N e w s   c o n f e r e n c e

The House of Commons Standing Committee on Industry, Science and Technology

Report on the Competition Act:

A Plan to Modernize Canada’s Competition Regime

Ottawa, April 23, 2002 -- The House of Commons Industry Committee has been studying Canada’s Competition Act for approximately two years.  And I have the pleasure of presenting to you the results of the Committee’s efforts.  Our report, entitled A Plan to Modernize Canada’s Competition Regime that was tabled this morning in the House,contains 29 recommendations for improving Canada’s competition regime.  The recommendations encompass substantial changes to the Competition Act itself, and are also aimed at invigorating the Competition Tribunal with new powers and bolstering the Competition Bureau with additional enforcement resources.  We believe that a vigorously enforced Competition Act is essential in ensuring that Canada’s business sector is productive, innovative and competitive in the new global economy.

While I encourage you to read the entire report, I will highlight six major recommendations for you this morning.  But before doing so, I want to apprise you of the overarching approach taken by the Committee in making all of its recommendations.  This should provide you with a better understanding of the report and help to single out the contribution each recommendation adds to the present competition regime.

There are three aspects to the Committee’s approach.  The first aspect is the reform of the Competition Act itself.  The Act must better reflect contemporary economic thinking to better guide the public in complying with the Act, as well as to improve the effectiveness of both the Competition Bureau in enforcing the Act and the Competition Tribunal in adjudicating contested cases.

The second aspect is the Competition Tribunal.  Currently, the Tribunal lacks sufficient powers to stop anticompetitive conduct in a timely manner.  The Tribunal must be armed with an array of administrative tools that provide incentives to the business community and the public that would prevent and deter anticompetitive behaviour before it arises.  When these powers fail to pre-empt such conduct, they should assist a civil adjudicative body in resolving disputes equitably and expeditiously.  Justice delayed is justice denied.

Finally, the third aspect is to provide more enforcement resources, both public and private, while focusing these resources on the more egregious anticompetitive conduct.

Let me begin with the two recommendations that would improve the economic underpinnings of the Competition Act.

First, the Committee recommends that the government adopt a two-track approach for dealing with so-called “horizontal agreements.”  The first track would modify the existing criminal provision (section 45) in two ways, and would permit the criminal justice system to deal with “naked hardcore cartels”; that is, conspiracies that have no redeeming social value. 

The current conspiracy provision, section 45, would be modified in two ways.  First, the word “unduly,” from the phrase “have the effect of lessening competition unduly” would be stricken.  As such, a horizontal agreement would not have to lessen competition “unduly” to be found to be a conspiracy against the public interest.  The second modification would be to provide a specific defence for the parties to a horizontal agreement.  The essence of the defence would be that the agreement has a broader, pro-competitive purpose, such as achieving greater efficiencies or fostering innovation that often are associated with a “strategic alliance” or “joint venture.”  In these cases, agreements only incidentally restrict price competition.

In recommending these two changes, we would in effect reverse the current “onus of proof” – putting it upon the party wishing to enter into the arrangement to prove the ultimate social value of the agreement.  Thus, the Committee’s recommendation would increase the effectiveness of the conspiracy provision.

The second track of the two-track approach would be to create a new provision to be included in Part VIII, the “civilly reviewable” part of the Competition Act, to deal with pro-competitive “strategic alliances” or “joint ventures.”  This new provision would be modelled on the current merger review provisions (sections 92 through 96) so that a “strategic alliance” or “joint venture,” which is often a more productivity-enhancing alternative to a merger, can be assessed on a “level playing field” with that of a merger.

The Committee’s second recommendation would be to decriminalize the three anticompetitive pricing provisions and make them subject to civil review under the abuse of dominant position provision (section 79).  The anticompetitive pricing provisions include predatory pricing (section 50(1)(c)), vertical price maintenance (section 61), and price discrimination (section 50(1)(a)).

