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]

Tuesday, December 4, 2001

• 0909

[English]

The Chair (Ms. Susan Whelan (Essex, Lib.)): I call the meeting to order pursuant to the committee's mandate under Standing Order 108(2), consideration of the competition law and policy. The themes for round table one will be merger review, consideration of section 96 and pre-notification thresholds; section 45, issues and options; pricing practices and abuse of dominance, issues and options; and special industries and special rules.

Good morning, ladies and gentlemen. Thank you for being here this morning. I think you're going to find the next two hours very interesting.

As you look around the table, I'm sure you will all see many familiar faces. The format for today's meeting is somewhat different from that of our usual meetings. I assure you that there has not been a realignment of membership in the parties, as you see them sitting around the table. This is a selective gathering, and it is indeed a privilege for us to have at this forum of some of the foremost experts in competition law in the country.

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Although the committee has developed a level of expertise in this area, these round tables will nevertheless be a good learning experience for members and will assist us in completing our June 2000 interim report.

In order to give both breadth and depth to these discussions, we have suggested several substantive themes as guidelines we recognize. However, some of these matters are of more immediate concern and obviously will attract more discussion than others.

It is possible that we may not be able to discuss all the items today. I suggest that we cover what we can in the allotted period, and we encourage you to be open in your comments in order to encourage debate amongst participants.

These hearings are being recorded for televising. We want these hearings to be a process of education for Canadians, not only in regard to competition law but also on the parliamentary process. Today's record will become part of the corporate memory of the committee. It will be of great assistance to us in forming future legislative proposals.

With these comments, I thank you once again for being here this morning. I note that we will have more time for informal discussions over a light lunch that will be served later in this room.

Let me start by inviting each of the participants to introduce themselves, after which I will invite comments from the floor on the first theme. If you wish to speak at that time, please signal the chair.

I'd like to go around the table and invite everyone to introduce themselves, beginning with Mr. Russell.

Mr. Robert S. Russell (Individual Presentation): I'm Rob Russell, with Borden Ladner Gervais.

Mr. Brent St. Denis (Algoma—Manitoulin, Lib.): Brent St. Denis, member of Parliament.

Mr. Thomas W. Ross (Individual Presentation): Tom Ross, of the University of British Columbia.

Mr. Walt Lastewka (St. Catharines, Lib.): Walt Lastewka, member of Parliament for St. Catharines.

Mr. Douglas West (Individual Presentation): Doug West, an economist at the University of Alberta.

[Translation]

Mrs. Jocelyne Girard-Bujold (Jonquière, BQ): Jocelyne Girard-Bujold, member of Parliament for Jonquière.

[English]

Mr. Calvin Goldman (Individual Presentation): Calvin Goldman, from Davies Ward Phillips & Vineberg.

Mr. Donald McFetridge (Individual Presentation): Don McFetridge, Carleton University.

Mr. Lawson Hunter (Individual Presentation): I'm Lawson Hunter, Stikeman Elliott.

Mr. Tim Kennish (Individual Presentation): I'm Tim Kennish of Osler, Hoskin & Harcourt, Toronto.

Mr. Jeffrey R. Church (Individual Presentation): I'm Jeff Church, Department of Economics, University of Calgary.

Mr. John Scott (Individual Presentation): I'm John Scott, from the Canadian Federation of Independent Grocers.

Mr. Joseph Volpe (Eglinton—Lawrence, Lib.): Joe Volpe, member of Parliament, Toronto.

Mr. John Sotos (Individual Presentation): John Sotos, Sotos Associates, Toronto.

Mr. Dan McTeague (Pickering—Ajax—Uxbridge, Lib.): Dan McTeague, a member of Parliament in the area around Toronto.

Mr. Deepak Obhrai (Calgary East, Canadian Alliance): Deepak Obhrai, a member of Parliament from Calgary.

[Translation]

Mr. Stéphane Bergeron (Verchères—Les-Patriotes, BQ): Stéphane Bergeron, member for Verchères—Les-Patriotes, in the Montreal area.

[English]

The Chair: And Mr. Bagnell, the member of Parliament from the Yukon, has also joined us at the table.

I don't know if anyone is willing to begin, but whoever would like to speak first, perhaps you could explain very briefly the topic you're speaking on. And since we are trying to do this for the general public as well, perhaps you could do so in layman's terms.

Mr. Joseph Volpe: You can always start on the left.

The Chair: Then we'll begin with Mr. Russell.

Mr. Robert Russell: Since I have that invitation, I'll start by commenting on section 45. Some of the activities you're well aware of are the round tables that have been conducted with various groups, and various reports have been submitted with respect to amending section 45 of the Competition Act. I consider this to be one of the foremost areas that we have to focus on today, because section 45 is the cornerstone of the Competition Act. It has been in our legislation probably the longest, originally coming out of the Criminal Code in its earlier rendition, and it certainly has attracted a lot of commentary from the bar and from economists about the need to reform our legislation.

I would say there are two things that are foremost in terms of considering proposed amendments to section 45. One is the history of enforcement in Canada. We have not had great success with this provision. Particularly because of some of the burdens and the wording of the section, it's made it much more difficult to use it against hard-core cartels in our legislation. Secondly, about that point, we are the only jurisdiction in the world that requires the level of analysis in order to prove a conviction under section 45.

Most jurisdictions, and I would line up Europe, the United States, Australia, New Zealand, South Africa, and others, have adopted a per se approach to hard-core cartel behaviour, while providing for a civil track approach—and it has been proposed in Canada—to deal with strategic alliances that may be important to our economy.

For example, in the development of a vaccine, it may be that two pharmaceutical companies need to collaborate in the development of the vaccine and need to fix the price for some short period of time in order to recoup the development costs.

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That sort of activity would be examined as a strategic alliance and may be exempt. It won't always be, unless the economics can establish that distinct need to recover those costs in a price-fixing arrangement after the fact.

The main point is that the primary objective of such an arrangement would be to develop the vaccine. Obviously, the public good is being furthered by that type of strategic alliance and we may permit it, under a new regime, to move ahead. All other regimes have looked at strategic alliances and come up with modifications, or, in the U.S. case, because it's a judicial-made law, exceptions for proceeding with such strategic alliances.

The second issue with respect to section 45 is the need to find a system that allows for a coordinated approach, if you will, with the global economy.

Strategic alliances and agreements between companies are now international in nature as much as they may be national, and unless we have a coordinated approach with other jurisdictions, we will find that Canada has some difficulties with certain companies doing business in Canada. That's true with a lot of the provisions of the Competition Act, but I would suggest with respect to this provision that it's very important we look at a coordinated approach to our competition laws.

Again, other countries have done that. They've looked at a way of trying to establish a coordinated approach to the equivalent of our conspiracy provision, and have moved ahead with amendments in order to further that objective.

The Chair: I'm wondering who else may want to jump in here.

Mr. Goldman.

Mr. Calvin Goldman: Thank you. It's a pleasure to be here and participate in this round table. I commend the committee for proceeding in this fashion, asking for what I understand to be our open and candid comments on these areas of possible review by the committee.

I would like to, with your permission, just move back one moment and talk about the generic necessity of ensuring, in order for the Competition Bureau and its commissioner to fulfil the mandate in each of the areas you are examining, that the committee also focuses appropriate time on ensuring that the bureau's resources and institutional framework are indeed as strong as they should be, so the mandate can be carried out in an efficient and effective manner.

I delivered a paper in June, which I would be pleased to make available, that speaks toward the whole area of institutional reform of the Competition Bureau itself.

I won't dwell on that point at this stage, but I do want to say we had a lively debate. Lawson Hunter and others were on the panel. This has been discussed earlier, and it's an area, I submit to the committee, that warrants consideration, in particular the issue of whether there should be a competition commission of perhaps three individuals because of the scale of the job that now lies on the commissioner's shoulders.

Having been there in the late eighties until near the end of 1989, when the mandate itself was unfolding—and the mandate was not as broad as it is today—I can assure you the challenges that face one individual at the top of the Competition Bureau are such that—without saying anything negative about the manner in which it's being carried out—they warrant consideration of a three-person body.

With respect to your particular subjects, I recommended earlier that in the area of merger review consideration be given to trying to define the time periods with statutory certainty so that business persons engaged in transactions, third parties interested in transactions and making submissions to the bureau, and members of the bureau itself know there are fixed time periods, as opposed to the current service standard guidelines that have come into play.

This would promote certainty. It would make the process in Canada somewhat analogous to what takes place before the European Commission.

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I have submitted for consideration a one-month initial review followed by a four-month timeframe. If, after the first month, the bureau does not go into a full-scale investigative mode, the merger is cleared. If they do go into that mode, then there is a fixed period—as there is now before the European Commission—of four months in which to complete the bureau's investigation. That would be followed by, again, a very specific period—which I've dealt with in the same paper—for tribunal proceedings.

As well, at this stage I do support what Rob Russell said about the importance of addressing section 45. I can tell the committee that having been one of the individuals responsible for the administration of the act under section 32, the predecessor of section 45, as it became known in the 1986 amendments, I've dealt with it for over 25 years in its various forms. I participated in a special council for the Attorney General of Canada in the Nova Scotia pharmaceutical proceedings, where we tried to bring clarification in the submissions to the Supreme Court of Canada in the early 1990s to the meaning of “undueness” in order to give broader certainty to the public and to the bureau. And my own view today is that despite all those good intentions, section 45 really does warrant priority consideration.

The reasons are spelled out in the three reports before the bureau. It is both under- and over-inclusive. I'm happy to elaborate. I'm sure you've heard it before. In addition to the bureau's resources and perhaps institutional reform, I would make that the other priority.

I have further comments, but perhaps I will pause right now.

The Chair: Thank you very much, Mr. Goldman.

Mr. Hunter.

Mr. Lawson Hunter: I just want to comment on section 45. You need to be careful, in my view, that you don't just help the lawyers. And this is a statement against my interests, obviously.

Mr. Tim Kennish: It may not even be credible.

Mr. Lawson Hunter: Tim says it may not be credible, therefore.

I think you really do need to be careful about this. Section 45, which is the longest section of the act, has been there over 112 years. This debate about uncertainty, in my view, has a tendency to be overstated, and I guess you need to weigh the current uncertainty against the future uncertainty. This, of course, is where the lawyers come in, because the more uncertainty you create about the law, the more work there will be for lawyers, and not necessarily in the interest of the business community.

I am concerned about the split that is being proposed between civil and criminal. Part of my reason for that... and for those of us who work in the trenches of this vineyard, if I can mix metaphors, is creating that sort of bifurcated approach puts an incredible amount of discretion and authority into the hands of the commissioner. If you think of a situation where there is a conspiracy that could go one way or the other, and the bureau is investigating it to decide which way to go, the commissioner would have incredible authority to say, for instance, if you don't do what I like, then I will throw you on the criminal side.

So I think you need to be careful about that, too. I suppose, if you're going to amend it, I would not take it out of the criminal law. I would leave it all criminal, and if something needs to be per se or not per se, I'd still leave it all criminal, which I think has worked reasonably well over the years.

There's another point I would like to make, and those around the table have heard me say this many times. When I was the director, or now commissioner, in the early 1980s, the government had tried for 20 years to amend the law unsuccessfully, and we decided to look at the three cornerstones of the law at that time—the conspiracy section, the merger section, and monopolization, which is now abuse of dominance. At that time we tried to write a per se offence, and we found that it captured so many things we didn't want to capture. We had a list of exemptions that went on for two or three pages because it captured too many things that you really didn't want to capture.

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The old example people used to give was that if you create a per se offence, you're basically saying that if I'm selling newspapers on the street corner—of course, nobody does that any more—and I say “You take this corner and I'll take that one”, an offence is created, which obviously is absurd.

Again, you need to be careful. The United States, as we all know, has a per se offence, but it is judge-interpreted. It is not statutorily defined. I think you also need to watch that the exemptions don't overwhelm what you're catching.

Finally, on the argument that the law isn't strong enough, when we analysed the cases back in the early 1980s, when we were trying to decide what we needed to do, we found that the government lost as many if not more of the cases because they couldn't prove agreement. It wasn't that they couldn't prove undueness; they couldn't prove there was actually an agreement. That is the cornerstone of a conspiracy section. You must prove agreement. So I think a lot of the discussion about the weakness of the law ignores the fact that the government couldn't prove agreement in the first place.

When we've had $150 million worth of fines under this section in the last few years, you need to be careful about saying that the law doesn't have sufficient strength.

The Chair: Thank you very much, Mr. Hunter.

Mr. Kennish.

Mr. Tim Kennish: Thank you very much.

Prior to 1976, of course, the entire Competition Act was based on criminal law. I don't think anybody's suggesting that is the best principle to operate on for the future, particularly in areas like monopoly. So I strongly favour reform of section 45, to narrow its criminal law focus to hard-core cartel behaviour activity, such as price fixing, customer and territorial allocations, and production curtailment.

I recognize there are some issues surrounding the proper definition of those terms, but in the more egregious situations there's not much doubt about what people are doing. If an area really warrants per se condemnation, this is it. We have per se provisions in other parts of the act, where I don't think they're warranted, but I do think they are warranted here.

So the reform that's been discussed will do two important things. One, it will provide for more effective resources or tools for the government to get after the most serious types of anti-competitive behaviour. Second, it will allow a more properly economic-based analysis of other horizontal arrangements that are not in this area to be considered and dealt with, wherein deficiencies can be taken into account.

It's recognized that our standard of undueness is a partial rule of reason, but it doesn't embrace any recognition of efficiencies. Efficiencies are one of the objectives of competition law, and are something that ought to be considered in determining whether or not some action or arrangement ought to be condemned.

Life is getting increasingly complex. It strikes me that it will be better for the administration of justice if in the future we can look at these arrangements the same way we look at mergers, with the full panoply of economic analysis that goes into the examination of merger arrangements.

In many cases, a strategic alliance is just a contractual joint arrangement similar to a merger. It may be dictated by tax considerations rather than any particular overriding purpose in having a contractual arrangement. So I support these reforms.

The Chair: Thank you very much, Mr. Kennish.

I will turn to Mr. Ross, who's written a lot about section 45 and the conspiracy theory.

Mr. Thomas Ross: Thank you, Madam Chair.

I'm happy to offer just a few remarks. I don't want to say they're on behalf of the economists here, but let me be the first economist to speak. And I'm not here to further the cause of lawyers and their billable hours, but I do favour reform of section 45. I have worked on this for a while.

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I don't need to say a whole lot more, because the reasons I have for this have been pretty well articulated by Rob Russell and Tim Kennish.

Mr. Hunter is quite correct that a number of problems the bureau has had with price-fixing cases in the past have been related to the difficulty in establishing agreement. There have certainly been prominent examples where the problem was evaluating the undueness of the lessening of competition. Clarifying this is the way to go, by breaking the law into two pieces—a criminal part without the word “undue” for naked price-fixing, hard-core cartels, and then a civil branch for the more complicated arrangements.

Again, there have been cases where undueness has been in the way. It's also reasonable to think about these arrangements between firms that fall short of mergers but are not hard-core cartel behaviour, like many strategic alliances and joint ventures. There's Rob Russell's example of a joint venture to develop a vaccine. A lot of these arrangements are wonderfully efficient on the one hand, but pose some certain competition challenges on the other. They need a more sensitive, nuanced evaluation of the sort we give to mergers.

It's somewhat odd that if two firms or competitors get together in a merger, they get a civil review where they get to talk about efficiencies, and there's a kind of cost-benefit evaluation of the proposal, yet if they do something less than a merger, they're subject only to criminal law, and people can go to jail and pay fines.

It seems to me the time is right for a reform of section 45, along the lines that have been discussed.

The Chair: Madam Girard-Bujold, do you wish to make a comment?

[Translation]

Mrs. Jocelyne Girard-Bujold: Madam Chair, I am very happy to hear Mr. Ross say that we are now at a stage where section 45 needs to be reformed. As Mr. Goldman mentioned, this section has now been in existence for 25 years. We have new means to obtain evidence today. At the time when section 45 was passed, there was only written evidence, but today, with the Internet and all of the new means of communication, we really need to amend this section, as Mr. Ross advocates.

Mr. Ross opened the door by saying that this section should be split into two parts, one criminal and one civil. I would like him to elaborate on his reasons for saying this is the direction the Competition Bureau should take.

[English]

Mr. Thomas Ross: I'm not quite sure what the question is precisely, but let me try to interpret it.

There is certainly a challenge, which many people have mentioned before, in drawing a line between behaviour that is subject to a criminal review and is clearly criminal, without the word “unduly”—a per se criminal offence—and the other side, where they are subjected to a more nuanced civil review.

Tim Kennish and I wrote one paper with just one proposal. There have been three or four others put forward. Our proposal was to focus on the question of whether the agreement was—we didn't use this language—in pith and substance price-fixing, or was any anti-competitive or price-fixing element only ancillary to some larger agreement that itself would not be found in violation of section 45. If it were just ancillary to a larger agreement, then the whole agreement would go down the civil track and be reviewed, very much like a merger. I think that is one possible approach.

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Others have suggested approaches based on whether the agreement itself is public. If it were a public agreement, it would get the civil review, whereas secretive agreements would be viewed as per se, illegal, and there are other approaches as well.

If we can split the review of agreements between competitors this way, we can get more direct enforcement of the core price-fixing provisions we really care about. We really want to stop naked cartel behaviour. At the same time, we don't want to have to worry about getting caught up in that aggressive anti-price-fixing campaign. We don't want to have to worry about getting caught up in strategic alliances and joint ventures.

A few years ago, the Competition Bureau issued guidelines on strategic alliances and joint ventures, to try to provide some comfort to the business community that they weren't on a witch hunt, looking at every agreement between competitors. I don't think the business community was very satisfied with those guidelines. They didn't find much comfort in them. Partly, I think, the bureau was tied up because they had a law that didn't allow them to do what they really would have like to do... what is economically sensible, in the circumstances.

So as I said before, the time is right for amendments to section 45.

Madam, I hope that answers your question.

The Chair: Mr. Russell.

Mr. Robert Russell: I have some comments in answer to your question and in response to Mr. Hunter, on a few of his points.

To understand the key elements for reform, it's important to note that although I hear Mr. Hunter say it's a gravy train for lawyers, I say au contraire; the gravy train exists today. Thank you very much if you hand me a section 45 defence case tomorrow, because I'll be working on it for the next four years, with a lot of hours put into it. It's one of the best types of cases to get today, because the statute gives me so many defences I'm going to have more than a lot of fun at it over the next number of years.

But let's look at the history of this section since 1980. A total of 51 cases have been brought and 29 were guilty pleas, because those cases were brought after successful enforcement proceedings in Europe and the U.S. We have to sit on the coattails of enforcement regimes elsewhere to get our convictions in Canada. That's the first point.

The second point is that of the 22 contested cases, three were successful. Is every Department of Justice lawyer or those retained from the outside incompetent? No. The provision is a criminal standard. It requires, beyond a reasonable doubt, the proving of all the elements. That standard should be maintained.

When we're going to go after hard-core cartel behaviour the standard should be met, but we shouldn't have to go into the economic effects. That's what every other regime in the world has done. Per se simply means if I engage in a price-fixing arrangement, you don't have to look to see whether it has an anti-competitive effect, with the huge cost of litigation that goes to that issue, because that is the main issue. There's either an agreement or not to prove. That's an easy case. It'll take you a week to prove that point, but spend the next four years trying to prove the economic effects. That's the reality of section 45 cases, when they go to court.

