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]

Thursday, October 4, 2001

• 0908

[English]

The Chair (Ms. Susan Whelan (Essex, Lib.)): I'm going to call the meeting to order.

Bill C-23, an act to amend the Competition Act and the Competition Tribunal Act, is our order of the day.

We're very pleased to welcome here this morning, from the Department of Industry, the Commissioner of Competition, Konrad von Finckenstein. With him today is Marcel Morin, the acting assistant deputy commissioner, and François-Bernard Côté, the director of the competition law division.

Without further ado, I'll turn it over to you, Mr. Commissioner.

Mr. Konrad von Finckenstein (Commissioner of Competition, Competition Act, Competition Bureau, Department of Industry): Thank you, Madam Chairman, and thank you for having invited me to talk to you about Bill C-23.

[Translation]

This bill reflects the valuable work of this committee's June 2000 report and initiatives taken by individual members of Parliament, some of whom are on this committee. As you know, there was an extensive national consultation process on this issue conducted by the Public Policy Forum. Twelve round tables were conducted across Canada.

As you know, the Competition Act is designed to promote competition and efficiency in the Canadian marketplace to ensure that all Canadians enjoy the benefit of low prices, product choice and quality service.

• 0910

[English]

The legislation before you is very important to keep up to date with changes in our economy and to give the Competition Bureau the tools it needs to do its job.

The bill basically has four items of great importance to us. It prohibits the sending of deceptive notices; it enables us to gather evidence located abroad; it will streamline the Competition Tribunal process; and it will give the Competition Tribunal the power to issue temporary orders.

Let me deal with these issues one by one.

In regard to deceptive notices, our bureau receives thousands of complaints each year regarding cleverly worded mail notices designed to deceive victims into believing they have won a prize, requiring the so-called winner to pay in order to receive the prize. Most often there's no prize, or the value of that prize does not exceed the amount that has to be paid.

Canadians who are targeted for these mailings are often the most vulnerable members of our society. They target specifically our seniors, and losses can amount to thousands of dollars per person. Increasingly, these scams also become international in scope. These scam artists locate in one location and target another one, and Canada, unfortunately, is in the process of gaining a reputation as a haven for these scam artists, who concentrate on the United States.

It's therefore very timely that we enact these provisions. They will also have, as a goal, to draw a difference between legitimate business contests and scams. The amendments create an offence that prohibits the sending of a notice by any means that a) leads recipients to believe they have won a prize; and b) requires them to pay anything to receive the prize. No offence would occur if the person actually wins a prize and the notice disclosures are satisfied.

You are going to hear from the bar and others who will appear before you. How are we going to do this? How do these things work out? There's a lot of discretion vested in the bureau. For that purpose, I have distributed to you today tentative draft enforcement guidelines that show how we would apply those provisions—what we consider a prize, what's considered payment, etc.—and hopefully, this will put some flesh on the bare bones of the legislation and give you a view of what we intend to do. It will also lead to greater certainty for business.

The next point was international cooperation.

[Translation]

The ability to obtain evidence located in other countries is crucial in administering and enforcing competition laws in today's global economy. In order to inquire fully into abusive dominance allegations concerning a large, multinational corporation, we need access to relevant evidence which is often located beyond our borders. Currently, there's no way to obtain that evidence.

The proposed amendments regarding mutual legal assistance will facilitate evidence-gathering on behalf of Canada regarding civil competition matters, such as abusive dominance and mergers. This will ensure that enforcement decisions affecting domestic competition are made in Canada.

The proposal sets minimum standards for treaties and essentially mirrors the existing tools with respect to criminal matters under the Mutual Legal Assistance in Criminal Matters Act.

[English]

Basically, what we are asking is to be able to do on the civil side what we can do now on the criminal side—gather evidence abroad and bring it into Canada so we can make decisions in Canada. Again, in order to explain what we have in mind, I have tabled with you a model treaty. The act would allow the Minister of Justice to make treaties with countries that have sufficient safeguards, and pursuant to that treaty, information would then be exchanged.

I think it is quite clear this new part III, which allows for the making of the treaty, and the model treaty show that we cannot obtain evidence in another country without significant safeguards. The safeguards are that the Minister of Justice has to be satisfied that this country has essentially the same confidentiality system as we have, and two judges have to order—the first one to gather the evidence and another one to remit the evidence to another country. So clearly, safeguards have been built in to provide protection for our business.

• 0915

Let me just tell you in advance, when you hear from the Canadian Bar they will probably suggest that section 29, which deals with confidentiality of the act, also needs to be amended.

In our view, this is not the case. Part III, as set out, is a self-contained code that applies to the gathering of evidence abroad and has a built-in sufficient safeguard. There is no need to open up section 29, which in our view is established law and needs no amendment.

One final point on this subject. Nothing in the proposed provision authorizes the bureau to send information already in its possession to be used as evidence abroad, whether it was obtained voluntarily or compulsorily. Again you're going to hear that voluntarily surrendered information needs to be included. As I say, there's a self-contained code, and it has nothing to do with voluntarily submitted information.

The next point is the streamlining of the competition process. The Competition Tribunal has proven to be very costly and time consuming and therefore is of very little use.

The proposed amendments will allow the tribunal, first of all, to hear references on questions involving a specific aspect of a case or a specific issue, rather than having to litigate a whole case.

Secondly, it will give the tribunal the power to award costs so it can discipline the parties before it and prevent frivolous or strategic behaviour.

Thirdly, it will give it the power to make a summary disposition to dispose of a case quickly where it finds there is no genuine case or no genuine defence.

I think all three of these amendments are needed and will allow us to make better use of the tribunal and allow it to control its own process.

