second question is on anti-competitive pricing practices and the criminal versus civil issue.

Looking at the three types of pricing we have in front of us--predatory pricing, price maintenance, and price discrimination--I think predatory pricing is relatively straightforward. But in price maintenance and price discrimination, look at the supply chain and you have.... I'll give you an example and ask you to tell me how what we're proposing would deal with it.

You have a supplier who, by virtue of reducing his price up the line--let's say to the retailer--anticipates a substantial increase in business, thus justifying his decreased price. The supplier is going based on a reduced price, which ultimately will reduce market price. Can you tell me how what we're proposing will impact that?

Mr. R.W. McCrone: Which proposal are you thinking of?

Mr. Andy Savoy: I'm talking about going from criminal versus civil on the anti-competitive pricing practice issue.

Mr. R.W. McCrone: Right. I think that's a recommendation that was made, or at least it was recommended that it be considered.

The bureau is not proposing such a change for the moment. Predatory pricing can be captured under section 79, the price maintenance provision that deals with these vertical pricing arrangements you're talking about. It's a very effective section for us. It's the section under which all our gasoline prosecutions have occurred, for example. It's very well understood by the business community and by the public. It generally dissuades increases in price, so it's popular with consumers. So really there doesn't seem to be a need to change that.

Regarding price maintenance, we considered removing it from the act in the past, but left it in following concerns expressed by the small-business community on the basis that they felt that retaining it in the criminal provisions created a significant deterrence, which assisted them in dealing with large suppliers. As well, we had a panel of experts who suggested that price discrimination could already be dealt with under section 79 of the civil provisions also.

Mr. Andy Savoy: Thank you.

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

Mr. Chuck Strahl (Fraser Valley, PC/DR): Thank you, Mr. Chairman.

Thank you to our witnesses for coming today. I have two or three things to kick things off.

First, on framework legislation in general, we've heard witnesses say that framework legislation should be just that: it should cover all industries with the same sort of brush. But in recent times it seems we've got away from that a little bit, and of course you remember the fuss we had specifically in the airline industry as we went through and are still going through the machinations following the collapse of several airlines.

Do you feel that the legislation is getting away from its original goal of trying to treat all people equally under general legislation, or do you think treating individual industries, whether it be airlines, newsprint, banking, or whatever, is just fine and makes your job easier?

Mr. André Lafond: The assessment framework for addressing anti-competitive activity in the airline industry is the normal section 79. Because of the special characteristics of the industry, there were changes made to section 78 that indicate what types of actions we would consider looking at, that we would find to be anti-competitive in the airline industry. But once those have been clearly identified--and by the way, section 78 is a non-exhaustive list, so we are not restricted by the wording that is there--once we have identified an anti-competitive activity, then it's the normal process under section 79 in the abuse provisions.

So the reason the government felt there was a need to add some definition in terms of the airline industries is because of the special characteristics of the airline, which are somewhat unique: you have an industry where you have an overwhelming dominance by a carrier; you have some restrictions in terms of the amount of foreign ownership that you can have in the industry; you have assets that can be moved fairly rapidly, which could be targeted at new entrants. That's why, at that point in time, the government decided to add some clarity into what types of activities would be considered anti-competitive in the airline industry.

If I'm too long, just cut me off, but in terms of the framework, I think the Competition Act as framework legislation applies to all sectors. It contains some general principles in economics and law that we then must apply to various cases in the industry. If we were to move to specific legislation for the particularities of an industry, I think we would miss or we would lose the flexibility of the act, because the economic environment continues to change over time.

¿ (0945)

Mr. Chuck Strahl: If the list that you mentioned is non-exhaustive under the legislation as it sits now and it can be applied to other industries as well, have there been any complaints or consideration by the bureau regarding the concentration of media power under those provisions in Canada? Has anybody brought a complaint or brought this forward? It's certainly gaining a lot of cachet in political circles, because it covers not only competitive behaviour, but also free speech. It's a very complex issue as well. Are you folks dealing with that?

Mr. Gaston Jorré: Media concentration and convergence raise some very important and difficult issues. Some of those issues are issues that interact or fall within the Competition Act. They're the traditional things we look at, for example, in merger review where you look at the effects on price, selection, and quality, and as you know, we look at advertising markets. In an extreme case, I suppose, selection could come in if you had two newspapers being amalgamated and they were the only newspapers in town, where clearly there might be an issue of choice.

A lot of those issues also are issues that don't really fall within the act as it is. It's an economic act with an economic structure, and as you say, these are free speech issues. Clearly, because we live in a political democracy, they are important issues. They're issues that need to be addressed. If Parliament and the government wanted to address them, there would be a need for legislation of some sort to deal with it.