So on the per se approach for hard core, if you're going to fix prices in the business community, you have a per se provision that comes at you just like bid-rigging. This isn't new. If you bid-rig in this country, there's no competitive effects analysis; it's per se illegal. So that's the first approach.

The second approach is what Mr. Ross and others have pointed to. There will be arrangements that are not much different from a merger where we should look at the competitive effects to see if they're going to be permissible. That is a category that falls outside hard-core price-fixing, and things like that. Every other regime has done that.

On how we deal with the administrative issues and procedure elements, there are a number of models, but they're all very similar to what has been proposed by all the people around the table who have written on it.

Again, are we trying to invent something new? I say to Mr. Hunter, no, we are looking at the experience around the world, looking at the prosecution record in every other jurisdiction, and coming up with a model that adopts our traditional approach to criminality for per se offences, which is different from Europe.

In Europe, everything is civil and they have to look at block exemptions to see the big net that's put out, under article 81, to see what's not pulled in. We have maintained a Canadian approach with per se criminality for hard-core cartels, in the models all the people around this table proposed, but look to harmonization, in terms of other arrangements we believe we need, to look at the competitive effects.

To answer the question down at the end of the table, that's why we propose the tribunal must look at any of the arrangements where the competitive effects should be analysed. They are the specialized tribunal, which has been the other problem in the courts. They haven't the experience, they haven't the fundamental focus on competition issues to look at the competitive effects. If you look at the failures in those cases, while many of them failed to prove an agreement, it's because of the criminal standard.

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Secondly, the $150 million in fines recently collected is the coattail argument. We have collected $150 million in fines in Canada after other jurisdictions have enforced against those international cartels. We've done very well at getting guilty pleas on them, but I don't consider that to be a success of our statute.

The Chair: I'm going to take Mr. Goldman, Mr. Hunter, Mr. Obhrai, and then Mr. McTeague.

Mr. Calvin Goldman: Thank you, Madam Chair.

I have two further points on the merits of looking at section 45. First, I agree with Mr. Russell's comments that Canada in the past has been at the forefront of modernizing competition law. Certainly in 1986 we were able to hold up the Competition Act at that time in a very proud manner and point to a number of aspects of the legislation that really did bring it to the attention of other jurisdictions.

But one of the ongoing deficiencies continues to be section 45 since, as Mr. Russell said, it is out of kilter in relation to hard-core, naked cartels. It's out of kilter with other jurisdictions, and it's necessary for Canada, in its enforcement of this area, to work closely with those other jurisdictions. Business as well is increasingly transborder, and it will not be an affront to business persons to know that naked price-fixing in Canada is per se—full stop.

Secondly, as Yves Bériault pointed out in one of the three reports, criminal law should have clarity and predictability. Clarity and predictability are absolutely fundamental to the development and enforcement of a truly criminal statute such as section 45. In my view, and I think in the view of others who have written on the subject, we do not have the clarity and predictability despite all the good work people have tried to accomplish over the years.

I certainly respect what Mr. Hunter is saying about the nuances and the need to go at this very carefully to ensure it doesn't overreach and to ensure that the right balance is attained, but I also believe it is a project that can be accomplished with the efforts of this committee and all the people willing to participate as assistants to you.

The Chair: Thank you very much, Mr. Goldman.

Mr. Hunter, please.

Mr. Lawson Hunter: I have a few rebuttal comments.

On this business about efficiency and how it plays into agreements, you must recognize that every time you add—and I apologize to Tom and Don and the other economists—these notions of efficiency you create uncertainty and you create complexity. One of the virtues of the conspiracy section as it has been is that the courts have held that you do not take into account the benefits that might accrue to the parties in deciding what is criminal or what is not criminal.

So I think you want to be very careful before you throw that concept out. I don't disagree with the notion that there should be some things that are per se illegal. I'm just saying be careful that you don't make this so complex...

Again, I'll give you my view of the history of some of the problems we've had over time with the courts and with adjudicators. If adjudicators find... and this was, I think, the case when the merger law and the monopoly law were criminal in this country. When the government brought cases, the courts said “This doesn't look like criminal behaviour to me”, and found some way not to find people guilty. So courts have a way of being just and fair even though the law may look somewhat different, and you may question why people were let off.

So be very careful about that. In my view, if you want to split it between criminal and civil, I wouldn't add any notion of efficiency. I'd leave it the way it has been interpreted.

By the way, the commissioner, in a speech he gave in October, said he thought that paragraph 45(1)(b) creates a per se price-fixing offence.

• 0945

Rob, on your point about how long it takes to do a section 45, you've obviously found better ways of milking your clients than I have, because I don't find it takes that long at all. I find that in fact the business community is very responsible, and does deal with the bureau. If there are problems then they face up to it. That is what's happened in these other cases. So I think you're being just a little too glib.

The Chair: Mr. Hunter, we try not to have too many personal comments back and forth, and I don't want to debate whose clients do what.

We do have a number of questions, and I'm going to remind members that if you have a question or a comment, please be very brief, because we have to move on to a couple of others.

Mr. Obhrai, please.

Mr. Deepak Obhrai: Thank you.

I'm new on this committee. Since it's televised, we have a lot of people watching.

A voice: They probably fall asleep, actually.

Mr. Deepak Obhrai: Exactly, because all of them are lawyers here. Of course, there's no billing charge, but it's technical.

I have two questions. On the first question, I want to bring it down to the level of what people outside are looking at and want to know—that is, does the current Competition Act protect new airlines like WestJet and the others from a dominant carrier like Air Canada? Does the current regime do that or doesn't it? People are interested in that.

My second question is coming out of a point made here about the extension of the jurisdiction—

The Chair: Mr. Obhrai, we're trying to only do one question at a time with so many experts around the table. We're having rounds. It's not like we're having witnesses. So let's just take your first question here about special different types of industries.

I'm not sure if Mr. Hunter wants to respond to that, since he's here...

Mr. Deepak Obhrai: Do I get my second chance on WTO?

The Chair: We'll come back to that. But we have four areas we're looking at today.

Mr. Hunter.

Mr. Lawson Hunter: I appeared before this committee, as you know, last Tuesday on behalf of Air Canada. I guess my view is that the extent to which Air Canada has the cost and difficulty it has had in trying to comply with the special rules that have been enacted just for it as a result of the merger have... If you were on the inside and if you saw the difficulty and extent to which they have tried to comply with this law, I think you would come to the conclusion that the answer is, yes, it is effective, the commissioner is very vigilant, and Air Canada has struggled daily with trying to understand what they can and can't do under the current regime.

The Chair: Maybe I can pick up on that about the special industries and different types of groups.

Mr. Scott, would you have any comments on that? They don't necessarily have to be specific to airlines.

Mr. John Scott: I thought you were speaking about section 45, which I have little comment on except to agree with some of the speakers that sometimes putting that type of case before a judicial body—and I'm not a lawyer—that may not be familiar with a type of law creates more difficulties than it solves.

I have a number of comments in other areas, Madam.

The Chair: Actually, Mr. Obhrai's comments were more about whether the Competition Act talks about special industries.

Mr. John Scott: I understand.

The Chair: I just wondered if you had a comment about that.

Mr. John Scott: In terms of the application of the act, I think it's whether or not people are actually going to... I think the elements are in the act. I think the interpretations are very poor. I don't think you need separate rules for separate industries. But I do think you need clear and consistent application of clear guidelines.

Obviously I'm missing something here.

The Chair: No, go right ahead. Something is being distributed here.

Mr. Dan McTeague: It's Bill C-472.

The Chair: Thank you, Mr. McTeague.

Mr. John Scott: Do you want me to start again?

The Chair: Please start over, Mr. Scott. I apologize.

Mr. John Scott: All right.

Let me say about three or four different things that end up probably relating to the grocery business, because I spent a little bit of my life in that, but not my entire career, and it's not my entire experience with the Competition Act.

First of all, I'd like to agree with Mr. Goldman's observation that the bureau requires additional resources. In fact, in the preamble to the act I believe it implicitly states that the bureau should be given the resources to handle the mandate it's given. That's number one.

Number two is in terms of our experience with the bureau and its application in our industry, which Mr. Goldman has also characterized, as late as 1994, as an overbalanced industry. I wonder what he'd characterize it as today, since it's more overbalanced. What has happened in that particular industry is you have a situation where there is such dominance by so few players, not unlike the airline industry, that nobody is prepared to come forward and speak about it. None of the people at the bottom are prepared to come, and none of the people, including the manufacturing community, at the top are prepared to come and speak about it.

• 0950

In fact, a year ago, the Public Policy Forum conducted hearings across the country and I believe expressed surprise that they didn't receive more comments on the issue of abuse of dominant positions. The reason for this, I believe, is that the hearings, as this one is, are open, televised and on public record. That of course allows the individual, or the individual company, to be totally open to abuse, which has been practised in this industry, as in others. So it's a very difficult issue.

What I'd suggest has to be done here is you need very clear guidelines in the areas that you've identified here in abuse of dominance and you need to clearly examine a couple of industries.

The Competition Bureau policy doesn't necessarily understand our industry. I know when they started they didn't understand the airline industry. They get there, they need the resources to do it. Once they do that, they may well understand the need to refine the issues around abuse of dominant positions, predatory pricing, and merger activity.

Just as an anecdote on merger activity, you need consistency in application in that particular area as well. I'll back up on that from this issue. When the mergers in the grocery industry were approved a couple of years ago, we had a number of comments—and we know this industry pretty well—as to what the fallout might be. When they were ultimately approved, with what I would suggest a requirement for a very minimal divestiture that was almost laughable, we then went to Access to Information and directly to the bureau and asked for the economic model they used to approve the mergers. It doesn't exist.

So what you require if you're going to approve mergers in whatever timeframe, whether Mr. Hunter is talking about four months, or in that particular industry, a year, is you need clarity, Madam Chair, you need open, honest clarity that says, here is what justified this particular merger in this particular situation.

I've covered a lot of ground, but I have a lot to say. I'm sorry about that.

The Chair: That's okay.

Mr. Russell wants to respond.

Mr. Robert Russell: I want to respond to both, because I disagree with both Mr. Hunter and Mr. Scott. You might ask why.

And I should declare an interest here. I appeared before the standing committee and the Senate committee on the amendments that went through on the airline industry coming on a year and a half ago, on behalf of a number of international carriers.

The difference is, one is a partially deregulated industry and the grocery trade is not. You have a fundamental difference in competition law when you're looking at those.

What happened with the airline-specific provisions is that certain things were brought in to define abuse clearly for that industry. That was seen as necessary as a code of conduct because of the crisis we were in. People could say it was already covered by the abuse section before that. That's actually an argument that you may succeed with, that it was already covered.

What did come in that was new was the essential facilities provision. We were the only western country that did not have essential facilities. Essential facilities in basic terms is a provision that provides access to network industries that are deregulating so that competition can occur. So we have the electricity industry deregulating in Canada. We've had a whole bunch of deregulation, and you need, in some of those cases, special rules.

Germany brought them in. Other countries brought them in to deal with deregulation. So at least some of the airline regulations were necessary. The question is, are they good enough?

Obviously the Canadian airline industry is in huge crisis at this moment, and whether or not we've had an effective competition policy to deal with it has to be balanced against transport policy, because when you're partially deregulated, it's not one or the other that necessarily deals with the issue.

You talk about groceries; I find myself here today in the country that has the lowest food prices of any western country. That's based on a Washington study, not a Canadian study. We have the lowest hours of work, in any nation, for the food basket.

• 0955

Now, the problem is, you have a fully competitive industry, so what happens is that you go to very low margins. Supermarkets make less than 1% of what flows through. It's become a volume business; it's based on commodities. We don't care where we buy bananas. What happens is it pushes that efficiency right down the stream. The farmers now say that maybe they're not making enough for their wheat. That's what happens.

What you have here is the intersection between two forms of government policy. You don't amend the Competition Act to deal with proper policy for farmers in this country and for small business incentives. That's a mistake, because the Competition Act has done what it's supposed to do when it comes to the grocery trade.

In the Annapolis Valley—and I've pointed this out before—what happened was that two big players, Loblaws and Sobey's, finally went in there after a small, family-run business had dominated that valley for years. Food prices were 20% higher than they were in the rest of the country. The big boys went in and there was a price war; there were casualties. Prices came down 20%. That's eight years ago, and they're still down there. So when it comes to competition policy, you have to ask what you want.

Compare that, having the lowest food prices in the world, with the price of the ticket to fly me up here this morning, almost $800. Two years ago I was spending just over $400 for business class. I no longer fly business class because it's now over $1,000 to come to Ottawa from Toronto. There's the contrast—a partially deregulated industry where there isn't enough competition and a very efficient industry where you have the lowest prices for consumers. That's what it's all about.

We're here today talking about competition; we're not talking about farmer subsidies or things we have to deal with to balance our agricultural policy in the country.

The Chair: Mr. Kennish.

Mr. Tim Kennish: I'm hoping we'll get the chance to come back to section 45, because I'd like to talk about it further.

On this point, as has been stated many times, the Competition Act is a statutory general application. I'm not sure it's still true, with specific provisions now dealing with travel agents and so on, but I think it should be. There are industries that warrant special treatment. To the extent that they are regulated, there is a principle of regulated conduct, which is somewhat uncertain in its operation. I think it would be helpful if there were clarification of its operation, but to the extent that an industry is regulated, it is withdrawn from the coverage of the act.

I think the theme or principle behind the Competition Act, which is that the competition as a process is going to generate tremendous benefits, is a valid one that applies across industry segments. I have not been persuaded in looking at any of these particular areas that this isn't a valid approach that should continue to operate.

So I'm not in favour of specific industry regulation or industry treatment within the competition sector, but if it's perceived that an industry does require special attention, then legislation or specific policy approaches by government in those areas are appropriate. To that extent, the Competition Act wouldn't apply.

The Chair: Mr. Sotos.

Mr. John Sotos: Thank you, Madam Chair.

I'm neither an economist nor a competition lawyer—

Mr. Joseph Volpe: Some redeeming qualities.

Mr. Deepak Obhrai: And no billing.

Mr. John Sotos: No billing today.

I bring a slightly different perspective. My experience is in the area of franchising. You may want to view franchising as a special industry or a distinct industry.

Franchising represents 40% of retail sales in Canada, yet there isn't a university course, to my knowledge, that studies or follows franchising, and certainly there isn't a law school in Canada that teaches a course in franchising. It seems to be a bit of an orphan in commercial life in Canada. And yet practices such as refusal to supply, exclusive dealing, and tied selling are commonplace; it's the bread and butter of franchising as it exists today. There's a lot of abuse.

Franchisers are able to require franchisees to purchase products and services at above-market prices. That's something franchisees have to do, because they've sunk huge investment in their stores or in their businesses. They've paid an up-front fee, they've bought equipment, they've bought leaseholds. Then the franchiser suggests that they purchase exclusively from the franchiser or its nominated suppliers. Well, they either do it or they risk termination. Given the size of the sunk investment that's been made, franchisees have really no alternative but to comply.

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I think Canada is unique among western countries in that it has a provision in the Competition Act that exempts certain forms of tied selling. It makes legal what otherwise would be illegal. That's absolutely anti-competitive; it's not required. I'm referring to paragraph 77(5)(d) of the Competition Act. I question whether it's appropriate for anyone to tie the requirement to purchase non-proprietary products from a particular source if you have to pay anti-competitive prices or terms to do it.

I think some consideration should be given to the definition of “market” with respect to franchising. The market should be limited or defined in the franchise system as opposed to everybody else. Private right of action is something that doesn't exist today.

A voice: That may change this afternoon.

Mr. John Sotos: That may change this afternoon, yes; I certainly hope so. Other countries—Australia, for example—have a private right of action. In Canada, to date, that doesn't exist.

Transparency in pricing is pro-competitive and useful, yet in franchising it's anything but. Anybody investing in franchising today has no idea what they're really buying. You have two components in terms of your payments. You pay a royalty fee, which is fixed across the board, and then you have all these secret commissions and other profits that are made by many franchisers, which vary from system to system. Franchisee investors have no idea what they're buying and can't really compare the various offerings.

One of the objectives of the Competition Act is to have healthy competitors. I think in order to have healthy competitors they must be around and they must be strong, not on their knees.

The Chair: Thank you, Mr. Sotos.

I have a number of comments on the special interest as well, before we go back to questions and section 45.

Mr. Hunter.

Mr. Lawson Hunter: On this special industries business, there's a constitutional issue we need to be aware of. The fact that airlines are in the Competition Act, I think, has to do with the fact that the federal government has jurisdiction over airlines, as it has jurisdiction over banks. There are sectors of the economy where the federal government has jurisdiction over that industry.

The Supreme Court decision that upheld the constitutionality of our new bill in the 1980s was civil powers. It's based on Tim's notion that it is a general law of general application. You have to be very careful. If you started regulating the grocery trade, I think you would face a constitutional challenge.

On the other hand, I probably don't share the view of some of my colleagues in that I do think it is important to have an interpretation of the act that applies to different industries, but I think it's going to be difficult to do legislatively. I think the commissioner is going to have to do it through guidelines where he says this is how he's going to interpret competition in this business and give the business community some certainty through that route. Otherwise, I think you'll run the risk of having the law declared unconstitutional.

The Chair: Professor McFetridge.

Mr. Donald McFetridge: Thank you. I'd like to speak to a couple of the points that have been raised. First, though, I'd like to commend the committee and its staff on its interim report. I think it's well done. In general, I agree with virtually all of it, although we can quibble on a few points here and there.

I also would like to commend the committee for its initiative in taking on reforms or changes to sections 50, 61, and 75, which have needed attention for a long time. I'm glad the committee has taken note of those recommended changes. More could be made.

With respect to two issues that people have been talking about, most of the concern about section 45 has been focused on the per se criminal offence, and there's been a lot of discussion about that. Then on the other side of it, we'll just move all these other types of agreements, which are not principally price fixing or market allocation, over to the civil side, and we'll have an efficiency test. I think Lawson has already alluded to the problems involved here.

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The analysis of efficiencies in competition law in this country is in a state of disarray, to say the least. I think I would want to encourage the committee to think very carefully about the type of efficiencies test you're going to recommend—the way you'd want to see this analysed by the tribunal—because we know what's happened here with a vague efficiencies test. We've had 15 years or more of toing and froing on it, and still don't know if we have anything we can work with. So I would like to see you focus, if you're going to go for the section 45 reform, on what constitutes the civil test.

The second question that was raised here was, does the Competition Act protect WestJet? My own view is that the Competition Act is intended to and should protect the competitive process, and it is intended to ensure market conditions where a good company like WestJet can survive and do well.

Whether it should protect WestJet per se is an open question. I think probably it should not be protecting any individual company. It should not focus on rescuing or making sure that no company gets bruised from competition. I don't think that's its purpose. I think attempts to go down that road are very ill-advised.

With respect to some of the specific issues about industry-specific legislation, I think the Competition Act should be general. In terms of my sense of what the committee ought to be doing, my recommendation is to focus on general principles. I think there are plenty of general principles here to debate that are at issue and that parliamentarians can express their opinions on. I don't think special treatment for special industries, or special considerations of the details of legislation, are perhaps the best use of the committee's time.