The last point concerns interim orders. The ability to act quickly and prevent irreparable harm in the market is a key issue in our fast-paced economy today. Currently the tribunal cannot issue an interim order under most circumstances, unless the bureau has applied to the tribunal. However, we can't apply to a tribunal until we've collected the evidence, which takes time. In the interim, very often, the victim of anti-competitive behaviour may go out of business.

So the proposed amendment would allow the tribunal to issue interim orders in three cases: if there's irreversible injury to competition; if a competitor would likely be eliminated; or if the person would likely suffer significant loss of market-share revenue or other harm that cannot be remedied by the tribunal.

These are the same powers the commissioner has right now regarding airlines. Here, we would apply to the tribunal, and the tribunal, on the basis of the same tests, could issue temporary orders giving us time to investigate. These orders would be interim and limited in time, and the final order, of course, could only be made after the bureau brings the case before the court for full litigation and a judgment.

[Translation]

There are some other amendments to the act, which we refer to as housekeeping amendments.

I wanted to refer briefly to some miscellaneous amendments included in the bill. These include the proposed revisions to the consent order process, revisions to the temporary order provisions in respect of deceptive marketing practices and making advisory opinions binding on the commissioner.

While essentially of a housekeeping nature, these amendments would nevertheless prove invaluable to the smooth functioning of the act.

[English]

For us, these so-called housekeeping amendments are of considerable importance in terms of the daily working of the bureau.

Now let me say a few words about something that is not in the bill but is essentially before you, which is private access.

You will remember that Bill C-472 proposed allowing private parties to apply directly to the tribunal for remedies concerning refusal to deal, tied selling, market restriction, and exclusive dealing—essentially the review of conduct under sections 75 and 77 of the Competition Act.

These kinds of disputes essentially involve private matters between buyers and sellers. The proposal contemplated in Bill C-472 would permit applications only with leave of the tribunal, to guard against strategic litigation. It would provide remedies by way of injunction only, so there are no damages and there's no incentive to sue for money. And lastly, they give the tribunal the power to award costs, so as to discipline and deal with frivolous proceedings.

• 0920

The minister has referred Bill C-23 to the committee before second reading to provide the committee with an opportunity to explore private access and to determine whether consensus on the subject can be found.

You will recall that the Public Policy Forum pointed out in its report that there were diverse views amongst stakeholders on this proposal, but found “consensus might be possible if changes were made to the proposal”.

As far as I can see, supporters of private access argue that there are some perceived deficiencies in the system and would make the following three points.

Number one is that the limited resources available to the bureau mean that some legitimate cases are not being taken to the tribunal. For example, cases that are very local in nature, or whose impact on the economy is small, will probably be given low priority by the bureau and therefore will not be argued. However, private access for such cases has a potential to complement public enforcement in this area.

Secondly, under the current system, a complainant is also left without an alternative if the case is given low priority by the bureau and is not pursued. Supporters of private access believe that people or companies should have the option to pursue their own cases in such instances, especially since it very often may mean that they go out of business if the issue is not addressed.

And thirdly, there is very little jurisprudence related to reviewable matters, and it's argued that private access would result in additional case law. This has been the experience in Australia, where most of the law in this area emanates from private cases. More jurisprudence would allow the business community to have a better understanding of how the law applies and conform with it.

Now, some powerful arguments are being made against private access. There's a strongly held belief by some that it will be used for strategic litigation. For example, a large firm with significant resources could initiate one or more applications against smaller firms with limited funds. Alternatively, it's also possible that firms of any size could initiate or threaten legal proceedings in the hope of deterring aggressive competition. This can be part of a negotiating strategy designed to harass a rival.

Secondly, they feel that the safeguards that are being proposed to deter strategic litigation will not work. They are doubtful that any safeguards, no matter how stringent, would work; that once you open the door to private litigation, strategic litigation will follow regardless of the safeguards.

And thirdly, they feel that while there is need for jurisprudence and it would be useful to have such jurisprudence, expansion of the case law is not a sufficient reason to expose Canadian business to the cost of disruption associated with more private litigation.

We at the bureau continue to believe that some form of private access is necessary in order to round out the provisions of the Competition Act. Whether the time is right for this now and what form such amendments should take is something your committee will have to study. As the minister has stated in a letter to the chairman of this committee, major changes to framework laws, such as the Competition Act, require broad consensus.

This committee will hear from all sides and will be well placed to determine, on the basis of their submissions, whether the required consensus to enact private access with substantial safeguards, along the lines examined during the PPF process, has been reached or not.

Now, let me just, for completeness' sake, deal with two other issues.

[Translation]

Other issues which were part of the consultation process included the conspiracy and abusive dominance provisions in the grocery sector. Participants in this consultation process expressed a desire to modernize the act's conspiracy provisions but generally felt that more discussion, analysis and consultation was required on such an important subject.

To facilitate the debate, the Bureau hired three experts well known for studies on this issue. Rob Russell, of Borden Ladner Gervais in Toronto, Al Gourley, of Macleod Dixon in Calgary, and Yves Bériault from McCarthy Tétrault in Montreal, were commissioned to undertake studies that are now on our Web site. A conference on this very subject initiated by the private sector on amending section 45 is taking place on October 12. Following the conference, the Bureau will be consulting stakeholders about reforming section 45 during the course of the winter and spring.

• 0925

On the issue of possible abusive dominance in the grocery sector, the Bureau commissioned three studies to facilitate the debate. Dr. Stephen Ferris of Carleton University, Dr. Guofu Tan of the University of British Columbia and Dr. Jean-François Wen of the University of Calgary undertook studies which can be found on our Web site. The Bureau is basing itself on these studies to prepare guidelines for the grocery sector which will soon be published.