Mr. Chuck Strahl: For many people looking on--and I don't claim expertise in the media business, that's for sure, although I think I've been the victim the odd time in the media business. But anyway, what we're talking about is not just market dominance but the integration of the media industry: newsprint companies owned by television companies owned by people who are in the advertising business, all coming together in a concentration of power.

In one sense of course they're just exercising their rights in free markets through economies of scale and integration, but that's really what you deal with all the time. People always make that excuse, that what they're doing is just good, sound business. Others looking on say yes, but there's such market dominance. That's what the argument is beginning to become in Canada, an economic one. It's not just a free speech one. You just can't break into a market where all the big markets are dominated by one or two players, one particularly.

Is this something you could deal with at all under the current legislation, or is this just something you're not going to touch with a ten-foot pole?

¿ (0950)

Mr. Gaston Jorré: Well, it's certainly something we've thought about a lot. The issues that aren't clearly economic ones aren't really ones we can get a good handle on. As I say, in some cases they may interact with something that has an economic handle, but where you get into issues such as having centralized policies on content, that may not affect the degree of competition in a particular market where there is only one paper to start with.

In looking at it in terms of whether there is a competitive change in our act, there's not much you can do about that. It's a serious issue, I grant you that, and it's one that really does need to be addressed, but I think you would need some other legislation. Whether that legislation would change our act and whether it would be entirely independent are something government and Parliament would have to decide.

Mr. Chuck Strahl: I'll leave that, but have you been asked to look into it? Have you had requests to...

Mr. Gaston Jorré: Every time there's been a transaction merging companies, we've had to look at those transactions. In some cases we've asked for changes, but those changes aren't really regarding the kinds of issues I think you're thinking about.

Mr. Chuck Strahl: I think we're not done with this issue, but maybe it won't be in this legislation. Time will tell.

I just have a couple of other things, quickly. One is on international agreements on anti-competitive behaviour. You mention that increasingly your work and research have to be global almost, certainly amongst industrialized nations. When we were going through the review of the act, there was a kind of draft agreement or at least a suggestion of what a draft agreement might look like with the United States or with another country. The suggestion was that perhaps the first country, the obvious country for Canada, to start those kinds of negotiations and to get a bilateral agreement with would be the United States. Has there been any progress on that? Have any discussions been taking place with the United States or other countries? If so, what is the status of that?

Mr. Gaston Jorré: Are you referring to the exchange of civil evidence specifically? We do have a number of agreements, but I assume you're referring to what will come out of the bill on civil evidence.

Mr. André Lafond: There have been some general discussions with the United States and the EU, but until such time as the legislation is passed I think little can be done at this stage except to indicate to the other parties that we will have legislation in place that will allow us to exchange information and get information from each other's party when we have an anti-competitive activity that goes across more than one country.

Mr. Chuck Strahl: So it's just at the tentative stage. I would hope that the committee would want to kept abreast of that, because increasingly, whether we like the idea of globalization or not, it's an inevitability, in my mind. It is a key part of it that we get these international agreements right, because getting them right at the very start... And I would think that we have a very experienced commissioner and staff. We're going to basically put our lives in your hands, so you're going to have to do a good job on this.

I hope the committee will be brought up to date and kept up to date on the status of those negotiations, because it is part of what will reassure people on the globalization issue that we're not going to hell in a handbasket, we're not sold out, we haven't given away our sovereignty, we haven't done a bunch of things. It's important to keep people informed at the status of international agreements, and I hope we will be well informed on this one, particularly because it will be one of those things that will reassure people if it's communicated well.

I hope you will keep us and the public up to date on the status of that. It's a reassuring thing to know that there's not a mystery behind it or a secret deal, which was a problem of the MAI, and it will be the problem with this if people don't feel reassured about it. I encourage you do that as those agreements get into the negotiation stage.

Mr. Gaston Jorré: If I might add one thing, within the limits of what is not confidential we and the other agencies, American, European, whatever, do help each other as much as we can. And there is a lot that you can do between agencies without breaching your own, or they their own, confidentiality provisions. For example, in a large international transaction we can all help each other, and do help each other, in understanding how we should analyse the transaction and where you have a lot of technical issues of what are the different kinds of products and how you group them. There is a lot one can do without currently breaching any of our restrictions, and we do that.

¿ (0955)

The Vice-Chair (Mr. Walt Lastewka): Thank you, Mr. Strahl. Now Mr. St. Denis.