Finally, with respect to guidelines and clarity, the Competition Bureau has just come out with abuse-of-dominance guidelines. This guideline exercise has been going on. Our experience is that the guidelines are routinely—and perhaps “routinely” is too strong a word, but I'll use it anyway—ignored when it comes to a specific case. We have the example recently of the Competition Bureau abandoning its merger enforcement guidelines when it came to arguing the Superior Propane case.

We have other cases in which the tribunal has taken no notice of guidelines. It's good to discuss these issues and to try to work out scenarios and see what we would do. But to think that guidelines and the publication of guidelines will necessarily result in less uncertainty... I think only jurisprudence can do that, and we don't have a heck of a lot of it.

The Chair: Thank you.

Professor West.

Mr. Douglas West: Thank you.

I have a number of comments on a number of topics that were discussed this morning.

I spent a year at the bureau in the T.D. MacDonald Chair in Industrial Economics, which is a revolving chair where they bring in academic economists to work with the bureau on policy matters as well as to work on specific cases and provide advice to the commissioner.

In my year at the bureau a few things struck me. One was the importance attached to guidelines, but also the difficulty in working on the guidelines with the resources the bureau had available at the time. When I was at the bureau the intellectual property guidelines were just being finalized and the abuse-of-dominance guidelines were in the works. There were revisions going on at that time to the predatory pricing guidelines. There was talk of working on a strategic alliance guideline as well. As well, there was a discussion, which has been going on for years, I think, on revising the MEGs.

So economists as well as other individuals in the bureau are working on a number of guidelines, but they're very resource-intensive in terms of the time it takes to work on them as well as to take the guidelines, once they are issued, out to the public for consultation purposes and go through that entire process. It's time-consuming, and a lot of resources are required to pursue it.

Not everything gets done in a timely fashion, because of the resources that are available. In particular, the merger enforcement guidelines have not been revised yet, and they're now about ten years old.

So that's one concern. The other concern is on the resource side, and it has to do with the enforcement in particular cases.

• 1010

It was my experience that one or two litigated cases by the bureau, especially if they're large cases, could pretty much wipe out the litigation enforcement budget, and that it doesn't take very much to basically use up the available enforcement budget for the bureau. This means the bureau has to be extremely selective in terms of the kind of cases it can actually take on, especially if they're likely to be cases that get complex in a hurry.

I'd like to speak in favour of the guidelines approach, even though I've noted that they are time-consuming. It takes a long time to write them—to draft them, to get consultation, and eventually put them into the public domain.

I think guidelines are the appropriate place to deal with industry-specific kinds of issues. I don't think amending the act to deal with industry-specific issues is necessarily the way to go. There are too many industries, and it would require too many amendments to the act to handle all of them.

Guidelines can be much more focused on particular industry concerns and how specific sections of the act can be brought to bear to address those concerns, so I think issuing guidelines is the way to go.

I think we have only one example where the guideline has been written to address industry concerns. That's the draft guideline on the airline regulations, which is still out there—it has not been finalized yet—until the current litigation involving Air Canada has been completed.

A voice: There are also the bank MEGs.

Mr. Douglas West: Oh, yes, the bank MEGs; that's right. There were merger enforcement guidelines with respect to banks that were issued prior to the bank merger announcements. That's right.

Let me make one other short comment on the essential facilities amendments that were made to section 78. That is an airline-specific provision, so it doesn't deal with essential facilities problems in other areas.

Section 78 has a list of anti-competitive acts that is non-exhaustive, so it is open to take an essential facilities issue, under section 79, to be one of the unspecified acts in section 78. That remains a possibility, although there is still the possibility of making it an explicit anti-competitive act dealing with essential facilities.

The Chair: Thank you.

Mr. Scott, you have a comment.

Mr. John Scott: I'm sorry, I can't let Mr. Russell go unchallenged there.

First of all, I want to go back to Mr. Hunter. Just to be really clear, I'm not looking for guidelines for this industry. I think I said that off the top. And, no, we don't want the industry any more regulated than it is through the supply management sections. That's difficult enough.

The Chair: We're not going to go there today.

Mr. John Scott: No, we're not.

Mr. Russell, I don't know you, but I compliment you on your knowledge of the industry. I make speeches on the efficiency of this industry all the time, all over North America and in fact elsewhere in the world. I'm very proud of it, and very proud of being a part of it.

Notwithstanding that, some of the ways in which the industry has grown may not at this current time be to the benefit of the long-term sustenance of the Canadian economy, particularly in Atlantic Canada on the distribution side, and, I would submit to you, elsewhere in the country in the small and medium-sized manufacturing enterprises in the food industry that want to supply the supply chain. They're not getting in. It's very difficult for them to do so.

I'd suggest there's quite a squeeze there. So in the pell-mell effort to squeeze the efficiency down as far as you can to the farmer, you make it uneconomic for the basic units that have been developed—people who have put their lives on the line to develop good, strong products that you and I have grown up with and been very proud of.

You know what? They're pretty efficient operators, sir. They're very efficient operators. At the other side of the spectrum, yes, indeed; on our side of it, our people get squeezed, and to varying degrees, depending on where you are.

So it's not okay. Yes, it's very efficient, but there is a point where somebody has to have a look at this and say, “Now, just wait a minute. How does this really balance out for the long-term good of the Canadian economy and Canadian society?” The consumer gets a deal today, but every economist in this room will tell you what happens when only two players are left standing at the end of the day, sir.

The Chair: Mr. Russell can respond, and then I've got Mr. Ross.

Mr. Robert Russell: I think you raise a very important discussion, but my point is whether the Competition Act is the proper realm for dealing with this.

• 1015

Let me tell you, to put special rules on retailers in Canada, to simply put a tax on the retailers in place of a subsidy that might be needed in terms of various sectors of our economy, is a mistake. It's a mistake if you look at the landscape of retail in this country.

Look at the landscape of retail and what's happened over the last 20 years. It might be interesting for everybody to know that Wal-Mart is the biggest grocer in the world. The fact that it hasn't gone beyond 10,000 square feet in a store—and 10,000 square feet is a small grocery store—does not mean that we don't have the same onslaught of American competition in this country.

So be careful where you place the tax. I don't say to you... and SERCA is what you're referring to on the east coast. I've spent 20 years in the industry, from the legal side, and that's why I'm responding to it. You do have high concentration in SERCA, which is distribution to hospitals and different things, which was a potential artifact of a merger because it was part of a bigger piece.

As far as I understand from public information, there were attempts to deal with that issue by divestiture and there was an interest. Sometimes those things happen.

I wasn't involved in what you're talking about, just so you know; that was a different client for somebody else in this room, not for me.

The Chair: I'm going to move on, Mr. Russell, because you kind of jumped in there. I have an order here, so I'm going back to Mr. Ross, then I have Professor Church and then we'll come around again.

Mr. Thomas Ross: Thank you, Madam Chair.

I'll be very brief. I simply wanted to add my voice to those who have suggested that we probably don't want to put in a lot of special provisions in the Competition Act for special industries. Although every industry, of course, is unique in some way, by and large the kinds of competition problems are fairly generic. You have problems of price fixing and you have problems of abuse of strong market position. You worry about mergers in any kind of industry, so in principle these problems come up or could come up in any industry.

As Mr. Hunter and others have suggested, to the extent that you need a more precise statement of how the Competition Act would apply to certain industries, my preference would be to do that through guidelines that can spell out the commissioner's interpretation, within the context of a specific industry, of how the basic elements of the Competition Act would apply. That said, I do take Don McFetridge's point very seriously that the commissioner had better be prepared to follow his or her own guidelines, or they're not going to mean very much. They will not provide very much guidance.

Thank you.

The Chair: Thank you.

Professor Church.

Mr. Jeffrey Church: Thank you, Madam Chairman.

I'd like to echo some of the comments made earlier that the interim report is a quite remarkable document. I commend the committee for considering the reform. There are a couple of points I'd like to make.

First, I as well as Tom, Don, and others in the room—Roger, in the back—have all been at the bureau as T.D. MacDonald chairs, and I think all of us have this frustration that the bureau is terribly underfunded, that its fiscal capacity in terms of getting the resources it needs to enforce cases is not there. That means there are certain parts of the act that, on a case-consideration basis, on a case-selection basis, are simply not pursued.

The second point I'd like to make comes back to one of the questions the honourable member of Parliament asked earlier about what was per se and what was not per se.

I think the kind of approach that should be taken is, can you identify types of behaviour that essentially have no redeeming social value, that are just—

A voice: Yes, it could be the House of Commons.

Voices: Oh, oh!

Mr. Jeffrey Church: It's naked cartel-fixing and those types of things. When you think about special industries and the special industry approach, the Competition Act is a very broad framework for analysis in terms of things that we think lead to increases in market power—substantial lessening of competition. When you start talking about special industries and special projects, you really must be saying something to the effect that in these industries we think some sorts of behaviour are so egregious that we need to have a special rule about it, which makes it per se in the legislative framework as opposed to having the flexibility to apply the framework of competition law and analysis.

In general, I think that's a very bad idea. I think we have a very good abuse-of-dominance framework that applies to most industries, and the merger provisions could apply as well. The abuse guidelines that have just been issued are very well done. They're exceptional. The bureau is to be commended for that perspective.

Finally, I want to come back to efficiencies a little bit, and the two-track approach. I think there are lots of kinds of arrangements that can be made by firms where we want to have a civil approach, where we want to have a remedy to say to them “Stop doing this”—without fining them, without going through all of the “beyond a reasonable doubt” stuff. We want to be able to say that on a balance of probabilities, we think these kinds of arrangements you've entered into are not, in general, efficiency enhancing.

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So we want to have a civil track, and we want to have in that civil track an efficiency defence where we get a discussion about what the effect is on wealth creation in the economy.

Finally, Don has brought up a problem we have with the efficiency defence on the merger guidelines. I think it would be an appropriate time for the committee to readdress section 96 and have a look at what it means, at how it should be applied, and provide, perhaps, some guidance from Parliament's perspective in terms of what the efficiency test is supposed to be in a merger context.

Thank you, Madam Chair.

The Chair: A number of members of Parliament also want to ask questions. I'm going to try to do this somewhat strategically in that you're allowed to ask a question, and only one, without a long preamble.

Mr. Dan McTeague: That's okay. I know you're looking at me, Madam Chair.

The Chair: Mr. McTeague.

Mr. Dan McTeague: Professor, you mentioned the efficiency defence. You may or may not know that my bill, Bill C-248, is before the House of Commons. It's votable. There seems to be some reticence over proceeding with it until a tribunal has again come to making a final determination in the case of creation of a potential dangerous monopoly.

My question is to you and to all members. I've circulated a copy of Bill C-472. As most of you know, we've gone through gas, groceries, vitamins.

Thank you very much for that introduction, Robert, because it seems to me very interesting that Canada has received a vicarious—

The Chair: Question?

Mr. Dan McTeague: I think it's important that I be able to set the framework, Madam Chair. I realize a lot of good things are here, but we wouldn't be here had it not been for some of the efforts that have been crystallized in some of the bills and some of the work done by members of Parliament.

On Bill C-472, would you care to comment, positive and negative, what you like about it, what you dislike about it, as a template that has already been half-used in Bill C-23 with respect to section 45?

The Chair: Mr. Russell, he seemed to be looking right at you.

Mr. Robert Russell: I was commissioned to do a report for the commissioner on section 45, and in fact reviewed the bill and the paper. It is on the bureau's website, so I won't go into it at length.

I think what most of the people around the room contributed to the review of that was what I will call “tweaking”, looking at procedural issues and coming up with a model that sort of evolves from the bill. But I don't see it as a major departure. There were some things we thought needed improvement in the bill, and I would see it as part of that process as opposed to being critical of the approach taken.

The Chair: Mr. Kennish.

Mr. Tim Kennish: Not to prolong this, but in regard to section 45, Mr. Hunter suggests the enduring legacy of section 45, which we shouldn't disturb, is the certainty that comes out of its being in place for 112 years. I have to say, I don't agree.

I grew up reading about the Howard Smith case, the Aetna insurance sugar case. Then we had the Supreme Court of Canada and the Nova Scotia pharmaceutical case, where there was a very elegant statement of the law, but it's tremendously hard to apply when you read through its quite confusing concepts. Even the lower court, when the case was returned to it, did the unexpected and acquitted the accused in circumstances that are still something of a head-scratcher.

So I don't think there's a lot of certainty in section 45 and I don't think that's a reason for preserving the approach of a single statutory provision.

I don't think the strategic alliance bulletin provided the comfort the business community was looking for, because it was very evident that there is an overlapping potential application of not only the merger provisions but also the criminal provisions of section 45 potentially, and even joint dominance provisions.

Reference was made to the difficulty we've encountered in applying the efficiency defence in section 96 of the mergers provision. I agree. What I would hope is that efficiencies would simply be a factor that could be assessed as part of the competitive effects of an agreement that is being judged for the purposes of deciding its legality.

A final point, because I don't know if this will otherwise come out, is that there have been a number of suggestions that the salvation for some trade-restraining agreements would be the public notification of those agreements that would enable the parties to them to be assured that they wouldn't be challenged.

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As a policy matter, I think it's undesirable to have agreements that are in contradiction to our general principles simply on the theory—a naive one, I think—that public disclosure of them will deter people from dealing with people who have entered into these kinds of restrictive arrangements.

The experience in other jurisdictions will evidence the fact that lawyers are very clever in the way they write up these arrangements, and describe them using obfuscation and confusing legal documents or burying the filings with the appropriate agency such that people really don't have a good understanding of what in fact is being disclosed.

Thank you, Madam Chair.

The Chair: Mr. Hunter, please.

Mr. Lawson Hunter: Mr. McTeague's on the phone, so I'll wait until he's off. There's a point I wanted to make about his...

On Tim's point about notification, I couldn't agree more with that. In the one jurisdiction that clearly had that system for many years, the U.K., it was a hopeless disaster, and they are now moving away from it. It won't happen. It reminds me of specialization agreements we put in the act in the eighties that allow you an exemption through the conspiracy section. Nobody has ever used it, and some of the things that are in your bill would, I think, suffer the same fate. No one would ever use them.

On your bill itself—and again, we don't have time to do it now—I think subsection 45(1) is both over- and under-inclusive. I think in paragraph 45(1)(a) the word “minimum” is a bad word there. It's too restrictive. On the other hand, I think paragraph 45(1)(d) is so open-ended that it potentially makes all kinds of things per se illegal, which I'm sure you didn't intend.

I think that at another time maybe we could have a discussion about how you might make it a little tighter than it is.

The Chair: Thank you, Mr. McTeague.

Mr. Bagnell.

Mr. Larry Bagnell (Yukon, Lib.): My question is for Mr. Hunter. It's related to the debate you were having with Mr. Russell on the time to prosecute and the irreparable harm.

If you go into Wal-Mart and steal a one-dollar item, it's not going to hurt their economy, but the fact is, it's still a crime; it's the principle of the thing. Unless it's exempt, price-fixing violates a principle, so why should you have to prove the economic harm?

Mr. Lawson Hunter: What I'm saying is that in principle I don't have any difficulty with the notion that making price-fixing a per se offence is the correct policy. What I do think is that we're closer to that than people think. Most of my clients, I know, really operate as if that were the law today, because they know the risk of an inquiry, let alone a prosecution, is so great and so harmful that they don't do it. I don't disagree with that in concept.

My concern is that you do have to be careful that you don't catch things you really don't want to catch. That's the debate you have to have. But I don't disagree with it in principle.

The Chair: Mr. Strahl, you had a question.

Mr. Chuck Strahl (Fraser Valley, PC/DR): Thank you, Madam Chair, and thanks to all the panellists for coming today. This is a good format. I like the give-and-take you folks have been so free with. This helps us all to learn these issues better.

In general, I think, framework agreements should ideally not be industry-specific. That's why there are framework agreements on competition law. But the political reality is that right now the airlines have found themselves caught in the crosshairs, because it happens to be the political issue of the day. If it were a couple of years ago it would be banks; we'd be dealing with bank-specific stuff here at some length. We also deal in the reality of the political world.

This is specifically for you, Mr. Hunter, though I'm interested in anybody's intervention on this. The government has created a bit of a monster here. And I'm not talking about Air Canada...

Voices: Oh, oh!

Mr. Chuck Strahl: You see, the problem we end up with is that with government regulation and government interference in the free market system, we create obligations for Air Canada, for example, to have labour agreements that specifically exclude it from doing something the marketplace might otherwise demand.

Canada 3000 got caught in all kinds of vortexes here, but they also specifically got caught by having to fulfil obligations that were forced on them by regulation.

• 1030

The problem we end up with is an industry that is heavily regulated in a bunch of ways with unforeseen economic impacts on the general industry but also specifically on Air Canada. Now we're trying to find out whether we need industry-specific solutions to this mess that's been created, one that has driven six other airlines into the dumpster in the last couple of years.

The question is, do we need industry-specific stuff to get us out of this mess? We've come from a heavily regulated creation, a government abomination, to a halfway house of quite a bit of regulation, trying to get it more free market, and are hopefully moving to a free market system that doesn't allow any abuse by one dominant player.

Many of us say that if we don't do something specifically, then Air Canada is going to rule the skies, because they'll just drive the... Unless we find this free market solution, there'll be nothing left to save. Do we just count on the commissioner to come up with guidelines or do we... And I'm not sure if this has been suggested. Is it at the discretion of the commissioner? Do we need guidelines that are industry-specific or should we just ask the government to get out of the way and let things happen more broadly?

The Chair: Mr. Hunter.

Mr. Lawson Hunter: I think you're absolutely right about what's happened. This is one point where I'll agree with Rob today, that in the airline business, trying to be semi-regulated and have the market operate does really create incredible problems; it clearly has done so in this industry.

I also think the government, maybe more particularly the transport department, created an expectation that they were going to look after this, if you will, when the merger of Air Canada and Canadian came about, a deal that in my view was orchestrated by the government. Once the government has created this expectation, it's very hard to withdraw from it.

If you look back to the early nineties, the transport department didn't do anything about the airline business. The merger issues that happened then were handled by the bureau. I think you're absolutely right; you either have to go in and regulate the business—and if you're going to regulate it, you shouldn't be regulating just Air Canada—or you're going to have to stand back and say “This is a dynamic business, and people are going to enter in, they're going to leave, and the chips will fall where they may.”

Unfortunately, at the moment we're in this really untenable halfway house, and something has to be done to break us out of this log-jam.

Mr. Chuck Strahl: With the commissioner?

Mr. Lawson Hunter: It's either that or you regulate the whole industry and put it back under the CTA.

The Chair: Mr. Strahl, we have a number of people who want to respond.

Professor Church, please.

Mr. Jeffrey Church: Airlines are interesting. In most industries when we move from a regulated industry to a deregulated industry, we pay particular attention to trying to set up government policies and regulatory rules that will allow competition to thrive. In particular, when you look at telecom or other industries, we've tried to put some constraints on the dominant firm, the incumbent, and tried to make it possible for competitors to come in.

It's my impression that we didn't do that in airlines, that in fact a dominant firm, Air Canada, had preferences under government policies as a matter of course, and that those things were not corrected or neutralized when we deregulated many years ago. It's not surprising that we ended up in this situation where we had one favoured firm that had routes and financing and other kinds of things that were preferential for it.