[English]

I hope by dealing in this way with section 45 and the bills of dominance in the grocery sector, we will be able to advance that issue further. But it's not part of your considerations today, and frankly these issues are not right. That's why we have commissioned these studies; that's why we're publishing them; and we hope to be advancing them further.

Last year I appeared before you in follow-up to the VanDuzer report. I also read your interim report. This report made several suggestions that we have followed up. First, we've taken your advice and issued abuse of dominance enforcement guidelines, which are now in place. These have been widely received with positive acclaim. Secondly, we are in the process of writing guidelines for unreasonably low pricing or reforming the existing policy.

So, Madam Chair, in short I'm sorry to have taken up so much time, but I wanted to give you an overview of where we stand with regard to all the issues that have come up before the Public Policy Forum. We think Bill C-23 is indeed timely. It represents concrete steps to deal with illicit contest scams and will give us the tools to obtain evidence abroad. It will streamline the Competition Tribunal and will give the tribunal the power to issue cease and desist orders. Ultimately Bill C-23 is designed to ensure that Canada has a modern and responsive Competition Act that promotes healthy and vigorous competition for the benefit of all Canadians.

Thank you very much, and I will gladly answer your questions.

The Chair: Thank you very much, Commissioner.

We're now going to turn to questions. We'll go back and forth, beginning with Mr. Rajotte, please.

Mr. Rajotte.

Mr. James Rajotte (Edmonton Southwest, Canadian Alliance): Thank you, Madam Chair.

Thank you, Commissioner, for your presentation this morning. I do want to ask about the issue of private access. You obviously endorse some form of private access here in your statement. Obviously, if it's something you favour, you must feel that the current system in place now is deficient in some way. So I would just like to ask some basic questions about how well the method in place works right now. How many cases are brought forward each year? How many cases are reviewed? How many cases are then put forward to the Competition Tribunal? I would also like to ask whether there are any other ways of dealing with the issue you raised concerning limited resources and other similar issues. I wonder whether you could address that.

Mr. Konrad von Finckenstein: The bill has consistently argued that it is probably necessary to round out the Competition Act so there would be some private access. As you appreciate, several provisions are difficult to enforce, because you have to draw the boundary between what is anti-competitive conduct and what's vigorous competition. That's not a clear boundary, and indeed it differs from case to case. Each case depends on its facts.

Right now the system works in the following way. If a company feels it is subject to anti-competitive behaviour—a fault under the civil provisions—it comes to us. It petitions us to investigate. We investigate, and if we find there's sufficient proof of such behaviour, we try to remedy it—usually without litigation—by convincing people to remedy the behaviour. If that doesn't happen, we go to court to get an order to try to have that company cease and desist such things.

We don't bring many cases. It's a difficult area of law, especially given our limited resources. Also, as is normal for a state agency, we focus on issues of great magnitude that have an economic impact on the whole country or a whole region, etc. The areas that are targeted here, such as refusal to deal, tied selling, etc., are essentially issues between two companies, usually a supplier and a distributor, and they are essentially private in nature. Very rarely do they have sufficient economic impact or involve sufficient complicated legal issues that we will take them forward. We resolve a lot of them through what we call alternative case resolution. But some companies undoubtedly feel we don't do enough. I can't see any reason why we would not give those parties the ability to try on their own, with their own means, to convince the tribunal to get an order.

• 0930

Now, the safeguards that have been promoted, put in Bill C-472, and discussed before the PPF, such as leave of the tribunal, no monetary damages—you just get an injunction—and costs by the tribunal, would hopefully make sure that this is not being used for strategic purposes. Of course, you can never prevent people from strategic litigation and there is a certain risk. But we felt, on the whole, that this would round out the provisions. As the minister and his predecessor have made abundantly clear, this is framework law. The minister wants to proceed only if there is general consensus on these issues and they make good economic sense. He has basically asked this committee to determine that.

Mr. James Rajotte: In terms of the number of cases brought forward now, what percentage are resolved through what you call your alternative dispute resolution? How many or what percentage are brought forward to the Competition Tribunal?

Mr. Konrad von Finckenstein: I apologize. I don't have the numbers in front of me. I can certainly furnish them to the chairman for distribution to the committee.

Under the civil provisions, contested cases are one or two per year at most. That gives you an idea of how many. As to the alternate case resolution, I don't have the numbers at my fingertips. It's a significant number. Most cases get resolved through the alternate case resolution and do not go to court.

Mr. James Rajotte: On the issue of the strategic use of private access, you just now said there's no way to prevent that completely. So what assurances can you give to companies that are genuinely worried about this?

Mr. Konrad von Finckenstein: Well, people can always go to court and sue right now, even if it's not to the Competition Tribunal. The question is whether you have a legitimate case and whether you could get penalized. What we thought is that by having a leave provision to the tribunal, you have to convince the court, first of all, that you have an arguable case, and secondly, that there's no incentive for you to sue, because you're not going to get money—all you're going to get is an injunction—and lastly, you actually may have to pay costs for yourself and for your opponent if you're unsuccessful. This process would be a sufficient deterrent so that only genuine cases would come forward.

The opponent of private access always thinks this will take us to the U.S. model. The U.S. situation is totally different. First of all, you have no costs; secondly, you have class actions; and thirdly, you have triple damages—all of which we don't want; we're not going anywhere near that. This is such a very modest, limited approach. The scope for strategic action, while hou can't rule it out, in our view, is going to be very limited.

The Chair: Thank you.

Thank you very much, Mr. Rajotte.

Mr. McTeague, please.

Mr. Dan McTeague (Pickering—Ajax—Uxbridge, Lib.): Thank you, Madam Chair.

Good morning, Commissioner and your staff. We've gone several months on this issue of modernizing the Competition Act. We have before us the essence of the changes that were both necessary and very much the product of many years of work from all angles.