Mr. Brent St. Denis (Algoma--Manitoulin, Lib.): Thank you, Mr. Chair, and thank you to our witnesses for helping us with this very important update.

I'd like to turn our attention for a few minutes to the issues around efficiency, the efficiency defence, the efficiency test. You made some helpful remarks on pages 8 and 9 of your report, Mr. Jorré.

I know the court case is not that far behind us, but it is out of the court, so I'm sure you'll chose your words judiciously. Is there anything that came out of the court ruling that sent it back to the tribunal--and I know it's at the tribunal now--that was helpful and adds to your corporate knowledge when it comes to how to deal with these things in the future? Or are there changes to section 96 that, apart from just having guidance on these things, need to be made in the legislation itself?

Mr. Gaston Jorré: From our perspective, the decision of the Federal Court of Appeal was very helpful. As you know, we disagreed rather strongly with the decision of the Competition Tribunal. We had been unsuccessful in persuading the tribunal of our approach to the efficiency defence.

On appeal, the court of appeal agreed with us in great measure and set out a new approach, if you like, on how you analyse section 96. We think that approach is much better, and from our perspective that was a very positive step. You still have to take that approach and then apply it to the evidence, and it's really hard to make a judgment until we see how it all falls out in the decision that the tribunal has yet to render.

I think that decision was helpful. It may resolve our problems when we look at the end result. It may not. It's very hard to forecast, but we're certainly in much better shape than we were before the court of appeal decision, again, from our perspective.

Mr. Brent St. Denis: Are you in a position to say whether changes to section 96 would be appropriate, or is it just too early?

Mr. Gaston Jorré: I think it's too early. It may turn out, if things work out as we hope and we are successful in the arguments we've made in the tribunal, that it has resolved our concerns, or most of them. It's really hard to tell without seeing how it comes out, but the court of appeal decision was a pretty good decision.

Mr. Brent St. Denis: First let me say, being a relatively new member to this committee, I'm appreciating more and more with each meeting on this subject how difficult a challenge it is to marry something that's very objective and subjective at the same time.

That brings me to saying when you're attempting, in a given case, to apply an efficiency test and you start with the centres of it--let's say there are two applicants to a merger case--how do you decide how far to go out from the individual companies involved to, say, suppliers, or suppliers of suppliers? I guess at some point you have to decide whether the efficiencies.... You could go all the way out, ripple after ripple, from the initial effects of the merger, but how do you decide where to draw the line so that you can compare this against the cost of the merger to the consumer or to society?

À (1000)

Mr. Gaston Jorré: Well, the question the section creates is whether the efficiencies outweigh and offset the anti-competitive effects. Really, in principle, that includes everything--all the anti-competitive effects. Some of those are measured quantitatively, but others are qualitative. In fact what is very good, I think, in the court of appeal decision is that it made it more than just a quantitative analysis. You can try to estimate the impacts on the price for consumers, or what customers lose and the effects of that, although you're right, with the subsequent dynamic effects you're starting to get into something pretty complicated. The merging parties will, of course, make their arguments on how much they will gain, but again, the downstream consequences of that are also a hard thing to see.

Then you have other factors that are more qualitative and that you can't really measure. To give you a very simple example, how do you weigh the impact of loss of choice? If you go from having two people you can buy something from to just having one, you've clearly lost something apart from price. It's not something you can really value, but it's certainly something that has to be weighed in.

We certainly try to measure or include all of those factors. I think the section allows for trying to include all of them. Not all of them are measurable quantitatively. What's good about the court of appeal ruling is it has clearly made it more than just a quantitative measurement. But it's a very difficult process.

Mr. Brent St. Denis: Concerning the guidelines you gave us a copy of today, on enforcement, I see in my mind's eye the Canada Customs and Revenue Agency issuing interpretation bulletins. This is like your interpretation bulletin on enforcement. Do you have such a document for efficiency? I'd be very interested in that.

Mr. Gaston Jorré: Within the merger review guidelines there's a part five about efficiencies, which was written many years ago before Superior Propane. We have, in effect, withdrawn these sections. We've said they've now been superceded by the court of appeal ruling on Superior Propane. At some point, once the Superior Propane case is finished, we're going to have to rewrite them, because clearly they're not--after this litigation--a reliable guide. So yes, there are some, but they're no longer up to date. We'll be rewriting that part of the merger guidelines after the decision is finished.

Mr. Brent St. Denis: Finally, Mr. Chair, I just have a short conclusion.

I presume that not all merger cases include elements of efficiency.