To expect the Competition Act and the competition authorities now, 12 or 15 years later, to be the instrument that cleans up this mess... I think they're the wrong instrument. It's transport policy; that's the problem. It's not with the Competition Act that we should be trying to clean up this major structural problem. That's not what the Competition Act is for.

In general, we have this problem that when we move from regulation to deregulation, the regulator is involved, and it takes an active role in making sure that the right policies are in place to facilitate competition. We haven't had that in airlines.

I don't think you should be looking for the commissioner to save Canadian consumers in this. You should be looking at the government, at government policy, and at Transport Canada. I think that's the appropriate place to start.

The Chair: Mr. Russell.

Mr. Robert Russell: I have to say, I disagree with both Lawson and Professor Church on this front. First of all, government policy is not the reason for the problems we're having. I have to say, the minister has done what he can within the framework of an international regulatory scheme. This is not a made-in-Canada regulatory problem. We can't unilaterally allow cabotage and other things in Canada easily without knowing the effects.

• 1035

So when Air Canada says—and it's not normal for me to defend them—you can't allow cabotage in their market without negotiating with the U.S., for example, to permit Air Canada to fly between cities in the U.S., this is a very difficult area. Transport policy generally does have problems with competition issues.

Take SCEA, for example. You may not be familiar with this, but we have a little piece of legislation called the Shipping Conferences Exemption Act that completely exempts section 45, and shipping conferences are allowed to fix prices around the world. That still exists—it's repugnant to competition policy—because all the nations of the world, going back to when England was an imperial naval and shipping power, have these statutes sitting around. Transport policy and competition issues are very difficult to resolve.

I just want to make sure I'm not on the record as favouring industry-specific provisions, but what I think happened here, and the reason I and my clients supported them, was that we needed changes in our Competition Act because of the crisis in the airline industry. The provisions that went in, though, were really twofold.

One was to deal with predatory pricing and the definition of “cost”. Every case in Canada has failed because cost isn't properly defined. So there was an attempt to deal with the wording of the statute to deal with that issue.

Second was essential facilities. I don't believe... and I was the proponent on that provision... essential facilities should be in the act to deal with any industry that has structural issues that require that type of provision. That's why it was brought in worldwide. In Germany it wasn't brought in to deal with the airline industry; it was brought in to deal with deregulation of electricity. Industry is another thing.

So what I would actually urge the committee to consider is to look at the airline-specific regulations we have, and look at them for general application. It just happens to be that crisis precipitates change. That's happened before with the Competition Act, and it's now happening again. But we shouldn't leave it like that. It shouldn't be that Air Canada is bound by special rules, but the act should be able to deal with any conduct we need to deal with in a partially deregulated industry.

The Chair: Mr. Goldman, and then Mr. Church.

Mr. Goldman.

Mr. Calvin Goldman: Thank you.

I want to support the broader statement that Mr. Hunter made in the latter part of his remarks, and that is that competition legislation as it exists in many parts of the world is designed to be a protector of free markets—a referee, so to speak—not a regulator. Regulation is done in industry-specific statutes, and when you mix the two you risk creating not only a hodgepodge but also a series of matrices that may not be effective in accomplishing either generic goal.

So I do want to raise this concern about going into too specific industry-based regulation in respect of any particular industry in Canada through competition legislation. If a market doesn't appear to be functioning in an open and free manner, and that would include not having barriers to entry at the border both ways—that's just one example of an impediment to a free market—then I support what Mr. Hunter said; parliamentarians should give some consideration to the merits of a properly regulated market for all industry participants, not just one.

Thank you.

The Chair: Mr. Church.

Mr. Jeffrey Church: I'd like to respond to Mr. Russell's point about essential facilities.

You have a problem in that the Competition Act and competition authorities are not very well set up to handle essential facilities. Essential facility means typically some asset, some network element, or something that competitors need to access to compete with the dominant firm, which is typically vertically integrated. But then the issue becomes, at what price? At what price is access to essential facilities going to be provided?

The competition authority doesn't have the resources to do the job it has a mandate to do now, and it certainly does not have the resources to do the detailed kind of cost and price monitoring required to establish what the price for the essential facility should be.

That's why the essential facility doctrine makes sense when you're moving from a regulated industry to a deregulated industry and you have a regulatory authority who's overseeing that process of deregulation, or it's written into the legislation. If you look at the province of Alberta, we've deregulated the electricity industry. In the legislation there are certain elements that are picked out that competitors must have access to, and there's a regulator who sets the prices for those things.

Thank you.

The Chair: I have Professor McFetridge and then Mr. Volpe.

• 1040

Mr. Donald McFetridge: I think the questions the honourable member raised with respect to what to do about the current airline situation are obviously very well taken. It raises the general issue of how you deal with predatory pricing.

Although the airline industry might be more prone to this, I think Mr. Russell is entirely correct; most transportation industries are prone to it. If you look at railway pricing or shipping pricing, average and marginal costs, or average and incremental costs—whatever phrases you want to use—are very different. There is that great tendency for price-cutting. So the bus industry and transportation industries in general have this common problem.

That doesn't necessarily mean a general predatory pricing law can't apply to them. It doesn't necessarily mean they all have to be regulated or you have to have the type of regulation or competition rules we seem to be adopting in this country.

I just want to distinguish between two ways of dealing with predatory pricing. One is the cease-and-desist type of power the commissioner has, and is maybe trying to have enhanced, maybe changing it from a cease-and-desist power to a “Don't even think about it” power, which would be issuing orders in advance of the incumbent firm even doing anything. That's one way to go, and it can have the virtue of appearing to protect a specific competitor and make sure they don't get hurt in the short run.

I think it's definitely the wrong way to go, whether it's airlines or any other industry. I think the way to deal with predatory pricing is to wait and look at the offence. I think where we have a problem in this country is that it doesn't do much good after finding that an offence has been committed if we take the civil branch and abuse of dominance and say, “Well, don't do it again”, and then issue an injunction. That type of remedy is simply insufficient.

I think what we really want to go for here, if it's possible—and I think it is—is to use the civil branch and use fines. And ultimately, perhaps, the committee might want to consider damage awards. That seems to me the better way to go. So if, after a thorough investigation and hearing, a tribunal decision, you're found to have engaged in predatory pricing, it will be more than just “Stop doing it”.

That strikes me as a much better approach, a much more considered approach.

The other issue here we have to recognize is that it doesn't necessarily guarantee the safety of all individual competitors in the market. Some competitors may have to exit the market, but in the long run, it will provide for market conditions that efficient competitors can survive in.

The Chair: Thank you very much.

Before I go to you, Mr. Volpe, I'm just going to go to Professor West.

Mr. Douglas West: Thank you.

I had just a couple of comments on the predatory pricing section as well as a response to Mr. Russell, who indicated that what we should do is look at the recent changes that were made with respect to the act dealing with airlines—in particular, the airline regulation. I agree with that. There were a couple of anti-competitive acts added to section 78 under the regulation, several of which deal with predatory pricing. So there would be operating, or increasing capacity... if fares that do not cover the avoidable cost of offering the service.

So in the airline regulation, there was specific wording put in about what the anti-competitive act would be with respect to predatory pricing. This differs quite a bit from what we have had previously. In section 50, where we have the vague wording “at prices unreasonably low”, we don't have much jurisprudence around that to give an interpretation of it. And there are other problems with section 50 that I think everyone has discussed in the past. There hasn't been much activity with respect to section 50, in part because of the way it's worded.

The other problem is with section 78. The particular predatory pricing anti-competitive act that's in there now, pricing below acquisition costs, is perhaps not the kind of predatory pricing one may expect to observe most often.

• 1045

So it is really time to revisit the notion of changing the act, in particular the predatory pricing section of the act. I like the idea of at least bringing predatory pricing on the civil side and giving consideration to making the wording around the act, the anti-competition act, more precise than simply pricing “unreasonably low”.

It's not clear to me, though, that it belongs just in the abuse-of-dominance section of the act, and that's where I have some concern. I think there is some possibility of changing the wording there and putting it as one of the anti-competition acts under abuse of dominance, but there may also be possibilities for predatory pricing by a firm that is not a dominant firm in its market. It depends very much on how that particular wording is interpreted.

So I do have some concerns about it, and I think it really deserves some further study.

The Chair: Mr. Volpe.

Mr. Joseph Volpe: Thank you, Madam Chair. Like others, I'm impressed with the collection of individuals you've put around the table today. It hasn't been an entirely academic discussion. Some of the best minds in this business are around the table, and I find this exercise quite instructive, notwithstanding the fact that there have been some lapses when, if I may, a partisan political approach has been adopted that relates to a specific issue. I found that instructive as well.

But as the rebuttal to that—and I don't mean to refer to you, Mr. Hunter—it seems to me that some of the other people around the table have been focusing on an issue that has muddied the waters, for me, at least. That is, if guidelines were much more specific, and they could be specific to industries as well as to particular circumstances, that would be the way to go. In the opinion of a couple of people around the table, it would appear that the commissioner and the bureau are reasonably well equipped to come up with the specificity required for such guidelines. But what is holding both the commissioner and the bureau back are the resources sufficient to withdraw from the commissioner the discretion that he currently labours under, that is, not to pursue all cases.

That would appear to be important—and I think it was specifically said by Mr. McFetridge—because these guidelines and the specificity that we would be looking for in them are probably best determined in a court of law, but the lack of resources is presumably what's preventing some of the decisions that would lead to the specificity from coming before the court of law.

If you'll forgive this rather murky preamble, my question is, if there were sufficient resources, would we require any amendments to the act that we've been discussing all morning?

The Chair: Mr. Russell.

Mr. Robert Russell: I'm going to give you a very concrete example that is outside the criminal sphere. I acted for the commissioner in a matter that went for three years. It was a merger case, so it's under the civil standard and should have been a bit easier to prosecute.

That case went on for three years, and once the application was commenced in the tribunal, there were 52 applications before the tribunal in 10 months. Almost every week there were at least three appearances in that case. The case stopped before it actually went to hearing because of a development in the market.

Just so you understand, and I'm going to give you the quantum, the defendant or the respondent in the case said in the press that they had spent over $10 million on that file. I'll tell you no more than this because of my role acting for the commissioner, but I can tell you that during the process I had to stop working on at least three occasions because of lack of funding. I'm acting for the commissioner in a case of that magnitude, and I have to stop work. There were 600,000 documents. There was no opportunity in any litigation to stop work, but it had to happen because the money wasn't there.

So the point made by Mr. Goldman first, and it has been echoed around the table, is that we can talk about all this, but without the resources, it doesn't work.

But there's one thing I will say. It's even more expensive to deal with a criminal proceeding because of the criminal standards. So decriminalization, in some respects, and going to a per se approach should cut the cost down, because overall it's a cost to society. But this is expensive litigation.

• 1050

Mr. Lawson Hunter: Mr. Volpe, in my view, your question is very astute. I think the answer, in a yes or no way, is probably that if they had the resources, we wouldn't have to do this. This law is a general law of general application, and the ability to fit...

I describe this law as a doctrinal law that is attempting to map industrial organization economics, which is a rather precise area of economics, onto a legislative scheme. The statute, as it is now, in my view, is general enough that it can do that.

I share someone's view on essential facilities. There's nothing stopping the commissioner today, under sections 78 and 79, from bringing an essential facilities case. In fact, they did in the Interac case.

So it's a very good question, and I think it is probably primarily a question of resources. The statute is still, as Cal commented, an economically sophisticated law, and is recognized as such around the world. That is still true today, so it may primarily be a question of resources.

The Chair: Professor McFetridge.

Mr. Donald McFetridge: Again, I agree with Lawson that it's an extremely interesting question. There are a couple of additional points I'd make.

First, nobody really wants to have to go to court or before the tribunal for the sheer sake of providing jurisprudence for others. That's kind of a public service that perhaps nobody necessarily wants to provide. But I agree that if there had been more cases, we would not be having to have so many guidelines. We would not be having to consider, for example, in section 78, all the illustrative anti-competitive acts or abusive acts that a dominant firm can do. This could have been explored before the tribunal, and we would see that in the jurisprudence. We wouldn't have to be listing things that we think might be anti-competitive acts under the abuse section.

Many people around this table are more highly qualified than I am to pronounce on this, but I get the sense that the way the law evolves is decision after decision, and it gets fine-tuned that way. What seems to happen in Canada is a decision that leaves a fair amount of uncertainty, and then nothing happens for eight or ten years.

So more and more cases are decided by the Supreme Court, whether the individual pronouncements leave uncertainties or not. If there are subsequent refinements of those pronouncements, I think we would be in a much better situation.

The Chair: Mr. Goldman.

Mr. Calvin Goldman: To come back to your question, Mr. Volpe, I would suggest that the bureau cannot be effective, simply put, without adequate resources in trying to administer a law of general application in an environment that is increasingly deregulated. They need the resources to act in a properly informed manner. That doesn't necessarily mean bringing many more cases. Adequate resources will allow the bureau to make even more informed decisions, properly informed from stakeholders on all sides of issues, as to whether the case should be brought or resolved on certain terms.

So resources are essential—that's point one—but they don't answer the realm of issues that I also suggest are before this committee, such as the issues on section 45. There is still a host of current issues in that area. There are questions as to whether the sections on predation and price discrimination, for example, should be decriminalized. People have been trying to address this for many years, and there are questions about the proper ambit of the abuse-of-dominance provision, among others. One does not displace the other, but you can't really go anywhere without adequate resources.

The Chair: Mr. Kennish.

Mr. Tim Kennish: I would like to relate the resources issue to another topic that is on our agenda, the merger thresholds, because I think there is a potential for freeing up some resources.

Personally, I believe the bureau's approach to merger review overcommits it in this area. If you examine statistical data, as compared with the U.S. experience with Hart-Scott, we're spending longer on cases, there are more cases, and they're getting extended reviews. This is absorbing a tremendous amount of time. I think we need to recognize that a very small proportion of them really do raise any significant issues.

• 1055

One thing that would help—it's been proposed but has not been moved forward because of a funding question—is the elevation of the thresholds to align them with the economic value of the threshold as it was when it first came in, in 1988. In 1988 a $35 million threshold on the transaction size was put in place. That is still there. In the meantime, the value of the dollar has eroded by more than a third, and if we were to make that adjustment today, I think it would release from the system, from the review, maybe 40% of the cases they now deal with, and would enable more people to be freed up to do other things.

I recognize that there would be a corresponding diminution of revenues from the review of those mergers, all of which are done on an equal-dollar basis; the smallest merger costs the same on a pre-notification fee basis as the biggest, longest reviewed merger. But I think the remaining cases probably warrant increasing the fees. If there is a personal resource potential here that could be accessed by making a simple adjustment, I think it's certainly warranted.

The Chair: Thank you very much, Mr. Kennish.

I have three more comments, and we're running out of time here.

Mr. Scott.

Mr. John Scott: Very briefly, Madam Chair, I hope the committee doesn't lose the thought put forward by Mr. West on predatory pricing. I thought that was a very sound suggestion for a way in which to deal with that.

I want to go back to what Mr. McFetridge said, that there may be some collateral damage in the whole administration of predatory pricing. That's indeed what's happening now in all kinds of industries. There just isn't the time to track the effect of a predation situation to actually take some action. By the time action is taken, it's gone.

I think it's time to look at this area pretty thoroughly, and hopefully fairly quickly.

The Chair: Jeffrey Church.

Mr. Jeffrey Church: Coming back to Mr. Volpe's question, there is a question of resources but I think section 45 is a problem. I'm always amazed when I go to the Department of Justice website and see all of the price-fixing cases they seem to concoct. Even if you divide it by twenty, or whatever the ratio is between the size of the Canadian economy and the size of the American economy, it leads me to conclude that our section 45 is either very effective or very ineffective. I suspect, because of intent and the emphasis on effects, that section 45 is not effective.

I mean, amendments are required. I think the proposals for the two tracks, criminal versus civil in section 45, is something that will have to be done. Even if the resources were available to the bureau, it's the sensible thing to do. There are other ones that are sensible. There's the predatory pricing. Clearly, you need a remedy besides cease and desist. A remedy based on damages and fines seems to be a sensible deterrent. You can move that into the civil side without having the problems on the criminal side. There are others, which are in your interim report, that I would support.

The Chair: Calvin Goldman.

Mr. Calvin Goldman: Thank you, Madam Chair. To give an illustration for you and other members of the committee, Mr. Volpe, as to why adequate resources can help both public sector and private sector interests, if the bureau is properly funded in the area of merger review, then it has a far greater opportunity of meeting strict timelines, such as the ones I proposed earlier—one month, and then perhaps four months, full stop—provided they have the adequate resources to do so. That will help both public interests and the interests of the private sector in relation to those proposing the merger, and it will lay out the playing field for those who may have third-party interests. It helps everybody.

The Chair: Lastly, Professor McFetridge, please.

Mr. Donald McFetridge: An extremely good point.

One other way to bring more resources into enforcement and to get more jurisprudence is the issue of private actions and allowing standing for private actions before the tribunal.

The Chair: Thank you very much, Professor McFetridge.

I want to thank our participants for being here today. I'd like to apologize for not getting to all the questions. We actually couldn't deal effectively, probably, with all the issues we set forward, and we may have to have another round table specifically to come back to merger review, in particular the efficiencies defence, pricing practices, and abuse of dominance, the issues and options. We touched on those briefly but we didn't have a very thorough discussion on those. Although it was a very interesting discussion and we've all learned a lot, I do think we may have a future round table as well, if all the participants are willing.

• 1100

I can't leave this session without saying we did get off onto a topic about the food industry, and there are a couple of things out there that I need to just clarify.

Supply management has an extremely low cost to consumers. All the studies prove that, in comparison with the United States. If anybody thinks retailers don't benefit from food subsidies, then we have some issues.

That said, we're going to suspend for five minutes before we move on to the next round table.

Again, thank you to our participants.

• 1101

• 1111

The Chair: We're going to reconvene the meeting. I want to thank everyone for joining us here today. We're hopefully going to find the next two hours very interesting.

As we all look around the table, I'm sure we see very familiar faces. The format for today's meeting is somewhat different from our usual meetings. I want to assure you that there's not been a realignment of the parties as you see them around the table, or not yet, anyhow. We believe it's a selective gathering.

It's indeed a privilege for us to have at this forum some of the foremost experts in competition law in the country. Although the committee has developed a level of expertise in this area, these round tables will nevertheless be a good learning experience for members, as I found in our previous session, and will hopefully assist us in completing our June 2000 interim report.

In order to give both breadth and depth to these discussions, we have suggested several substantive themes as guidelines. However, we recognize that some of the matters are of more immediate concern and will attract more discussion than others. It's possible that we may not be able to discuss all of the items today. We found that at an earlier session. However, we'll try to cover what we can in the allotted time period, and we encourage everyone to be as open in your comments as you can to encourage debate amongst our participants.

The hearing is being recorded for televising. We want these hearings to be a process of education for Canadians, not only in regard to competition law but also on the parliamentary process. Today's record will become part of the corporate memory of the committee and will be of great assistance to us in forming future legislative proposals.

With these comments, I want to thank you once again for being here this morning. The themes for this round table, so far identified, are: enforcement, evaluation and recommendations; the Competition Tribunal, consideration of procedures and remedies; the future for competition law; and the June 2000 interim report on the Competition Act, the invitation for final comments. That could take the whole two hours and maybe two days, but we'll see what happens.