I'm interested, Commissioner, in ensuring that consumers and small businesses that constitute a fair chunk of our concern as members of Parliament are also considered in the legislation. For this reason, I understand the issue of private access may create concerns. As we saw in the PPF, the same group of individuals, organized by one or two groups, could recycle their members five and six times over and give the impression of never allowing broad consensus.

I'd like to talk to you, Commissioner, and ask a question about what has been said in a global context. Recently at a policy conference on competition policy on June 21, the following individuals made observations with respect to right of private access.

In Australia's case, it

...has given citizens the right to initiate competition actions. “It's been fairly important at times when the government has been cutting back on the budget of the public regulator.” “Then private actions tend to increase.”

That's Mr. Allan Fels, chairman of the Australian Competition and Consumer Commission.

The second quote:

“I see no reason why it should be a matter of public policy that the commissioner is the only individual who has access to a tribunal....”

• 0935

That will be an individual with whom you're perhaps familiar, Mr. Howard Wetston, your predecessor in the same position, currently vice-chairperson in the Ontario Securities Commission, as appointed by the provincial government.

The final quote is from a Mr. Frédéric Jenny who is, of course, vice-chair of France's Conseil de la concurrence:

“Previously, competition law was something (companies) could be victims of because the regulator could come after them for bad behaviour. Now (companies) can use competition law to defend themselves against abuses of others.”

Commissioner, I was very interested in your comments that the bureau continues to believe some form of private access is necessary in order to round out the provisions of the Competition Act. Given what has already been taken out of my Bill C-472 with respect to interim orders and the safeguards you referred to in Bill C-472, are you of the belief now that concerns raised by individuals, that this would amount to strategic litigation, are in fact valid, or that the proposal you have before us would ensure private actions taken before the tribunal will be bona fide and not frivolous and vexatious strategic litigation?

Mr. Konrad von Finckenstein: Well, first of all, there's no proposal before you. What I was talking about was a proposal before the PPF. I just want to set the record straight. You ended up saying “the proposal before us”.

Mr. Dan McTeague: I meant the interim orders and the issue you raised with respect to summary dispositions.

Mr. Konrad von Finckenstein: Oh, yes. Sorry. Absolutely.

On private access, what I said in my opening statement was we feel it needs to be rounded out. The bureau has done extensive work on private access. We have two studies on our website. One of them is an international comparison on how private access has been dealt with in other jurisdictions and what the effect is. The other one is a study on the cost benefits of litigation by the bureau, and how much it costs to mount these cases.

As I say, we feel it is necessary to round it out. There is some private litigation already under the Competition Act. You'll appreciate that if there is a criminal violation of one of the provisions of the Competition Act, the victim can now go to court on their own and sue for damages. And that happens. For instance, we had the big convictions on conspiracy in vitamins, and there are now several suits for purchases of vitamins against those companies wanting damages for having been subject to a past conspiracy.

There's also provision in the act right now that where the commissioner has gotten an order from a company telling them they may not do certain things, an injunction, and that is being breached, then the victim of that breach can go to a court and get damages. It's not as if this were virgin territory. There is already some relief for companies by way of proposed section 36. What we are talking about here is opening the tribunal for the four areas I mentioned, and, as you quoted, “other competition authorities who believe the time is right”.

Our view of this is that these are essentially private matters between buyers and sellers—refusal to deal, tied selling, market restriction, and exclusive dealing. Most often, the victim in these cases is a small or medium-sized business, and they should have the ability—if they really feel it vitally affects their business and we do not believe so, or we don't believe the case is of sufficient import—to argue it themselves. That's essentially our position.

Mr. Dan McTeague: Commissioner, some of us here certainly find it interesting that you, as the only gatekeeper for cases that can be referred to the tribunal, would suggest there should be and might be other means or reasons for us to proceed with this, given the safeguards that might be proposed or that are currently in Bill C-23—safeguards that might also find themselves in the area of Bill C-472.

I'm wondering if you would agree.... There have been a number of studies that have suggested the private sector has the superior ability to detect anti-competitive conduct having an immediate impact on their markets, and given the length of time in which certain cases come before the tribunal—in the case of WestJet, for instance, a full year—would there not be an opportunity for some to bring their cases sooner? In the instances where your bureau believes it's not a case worth pursuing, is it not a fact that many people in this country may be subject to a denial of economic justice, without private access?

Mr. Konrad von Finckenstein: Well, I don't think I can agree with you there. As I said, we believe private access is needed to round it out. Whether the time is now and whether the consensus is there is something you have to determine. These cases are not easy to mount and to litigate, and they take so long because, as I mentioned, it's one of the most difficult decisions we make: what is anti-competitive conduct as opposed to vigorous competition?

• 0940

As to whether private parties will be able to mount cases more quickly or not, I wouldn't want to speculate on that. I just know from our experience that we agonize over those because we realize the importance of the decision. If we bring a case against a company alleging abuse of dominance, it has an effect on the company's reputation, on its share value, on its relationship with its contractors, etc. So we don't do this lightly. We do it only because we feel it needs to be done and it will bring economic justice.

Private parties should not be able to use these powers randomly either, and do damage or use them for strategic purposes. That's why the many safeguards have been suggested. Now, are they sufficient or not? That's something for you to determine. In our view, we thought this would deal with most instances of strategic litigation. But you can never rule out completely strategic litigation.

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

[Translation]

Mr. Bergeron, please.

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

Mr. von Finckenstein, Mr. Morin, Mr. Côté, welcome to the committee.

This is the first opportunity I have had to exchange ideas with you about the work of the Industry Committee. I am new to this committee and therefore I am still in the process of familiarizing myself with many different issues under the purview of this committee. However, I have been able to determine just how interesting this work may well be over the next few weeks.