Mr. Gaston Jorré: It's not always raised, and of course if there's no issue at the anti-competitive level, you never even have to get into them. But even where there are issues, it's not always raised as a defence.

Mr. Brent St. Denis: I'll just conclude by asking, without getting into specifics, let's say with respect to the whole issue of the airline mergers and so on and so forth, were there elements of efficiency testing in that, or were they left to a whole other area of philosophical consideration?

Mr. Gaston Jorré: Well, the neat thing in the Air Canada-Canadian merger, of course, was that you had the failing firm issue there prominently, which is an entirely different area. I don't think efficiencies played a large role. No, they did not play a large role.

Mr. Brent St. Denis: Thank you very much.

Thank you, Mr. Chair.

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

Mr. Bergeron.

[Translation]

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

I would like to come back to what the previous speaker said, and although we do intend to discuss the issue of price-fixing, please do not think that I am upset with section 45. I think that it is important to clarify a certain number of issues.

Firstly, as far as section 45 is concerned, Mr. McCrone, it seems to me from what you have said that you are indicating or believe or seem to think that we believe that the two-pronged approach automatically precludes any reassessment of the use of the term “unduly” in the section itself. I'll explain what I mean.

In your mind then, if I understand correctly, implementing this two-pronged approach, which is geared to placing part of the issue under criminal law and part under civil law would mean that the term “unduly” would be retained. This does not address the fundamental problem which is that , when companies attempt to approve uncompetitive behaviour, the inclusion of the term “unduly” in the part covered by criminal law means that these companies will never be able to prove, in the majority of instances, uncompetitive practices.

Consequently, in your opinion, how would this two-pronged approach, whereby the term “unduly” would continue to be used in the legislation, solve the problem? Indeed, if I may say so, we would only be addressing part of the problem. Nevertheless this would do nothing to address the fundamental problem whereby companies—because the term “unduly” provides too much latitude to the Tribunal—are unable, in the majority of cases, to prove uncompetitive behaviour. How then, in your mind, does the two-pronged approach, whereby the term “unduly” is retained, address the problem that we are currently facing?

À (1005)

[English]

Mr. R.W. McCrone: I guess I haven't been very clear. In the two-track approach, the term “unduly” would disappear from the criminal provision. It would not be necessary to prove there had been undueness at all.

If price fixing or market sharing is involved and you can establish that there's an agreement to fix prices or to share markets, there will be an offence. There is no balancing due to the term “undue”. Undueness won't be in either the civil or the criminal track, so any problems associated with the interpretation of undueness we deal with now will disappear.

[Translation]

Mr. Stéphane Bergeron: I've nothing to add on that.

To come back to the question of normal market conditions, you said at the very end of your remarks, Mr. Lafond, that despite the fact that the words “normal market conditions” were contained in the act, you had the latitude required to determine that there could be an abusive interpretation of the normal market conditions that would lead you to take the case to the Competition Tribunal, nonetheless.

As I was saying at the end, when the chair quite rightly gave the floor to someone else, this does not guarantee that the tribunal will necessarily make the same assessment. The tribunal must restrict itself to a number of interpretation criteria, one of which is stated very clearly in the act to the effect that everything must be done in accordance with normal market conditions.

However, I come back to the example I was mentioning earlier. In a virtual monopoly situation, when a number of firms, operating almost on the basis of a tacit agreement, define the normal market conditions, they have every opportunity subsequently to avail themselves of these normal market conditions, and the tribunal must in fact comply with this interpretation criterion. The result is that even after you have decided that you have the latitude to take the case to the Competition Tribunal, it is very likely that the tribunal will rule in favour of the firms that put forward the normal market conditions, because this is an interpretation criterion for the Tribunal.

Mr. André Lafond: You are right to say that it is an interpretation criterion. There is no doubt about that. However, when we take cases to the Competition Tribunal, we do our homework first. In an adversarial system, it is up to us to prove and demonstrate to the Tribunal that a particular company or companies are going beyond the normal market conditions. I think if we were to decide at some point to take a case, we would be almost certain that we had the necessary arguments to convince the Tribunal that we were right, and that the company was hiding behind the “normal market conditions” to block the supply of a product it required.

Ultimately, of course, our organization carries out investigations. It is up to the Tribunal to decide, but it must decide according to the information presented to it, on the basis of the argument put forward. It is our job to show that there was a misinterpretation on the part of the company about which there was a complaint.

À (1010)

Mr. Stéphane Bergeron: You will forgive me if I speak bluntly, but my mother often said that that was causing oneself a lot of trouble for nothing.