What I'd first like to do is start by inviting the participants to introduce themselves, after which I'll invite comments from the floor on our first theme. If you wish to speak at any point, please try to signal the chair. My able assistants up here will help me if I miss you, so don't worry, they always make sure I get the message.

We're going to start. We'll go around the table. We have a couple of participants from the other session who are going to be part of this session as well.

Mr. Robert Russell: Rob Russell, Borden Ladner Gervais.

Mr. Charlie Penson: Charlie Penson, the industry critic for the Alliance.

Mr. Brent St. Denis: I'm Brent St. Denis, member of Parliament.

Mr. Jack Quinn (Individual Presentation): Jack Quinn, Blake, Cassels & Graydon.

Mr. Walt Lastewka: Walt Lastewka, member for St. Catharines.

Prof. Doug West: Doug West, Department of Economics at the University of Alberta.

[Translation]

Mrs. Jocelyne Girard-Bujold: Jocelyne Girard-Bujold, member for Jonquière.

[English]

Ms. Margaret Sanderson (Individual Presentation): Margaret Sanderson, Charles River Associates.

Mr. George Addy (Individual Presentation): George Addy, former commissioner and now with Osler, Hoskin & Harcourt in Toronto.

Mr. Stanley Wong (Individual Presentation): Stanley Wong, Davis and Company.

Mr. Larry Bagnell: Larry Bagnell, member of Parliament, Yukon.

Mr. Paul Crampton (Individual Presentation): Paul Crampton, Davies Ward Phillips & Vineberg. In contrast to the earlier occasions where I've appeared on behalf of the chamber, today I'm appearing in my own right.

Mr. Chuck Strahl: Chuck Strahl, member of Parliament for Fraser Valley.

Mr. A. Neil Campbell (Individual Presentation): Neil Campbell, McMillan Binch in Toronto.

Mr. Roger Ware (Individual Presentation): Roger Ware, Professor of Economics, Queen's University.

Mr. Thomas Ross: Tom Ross, Faculty of Commerce, University of British Columbia.

The Chair: Thank you very much for joining us.

Now, I'm not sure if someone wants to jump right in on enforcement, evaluation and recommendations.

Mr. Addy.

Mr. George Addy: Thank you, Madam Chair. When we were invited we were told not to prepare a brief or a presentation, but I did take the liberty of making a few notes for myself just so I wouldn't forget.

• 1115

On the enforcement issue, there are some statistics available. I don't propose to go into that, but I want to pick up on the theme I heard briefly this morning on the issue of allocation of priorities, or setting of priorities, within the bureau.

I think a lot of the resource emphasis within the bureau has been placed on merger review. Part of that is understandable. It's the most recent provision of the legislation, and it gets a lot of media attention and so on. But we've now had 15 years of experience with that process, and I think it's time to revisit some of those provisions around merger review. You heard some this morning. I think Mr. Goldman was proposing some time periods. In an earlier submission to the committee, I also proposed some changes along those lines.

From an enforcement perspective, I would like to see increasing attention paid to other provisions of the act, perhaps becoming a little less risk-averse from an enforcement perspective in dealing with mergers. We also heard this morning about the possibility of increasing thresholds. That might help too.

On the other issue, from an enforcement perspective, there's a lot of discussion in the business about how few cases there are and how much guidance is available to the public at large and the business and consumer legal communities about how decisions are made. This issue has been debated probably longer than private access, but I think it's time we institute some form of formal decision publication process.

The EU has a process where, even though a transaction isn't challenged, a decision is released describing how the agency went through its review, what its findings were, and what it considered important or not important. I think that would serve as a very useful public information service for the bureau to adopt.

The third point I'd like to pick up on was dealt with briefly earlier, and that's the resourcing issue. On the debate as to whether the bureau is kept whole or not if the thresholds are raised, it's important, whenever we consider addressing the responsibilities to be given to the competition authority, that we address the resource issues as well.

Part of the debate is around splitting section 45 into both a per se and a civil offence. If you do that, it will be more costly for the commissioner to prosecute a civil offence. Under the criminal model now, responsibility is split between two departments, so there are two budget funds to address the cost of prosecution. The commissioner's office acts as an investigator, and the Department of Justice acts as the prosecutor. To the extent the role of the commissioner is revisited, part and parcel of revisiting that should always include the resource implications of giving this additional task or responsibility to the bureau.

Those are the three comments I wanted to share at the outset, Madam Chairman.

The Chair: Thank you, Mr. Addy.

I have Mr. Crampton and Miss Sanderson.

Mr. Paul Crampton: Thank you.

With respect to enforcement, five key areas need to be addressed. I would encourage the committee to rise to the challenge and provide a more ambitious blueprint for the modernization of our act in your final report to Parliament. It's my hope that this blueprint will form the basis of a government white paper that will effectively launch the next round of amendments.

The five key areas deal with the independence of the commissioner. That's tied to the resource issue, and I'll get into that a little more in a moment.

The second one is the need to reform the arcane criminal provisions in the act—not just section 45, but many of the provisions relating to the pricing practices, including predatory pricing, price discrimination, and price maintenance.

The third is a need to rethink our civil matters provisions, which could be restructured under a reinforced provision dealing with abuse of dominance.

Fourth, on competition law as framework legislation, it would be very helpful if your final report provided a strong endorsement of the principle that competition law as framework legislation ought not to be expanded to include a hodgepodge of industry-specific amendments.

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In the interim report there was a flavour of a recognition of that, and there was also a bit of a flavour of that in the paper you delivered, Madam Chair, to the competition law conference a couple of months ago.

Finally, there's a need for something to be said about competition policy being broader than simply the competition law. There's a need to extend our competition policy to address the broader range of federal, provincial, and municipal government restraints to competition. In aggregate, these have a far greater adverse impact on consumers, small businesses, and large businesses in Canada than all private restraints combined.

The Chair: Thank you very much, Mr. Crampton.

Ms. Sanderson.

Ms. Margaret Sanderson: Thank you, Madam Chair.

In terms of opening comments, I just want to speak about a couple of things in the context of enforcement.

We've heard quite a bit about whether there's an appropriate level of enforcement, and George spoke briefly about priorities. In terms of the priorities over the last period of time and where the bureau is putting its resources, because it is resource-constrained and an unprecedented merger wave has taken place over the last several years, and because of the pressure when you have an international transaction that has already cleared Europe and the United States, it's perfectly natural that many of the bureau's resources would be devoted to merger enforcement.

It will be interesting, now that this merger wave is sort of down, to see how resources are reallocated. As a result of that, it is certainly true that the other areas of the organization, such as the civil reviewable practices areas and conspiracy, are not nearly as well funded relative to other international comparisons.

In terms of dealing with enforcement issues, there are really three things that can be dealt with by this committee. There is this question of funding, which people have already spoken about. There's also the question of alternative enforcement mechanisms like private access, which I hope we'll have the opportunity to discuss here. I know a number of us have quite different viewpoints on private access.

Basically, private access with procedural safeguards for civil cases would help the bureau a great deal by taking some of the workload away from them. It would allow private parties, where they're better informed, to take action themselves.

The other area on the agenda, again linked to enforcement, is we need to radically reform the Tribunal process. The Tribunal process needs to be streamlined and improved quite dramatically. In this I echo comments that Dr. Neil Campbell, Hudson Janisch, and Professor Michael Trebilcock have made.

Currently, part of the reason why this process costs so much is the average timeframe for mergers, not including the abuse provisions. There have been four contested mergers before the Competition Tribunal. The average time the bureau has dealt with those transactions has been about eight and a half months. In the tribunal process, the average was 19 months from the start until the remedy. Actually, that's not really a fair number, because that incorporates a case that's currently under appeal.

But if we think about the most recent case involving the Ridge landfill, where a number of procedural reforms were brought forward for the tribunal, my understanding is there was no formal discovery in that process. The commissioner and the parties put forward an agreed statement of fact. There was a narrow issue to be litigated. There was also electronic filing of all documents. Even with all of those reforms, it took the tribunal 11 months to deal with the liability issue and then another six months to deal with the remedy, and the remedy is now under appeal.

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When we're thinking about enforcement, if we take a holistic approach and think about the institutional structures and the incentives that are put in place, that will help us deal with multiple things. If we can, for instance, get the institutional framework, the procedures, correct in front of the tribunal, that will go a long way towards dealing with some of these cost concerns.

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

I have Mr. Campbell.

Mr. Neil Campbell: Thank you, Madam Chair, and good morning. Thank you for having us for a very interesting discussion, I hope.

On enforcement issues, I wanted to just touch on a couple of points I believe are particularly important. I think the interim report the Committee has done has already made some significant gestures that are relevant in this area. One of those is in the area of pricing practices. You've had the benefit of Professor Van Duzer's detailed report, which has examined the fact that some of those laws are economically no longer really very modern. As a result, I think we see enforcement you would regard as low.

What has obviously happened is that the bureau has essentially built into its internal case prioritization the principle that cartels are viewed as quite a problem, and price maintenance and price discrimination laws, for example, are viewed as laws that are not economically sound, that are overreaching, and that should not be enforcement priorities.

It seems to me that you have the right basic idea there with respect to modernizing and decriminalizing a number of the pricing provisions in the act and moving them into a framework such as the abuse-of-dominance regime. This will provide a kind of coherent and single place in which you can think about those types of behaviour in the particular situations where there is a competition concern as opposed to the many situations where there is not. That will not get you a huge flow of cases, but it will get you a flow of the right kinds of cases.

I want to just echo two other points that have already been made, because I think they're very important points. One is Mr. Addy's point about case-specific reasons for a decision, in particular when the commissioner decides not to bring formal legal proceedings. When he brings proceedings in front of a tribunal, you get a full public record. When you have complainants to the Competition Bureau who believe they have a concern and the bureau decides not to bring it forward, most of the time that is because the bureau has looked at it and does not think, with the laws we have on the books, there is a problem.

We all benefit from having a reasoned decision. Not only will the complainant benefit, members of the public will benefit by understanding the way the bureau is applying the law in a particular situation. You get an accountability benefit from seeing what the bureau has done or has not done.

I give the bureau very high marks, generally speaking, for its work on transparency and guidelines. They're continuing to do more. I think the bureau could do much more on case-specific disclosure. If you were to encourage that and ensure that the resources exist for that activity as well as for the bureau's activity, that would be very helpful.

Margaret Sanderson alluded to a paper I co-authored some years ago. I do think our ability to get good enforcement in the sense of formal proceedings does depend in part on streamlining and improving the Competition Tribunal proceedings without undermining the ability of people to make a defence for the particular activity they have. We do not need the full-blown court-like structure that currently exists there. What I have said previously is that a more streamlined and essentially administrative tribunal, an expert tribunal, would be a much more useful structure. Indeed, I have perhaps been a lone voice in suggesting that this is a tribunal where judges have not played a helpful role in the sense that they have formalized and judicialized it. I would prefer to see a tribunal that really is administrative and that could make decisions more quickly on an expert basis.

Thank you.

The Chair: Thank you very much, Mr. Campbell.

Mr. Wong.

Mr. Stanley Wong: I'd like to make two general points to start. One is on this issue about legislative amendments. I want to echo some of the comments made by the previous panel and certainly by others around this table. We have a tendency to think of the Competition Bureau and the Commissioner of Competition as the solvers of all evils in this world. The pressure is always on Parliament and on the government to find a different place to solve it. The government has made a commitment to not deregulate, if you will, the airlines. They decided, well, the only way we can solve the problems under the current framework is to give the power to the commissioner.

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I think this is very dangerous for all the reasons my colleagues have said about turning this from framework legislation into a regulatory regime put in the hands of somebody who not only doesn't have the resources but who, frankly, is very ill-equipped to deal with it. To paraphrase an expression of my former colleague, Professor McFetridge, you are really trying to corrupt the Competition Act by doing it that way. Maybe I'm overstating it a bit, but then, I'm a lawyer, and not an economist at this stage.

The other point I want to make, a point competition economists and lawyers always talk about, is about concentration. What we see—and we should not lose sight of it, and this a point Margaret Sanderson has made—is that enforcement means the whole scheme, not concentration of power in the hands of a single person. I think that is very dangerous. And it's not because I have some axe to grind with the commissioner. It's really an issue about what our proper system is.

What we have right now is a Commissioner of Competition who by statute is independent and reports to the Minister of Industry but who takes no direction from the Minister of Industry other than for the purposes of starting an inquiry. That is very dangerous, and that is why, in my view, Parliament changed the scheme in 1986 to create the Competition Tribunal, to have some balance. What we have now is really decision-making in the hands of a single individual who is really unaccountable. Every time we see an unsuccessful case, there is immediate pressure to amend the act. The commissioner has proudly announced that we have now an ongoing amendment process.

Frankly, I think we've done too much tinkering. I think we should not lose sight of the fact that this is framework legislation. Yes, there are some structural issues, but I think this committee should look at it, if possible, in the political climate, think about it in a framework way, and propose amendments in a framework context.

Back on the point of adjudication, I think we have far too few cases. That is, the law is not tested. The United States Department of Justice and the Federal Trade Commissioner issue guidelines, but they're guidelines based on statute and on case law. We have guidelines in there where there are no cases. Now, that's useful when you're advising clients as to what the commissioner thinks, but we have so many sections of the act where there are zero cases. It's really between you and the commissioner.

Obviously, when you're representing a party, you want to make the best deal for your client. You wrap it up, you do what you can to get approval or get a no-action letter from the commissioner, but you never get it tested.

Frankly, I think we need far more testing of the interpretations of the act made by the commissioner. I'll have more to say when we get to the Competition Tribunal. I'm a member of the tribunal liaison committee, and there is a serious concern on the part of the committee and, through them, of the tribunal itself as to how to move the process on.

I'm going to come back to this theme that we have to have more testing of the enforcement of the law, not just more powers for the commissioner.

The Chair: Thank you very much, Mr. Wong.

Mr. Addy, you had a response.

Mr. George Addy: Thank you, Madam Chair.

I'd like to tie together two comments, one by Ms. Sanderson and the other by Mr. Wong, which I echo wholeheartedly. That brings us back to the issue of the role of the commissioner's office. One of the points I made in an earlier appearance before the committee was an expression of concern over the balance—that I think is core to Canadian values—of the efficiency of an enforcement process versus the rights of individual Canadians, be they consumers, businesses, or whatever, to be free from state intervention.

An essential component of that correct balance is accountability. Stan and Margaret are quite correct. The creation of the tribunal and the role of the tribunal are of critical importance to maintaining accountability in our process. That's why I'm a great supporter of the Competition Tribunal. Yes, it needs improvement. Yes, it can do a better job managing the cases, quite apart from the rules.

The tendency is always to say, well, let's tinker with the tribunal process rules, and hopefully that will solve the problem. That's not always the case. That can help, but there also has to be aggressive case management on the part of the tribunal as well. By way of example, a recent case, one of the many involving Air Canada, was adjourned for six months without any reasons being given.

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So I think there's room for the tribunal to be acting more aggressively in managing cases. There's also room to consider time limits. We've talked about time limits on the commissioner and merger review. I think it's time to put time limits on the Competition Tribunal, and that's not unheard of in this field of law.

By way of example, in South Africa the commission is obligated to initiate a hearing within 30 days of filing the complaint and is obligated to issue reasons, a decision, within 15 days of the close of the hearing and formal reasons within 30 days. Why can't we do that here? That's something that I think would solve the process and assist us in the timing of and delay in protracted cases.

Case management also means limiting witnesses. You might be interested to know that in the Microsoft case, that has such fame, they had only 24 witnesses and the decision was 46 pages long. The Superior Propane case that you've heard about a lot had 91 witnesses and a 109-page decision. I think, frankly, that's reflective of something short of aggressive case management. People will complain, the commissioner will complain, respondents will complain, but I think there's a role there for the tribunal to play in managing the cases and the tribunal members have to be given authority.

As I understand the administration of the Federal Court, their role as members of the tribunal is on an equal footing with their role as trial judges of the Federal Court, so they have to fit the tribunal proceedings into their work allocation agenda, wherever they are in the Federal Court. Maybe there should be some direction given that this should be priority work for Federal Court tribunal members.

The Chair: I have a number of people who want to respond and I have a number of questioners who want to come in, but I'm going to go first to Professor Ware and then Professor West.

Mr. Roger Ware: Thank you, Madam Chair.

I'll make two points relative to the enforcement issue at this stage. First, it's been said before but it's worth saying again that the best competition policy of all is a free trade policy, a free trade and investment policy. There are at least two cases that have preoccupied the resources of the Competition Bureau and the Competition Tribunal in the last five years that might not have even been there had we had a more open, continent-wide approach to these industries. I'm referring, of course, to airlines and book retailing.

I wanted to raise that as being an issue that is relevant to enforcement, because if we will not consider efficient continent-wide structures for some of these industries, then we're going to be forced into more resources for competition policy in those industries.

The second point is to echo what Margaret Sanderson said about private action. Clearly, that's a major issue with respect to enforcement, because it adds to the whole set, if you like, of sources and origins from which actions can come. I do want to emphasize here that there's been a tendency to describe private action as being a kind of way of helping the commissioner out, sort of putting more resources into his pocket and doing some of his work for him, but I don't see it that way, actually.

I agree with my colleague, Michael Trebilcock, on this, that one has to think much more broadly about private action, that private action is a way of essentially enlarging the scope of competition cases. Competition cases will broaden in the sense that, as Stan Wong said, we won't have just one person responsible for bringing actions to the tribunal, we'll have lots of different reasons and lots of different sources for these cases and we should get a much richer case law and a much richer body of decisions from which to draw.

The Chair: Professor West.

Mr. Douglas West: Thank you.

I also, like many of the people sitting around the table, have concerns about the length of time of the tribunal process. Putting time limits on the Competition Tribunal might sound like an attractive possibility. The difficulty is that some, if not most, of the cases going to the tribunal are extremely complicated in terms of the conduct that is being examined, and the requirement in all these cases is that there be expert reports commissioned and filed.

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Now, these reports take time to write and to research. They rely on a lot of data and documents that have to be provided by the parties. So while you can try to shorten the tribunal process, you have that part of the process that is very difficult to shorten, and that can take four to six months, depending on the particular case.

One of the interesting procedures that's being pursued in the abuse-of-dominance case involving Air Canada at the moment is that the tribunal process in that case has been broken up into two phases. In phase one of the hearing, the tribunal is dealing with the generic question about avoidable cost: what is avoidable cost, timing issues related to avoidable cost, when the cost became avoidable, and what revenues to consider as part of the test. So there's a phase one part of the hearing that I would liken to establishing the rules of the game, or what is the rule that we're talking about in terms of when conduct would go offside of the Competition Act and the airline regulation.

This kind of approach could possibly help to shorten the process. By helping to establish what the rules of the game are, you can avoid that part of the litigation process in each subsequent case that will come across, at least on the same grounds, the same abuse of dominance. I think there are probably other examples, other industries in which the conduct that's being complained of could be in the nature of, say, predatory pricing, where there could be quite a few complaints about a certain kind of conduct, but the question is, what does the interpretation mean, and how would the tribunal interpret predatory pricing in a given context? This idea of establishing the rules of the game in other industries and other context makes sense to me.

The Chair: Thank you very much, Professor West.

I'm going to take Mr. Quinn and Mr. Russell, and then I'm going to go to Mr. Penson for a question. I have a couple of others who want to jump in, but I'm going to hear from Mr. Quinn first.