I have two questions: one pertains to the provisions provided for in Bill C-23 and the other, unfortunately, does not. However, the committee may want to add certain provisions. I would like to hear your opinion on the matter.

First of all, as regards the elimination of deceptive practices, I was wondering about the provisions prohibiting the sending of deceptive notices about prizes to be won and all that. I was wondering if you had done the necessary checks to determine how this bill could have an impact on, or complete or short circuit legislation that is already in effect in certain provinces, particularly in Quebec, where we have the Consumer Protection Act and the Lotteries and Races Act, which may play a role on this area.

My other question pertains to a situation that underscored the potential importance of the Competition Bureau, namely, the whole issue of runaway gas prices or the fluctuating gas prices that we have witnessed over the past few months or weeks.

My colleague from Jonquière, in particular, sent you on July 10 and January 23, a little earlier in the year, complaints pertaining to the very high prices charged in the Saguenay—Lac- Saint-Jean region. It appears that the current provisions of the act do not enable you to initiate an investigation unless the complainant is able to provide you with written evidence of collusion. That would be under the provisions of section 25, where we interpret the word "unduly" very broadly.

First of all, would you be favourable to tightening the act so that you could have more flexibility in conducting this type of investigation? Secondly, to be more specific, how would you like to see this legislation tightened? What would you suggest we do in order to eventually tighten the legislation?

Mr. Konrad von Finckenstein: Thank you. I will ask my general counsel to talk about the constitutional nature of what we do. In a nutshell, we don't have any problems. The roles of the provincial and federal governments are very well defined. Mr. Côté will explain this matter to you in greater detail.

Mr. François-Bernard Côté (Director, Competition Law Division, Departmental Legal Services, Department of Industry): Mr. Bergeron, as far as the relationship between the federal and provincial governments in this area are concerned, it depends on what problem you're dealing with. What do we want to remedy with this act or bill?

• 0945

The Quebec legislation is designed to protect the consumer. We are concerned about activities involving fraudulent representations, deceptive representations which have an impact on both the consumer who, ultimately, is a fraud victim as a result of these practices, and the rest of the competition. If you are an honest competitor who does not attract clients through fraud and so on, you yourself are victimized because one of your competitors is acting in an illegal fashion. In my opinion, the federal legislation and the provincial legislation do not contradict each other whatsoever. They work together to protect the public in general.

The final aspect, and perhaps you will note that the commissioner alluded to this in his statement, is that, in practice, many of these activities are international. Consequently, when an activity is international, it falls perhaps more under the purview of the federal government than the provincial government, given the nature of our activities with foreign countries.

I hope that answers your question.

Mr. Stéphane Bergeron: To come back to the first question I asked you, would you say that this bill is complementary, that it would round out the legislation already in force in some provinces, including Quebec, which, as I was saying before, has its Consumer Protection Act and its Lotteries and Races Act.

Mr. François-Bernard Côté: Absolutely. We are not dealing with the same problem. The Office de la protection du consommateur and the board may deal with this problem indirectly, but we are approaching it from different angles.

Mr. Konrad von Finckenstein: As for the price of gas, you are lucky because Mr. Morin comes from the criminal division and knows all about that.

Marcel.

Mr. Marcel Morin (Acting Assistant Deputy Commissioner of Competition, Legislative Affairs Division, Competition Policy Branch, Department of Industry): I want to emphasize something that has to do with what François said.

When the committee studied Bill C-20, which dealt with the Competition Act, three years ago, some witnesses said that some provinces were not as advanced as Quebec with respect to the Consumer Protection Act. Provisions such as these will help strengthen the powers of provinces that have fewer of them.

As for Ms. Girard-Bujold's matters, the bureau has received documents in connection with those matters. The files have been reviewed.

With respect to the gathering of evidence, it is not just a matter of written evidence. Oral information counts too. The evidence does not necessarily have to be written. In matters of conspiracy, it is indeed difficult at times to obtain evidence. That is why we always clearly state that people with information must consult us in our offices. The bureau always examines these matters very seriously.

As far as Ms. Girard-Bujold's motion to strike the term “unduly” from the Competition Act is concerned, one of the problems we see with that is that “unduly” is a term that has been in the act for a number of years. Before removing it just like that, we should look into the matter to make sure that we do not do any damage by removing it.

For example, the word “unduly” means a significant impact on competition, and this has been argued at length before the courts. Before we just strike the work “unduly”, we should do a serious assessment of all the consequences, because there are a number of existing agreements. For example, many franchise contracts and some strategic alliances would now be affected by section 45. This would therefore affect agreements that are not inherently anti- competitive and that could now come under section 45, if we suddenly struck the word "unduly".

Under the circumstances, as the commissioner just said in his statement, and with the studies that are currently being done with experts on section 45, one of the things they are contemplating is a criminal approach to the actual offences of price-fixing and conspiracies to fix prices and share markets.

• 0950

As for other agreements that might, in some cases, like that of strategic alliances, have an effect on competition, those could be dealt with under a civil system. In connection with that procedure, the "unduly" issue could be discussed. That debate will shed light on the issue and possibly give rise to amendments, if necessary, in the future.

[English]

The Chair: Thank you.

Mr. Bergeron, we'll come back to you again.

Mr. Lastewka, please.

Mr. Walt Lastewka (St. Catharines, Lib.): Commissioner, you were discussing with Mr. McTeague the pros and cons of private access, but in your report you mentioned that supporters of private access argued that there were limited resources available to the bureau, and sometimes you didn't get involved in certain cases. But you said during your testimony that you had limited resources. It seems that the bullet said that because of limited resources you might not, as a department, be involved in cases, so I'm not quite sure what you were saying there.

Mr. Konrad von Finckenstein: Like every law enforcement agency we have a limited budget, and there's more crime going on than can be addressed, so you have to establish priorities and deal with the ones that have the greatest impact, etc.