In making this recommendation, the Committee is in fact agreeing with the VanDuzer Report that two of these pricing practices, vertical price maintenance and price discrimination, can be either pro-competitive or anticompetitive, depending on the situation.  Therefore, treating them strictly as criminal offences is the wrong approach.  Moreover, the Competition Tribunal is better equipped than a Court in assessing the competitive impacts of these pricing practices.

The third pricing practice, predatory pricing, is very hard to establish at the criminal standard of proof – that is, “beyond a reasonable doubt” – and a Court is not the ideal place to conduct such an inquiry.  The Competition Tribunal has more expertise in distinguishing between aggressive pro-competitive pricing and predatory pricing.  Moreover, the Committee notes that the Commissioner of Competition has already chosen to make its predatory pricing case against Air Canada at the Competition Tribunal under the abuse of dominance provision (section 79), rather than having the Attorney General test this case under the criminal predatory pricing provision (section 50(1)(c)) before a Court.  So, to some extent, the Committee’s recommendation merely confirms current practice.

Moving to the second aspect in the Committee’s approach to improving Canada’s competition regime, we recommend that the Competition Tribunal be given the power to assess monetary penalties with respect to sections 75, 76, 77, 79 and 81 in the civilly reviewable part of the Competition Act.  These provisions include business practices such as refusal to deal, consignment sales, exclusive deals, tied sales, market restriction, abuse of dominance, and delivered prices.  Additionally, the Committee recommends that the Competition Tribunal be given the power to award damages to injured parties under sections 75, 77 and 79.  These sections include business practices such as refusal to deal, exclusive deals, tied sales, market restriction, and abuse of dominance.

The Committee believes that these powers are needed to properly deter these anticompetitive practices from happening in the first place.  However, when they cannot, they will help expedite proceedings at the Competition Tribunal.  Currently, the Tribunal can only order an abusive firm to stop its practice, and the abusive firm has every incentive in the world to just delay the proceedings as long as he can.

The third aspect of the Committee’s approach to reform is to provide more enforcement resources, both public and private, while focusing these resources on the more egregious anticompetitive conduct.  Here, the Committee makes three recommendations:

One.  Extend the private right of access to the Competition Tribunal, which under Bill C-23 would encompass only to refusal to deal (section 75) and exclusive dealing, tied selling and market restriction (section 77), to include abuse of dominant position (section 79).

Two.  Provide the Competition Bureau with the necessary resources – and that may mean more resources – to enforce the Competition Act.

And three.  Raise the transaction or sales threshold for notification of a merger subject to civil review from the current $35 million to $50 million.

The first of these three recommendations would increase the amount of private sector resources devoted to enforcing the Competition Act.  In most cases, private individuals know better than the Commissioner of Competition when the Competition Act has been breached.

The second recommendation that would have the government allocate more resources to the Competition Bureau would help the Commissioner in enforcing the newly decriminalized provisions; that is, the anticompetitive pricing provisions.  Currently, the Attorney General enforces these criminal provisions.

The third recommendation would help the Competition Bureau focus its enforcement resources on the larger mergers that are likely to pose an issue under the Competition Act, as well as more vigorously enforce other provisions of the Act, such as conspiracies and abuse of dominance.

Thank you.  I will now invite the representative from each opposition party to comment briefly on the report, after which the panel will be free to answer any questions you may have.

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Members of the Committee are: Walt Lastewka, Chair (St.Catharines); Dan McTeague, Vice-Chair (Pickering-Ajax-Uxbridge); Larry Bagnell (Yukon); Stéphane Bergeron (Verchères-Les-Patriotes); Scott Brison (Kings-Hants); Bev Desjarlais (Churchill); Brian Fitzpatrick (Prince Albert); Cheryl Gallant (Renfrew-Nipissing-Pembroke); Jocelyne Girard-Bujold (Jonquière); Serge Marcil (Beauharnois-Salaberry); James Rajotte (Edmonton Southwest); Andy Savoy (Tobique-Mactaquac); Brent St. Denis (Algoma-Manitoulin); Paddy Torsney (Burlington); Joseph Volpe (Eglinton-Lawrence) and Susan Whelan (Essex).

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