Mr. Jack Quinn: It seems to me, Madam Chair, that we maybe are already talking about the Competition Tribunal process. I think it's an interesting question as to what the contribution of Parliament could be to the streamlining, as Margaret had said, of the tribunal's rules. Traditionally, the rules of courts and tribunals have been established by their members through a public process, but it's been viewed as really a kind of technocratic legal exercise.

I must say, I have some sympathy with George's proposal to simply establish time limits to say that by certain times certain decisions have to be made. We have this process, for example, in the Canadian International Trade Tribunal, where determinations must be made within very narrow timeframes. In order to accommodate this sort of process, there has to be specific direction to the officials, the authorities who are administering the process, to make determinations on the best evidence available within this timeframe.

Inevitably, there may be some mistakes, there may be some unfairness from doing it this way, but the alternative to not doing it this way is to have no meaningful tribunal process at all. I worked in tribunal cases since it was established in 1986 and have been involved in these merger cases that have been contested, all four of them. I would say that these cases got before the tribunal because the parties managed to figure out a way to close the transactions, to get the profits from the mergers, before they would undergo the tribunal process.

How many mergers have not gone ahead, have not closed, because of resistance, uncertainty, and no ability really to test the enforcement decision within any timeframe that made sense from a financial standpoint? Without a decision in a couple of months, you have no deal. That's the reality.

This is something we have to learn to deal with. We cannot go back to the tribunal members now and simply say, “Fiddle with your process and make it more streamlined”, because what we're going to get back is still basically a model that's based on the judicial trial, the civil court trial that we are very familiar with. We have to throw that model away and start with a new model. If we don't, we will never have any meaningful amount of jurisprudence, as Stan Wong has indicated.

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That is the strength of the American system. Sure, they litigate a lot, but they know what the law is, because they go to court and test it.

There are really two important things about enforcement policy, in my opinion. One is independence and the other is accountability. The commissioner needs to be independent, needs to have the resources required to do the job, but needs to be accountable, too. That means we have to be able to go to tribunal and test the commissioner's decision. That's one way of keeping him accountable.

Another thing that's been proposed is more transparency in terms of decision-making. Frankly, there already have been efforts. George did a lot, when he was director, to do this. There are inherent limitations in that process, because you cannot test the facts, and these are very fact-sensitive cases. These cases inevitably turn on slight distinctions of facts, and that's the problem.

In my view, then, as part of your final report you really need to focus on the fact that we really have no competition law jurisprudence in this country at all. We haven't since I started teaching law in 1975. When are we going to address that issue in any meaningful way?

The Chair: Thank you very much.

We're going to turn to Mr. Russell, please.

Mr. Robert Russell: I have to say, I feel as though I'm incited to debate by some of the comments that have been put forward—the suggestion, on the one hand, that you not tinker with the act, and then some of the most fundamental core issues in the act are being addressed as if they were an easy thing to do.

First of all, on the commissioner's discretion, our act is built on a model that uses administrative discretion to streamline our process, but in all cases is subject to review by a judge. You can contrast that with other jurisdictions. When the commission in Europe issues an order, for example, equivalent to our section 11, there's no judicial intervention at all. The FTC has no judicial intervention at all with issuing similar orders.

So I have to say, to the contrary, our act has a very good balance between administrative discretion to streamline the process, but always has the checks and balances the judicial process brings. If there's anything we have as a model in the world, it's our Competition Act structure, which I don't believe you should tinker with, because that's why we are able to proceed at least as fast as we are.

This goes to the issue of time limits. I think it's a bit of an artificial argument people are making. It's not that they're saying it in an artificial way, but when they point to Europe and they talk about the four-month period of time, let me tell you how it happens there.

When you have a merger, you don't file until you've had very many discussions with the commission to solidify the issues. Here we file and then we discuss, and it's quite artificial.

I'm involved in one now, Hewlett-Packard and Compaq. They haven't filed in Europe—it was in the press—because of all the meetings that take place first. It's not because you're reluctant or you're worried, but the process in Europe is to discuss first and file later. We file first and discuss later.

Quite simply, it's actually no different from us if you look at the overall timeframe to review a merger in this country. To suggest that we don't follow the same timeframes, even if they're not statutorially solidified in the act, is incorrect.

Finally, on tribunal procedure, everybody points to this being a problem. It is a major problem, which I illustrated earlier by the example of 52 applications in 10 months. Those were over discovery issues only. It was horrendous; 52 applications. And it's horrendous, in contrast to Mr. Campbell's point, not because of too much judicial oversight but because what we did in the beginning was to say, let's have flexibility for the tribunal, let's not have a set of hard and fast rules like we do for court, and as a result of that, nobody knows what the rules on discovery are, so we go to applications. We have to go to the judge each time.

So I would suggest that what we need to do is look at some of the models that have been successful in regulatory environments, like the CRTC and in the courts, and find a procedural model that makes it more streamlined, not to go the other way and away from judicial models, which actually have more and more efficiency built into them, with things like Mr. Addy speaks to, case management.

That's a development in the courts that's been under way now for almost two decades. We need to adopt it here.

The Chair: Thank you very much, Mr. Russell.

Mr. Penson, your question is on the first theme?

Mr. Charlie Penson: Yes.

The Chair: Go ahead.

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Mr. Charlie Penson: I'm a little overwhelmed with all these legal minds around the table here, as a layperson, but it just seems to me that it's very difficult to try to substitute competition policy for competition. I think Mr. Ware made that point.

Right now everybody's excited because of the airline industry and what's been happening there, but it seems to me that many of those problems are caused by regulation, conditions imposed on industry that they have to abide by that make it very difficult for them to operate.

To my point about the enforcement part, Mr. Wong, I think you made a good case for why we need more jurisprudence here, more case law. Would that solve the problem, if the tribunal at some point would say “Based on what we've seen in the past, we won't hear this case. We've already ruled many times in this area; therefore don't bring it forward”?

If that's the case, the further question I have for anybody on the panel is this: Is there a need for the commissioner at that point? Can we just go to the tribunal and develop a process where, by private access or whatever, these cases are taken directly to a judicial body or a semi-judicial body or whatever, and we get to have some case law there? If it's a different topic area, it can be heard, and if it's one that's been heard many times before, it will not be heard.

The Chair: I'm going to start with Mr. Wong and then I already have on my list Mr. Crampton, Mr. Campbell, Ms. Sanderson, and Mr. Addy.

Mr. Wong.

Mr. Stanley Wong: Let me just comment in reply to Mr. Penson.

First of all, in terms of decision-making by the tribunal, as a matter of procedure, the tribunal will always have to take cases that apply, where the commissioner or a party has applied for a determination. It would be a quick decision saying, “This is no different from the last case. Here's the decision.”

The second point is one that's somewhat related to Bill C-23. I know we're not here for that purpose, but one of the comments made by a number of interveners—the Canadian Bar Association, for example—is that when you go for a reference to the tribunal, you shouldn't be limited only to the commissioner or on consent of the commissioner and a private party. If a private party is under investigation, they should say to the commissioner, “Mr. Commissioner, we disagree with you fundamentally. Let's go to the tribunal on this issue. Whether you like it or not, I'm going to apply for a determination.” That's part of the reason for that, because right now our system is set up so that it's up to the commissioner whether he or she wants to bring a case to the tribunal or to the courts. And we're giving increasingly more powers to the commissioner where he doesn't have to do that.

The Chair: Thank you, Mr. Wong.

I have to keep going, Mr. Penson.

Mr. Charlie Penson: Is there a need for a commissioner at all?

Mr. Stanley Wong: Oh, absolutely.

The Chair: Thank you, Mr. Penson.

Mr. Crampton, please.

Mr. Paul Crampton: Thank you, Madam Chair.

Just before we get too far into the Competition Tribunal issue, I'd like to make a few points on the enforcement agenda item.

First, with respect to independence and bureau resources, which are linked issues, the independence issue keeps popping up. It won't go away. It's been referred to internationally in the OECD report and in a global competition review, Rating the Regulators. It's been raised in the Canadian press, notwithstanding the efforts of the commissioner to distance himself from the government in various areas, such as the airline area.

This issue goes to public confidence in the system, in the administration and enforcement of the act. It may be more of an issue of perception than reality, but perception does become reality. What happens is it increases the uncertainty associated with the administration and enforcement of the act and increases the unpredictability of the process. This in turn has adverse implications for business people's assessment of the risks, not just the risks associated with pursuing initiatives and transactions in Canada, but the risks of making investments in Canada when foreign investors are sitting around thinking of where they're going to invest their money.

Solving the independence issue could go a long way towards solving another problem that's plagued the bureau, and that is a human resource problem. If the commissioner were given deputy head status by amending section 7 of the act—“deputy head” within the meaning of the Financial Administration Act—he would have his own budget, and presumably he would have the flexibility to designate job categories that were unique to the bureau.

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Right now you have commerce officers in the bureau and you also have commerce officers elsewhere, so the commissioner's ability to attract and retain good people in commerce officer positions is limited by the general government cap on the commerce officer position. The same thing applies with respect to the EX category, which is the more senior people in the bureau. As a result, the gap between what the bureau can pay and what is paid in the private sector to economists and lawyers in this field—and there's a very active market for their services—is limited.

So if the commissioner had this independent deputy head status, he would presumably have that flexibility to increase the pay that would correspond to the various positions in the bureau and therefore attract and retain good people.

The Chair: Thank you very much, Mr. Crampton.

I'm going to have to ask everyone to try to be just a little briefer, because we're never going to get even to the second issue fully.

Mr. Campbell, please.

Mr. Neil Campbell: Thank you, Madam Chair.

In reaction to Mr. Penson's question, yes, we do very much need the commissioner. There have been a number of comments about private access, and Madam Chair, I don't propose to go there today very much, because you've heard me on behalf of a group on that subject, but I'd just point out that the costs for a plaintiff to bring a case to a conclusion are very substantial, and that is all the more an issue for small and medium-sized enterprises. So they most definitely will need to continue to use the commissioner as the point of first contact on competition cases. I don't think private actions will be a solution to the resource issue, or indeed really to the accountability issue.

The second comment I wanted to touch on is the commissioner's accountability. I disagree with my friend Mr. Wong when he says the commissioner isn't particularly accountable. The commissioner, I think, today is one of the most highly accountable officials in the Government of Canada, and that comes in part from his oath under the act and it comes in part from what Mr. Russell has described in terms of your ability to take him to court on a judicial review. It comes in addition from the fact that any six residents can force him to conduct an inquiry and can go to the Minister of Industry and ask the minister to reopen an inquiry that's been discontinued. It also comes from the entire governmental organizational controls around the commissioner and how he functions as a member of the industry department. I agree that he needs independence around case enforcement, but he also has a high degree of accountability in terms of being tightly attuned to the overall Canadian government infrastructure, if you want.

Another very important part of his accountability comes from this committee, which has put the commissioner under a spotlight for the last three years. We've had numerous studies and we have the commissioner appearing and taking questions and justifying what he does and does not do on a literally monthly basis, I think, and I commend you for that. You play a very significant role, and you should be continuing to ask him how he's performing with respect to policy and the general administration of the act.

The one area where I do think there is an issue is the one Mr. Quinn noted and others have touched on, which is if we cannot make the Competition Tribunal a more meaningful place for both the commissioner and the defendant to get an impartial, objective determination, we do have a leverage problem in the context of a merger or in the context of an abuse-of-dominance inquiry, where the commissioner's say-so often governs, particularly for parties who are in a small market and have difficulty looking at the current costs and time of a tribunal proceeding. That is why it's important to streamline the tribunal process.

The Chair: Thank you very much, Mr. Campbell.

Ms. Sanderson.

Ms. Margaret Sanderson: Echoing these comments, one of the reasons that concerns have come up about independence is related to the fact that the adjudication system isn't working on the civil side. Essentially what's happened in mergers and in cases where speed is of the essence, such as predatory pricing types of complaints, is the commissioner has been concerned that the process doesn't work expeditiously enough; therefore he's sought additional powers, turning his own office into an investigator and an adjudicator. As soon as a single body is performing both of those functions, concerns are going to be raised about independence.

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So if we can solve the adjudication model, if we can have the tribunal play a more active, effective role as an independent check, and procedurally allow it to balance these concerns... As Rob was saying, it's very important that there be this balance between an expeditious process and allowing a full due process for the various parties.

The difficulty is if we insist too much on this full due process system, which takes tremendous time, and for which we have this judicial model. Stan says I always preface my remarks by saying “I'm not a lawyer”, but as an economist, sometimes you wonder, is this process really designed to get to the truth? If we could solve that side of things, that would go a long way to dealing with questions of independence and so forth.

The Chair: Thank you very much, Ms. Sanderson. I'm sure that will cause some discussion.

Mr. Addy, please.

Mr. George Addy: Thank you, Madam Chair.

In answer to your question, sir, yes, we do need a commissioner, in my view, and we need a commissioner who's independent. I don't think things have changed since my time. The commissioner is independent today in exercising enforcement direction. He is not independent from an institutional perspective. The deputy minister owns his people, so the staff and organization budgeting is all subject to the Department of Industry's priorities. One of the issues of independence I think you've heard from a lot of people is that we should ensure he has both institutional and enforcement independence.

Part of the debate we've been reading about in some of the media as to whether or not the office is politically independent stems from this confusion of roles that was frankly discussed earlier this morning. We have a scenario where we're not quite at the framework model and we're not into regulation, and we're asking the commissioner, in exercising his powers, to straddle the fence.

Part of the concern that's being expressed is that the perception is that, because of a lack of accountability from the process side, which Margaret was getting at, there may be some lack of independence. Part of that is due to this confusion of roles. We've in effect turned the commissioner into our airline regulator.

The Chair: Thank you very much, Mr. Addy.

We might deal with Bill C-23 later today or this week, and that will be interesting.

Mr. Strahl, please.

Mr. Chuck Strahl: I'd like to zero in on one of your recommendations, Mr. Addy, about the decision to publish cases that the commissioner hears or applications that have come to him. At first blush, that sounds like a good idea to me. I don't know enough about it.

Let me rattle off the questions I have. If the commissioner rules on a case, so to speak, or gives the reasons he's decided not to proceed with a case, does it taint a future right to private access? In other words, what happens if someone just says, “I don't care what the commissioner says,” and we give them right to private access and they go to the tribunal? If I were a lawyer in this case, I think I'd say, “Well, the commissioner has already ruled on this, so this is moot.” That's an extremely powerful argument, I would think. That's one.

Second, does publishing those results help build jurisprudence? By publishing the commissioner saying, “This, in my educated opinion, does not amount to anti-competitive behaviour, for the following reasons,” does it build jurisprudence, or is it a nuclear bomb on jurisprudence? Does it eliminate the chance of building jurisprudence, because the commissioner has ruled, but it's not really a legal thing—it's just an opinion—and therefore nobody gets to the jurisprudence?

Finally, what would you do for the people who bring forward cases, the commissioner gets involved, there are negotiations back and forth, and they settle on the steps of the court, so to speak? Just before it goes forward, the commissioner has convinced one of the sides, “If you just do this, then everything will be fine and I won't have to proceed, but if you don't, I will.” So you end up with a commissioner who has all this power of influence, if nothing else.

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By making a ruling and publishing it, he says, “It was this close. I just about took Wal-Mart or Air Canada to the cleaner's, but they agreed with me and they changed their ways.” Would that suddenly put a freeze on any of these applications where people just say, “If you're going to do that, I'm just going to go to private access and we'll have it out,” because the commissioner again has too much power?

The Chair: Mr. Strahl, a number of people want to answer and jump in here.

I'm going to start with Mr. Ross.

Mr. Thomas Ross: Thank you, Madam Chair. Someone may want to respond more directly to Mr. Strahl's point, so I'd be happy to hold off.

The Chair: Okay, we'll have you hold off.

I have Mr. Addy and then Professor Ware.

Mr. George Addy: Thank you.

The model I was referring to is the one they've adopted in Europe. When a merger is reviewed, even though it's not challenged, a 20- or 30-page decision will be released. It will run through the factual scenario, explain the logic, the rationale, the analysis, and support their conclusion. The issue has always been raised in the past, what about commercially sensitive information? Well, they're dealing with that in Europe, so that isn't an impediment. That's the model.

As to whether it would stifle private action, no way. These cases, as Mr. Quinn identified, are so fact-specific that able lawyers would be able to deal with the suggestion that somehow they're precluded. And they're not binding. They don't bind the tribunals. So if you think the commissioner's conclusion in a case similar to yours, but not your case, was wrong, well, you always have the chance to fight that before the tribunal. So his decisions wouldn't bind the tribunal, and I don't think they'd stifle private action.

As to whether a settlement on the court steps would be increasing his power or his discretion any more than it exists today, I don't think so at all. In fact, from a policy perspective, I think the commissioner has taken the correct approach of saying, “When I do have settlements of that nature, I'm going to do it by virtue of a consent order before the tribunal.” I think that's the right way to go.

The Chair: Professor Ware and then Mr. Crampton.

Mr. Roger Ware: I was in fact responding, as Mr. Ross was, to an earlier point.

The Chair: Can we hold off on yours for a second?

Mr. Roger Ware: Sure.

The Chair: Then I have Mr. Crampton and Mr. Russell.

Mr. Paul Crampton: I'll just respond to your question.

I don't think that having increased transparency regarding the reasons for the commissioner's decision not to challenge would be a bad thing. We used to have much more detailed backgrounders and press releases in the late 1980s, when I was at the Competition Bureau. Within the bureau, we found them to be very helpful precedents in terms of promoting consistency of decision-making. Once I got out and started practising, we also found them to be very helpful precedents, because they were the only ones we had.

Your question is, well, wouldn't it slightly undermine a private plaintiff's case if the commissioner had already signed off and detailed his reasons for signing off? There might be a little bit of that, but I don't think that justifies not giving everyone the benefit of the director's thinking, because that would promote a high degree of certainty with respect to future cases in that industry. A private plaintiff is not likely to be too adversely affected by that, because the tribunal has shown that it's not at all hesitant to dismiss or adopt a different position from the commissioner's. So I'm not too worried about that.

The Chair: Mr. Russell.

Mr. Robert Russell: There's no doubt that transparency is a laudable objective, and in fact it's one of the core principles you'll see at the top of the bureau's web page. I think what's being raised is whether the transparency level is good enough as it sits today. There is a debate there, and I just want to make sure you're aware of it.

The bureau does publish, in each merger case, aspects of its decision. What people are saying is there's not enough core analysis necessarily there for us to judge the next case. The contest, however, is how much can you disclose of the confidential information that gives rise to the analysis? And we're talking about the most confidential information any business could have. We're talking about board documents and sensitivity. It's very difficult to write a decision referring to some of those core confidential issues and be fully transparent.

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I think the commissioner today would tell you he really does try to be as transparent as he thinks he can be, but I can tell you, when you're sitting in the room negotiating the resolution, you also talk about what should be published, and it can interfere with some of the remedy. If you're having to divest of a core asset, if you put too much out there, it becomes a fire sale, which makes it more difficult to resolve. If you're going to give me a penny for my asset or $100 million for my asset, you're going to have a different negotiation coming up with a resolution.

I just want to point out that a lot of balancing is going on here. It's not a simple issue. The commissioner usually does try to be as transparent as he can be, but you'll find the party is saying, “Don't disclose all the confidential information from my business.” It's that balance that has to be struck in every case.

The Chair: I'm going to go back to Professor Ross.