Obviously, when we come to the civil side, but also others, we look at cases brought before us or complaints made. We look at the economic impact. We look at the jurisprudence involved and whether it is a new area, etc. We look at the ramifications on the competition generally within the country.

You may have cases that are very local in nature and affect one business—let's say, the fuel supplied. Where there is no competitive impact over a large area or no known novel legal point of view, etc., we may try to resolve it without going to court. We may not go to court because we simply don't have all the resources necessary for it.

That's the reality of life. You have to make priorities and decide which cases you pursue and which you don't. To tell that to a small businessman for whom this may be vital is sometimes very difficult. Obviously, these cases are never clear-cut. It's very difficult to determine whether something is anti-competitive or vigorous competition. If the person is not willing to change and we can't persuade them or work out some compromise, trying to litigate that case is costly and lengthy, and sometimes we don't do it.

Private access suggests that if a small or medium-sized business feels this is absolutely vital, it should have the ability to fight for itself.

Mr. Walt Lastewka: I guess it will be interesting when we hear all the testimony. I take it that you have had discussions with the small business association groups. Is that correct?

Mr. Konrad von Finckenstein: Yes.

Mr. Walt Lastewka: It will be interesting to hear their point of view on whether they should have a mechanism to be able to argue their point, so the situation they may be discussing can be heard.

Mr. Konrad von Finckenstein: You know, when we had the Public Policy Forum, it was very good at bringing together all possible stakeholders at the 12 round tables that were held across the country.

Various business organizations, such as the CFIB, participated and gave their points of view. I assume they will appear before you and you can ask them that question. I wouldn't want to speak for them.

Mr. Walt Lastewka: Thank you, Madam Chair.

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

Mr. Strahl, please.

Mr. Chuck Strahl (Fraser Valley, PC/DR): Thank you, Madam Chair, and good morning, gentlemen.

Like Mr. Bergeron, I'm new to this committee. There's nothing like getting a framework bill like this at the referral before second reading to dive into the deep end of the pool here. But I look forward to it. It's obviously a very important issue, for a variety of reasons.

I would just like to get clarification on a couple of points, on the international cooperation section of your briefing.

• 0955

You mentioned that the Canadian Bar is likely going to protest the fact that the provisions under this section put people's confidentiality at risk. You mentioned here that nothing in here authorizes the bureau to send information. Does this specifically prohibit the bureau from doing that?

Mr. Konrad von Finckenstein: No. I don't want to misstate what the bar is saying. The bar is saying that section 29, which deals with confidentiality issues, basically provides that when we make an inquiry and everything given to us is confidential, it cannot be disclosed except by court order. We, as a policy, will fight those court orders as much as we can by invoking privileges, and so on. That deals right now with our own domestic or international investigations. Those are the restraints that are being put upon us.

What we are asking for here is totally separate. It's a self-contained provision that says Canada may make treaties with other nations, such as the United States, for the gathering of civil evidence. If that's the case, the Minister of Justice will make a treaty.

She has to assure herself of various things, such as whether the country with whom we deal is responsible, has provisions regarding confidential information, and has due process in all of these things. So it has to be responsive to the advanced competition system.

Then she will make a treaty, and pursuant to the treaty, that party can make a request to us. We will take the request, go to a judge, get a court order, go and seize the document, go back to the judge and say, “We have seized the documents pursuant to your order. Can we now send them to the requesting party?” It's a totally separate self-contained provision. It will work and has nothing to do with section 29.

The bar thinks that's fine. Essentially, they have no problem with the new process. But they are saying, “You don't go far enough. You should also review section 29.” I say, “That's not necessary at this point in time. Section 29, as it exists right now, causes me no problem. Everybody knows what it means. Why open another can of worms? We have enough issues before us.”

Mr. Chuck Strahl: So that just has to do with the international gathering of evidence.

On that, and maybe you can just clarify it for me, right now there is no process to obtain information internationally.

Mr. Konrad von Finckenstein: That's true on civil cases. There is a process for criminal cases.

Mr. Chuck Strahl: Right. What does the bureau do, what should it do, or what can it do, if someone is in the midst of merger negotiations—yes, they like the merger more than a strategic alliance—and wants to merge a couple of big companies? These are, as you mention here, the problems of multinational corporations that have tentacles everywhere. They get approval in Canada because we think it's fine, then they proceed apace, only to find out that the United States or somebody else says she's a no-go.

This bill doesn't address that, I take it. But some company could spend millions of dollars and affect share prices, again worth billions of dollars perhaps, and yet not be able to proceed with a merger.

Mr. Konrad von Finckenstein: On the way it works right now, when you have one of these multinational mergers, you notify in all the jurisdictions in which you do business, and each competition authority has to approve. The competition authorities talk with each other. They may not exchange the data you have tabled, unless you get a waiver from the company, but you can talk generally about the business that's going on, the theory of the case, what the problems are, etc.

There's very close cooperation, especially among the major nations such as EU, the U.S., Australia, etc. We all try to share as much as we're allowed by law, and we usually come to fairly similar resolutions.

Of course, each agency is charged with the job of making sure the competitive system remains intact in its jurisdiction. A merger may have a different impact on one jurisdiction than another, so it's possible to have differential results. But that just means the merging party will have to restructure their proposed merger in such a way as to get approval everywhere, or else abandon it.

Mr. Chuck Strahl: Thank you, Madam Chair.

The Chair: Thanks, Mr. Strahl.

Mr. St. Denis, please.

Mr. Brent St. Denis (Algoma—Manitoulin, Lib.): Thank you, Madam Chair.

I thank the commissioner for being here with his colleagues. It's a very important and interesting subject.