You seem to be setting the burden of proof relatively high by wanting to keep the terms of “normal market conditions”, you seem to be making it harder for you to convince the Tribunal that there has been anti-competitive behaviour. If the terms “normal market conditions” were not there, it would probably be much easier for you to demonstrate to the tribunal that there had in fact been anti-competitive behaviour.

It seems to me that you want to cause yourself trouble for nothing.

Mr. André Lafond: Not really. I do not think it is necessarily a matter of causing trouble for ourselves. As worded, the provision gives us some guidelines within which we must work. But, as I was saying earlier, if we were to remove this provision, it might have the opposite effect as far as causing trouble for ourselves, in that it would be much more difficult to establish whether or not there is an anti-competitive activity involved.

If, for example, this aspect were removed, I think we would have to look at far more cases which, depending on the values of complaints submitted, would require us to do a great deal more research to find out what is going on in the market, and what should be going on in the market. As for a refusal to supply a product, that depends on the market conditions.

One of the basic principles is that we cannot require a firm to supply a product. However, if they do this in order to eliminate a competitor or to reduce competition significantly, then we can take certain measures.

Mr. Stéphane Bergeron: Let me try to interpret what you are saying, Mr. Lafond. Contrary to what I had thought initially, you want to retain “normal market conditions” to avoid causing yourselves a lot of trouble for nothing. Your feeling is that if these terms were to be removed, you would have to deal with more cases, and therefore you would have more work. Since you do not have enough resources, apparently you would not manage to meet the demand. Did I understand you correctly?

Mr. André Lafond: You could give this interpretation, but in the course of our normal activities and on the basis of the complaints we have received and reviewed in the past, I do not think that the “normal market conditions” aspect in any way impeded our review of complaints.

Mr. Stéphane Bergeron: I do think I mentioned the situation that was raised here, at the committee, in which when oil companies to all intents and purposes set the normal market conditions, the independents very often have to deal with the arbitrary decision of the oil companies about whether or not to sell the product. In light of the terms “normal market conditions” the independents have almost no recourse to use against these giants, the major oil companies.

So I come back to my initial question. If we want to avoid having the pendulum swing to the opposite extreme, if we implicitly acknowledge that the pendulum is currently at the other extreme, perhaps we should try to find some terms that could bring the pendulum back to the centre--if we want to avoid having it go to the other extreme--by simply eliminating the terms “normal market conditions”.

I therefore come back to what I was saying earlier. Has the Competition Bureau ever looked at terms to replace “normal market conditions”, to avoid abuse on the part of large companies that have a virtual monopoly over a market and define, to all intents and purposes, what the normal market conditions are, and use this provision of the legislation to blackmail the little independent?

À (1015)

Mr. André Lafond: We have looked at changing the wording of section 75. Usually, when we do this, for section 75 or another provision, in the course of examining the complaints and questions submitted to us, we have been able to identify potential problems that prevent us from acting when we think there are serious problems in a sector.

With respect to the “normal market conditions” provisions I must tell you that to date, I personally have not encountered any problem in this regard.

Mr. Stéphane Bergeron: The thing is that small businesses...

[English]

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

[Translation]

Mr. Stéphane Bergeron: Mr. Chair, please allow me to wrap up very briefly.

[English]

The Vice-Chair (Mr. Walt Lastewka): We have lots of time. We'll be back to you. Maybe you could rephrase exactly what you want to ask. I'm now going to go to Ms. Torsney.

Ms. Paddy Torsney (Burlington, Lib.): Thank you.

Listening to the discussion that's taking place and looking at these threshold limits of $35 million in assets or gross sales, or $400 million in combined assets of the merging parties, this is really out of the realm of most of the business people in my community. There are a few big businesses that can pay these $25,000 fees, that need to have this kind of reporting. But I would think the indication of whether a country has a competitive atmosphere would be quite different from just looking at these higher-end mergers and acquisitions and what have you.

I know that in answer to one of the questions, you referred to two medium-sized grocery retailers merging or something. I don't think that was really what they were talking about in the north. From our perspective here, sitting in Ottawa, we're talking about two variety stores, but those are the only two food retailers, so of course there's going to be no system of having them file notice.

I guess there's a possibility that someone could lay a complaint. If I'm trying to provide for my family, costs are extraordinarily high in the north anyway. It's not even just the north, it's not just the territories. It would be Ms. Desjarlais' riding, and probably everything above Mr. St. Denis' area as well. Yet it really does affect the consumer.