Mr. Thomas Ross: Thank you, Madam Chair. I will be brief. I just wanted to make a couple of points about what people have been discussing here.

I'm delighted to hear this discussion about the importance of the independence of the bureau. It's important, and Paul Crampton has given you lots of reasons to think long and hard about what we can do to reinforce the independence. It's something that I know some antitrust analysts in Canada have been thinking about for a while.

There are concerns about both the financial independence of the bureau as well as its political independence, and maybe there are ways this committee can help address both of those. Part of it is just a little bit due to some unfortunate timing.

One of the things that has contributed to this perception Paul Crampton referred to, that the bureau is not politically independent, is the involvement of other government departments in the two high-profile cases of recent years, the bank merger file and the airline case, where ministers from other departments had very important roles to play. That wouldn't happen in too many industries.

Those industries were special in some sense, and unfortunately big competition issues came up in those industries close together, so people look and say, “See? The commissioner doesn't really rule the roost in competition. Whatever minister is involved, he or she's the one who's going to come down with the big, important decisions.” It's just partly bad luck that those industries came up. And this is reflected in some of the foreign assessments of the independence of the Canadian bureau and commissioner.

We do need to have a good, stable framework that allows the commissioner to be and be seen as being independent financially and politically. This does relate to the resource question, because as Paul and others have said, the bureau is stretched getting and holding onto good people. As an economist, I'm particularly worried about the quality of the economics done in the bureau. I like the people there very much, but I don't think there are enough of them, and there aren't enough people at the highest level, so as a result they end up having to hire people like me and other people here for advice on cases, when perhaps they should have more internal capability. So independence is important.

I wanted to make one point partly to back up something Neil Campbell was saying. Neil Campbell alluded to the possibility of another administrative model. While I haven't determined in my own mind whether we'd want to go to a different administrative model, the point was made that perhaps it wouldn't be as accountable. It seems to me if you had a more administrative commission, it would still be accountable if its decisions were reviewable on appeal. That's in fact the way it works when the Federal Trade Commission makes determinations; those are appealable decisions. So I don't think you lose accountability by having a commission with a little bit more power. That's just an academic point.

I'll leave it at that. Thank you.

The Chair: Thank you very much, Professor Ross.

Professor Ware.

Mr. Roger Ware: I wanted to make a comment on speed of decision-making. It's important to distinguish between, say, the proposals for putting time limits on the tribunal, which I quite like, actually... Even in abuse-of-dominance cases, that would focus the tribunal and encourage them to organize their case management in a useful and productive way and probably lead to shorter reports, which would make everybody happy.

But there's a fallacy in taking this to the extent of saying, let's say in the predatory pricing area, that the cease-and-desist powers we now have and are thinking of extending, because they act very quickly, are necessarily desirable. There is an alternative enforcement model here, and my colleague Don McFetridge did talk about this a bit this morning. It is perfectly possible to have an enforcement provision against predatory pricing through the act, working through the normal process with the tribunal, not using any injunctive relief. Provided one introduces fines and makes the disincentives for a conviction high enough, there's no reason that can't lead to successful and efficient enforcement.

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It doesn't have to be fast to be effective. In other words, we create penalties, and the whole point of enforcement is to discourage people from doing bad things. If you discourage them from doing them, you don't need to go to the tribunal.

So a few successful cases on predatory pricing, no matter how long they take, might create the right kinds of incentives to get whatever we think should be the right enforcement stance on predatory pricing. We don't need regulatory powers from the commissioner to do that.

The Chair: Thank you very much, Professor Ware.

I have Mr. Campbell, Mr. Wong, and Mr. Crampton, and then Mr. Bagnell has a question.

Mr. Neil Campbell: Thank you, Madam Chair. I'll make three quick points.

First, there's a theme percolating that jurisprudence is just inherently good and we should have lots of it. I'm concerned about that, because it's a very costly way to create law, relative to legislation that's fleshed out by regulations or guidelines, which have their imperfections but can also play a much more efficient and faster role in many areas.

The real question for the committee is, how do we ensure that we get good, economically sound competition law enforcement decisions? If we have a lot of behaviour that is offside, then we do want it reined in... although it can be reined in by litigated cases or it can be reined in when the commissioner gets somebody to stop their behaviour because that party knows the alternative is to face litigation. You see the commissioner settling cases with alternative case resolutions all the time, and that's highly, highly cost-effective for all of us.

So we should be focused on—and we have some of the best economists in the country here this morning—what are the right, economically sound designs of the law, and the jurisprudence should follow in terms of the commissioner enforcing the act in a steady manner based on meritorious cases. It may be that in a number of areas we simply don't have that many meritorious cases.

To go to my second point, predatory pricing, that is a very difficult area. It's one obviously of high concern to the committee. It's one of the most difficult areas in which to pull apart pro-competitive from anti-competitive behaviour. We are all beneficiaries of the low prices, as consumers, in any situation where we have a price war. It is only, I think the economists here would say, in rare circumstances... and Roger Ware I think would say common but not frequent, based on what he's said to you in the past. We can look around, and there aren't that many real cases of predation in the sense of knocking somebody out of a market in order to be able to recoup monopoly profits later on. We need to ensure in that area a design of the act that allows you to deal with those issues without over-deterring.

So I would actually not favour the high-penalty deterrence process, because unlike a cartel situation, where it's inherently bad conduct, aggressive price competition is usually good. You're on a sounder path in your interim report, where you look at moving into a more refined treatment of predation in the context of the abuse-of-dominance provisions in the act, because it really is a species of that area of monopolization.

My third quick point is with respect to resources. Madam Chair, you will find that the bureau now has reported in considerable detail about the resources it has and its performance in the context of merger review. It's done benchmarking and it's reported to stakeholders. It seems to me there's a model there that could be extended, if you perhaps encouraged the bureau, to other areas of its activity, be it the criminal area, the civil matters area, or the fair practices area. They can do more in terms of reporting to you and the public on their enforcement activities, in turn helping us all determine where resources may really be warranted.

Thank you.

The Chair: Thank you very much, Mr. Campbell.

Mr. Wong, please.

Mr. Stanley Wong: I'd like to talk a bit more about the tribunal now. One observation I'd like to make is that I don't recall whether the chairman of the tribunal has ever been invited to appear before this committee. I appreciate that in his judicial status, this would be completely inappropriate, but my understanding is that heads of independent tribunals are invited. The head of the CRTC has been invited and so forth.

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Frankly, that's part of the problem. The chairman of the tribunal wears a number of different hats. We have a tendency to call the judges in the tribunal “My Lord” and “My Lady,” and then the regular people are called either “Dr. So-and-So” or “Member So-and-So.” That's part of the problem we have developed over the years in terms of the tribunal.

More generally, the tribunal decisions have taken far too long. The recent model of excellence I think is not a model of excellence. The most recent consent case, which was done with agreed statements of facts and a high degree of collegiality among counsel on both sides, took something like 18 months on a consent basis. It took 18 to 20 months on a merger. This is far too long. It is absolutely ridiculous.

I say that having worked as counsel for the first merger case, which I'm embarrassed to say took eight years to resolve to the end. That is completely embarrassing. That was the previous record before Rob's case of 26 to 28 interlocutory decisions involving constitutional challenges.

The long and the short of it is we have a very short history of the tribunal, and we can't look back and say, “Gee, how come they're not moving faster?” Every time there's a new adjudicative body, it is expected that the law will be tested.

That said, I think the tribunal has to do more, and it has tried to do more. I'll give you an example. As I mentioned, I'm on the tribunal bar liaison committee, and we've been actively involved in streamlining procedures. One set of procedures dealing with the non-merger side is going to be shortly gazetted, but to get there, it took us several years.

Frankly, many of my colleagues in this room and elsewhere fought tooth and nail, saying, “Well, that's not justice. Justice means you can have as many witnesses as you want, you can plead as long as you want, and you can get whatever adjournments you want.” I think the hesitancy on the part of the tribunal to do more is because there's this view of a private bar to say the model is like court.

The problem is misconceived. It's not one of perfect justice or imperfect justice. The question is, in this type of area, what is the best model? Limiting witnesses may not be imperfect justice in this type of area. For example, in mergers, having 55 witnesses saying, “I'm going to be done in if there's a merger” really isn't the basis for decision-making. You need survey evidence. You need economic evidence. So perfect justice doesn't mean to lead 50 witnesses.

I just want to mention a couple of things that have been talked about in the tribunal liaison committee that I don't think require amendment to the act. One is the idea that decisions will come out in eight weeks. That's probably a pretty good idea, somewhat like the CITT, which takes 30 days. That's the kind of idea that's been tossed around.

Another one is to limit witnesses. I know there's going to be a hue and cry when that happens. An idea is 12 witnesses each unless you get leave of the tribunal. I'm sure many of my colleagues, those who are litigators in the room, will say, “This is just horrible. How could you do that? This is natural justice being denied.”

The third thing would be to have aggressive control of pre-hearing procedures by basically saying, “After the commissioner files, you have 30 days to reply.” People say, “Well, I can't. I need more than 30 days.” Frankly, when you get to the stage of an actual application, a lot of negotiations have gone forward. You know what's the case to meet. You know what the issues are.

Then the fourth area is really something the tribunal has to do more of, and they know that. I've certainly said it in my committee, and I'm not going to report what they said. I've said you have to be able to say to the parties, “I want experts on this issue and this issue, and you'd better file experts in this area,” instead of saying, “You do what you want, you do what you want, and then you can reply and you can reply.” That is not case management in this area. This is one where you have to be extremely aggressive, running the case from the first day it comes into the tribunal.

The tribunal can do that without amendment to the process. Every time you have amendment, it leads to more jurisprudence about what it really means. The framework is good enough for the tribunal to make these changes.

The Chair: Mr. Wong, just before I go on, were you suggesting that's something we as a committee should be recommending, or do you believe that's something the commissioner could do on his own?

Mr. Stanley Wong: Do you mean these changes?

The Chair: I mean the tribunal, not the commissioner.

Mr. Stanley Wong: Well, the tribunal can do it on its own, but I think you should consider... I appreciate there's this issue about calling up judges to appear before the committee, but after all, Mr. Justice McKeown is chairman of the tribunal. I quite frankly see no reason that he could not be invited to speak, maybe in camera. He certainly has to report to the Minister of Industry concerning his budget and is under the Minister of Industry's budget. I see no reason that you shouldn't get it directly from him rather than through me or through the commissioner.

The Chair: Okay, great.

Mr. Crampton, Ms. Anderson, and then Mr. Bagnell has a question.

Mr. Paul Crampton: Thank you.

I'd like to go back to predatory pricing and criminal pricing practices in general. The views I'm about to summarize are detailed in a paper I wrote recently. I gather some of you have it. If others don't, please feel free to ask me for a copy afterwards.

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I agree with what's been said by Neil and Roger and others, that instances of true anti-competitive predatory pricing are rare. The problem, as you've all seen here in the committee and as we've talked about on prior occasions, is that every once in a while you do get a bona fide case of anti-competitive behaviour. The current act just doesn't provide the commissioner with the ability to effectively address that behaviour when it occurs.

The principal reason for that is the commissioner would have to prove his case on a criminal burden of proof, beyond a reasonable doubt, which is very difficult to do, especially with respect to the substantial lessening of competition branches of the predatory pricing offence. There are basically four offences. Two of them are substantial lessening of competition branches, and two of them have to do with subjective intent—again, something that's very difficult to prove beyond a reasonable doubt. The criminal process is also very slow and cumbersome.

As a result, the best and most effective way to deal with predatory pricing, as well as geographic price discrimination and vertical price maintenance, is to repeal the current provisions and deal with this conduct under reinforced abuse-of-dominance provisions. By “reinforced” I mean you need to create an administrative penalty of the type you currently have in the deceptive marketing practices provisions of the act. You need to create that type of penalty in the abuse-of-dominance provisions of the act to retain the deterrence effect of the law.

I think the commissioner has come before you and said he didn't accept the Van Duzer report's recommendation of complete decriminalization of predatory pricing, because he thought it was necessary to retain the deterrence effect of the criminal law. Well, if you put a civil administrative penalty power into the abuse-of-dominance provisions, you would retain that deterrence effect of the law. And if you further amended the abuse-of-dominance provisions to eliminate the words “substantially or completely control”, then the anti-competitive test would simply be substantial lessening of competition, which is the same test that you have right now in the predatory pricing provisions.

So the abuse-of-dominance provisions basically would have a similar anti-competitive threshold and similar deterrence power in the form of an administrative fine that the criminal provision today has, except you wouldn't have to deal with the criminal burden of proof. That's the way I think is the most effective way of dealing with not only predatory pricing but also price discrimination and the other pricing practices.

When it comes to horizontal price maintenance, that ought to be dealt with under a new section 45. I gather you addressed section 45 this morning, so I won't go into it in greater detail other than to caution you that if you do decide to endorse the two-track approach—which I have strongly endorsed since 1990, when we started looking at it in the Competition Bureau, when the constitutionality of the current section 45 was first raised—you should avoid recommending a criminal per se provision that's based on the effects of the agreement. You should focus on the object or the nature of the agreement rather than the effects of the agreement, because if you recommend a test based on the effects of the agreement, it will be far too over-inclusive.

There are many agreements that incidentally affect prices or incidentally affect customers but are not in essence price-fixing agreements. If you stick to prohibiting agreements to fix prices, i.e., agreements the object of which is to fix prices, as opposed to agreements that simply affect prices as an ancillary matter, you'll get much closer to truly hard-core criminal behaviour.

The Chair: Thank you very much, Mr. Crampton.

I'm going to let everyone think about that for a minute while I go to Ms. Sanderson, who wanted to speak earlier.

Ms. Margaret Sanderson: I was just going to make a couple of points. One is to clarify that the tribunal process is actually quite an efficient process on consent.

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If you look at 10 cases, for instance, on the consent side, the average timeframe those cases were at the tribunal was 2.4 months. The longest one was seven months.

The case Mr. Wong referred to at the end is the Waste case. It's the contested side that is the problematic side, and I just wanted to clarify that.

If the committee is going to think about adopting timelines, they might want to think about whether they want to apply those timelines in the context of the bureau's review process as well.

The last point I wanted to make is that there should be a recognition that as we strengthen the tribunal process and improve the adjudication mechanism through the tribunal, we should not at the same time give the commissioner powers to avoid the tribunal. I think the interim injunction provisions that have been granted to the commissioner in the context of airlines are a special case, but if one wants to have separation of investigation and adjudication, one should have a revitalized tribunal. It doesn't help to give, at the same time, the commissioner powers whereby he can avoid the tribunal.

The Chair: Mr. Addy.

Mr. George Addy: I just wanted to flag this, Madam Chair, for your final report or your future deliberations. I would echo the comments that were raised earlier by one of the participants this morning as to how useful I find this as a forum to have a debate on future directions in the law and the policy in this area.

When you go down that road and look at that bifurcated model for section 45, the conspiracy provision, I would alert you to the fact that as the law is currently cast, all activity within the criminal part of the act can be the basis for a claim for damages. To the extent you remove any part of that activity and put it into the civil part of the act, it will no longer be subject to a possible claim for damages. It's something you might want to factor into your deliberations.

The Chair: Thank you very much.

Mr. Bagnell will ask his question before I go back to other people.

Mr. Larry Bagnell: Thank you.

This is for anyone who wishes to respond. I'm generally in favour of most of the proposals we're looking at for change, for amendments. In fact, I sometimes think they should be stronger. I'm also in favour of increased resources for the bureau.

I want to ask the same question Mr. Volpe asked the previous panel. If the bureau had substantially more resources, as some claim it needs, would we need to have most of these discussions on these changes? If you want to be really bold, you could say which one is most important. I think both are important.

The Chair: Mr. Quinn.

Mr. Jack Quinn: On the enforcement side I think it would be an important contribution to have more cases before the tribunal. In a lot of the thinking about what sort of process we want to have in the tribunal, there is typically an attempt to impose a full-blown traditional trial model. That kind of enforcement activity is not appropriate in a public law enforcement context.

In private litigation, the parties have the freedom to spend as much money on their cases as they think their interests bear, so there's a natural competition in spending money on cases. Part of the resistance to the bureau bringing more cases has been the amount of money they consume. This is simply saying that the process becomes a kind of pearl without price. The lawyers always argue for more protections, more safeguards, more hearings, and more redeterminations.

That is really not the focus Parliament should take. Parliament should ask itself, how much of the public resources we have to allocate amongst many valuable objectives can we afford to put into this kind of adjudication? There needs to be a determination at that level.

I'm sure what Neil Campbell said about jurisprudence being expensive to create is right in a broad, absolute sense, but here, it seems to me, it's really a question of public policy as to how many resources we're going to put into these cases and how much we're going to allow the lawyers to drive that as opposed to the kinds of public policy objectives we're trying to achieve.

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So I think giving the bureau more resources without dealing with the tribunal process will not take us very far down the road we're trying to travel down.

The Chair: Thank you very much, Mr. Quinn.

I'm going to move to Ms. Sanderson.

Ms. Margaret Sanderson: I worked at the bureau for ten years, and I do not think just throwing more money there will solve the problem.

If we kept the model we have today, as different people have said, you can have a situation such as the Superior Propane case where the commissioner can lead ten economists as experts. Otherwise, and George alluded to this, the U.S. Department of Justice... because the court said, I don't want this to be another IBM or Microsoft case; you can have one. I think we have to change this process, or the quantity of resources that will have to be devoted to it will likely far exceed, as Jack was saying, what the general taxpayer would view is a reasonable allocation, given competing and highly desirable goals for government policy.

The Chair: Mr. Wong.

Mr. Stanley Wong: I am in favour of seeing more resources for the commissioner, but that is only one part of the equation. The part of the equation that concerns me is really, for example, on the merger side, where we have pre-notification requirements, 14 days for short form and 42 days for long form. But you have to explain to your client, “Oh, by the way, you can close after then, but the commissioner will not have finished his consideration.”

If he classifies it, as many of you know—maybe some of you don't know—he has an internal procedure. It's laudable that he has announced his standards: 14 days for non-complex, ten weeks for complex, and five months for very complex. Of course, you appreciate the fact that part of the game is making sure you don't get classified in the wrong place, so you often have battles with the bureau officers as to how you are classified.

The problem is, it's easy to understand this if you're a practitioner, but how do you explain this to your client? Do you say, “By the way, you can wait 14 days and try to close, but it's not final because he's still investigating”? What we need to do is to bring the review standard in line with the notification requirements.

In the United States, of course, when the 30 days pass, it generally passes and you're finished. Obviously, there are extremely complex cases that require a lot of negotiations up front. The trouble now on any typical case is that you don't know going in exactly how it's going to be classified, and then you have to play the classification game.

Having more resources will allow the commissioner to make decisions earlier in the mergers case, to come to a quicker determination if you are complaining about conduct, and to get a quick resolution if you are the person under investigation. Any one of these parties, if they don't like the result, can take it to the appropriate adjudicator forum, assuming they have a right to go there, to have it determined independently.

The Chair: Thank you, Mr. Wong.

Mr. Campbell, please.

Mr. Neil Campbell: Thank you, Madam Chair.

On member Bagnell's question, I think there's actually almost a unanimous consensus around the principle that the bureau should be adequately resourced. The real question is, how can we tell if it is or it isn't?