• 1000

I have a couple of short questions, first in the area of the deceptive notices. I think we would all agree that whatever we can do to protect our citizens, in particular our more vulnerable seniors, we should do, and with a growing senior population, shall we say, the marketplace for those who would take advantage of others is growing.

That said, you make a statement here that Canada is gaining a reputation as a haven for scam artists. I'm sure that's quite true, but is there any quantitative data to that effect, or is it anecdotal? And what does it mean to be a haven? Does it mean that these operators operate in Canada and do their illicit business somewhere else, or they operate somewhere else and do their scamming here, or they operate here and scam here? I wonder if you could clarify that a little.

Mr. Konrad von Finckenstein: You have scam artists who operate here and scam here, but the more difficult ones are the ones who operate here but scam in the U.S., and that's a bit of a growth industry. The number of complaints the U.S. authorities get about scams that are originating in Canada, but where the victims are in the U.S., is growing. Their statistics show a steady increase of Canada being one of the major originators of these scams. We want to go after them, and that's part of what this legislation is designed for.

We also have some of them who operate in Australia and New Zealand. The scams are there, but they originate from here. The really smart ones do not have any victims in Canada. There will be no complaints in Canada to provincial authorities, to the provincial attorneys general, and there won't be any to us, because there are no Canadian victims. The victims are located in Utah, or Florida, or something. They complain to the FTC. The FTC tells us and then on that basis we try to go after them, but we really don't have tools designed for it.

The second part of this, which I think is just as important, is you don't want to tar the innocent. There are a lot of people who run legitimate contests, with prizes, etc., and this legislation basically puts down a code of behaviour and says if you want to do a contest this is what you have to do. The guidelines I tabled with you explain that in more detail. They should be able to do that; there's nothing wrong with doing contests. What's wrong is running a contest where you're scamming people, where you're asking them to pay and they don't get a prize.

Mr. Brent St. Denis: I want to go on to the second part on the international cooperation and evidence gathering. You gave us a working model to consider. I take it from this that Canada would have to make an agreement with each other state; let's say, Canada and the U.S., and Canada and Australia, and Canada and France. Would there have to be a separate agreement with each country? There are no means to have an international protocol, like you had say with land mines? You have to do these one at a time?

Mr. Konrad von Finckenstein: That's because competition law in some countries is relatively new. There's no tradition. There's an agency that doesn't have a reputation yet, or hasn't established a track record, etc., so we would be doing those treaties only with the countries where we feel the other side in effect has a system of equal value, of equal guarantees, to what we have. Primarily, I see us doing one with the U.S. first and foremost, then the EU, probably with France, with the U.K., with Germany, etc.

Down the line we may have it with lots of countries as they develop. Competition is a growth industry where 40 years ago 10 countries had a competition regime; now about 100 have them. But they are at various stages of various sophistication, etc., and you would only do this with a country where you can be sure they will play by the rules, and things that are given to them, subject to certain conditions or confidentiality, will be treated that way.

Mr. Brent St. Denis: Are there any—

Mr. Konrad von Finckenstein: I'm sorry, my colleague would like to elaborate.

Mr. François-Bernard Côté: It's possible. It's been done in other areas, criminal areas, for example, where it could be that there is a multilateral agreement between a number of countries. If the conditions that are in the multilateral agreement, or treaty, are also conditions that are found in the proposed legislation, I would venture to say that this would be a valid cooperation agreement between those countries as long as Canada finds in those treaties what the legislation would require.

• 1005

Mr. Konrad von Finckenstein: This is very optimistic. We're not there yet by a long shot. But it is substantially correct.

Mr. Brent St. Denis: So I take it that, as good an idea as this is, no doubt, once the bill is in place, it could conceivably be years before we have.... Are there other agreements somewhere else now? Or are there discussions going on as we speak on these matters?

Mr. Konrad von Finckenstein: Yes, the origin of this bill is the U.S. legislation. The U.S. legislation specifically says that the U.S. may not make this type of treaty with another country unless that country has reciprocal legislation. So as soon as this is signed, we will sit down with the Americans and do one with the U.S.

Mr. Brent St. Denis: Thank you, Madam Chair.

The Chair: Thank you, Mr. Finckenstein.

Mr. Rajotte.

Mr. James Rajotte: Thank you, Madam Chair.

I'm going to touch on two of the broad aspects that the amendments cover. The first is streamlining the competition and tribunal processes by providing the tribunal with the power to award costs, make summary dispositions, and hear and determine references. And there is the fourth broad section, which is broadening the scope under which the Competition Tribunal may issue temporary orders.

These amendments are designed to streamline the process, which I think we can all favour here. But I think one of the possible negative side effects of increasing the power and influence of the Competition Tribunal was raised by a comment you made, Commissioner, about determining what is anti-competitive behaviour and what is true competition. So I would like you to address the concern about the negative side effects of possibly increasing the power and influence of the Competition Tribunal, and how do we determine what is anti-competitive behaviour versus true competition?

Mr. Konrad von Finckenstein: Actually it fits the other way around. Right now we're reluctant to go to the tribunal because it is a very crude instrument. It's a tribunal that does not have the power to award costs and as such cannot really control its process.

To give you an example, we had one merger case in the port of Montreal. We started litigation. We had 54 motions, and we never got to discovery because there is no penalty for bringing motions. In my view, that's the sort of abuse of process that would be cured. By putting these streamlining provisions in the tribunal, it will be a more useful tool to use. It's still our decision as to whether to bring cases there or not, but we will bring cases there if we find out we're not going to be tied up in endless litigation but we're going to get a decision.