In the whole section of talking about increasing resources for the bureau, is there any regard to looking at setting up a small claims type of corridor, some kind of process where real people who have real little businesses could have a process? They could say, “Just a second. If Jane and Bob really merge their grocery stores, then I'm screwed over here. There's no way I can compete with them.” Is there some system of figuring things out for what are really very small communities in Canada? There is also a need to have competition and to further enhance the rights of consumers.

Mr. Gaston Jorré: It's hard for me to imagine how you would have a low-cost system where any form of notification was required.

Ms. Paddy Torsney: No. No form of notification.

Mr. Gaston Jorré: But as I said, if the issue is raised with us...we can look at any merger transaction if it is raised with us.

Ms. Paddy Torsney: I am sorry to interrupt, but what's the likelihood, seriously, of Jane and Bob in Dawson City merging and somebody complaining and you really looking into this? You're going to say “Their sales were several thousands of dollars a year. Sorry, we have other things on our plate.”

Mr. Gaston Jorré: You're right, we don't hear people raising this kind of thing very often.

À (1020)

Ms. Paddy Torsney: They call their MP, though.

Mr. Gaston Jorré: I can't imagine, though... It would take an awful lot of staff to know what was going on. How would one even review these things unless you had some large organization systematically looking at what went on? I don't know what else would even trigger an examination.

Ms. Paddy Torsney: Okay, let's say there's a system where someone has to file a complaint. Obviously you're not going to get to this, because, as you say, if people really knew they could simply file a complaint and you guys could look into it and there was really no fee attached to them filing a complaint, you would be overburdening the present system. But is there a need for a parallel system, much like we have in the court process, for very small matters--and it started off very small--to be reviewed and for there to be an encouragement? Do the Australians have anything, because they would have a similar distribution of population in large parts of their country? Does anybody have anything, where individual citizens can say “Hang on a second, it may be small potatoes in the national scheme of things, but it really affects my neighbourhood”?

Mr. Gaston Jorré: I'm not aware of other jurisdictions systematically looking at all very small merger transactions.

Ms. Paddy Torsney: Even on the basis of filing a complaint.

Mr. Gaston Jorré: Well, I've never examined the question, but I would expect that in other jurisdictions, if people write in and raise it, it will probably trigger people to look at it. If this happened a lot, you're right, there'd be a resource issue. But I would guess in most jurisdictions--assuming they're set up like ours, where they can review anything--if someone wrote and raised the issue, that might trigger their looking at it.

Imagine, though, two small stores. It would be very heavy to frequently get into looking at this. Even with simplified procedures, you still need legal advice if you're the private party in the transaction. If you're talking about two small stores, that's very expensive. So there is a need for some balance in this.

Ms. Paddy Torsney: Could you please tell us how many requests or complaints--obviously, you won't have the number offhand--for a review have you had from citizens on mergers that are less than $500,000 in assets?

Mr. Gaston Jorré: The number of non-notifiable transactions raised with us in one way or another--

Ms. Paddy Torsney: Less than 35 million.

Mr. Gaston Jorré: --is very small. I don't have numbers, but it's very small. By the way, we are talking complaint, we're not talking a formal process. Things come to our attention one way or another. Someone may write in and say something has happened that they think is terribly anti-competitive and is killing them because of what someone else is doing, and so on. I don't have any numbers, but it is very small.

Ms. Paddy Torsney: Could you get us that number?

Mr. Gaston Jorré: I don't know whether--

Ms. Paddy Torsney: If it's very small it'll probably come out as five or ten.

Mr. Gaston Jorré: Yes. I don't know that we have a systematic record of it. I can only think there are matters where, one way or another, it came to our attention, perhaps, through somebody affected and they contacted us and we started looking at it, none of which would be, by the way, really, really small. They might be smaller under our thresholds, but typically of some size nonetheless.

Ms. Paddy Torsney: I'm quite interested in this idea that in recommending allocation of additional resources to the Competition Bureau , we would ask them at that time to investigate setting up something, or even figuring out if it is possible to set up something, for a very low threshold. We could perhaps ask our research staff or ask the bureau to put heads together and think of examples of cases that did come to them where they either couldn't deal with it, they really didn't belong in this bigger process, or there were things where it was two little variety grocery stores, by our big city comparison. It would make a difference in communities in Canada. We could think about how that would work if we were to set up something, because I think it would be fairly innovative, again, not being so onerous that nobody could sell their business to anybody, but just trying to think about that level of competition.

À (1025)

The Vice-Chair (Mr. Walt Lastewka): I just wanted to make a clarification here. If six or more people had complained about something, using your example, Ms. Torsney, the Competition Bureau would then investigate.