My own reading of what the bureau has now reported in the merger areas is that they have now reached a stage where they are probably pretty well funded in that area. The user fees have provided a cashflow to assist in that. Following my attempts to understand from the published data whether they were needed for resources on the civil matters side, all the other reviewable practices led me to conclude there wasn't enough data to really be sure of that.

I suspect that resources would be helpful there and that this would alleviate some of the issues. In particular, as you've heard me say on behalf of a group, I think that is the place where you would expect to look to ensure that the bureau is actually doing the cases on behalf of small businesses, cases where, to my mind, private actions aren't conceivably a realistic alternative. You need to ensure that the bureau is resourced adequately to do the local-market exclusive-dealing case in western Canada, or the tying case in Atlantic Canada, or whatever it might be.

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I think there are a couple of areas where resources wouldn't be the answer. I would encourage you, as a number of people have already said, to look at the decriminalization of the pricing practices. I think what you found in your interim report, after hearing from a number of economists and from what Professor Van Duzer found, is that those laws are out of date and out of sync with good economics.

I would say the same thing, just briefly in passing, about your interim report noting the need to modernize refusal to deal and deliver pricing, to include a substantial lessening-of-competition test for the same reason, to give those an economically sound underpinning.

Lastly, without getting into the full debate from this morning on section 45, I haven't yet seen a compelling case that there is really a problem here that needs to be fixed by way of massive legislative rejigging. We do need to ensure the bureau is properly enforced, but I believe they can and do win conspiracy cases in both big and small settings, particularly in the modern environment, with their current immunity program, which allows them to approve the agreements they used to have so much difficulty approving in the 1980s. The pre-1992 statistics really aren't relevant in helping you decide whether you need to do something in that area.

Thank you.

The Chair: Thank you very much much, Mr. Campbell.

Mr. Addy.

Mr. George Addy: Thank you, Madam Chair.

To answer the question, I think the enforcement process and the enforcement of the law would benefit from more resources being allocated to the commissioner's office. Underlying that question is a bigger question—namely, what is the role of the commissioner, the role people are seeking to have funded? Obviously, there's always the overriding question Margaret raised, that amongst all the other competing public policy priorities, how much do we as Canadians want to invest in the enforcement of competition law?

On the role issue, I really think we are at a critical point, a fork in the road. We're on the edge of the precipice or whatever, depending what your perspective is, as to what role we are seeking to be performed by the commissioner. Do we want the commissioner to be our airline regulator? Do we want our commissioner to be the regulator of shelving allowances in the grocery industry six months from now? To the extent we have that type of discussion, we're going to have to deal with the resource implications. Maintaining competent, qualified staff within the bureau to go through on a daily basis costing calculations for airline air fares would be very expensive. We have to figure out if that's the model we want.

The Chair: Thank you very much, Mr. Addy.

I have a number of people who wish to make comments, so I'm going to Professor West and Professor Ross.

Mr. Douglas West: Thank you.

I have a comment that relates to a comment Mr. Crampton made earlier, and it's more along the lines of a comment on the interim report in terms of the pricing provisions. My sense of the complaints that arose from a number of sources when I was at the bureau had to do with complaints about the conduct of a large firm, possibly a firm that has deep pockets, when it enters a new market it isn't currently in. It could be a dominant firm that has operations in a number of geographic areas, but it is entering a new one. You might get complaints from existing firms in those markets regarding the conduct of this new entrant.

The current provisions under the abuse of dominance might cover that kind of conduct, but it's a bit of a grey area because the firm that's entering the new market may not in fact be dominant in that market. The abuse-of-dominance provisions refer to a firm having substantial or complete control of a class or species of business. Now, you could try to sandwich the conduct under the abuse-of-dominance provision. It's not clear that this is what it was intended for, but my sense is there are a lot of complaints surrounding that kind of conduct.

I'm relating this to this notion of trying to make some changes to the predatory pricing provisions and to bring them over to the civil side. Again, I made this comment earlier. I think it's important to consider the possibility of creating a new section that deals with predatory pricing, but not necessarily under the existing wording of the abuse-of-dominance provision.

The Chair: Thank you very much, Professor West.

Professor Ross.

Mr. Thomas Ross: Thank You.

I have a couple of things, Madam Chair. First of all, I have a point about the general question as to whether just more money for the bureau would solve things. There are three aspects we're all paying attention to here that go towards good competition policy, law, and enforcement.

First of all, you want the law to match the economics. This is a kind of economic regulation. In fact, some of these proposals we've been discussing relate to changing the law to better fit the economics.

You obviously want a process that allows for proper adjudication and decision-making in the least-cost way possible, and some of the procedural suggestions that have come up have been directed at facilitating that.

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The third thing, of course, is that you have to resource it effectively. So improving the level of resources for the bureau does mean some of these other things become possible, but it doesn't take away our need to address the law, the economics, and the process.

I also wanted to very briefly add to a point George Addy made earlier that is quite correct. It's also related to something that Neil Campbell was talking about, which is if we move certain actions from the criminal to the civil side of the Competition Act, it is true that under the current act, we would remove the right of private action to recover damages, which is available now if you're harmed by a criminal act. George made this point with regard to making a civil branch for section 45. Neil was talking about moving some of the other pricing practices over to the civil side. That's correct. I think that just argues for greater access for damages on some of those civil-side offences as well. I don't think it's an argument to keep them on the criminal side. We just have to open up to the possibility of allowing private actions, possibly including damages or at least cost awards for some of these other offences.

The Chair: Thank you very much, Professor Ross.

I have a number of people who want to speak, and then I have some questions.

Mr. Crampton.

Mr. Paul Crampton: Let me begin by responding to the brief point Professor West made, then I'll also respond to member Bagnell's question.

With respect to your scenario, I think if we did what I was suggesting—eliminate the words “substantially control” all or part of a class or species of business—then you'd just have the substantial lessening of competition test, and either you're substantially lessening competition or you're not. I think that would address your scenario.

With respect to your question, member Bagnell, I don't think resources alone would solve the problems we're talking about here. You could give the bureau as many resources as you wanted, and that wouldn't address the basic point that it's very difficult to establish beyond a reasonable doubt that any competitive predatory pricing has occurred. It wouldn't address the point that if someone chose to contest a section 45 case—we're talking about hard-core criminal behaviour right now, as most people plead guilty—all the resources in the world wouldn't help the commissioner to establish that case beyond a reasonable doubt. Chances are he probably wouldn't be able to establish it.

So I think you definitely need amendments to the act to make the act more effective in addressing anti-competitive conduct and also to reduce the chilling effect the act currently has on a broad range of pro-competitive conduct, whether it's these pricing practices we've talked about, which in the vast majority of circumstances are pro-competitive, or horizontal cooperation, which once again in the vast majority of circumstances is pro-competitive once you get outside this limited category of hard-core criminal cartel conduct.

Just on that last point, your interim report suggested if we go the two-track approach, the hard-core criminal per se provision might be limited to price-fixing and output restrictions. I would encourage you to expand that list to include market allocation—and by that I mean geographic market allocation and customer allocation—as well as certain types of group boycotts, such as group boycotts in support of price-fixing or keeping new entrants out of the market.

The Chair: Thank you very much, Mr. Crampton.

I'm going to have to ask if everyone could try to be a little briefer. We're going to run out of time, and Mr. Lastewka and Madame Girard-Bujold still have questions.

Mr. Russell.

Mr. Robert Russell: I'll go through the points quickly. I think the answer to the question put in the last session today is, no, resources are not the fix we're talking about. They're part of the fix, and there are various provisions. There's a weighing that goes on with every provision to see if a case can be made. Currently there are problems with the section, and proper enforcement can't be made because of the wording of the section.

But it does answer the question I'll posit rhetorically, which is, why do we not have a Microsoft case in Canada? Seventeen states in the U.S., the federal government in the U.S., and Europe have all looked at that. There's no argument that the impact in Canada and the economy is any different. I posit that as a rhetorical question. And I posit the answer: We don't have the funding to take that abuse case in Canada.

I'd like to put just two quick points. One is timing. That needs to be fully considered and fully expanded. If you were running an investigation for the commissioner, as I have, it's very much the dimension of a commercial fraud case. And to say it's going to be dealt with in a month, like a CITT case, just does not see the dimension of the review that has to take place in investigation before a case is either referred to the Attorney General or to the tribunal.

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So it's not easy. These cases can be huge and the amount of documentation, investigation, and witness examination can be enormous. To put artificial time constraints on what is effectively a policing statute, though it be in the commercial arena, I don't think is wise.

Finally, I have a concrete proposal I'd like to put to you on tribunal rules. We don't have a good structure right now for evolving rules in this arena. If we look at the courts, they have rules committees that are structured under statute. They have various participants—lawyers, judges. In this case it would be economists and Competition Bureau representatives, who should report the way they do in the courts. I sit on a subcommittee of the rules committee in Ontario biyearly. They're constantly evolving the rules to fine-tune things. For you to get into a whole bunch of baggage to consider an overhaul of the rules would make it too difficult to move ahead.

If we had a concrete structure built into the statute that called for that ongoing review of tribunal rules, you would find a lot of the problems—and I agree with what Mr. Wong said, in listing some of them—would become much easier, and not the struggle he outlined for you.

The Chair: Thank you.

Ms. Sanderson.

Ms. Margaret Sanderson: I was going to just touch on the last item on your agenda. I will do it quickly.

You asked for comments on the interim report, and I want to stress that the interim report is an excellent report, but sometimes I worry that in moments of crisis—when an airline is about to go bankrupt, or somebody doesn't have enough power or resources to do something—we put in these fixes for particular problems that actually go against some of the clear principles articulated in the interim report. I would hope this committee, when they're considering those proposals in moments of crisis, would return to the excellent principles that are documented here.

The Chair: Thank you, Ms. Sanderson. We'll have to wait and see what happens there.

Professor Ware.

Mr. Roger Ware: Thank you.

I'll first comment on Paul Crampton's proposal for eliminating the “substantial lessening of competition” phrase in section 79. I think one has to be a little bit careful about that, because if one were to do so, it would in a sense undermine the whole methodology of investigation for abuse-of-dominance cases. That methodological framework, which has evolved out of the cases we have—

The Chair: Professor Ware, there seems to be some confusion. Mr. Crampton is saying he didn't say that. Maybe I can have him clarify.

Mr. Paul Crampton: No, I didn't say that.

Mr. Roger Ware: I'm sorry, it was “substantial control”.

Mr. Paul Crampton: Yes, and you're left with a substantial lessening of competition tests.

Mr. Roger Ware: Yes, sorry, Paul. I meant eliminating the words “substantial control” of a class or species of business.

My point here is that the way that phrase has been interpreted by the tribunal has been as a market power test, that we start every investigation by establishing whether or not the defendant has market power.

Now, if we're going to eliminate that phrase, are we going to eliminate the market power test? I don't think so. So it's not clear to me, and we at least want to think about that a little bit more.

The second general point, since I know I'm running out of time, is that I think this committee might well consider in its final report some statement about the role of efficiency in competition law. I know this was touched on this morning, and I would echo what my colleague said, that in merger provisions of the act, we have a considerable degree of turmoil now in understanding what the objective of the act is in terms of recognizing economic efficiency. It seems to me it's rather premature to try to extend the notion of efficiency to other sections of the act—section 45, the reviewable practices sections—until we know, or at least can restate to some extent, what the view of Parliament is on the role of efficiency in competition law.

The Chair: Thank you very much, Mr. Ware.

Mr. Campbell.

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Mr. Neil Campbell: Madam Chair, I just want to touch briefly on Mr. Crampton's comment about the difficulty of proving a cartel case in the modern world, which I take to be in the last few years, because the world has changed very significantly. The bureau's immunity program plays a serious practical role in almost all of these cases now, and it's worked very well. It's modelled on the same successful program in the United States.

After Hoffmann-La Roche pleaded and paid $50 million two years ago, and some other companies paid some large amounts of money, member McTeague, I think, was quoted as saying his three-year-old could have done it, because the bureau was just tagging along. Presumably his talented now five-year-old is a terrific young person.

But the bureau actually does achieve remarkable results in that area. When you think about the biggest multinational companies in the world coming and paying attention very closely, after the United States, to Canada, paying huge fines and having individuals pleading guilty to crimes in Canada, that is fairly remarkable. I think the bureau is a very credible enforcer on the world stage on cartels.

It has also done perfectly well on local cartel activity in Canada. It has sent people to jail. It has obtained convictions. I think the difficulty with the reform of section 45 is not so much that there's any disagreement around the evil of hard-core cartels. The difficulty is whether you can successfully write a definition into a law that is not massively over-inclusive.

It's like that old saying of the U.S. Supreme Court judge about pornography, “I know it when I see it.” And I think it's the same thing here. We all know a hard-core cartel when we see it, but if you look at Bill C-472, for example, and apply it to a bunch of things we would all regard as not being hard-core cartels, they still get swept in. So I would encourage some very significant caution in the area of section 45 reform.

The Chair: Thank you very much, Mr. Campbell.

Mr. Lastewka.

Mr. Walt Lastewka: Thank you, Madam Chair.

I too want to thank all the witnesses here today, because the last two round tables have been absolutely excellent. I've been trying to do some summary of what we've heard today.

On the one hand, we've heard about adding funding and looking at the funding side. Some people have mentioned having capable resources and people there for a longer time. On the other hand, we've talked about process—so many witnesses, time limits. But the one that intrigued me the most—and it's come up in both these round tables—is the need for proper guidelines and examples.

I'll just quote some of the people.

It was said there's a need for clarity and examples, and that we need to establish the rules of the game. Mr. Russell, you stole my question here, and I thank you for your comments on the rules committee. And there was the comment that if you throw funding at a bad system, you're still going to have a bad system.

So my comment to you is that we need to fix the system, but we need to be doing it on an ongoing basis. I think Mr. Ware mentioned how the world has changed in the last three, four, or five years. We need to have something on an ongoing basis that can be looked at to improve the system, and then the money put into the system will be well spent. My concern is if we don't fix the system, we won't get our value for the money.

I'd like to hear your comments.

The Chair: Mr. Addy, please.

Mr. George Addy: Thank you, Madam Chair.

I would like to respond to that and then add another comment with respect to the interim report.

I think Mr. Lastewka's comments were quite apropos. Personally, I don't think the system is irreparably broken. I think it is a system we can continuously improve through some process. I agree with you, we can develop a process, and this committee's round tables are part of that process. We should be doing that on an ongoing basis. So I think you're right.

Second, I want to commend the committee's interim report in setting the scene—the market context within which this market behaviour is being assessed, enforcement decisions are having to be made, and discretion exercised by the commissioner.

The pace, as you indicate in your report... and frankly, I don't think we've spent enough time thinking about what these changes really mean. You said in your interim report that the market cycle for products is a lot shorter than it was 10 years ago. Innovation is a lot faster. Transactions are taking place in nanoseconds, as opposed to quill pens on parchment. The pace of market behaviour is so fast today that it really imposes a very difficult challenge on an enforcement agency.

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When you're running an operation like that, you're constantly worried about two things. You're worried about what Paul, I think, refers to in some of his papers as the “type one” errors, where you haven't taken enforcement action when you should have. You're also worried about the “type two” errors, where you have taken enforcement action in a benign case that may have caused narrow damage to those parties or a chilling effect on the marketplace. Dealing with those challenges in the environment we face in today's business climate is very, very difficult, and it may be that the committee wants to think about flagging that challenge for the commissioner in its interim report.

The Chair: Thank you very much, Mr. Addy.

I have Mr. Crampton, Mr. Russell, and then we'll move to Madame Girard-Bujold.

Mr. Paul Crampton: Thank you. I just wanted to briefly respond to a couple of points made by Roger and one point made by Neil.

Roger, I don't think we would abandon the market-power test at all if we went to a substantial lessening of competition test in section 79, and abandoned the substantial control element. That's the test we have in mergers and in other areas that are couched solely in terms of substantial lessening of competition. I think the tribunal, when it has articulated the need for a market power test in the abuse-of-dominance provisions, has never gone further and told us what degree of market power you need. But I think most of us would agree.

In fact, the Supreme Court of Canada told us we need a greater degree of market power because of the presence of those words “substantially or completely controlled”. So if we get rid of those words, we simply have the general market power requirement we have with respect to all of the other provisions of the act that have this substantial lessening of competition test, which is a lower anti-competitive threshold, and the same one that you currently have in the predatory pricing provision. So you wouldn't be losing anything by shifting over to the abuse-of-dominance provisions.

Regarding your comment that it would be premature to extend some kind of consideration to efficiencies in other areas of the act, I personally take issue with that. I don't see any basis for treating one type of horizontal arrangement, such as a merger, analytically differently from another type of horizontal arrangement such as strategic alliance. I think the two ought to be treated the same way.

So outside what would be the new criminal track under a revised two-track approach to conspiracies, I think you would want to have basically the same efficiency provision, and a similar provision as well in the abuse-of-dominance provisions. But the nature of that efficiency provision would have to be different from the one we have today in section 96, which never worked for almost 10 years, while the Competition Bureau had a business-friendly interpretation, and it certainly won't work now that there's not a business-friendly interpretation being adopted. The efficiency test—

The Chair: I'm going to have to move on from there, I'm sorry.

Mr. Russell.

Mr. Robert Russell: I think the point made is one of continuous improvement. That's exactly, I think, what you're hearing from both sessions, that there are various aspects that need continuous improvement in the act.

I want to end by thanking the committee for bringing us into a chapter of competition policy that is quite exciting. I think the process, Madam Chair, that is being brought forward has allowed us to have the prospect of change that's needed in the act measured within months and years as opposed to decades, which has been the history of this dusty old statute that most judges still are completely unfamiliar with in this country. You've brought it up a level.

I commend those private members' bills. Even though I may think they're wrong, it stimulates the debate and the discussion around these very important provisions of a statute that has general impact in our economy, and this is a very exciting process you've brought us all into.

Thank you.

The Chair: Thank you very much, Mr. Russell.

Madame Girard-Bujold, a fast comment.

[Translation]

Mrs. Jocelyne Girard-Bujold: Thank you, Madam Chair.

I much appreciated our two round tables of this morning. The first round table dealt more specifically with section 45. You are aware that I moved a motion in the House regarding the word “unduly” in clause 45.

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I must say that I also find very interesting what you, the experts, came to tell the committee during the second round table dealing with enforcement, evaluation and recommendations.

I have a question for professor Ware. In your statement, you said that in order to have a better competition policy, the Competition Bureau should have a more open approach and a continental level structure.

What do you mean by that? What would such an approach allow for? Would it help make the Competition Act more effective?

[English]

The Chair: Professor Ware, you'll have the last comment.

Mr. Roger Ware: I realize that was perhaps beyond the jurisdiction of this committee and this forum, but my point simply was that most of the companies that have high-profile cases before the tribunal are operating on an international sphere and that an open international trade policy is in many ways a better way of creating competition than through a legal enforcement of one's own competition laws and, I should add, open foreign investment policy.

The Chair: Thank you very much, Professor Ware.

I want to thank all the participants. The researchers and I are just trying to figure out what we didn't cover today. This area is so broad and there are so many things to talk about in the Competition Act; we all find it very interesting. I do appreciate everyone taking time out of their busy schedules to be here, to be part of this, and I hope you'll be able to stay for a few minutes and have some informal discussion with us over lunch.

Thank you very much. I remind members that we're meeting this afternoon at 3:30.

This meeting is now adjourned.