Mr. Gaston Jorré: You have the six-person complaint. As I say, a few things that are not notifiable have come to our attention, and they don't have to act in any formal way. It can be people phoning or writing and saying something has happened. But you're right, though I'm not sure how the six-person complaint process would.... I guess it could trigger an inquiry into a merger, provided it was within three years.

Ms. Paddy Torsney: Maybe we could all do some thinking about this when we come back.

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

Ms. Desjarlais.

Mrs. Bev Desjarlais: Are you shuddering in your boots at the idea that you might have to check into every merger that takes place in every small community in Canada?

Mr. Gaston Jorré: It seems to me that would be a very heavy system.

My colleague just pointed out to me, by the way, and I should say it before we lose the idea, we do have a 1-800 number where people can call about any anti-competitive act. I don't have the full number in front of me here, but it is available.

Mrs. Bev Desjarlais: That's fine. My guess is, it probably wouldn't be jumped on all that quickly anyway.

Is part of the reason that there probably wouldn't be suggestions of anti-competitive behaviour in those cases the smallness of the financial transactions of those businesses, so there still would be a climate for other competitors to come in if the market was there, it's not as restrictive as if you're in the situation of the two gas companies, with a huge costs involved for entry into the market?

Mr. Gaston Jorré: If the parties merging are very small, it may be that the barriers to entry are low. On the other hand, if it's a very small town in a rural area, the market may not be one that really supports new entry very well, just because of its size.

Mrs. Bev Desjarlais: And that would be considered as well in the whole procedure. Okay.

I'm curious, since we're talking about small towns, about a situation where there are, say, two small grocery stores, and one of them has the capability of providing funds when cashing cheques and the other doesn't, and therefore ties the cashing of those cheques to the purchasing of the supplies from that store. Would that be seen as an anti-competitive act?

Mr. Gaston Jorré: I'm sorry, could you repeat the question?

Mrs. Bev Desjarlais: Say there are a couple of little stores in town, you go cash your cheque, but only one store really has the finances available to cash all the cheques that happen to come in on the same day, for whatever reason--let's use our imagination. Often in these cases it's the day the assistance cheques come in, and pretty much everybody is getting one, because there's sometimes 90% employment. One retailer says, we'll only cash your cheques here if you buy your groceries here, or vice versa, and charges for cashing the cheque as well as for your groceries. Would that be seen as anti-competitive behaviour?

Mr. André Lafond: It depends on the circumstances. If this is simply a service that is being provided to the client, then the client can go elsewhere. I doubt we would look at it as being an anti-competitive activity.

Mrs. Bev Desjarlais: Thank you.

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

Mr. Andy Savoy: Thank you very much, Mr. Chair.

Back in 1979 a number of competition experts made some suggestions or recommendations by that we should look at reviewable civil practices under section 79, versus criminal practices. I understand there's an argument from the bureau that you would see this as losing your deterrents, possibly, if you were to lose the criminal aspect. But if you were given the right to levy administrative fines, would that in some manner replace that deterrence you would gain from reviewing them under criminal sanctions?

À (1030)

Mr. R.W. McCrone: The thing that comes with criminal sanctions is the possibility of prison terms in some cases, so you wouldn't replace that on the civil side. There's also the stigma of a criminal record. It has a deterrent effect that you wouldn't get on the civil side.

I really don't think fines on the criminal side and administrative penalties on the civil side are really comparable. One is clearly designed to penalize for criminal behaviour, and I think the other is more designed to encourage compliance with orders of the tribunal.

Mr. Andy Savoy: Among competition experts there's a real concern regarding the over-inclusiveness, specifically in the area of price maintenance—vertical price maintenance, of course, because horizontal price maintenance is very straightforward—and price discrimination. They feel that if we were to look at the civil track or the civil approach, it would permit a consideration of the competitive effects of the practice, it would remove the chilling effect or the over-inclusiveness aspect of it, and it would lower the burden of proof to civil standards.

If you were to look at decriminalizing the anti-competitive pricing practices and at retaining criminal sanctions for the most egregious cases, wouldn't that in effect achieve the same thing you have now? You would have the criminal option in the most egregious cases, or you would be retaining your criminal sanctions. If you included the right to levy fines along with that approach, would that deal with the over-inclusiveness issue, the chilling effect we have now in section 79?

Mr. R.W. McCrone: Well, when it comes to price discrimination and predatory pricing, these are already reviewable under section 79. And as I said earlier today, the price maintenance provision's been a very effective provision for us. We don't really take many cases under any of those sections. We have been very careful in the last seven or eight years to apply those provisions judiciously. We use a lot of alternative case resolutions rather than prosecutions to get resolutions to these matters quickly, without cost to us or to the private parties. As long as those resolutions are effective and we don't have repeat offenders, we find that is an effective way of dealing with it. I'd challenge anybody to identify a price maintenance case that we've taken in the last ten years that would not have pro-competitive effects. This really shouldn't be a problem.

In regard to predatory pricing, we've had three cases in history--three prosecutions. So I don't see that this can have a chilling effect on many people.

Mr. Andy Savoy: Well, in the past I've seen that in terms of vertical price maintenance and price discrimination, in a lot of instances they actually have pro-competitive benefits. They feel that section 79 may be too over-inclusive. I see that as a problem. Industry experts, competition experts, see that as a problem, and they see a solution in terms of recriminalizing the anti-competitive pricing practices, with the exception of horizontal price maintenance, and retaining all criminal sections, which I think is the best of both worlds.

You don't see that as a solution to address this over-inclusiveness problem? I guess you're telling me that you don't see over-inclusiveness as a problem.

Mr. R.W. McCrone: I don't see that it is over-inclusive. As I said, I would challenge anybody to point to a case in which they would consider it was inappropriate of us to deal with it under the provision. I just don't think they exist. I would fear that the success we've had in dealing with the gasoline industry would be lost, because this is the section we've used to deal with attempts to force prices up in gasoline markets. This is the section under which we've had eight successful prosecutions. If it is made weaker by adding substantial lessening of competition test or something, I can't see how it would possibly help us deal with this perennial problem.

Mr. Andy Savoy: But wouldn't decriminalizing the pricing practices while retaining the criminal sections still have the teeth you're looking for?

Mr. R.W. McCrone: I think we have that with respect to predatory pricing and price maintenance. In terms of those situations where we apply price maintenance, I think it's appropriate to have criminal sanctions. Where we think the situation is not particularly egregious, we have used these alternative case resolutions, which are effective. I don't see that a civil provision would improve the situation.

À (1035)

Mr. Andy Savoy: Okay. Thank you, Mr. Chair.

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

Ms. Torsney.

Ms. Paddy Torsney: No, thank you.

The Vice-Chair (Mr. Walt Lastewka): I have two questions I'd like to pose. Has the court ever considered the phrase “usual trade terms”?

Mr. R.W. McCrone: There have been a number of cases under section 75. It is one of the elements that has to be established. The tribunal would have addressed that phrase at the time. Whether it was an issue, whether there were some critical findings, I couldn't tell you offhand. But certainly it's been the subject of a number of cases.

The Vice-Chair (Mr. Walt Lastewka): In your guidelines, and for clarification, is there a definition of what you mean by that?

Mr. André Lafond: No there isn't, because we don't have any specific enforcement guidelines for section 75.

But in answer to your earlier question, I think we could look into cases that went to the tribunal, and we would be able to come back to you and indicate whether or not that particular issue was part of the case.

The Vice-Chair (Mr. Walt Lastewka): I want to just hitchhike on Ms. Torsney's question concerning mergers that have been investigated and so forth. Have there been mergers that have fallen within the Competition Act, the $35 million, the $400 million and so forth, that weren't reviewed because of time and resources and so forth?

Mr. Gaston Jorré: That depends on what you mean by review. Under the process, when something comes in you always look at it and try to determine quickly whether it is a case that's really straightforward and doesn't raise issues or not. The bulk of the notifications don't raise issues, and with most of them you can usually tell that after a relatively modest amount of work. We try to do that so we can save our resources for the difficult cases.

In some cases it takes more work before you can determine there's no problem there. So a handful of cases take the bulk of the time, and a lot of them take a modest amount of time.

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

Thank you very much. There are no further questions.

I have one more item to cover for the committee before you leave, but I'd like to thank the witnesses for appearing today and answering the questions. I'm sure if there are any more questions from the committee, we will ask you to come back.

I just want to table an item for the committee. Under the new procedure in the House, when a question is not answered in the House within the time limit of 45 days, the question is automatically referred to the respective committee.

There was a question that was not answered in the House and did not get answered within the 45-day policy. It's question 85, which was answered in the House yesterday. Therefore the committee does not have to deal with it.

If there are any other questions on the procedure, since this is a new procedure, I'm sure the clerk will be able to answer them.

It was my responsibility to bring that to your attention because it had not been answered. It was automatically referred to us, and we had to deal with it, one way or another, within five days. I too need to get myself up to date on the new procedure.

Since there are no further questions, we'll meet again next week.

The meeting is adjourned.