In terms of the references, when you have a merger, usually there's one bone of contention that turns the case around and it means approval or disapproval. We may disagree on it. We may disagree on interpretation of a section, or how to apply it. What this would allow us to do, with the consent of the other party, is go to the court and say, we are not going to argue the whole case; we know what the outcome will be. What we need is clarification. How do you read...whatever section it is, 96.2?

Let's argue that we get a decision and then it will accelerate the process. It will help both sides. For me it will mean fewer costs for the bureau in bringing the case before the tribunal. For the other side, they realize this is something that's key to them for their business plan. They are not willing to give it up unless they have to. Fine, let's find out whether the law says I have to or not. That's what the reference is meant to deal with.

I think on the whole these provisions will help us use the tribunal...will make, rather than what happens now.... We've been heavily criticized and observers feel the process doesn't work, that the bureau is omnipotent and makes a lot of decisions, and that people are not taking them to court because the court is such an unwieldy, crude instrument the way it's set up right now. It costs too much and takes too much time, and therefore cases are not being brought there. This will allow us to bring genuine differences of opinion for courts to resolve, which is what courts are for.

In terms of making a distinction with anti-competitive and rigorous competition, I can't give you a short answer. You have to look at the various provisions of the act, at what they stipulate, and then look at the effects of the individual case and see whether this conduct is such that it is designed to have that effect or it is only designed to maximize further profits.

It is not an easy decision. As I say, it is one of the most difficult ones and the cases are not usually clear-cut. We try to resolve them mostly through negotiation, but where they can't be, with a streamlined procedure we will again be able to find whether the activity can be considered anti-competitive or not.

• 1010

Mr. James Rajotte: Thank you.

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

Ms. Torsney, please.

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

It's great to see the game contest section of this act. It's something I had been working on prior to the bill becoming Ms. Redman's.

I've seen a lot of these game cards over the last number of years, and when I was reading the guidelines I had some concerns about some of the non-application sections.

Proposed paragraph 53(2)(a)—this is on page 2 of your notes—reads:

makes adequate and fair disclosure of the number and approximate value of the prizes or benefits, of the areas or areas to which they have been allocated and of any fact within the person's knowledge that materially affects the chances of winning;

Would that still allow someone to charge you a fee for claiming the prize if you provide that information?

Mr. Konrad von Finckenstein: I'm sorry, you lost me. Where are you reading from?

Ms. Paddy Torsney: These are the proposed guidelines on the Competition Act, page 2—sorry, page 1—regarding non-application.

Regarding subparagraph 53(1), they say there's a scratch-and-win here, call this 1-900 number or send us $50 and you'll claim your prize. I get that part. But it does not apply if they say what?

Mr. Konrad von Finckenstein: That's if they say you can win a prize provided you pay $20. Then it is up to you to decide whether you want to. There's no deception. You know you are going to lose $20; that's the entry fee. You take your pick: You do it, or you don't. That's a fair contest.

If people want to run a contest that way, I'm not going to stop them. What we're trying to do is stop them saying, here, you can win, and you don't realize that by entering it will cost you $20.

Ms. Paddy Torsney: But what they do is write in really tiny, little print “Some charges may apply.” Most people are so flipped about winning the prize after they've scratched that they don't even notice that.

Mr. Konrad von Finckenstein: That's why the words “adequate and fair disclosure” are there.

Ms. Paddy Torsney: So how do you decide that?

Mr. Konrad von Finckenstein: I can't do it in the abstract, but I can tell you that if there is fine print at the bottom, if it says I win $2,000, and down here in one millimetre size there is a disclosure, then obviously that's not adequate.

We actually have a definition of “adequate and fair disclosure” at the bottom of page 4.

Mr. François-Bertrand Côte: No, it's the bottom of page 3; it announces page 4.

Ms. Paddy Torsney: I'm glad you guys all got mixed up on that, because I did as well.

Mr. Konrad von Finckenstein: You see, it says:

disclosure has been made in a reasonably conspicuous manner, at a time before the potential entrant is inconvenienced in some way.

That's why we issue the guidelines, precisely for this type of question. If you are a scam artist, you are going to try to get around it. If you are an honest participant, you look at them and say, what do I have to do to get the Competition Bureau off my back? Live up to these, and you'll know what to do.

Ms. Paddy Torsney: Except that, with respect, your “adequate” and my “adequate”, based on our vision, are slightly different.

I've talked to some of these scam artists, and they think they've been perfectly clear in their information. Perhaps I can go through my files and pull out some, and we could have a little chat about what might and might not work, because that would give me a little more comfort.

Mr. Konrad von Finckenstein: Sure, I'd love to hear from you, but rest assured, we have gone after many scam artists under our present provisions, which are not as targeted in terms of it being misleading, and so on, and we've gotten quite a few of them to change or stop their behaviour—but not enough, I agree with you.

Ms. Paddy Torsney: It's not just seniors; I've had lots of people of all ages get scammed by these guys.

The other question I have is in the general principle section on page 3, the determination of cost incurred. In the second paragraph, it says:

An example of such allowable costs would include: auto insurance premiums required to be paid prior to taking delivery of a free automobile.

That would be that someone would have to ensure that they do have automobile insurance, not that you have to buy auto insurance from this particular company, right?

Mr. Konrad von Finckenstein: Right.

Ms. Paddy Torsney: What I would be concerned about is, of course, an inflated insurance premium from somebody.

Mr. Konrad von Finckenstein: Precisely.

Ms. Paddy Torsney: Okay.

• 1015

My other concern is that when we first brought this bill forward, there were two parts to it: one was on this game card, and the second one was on all those people who use a government logo on their envelopes that imply that it is official government business. They would use the Canadian flag, perhaps not both bars; they make it look like government type, they write “Tax Office”, or something, instead of Revenue Canada or CCRA, or they use pseudo-government logos. They're all out there, and then I get complaints saying this office sent me this thing.

There's one right now that is pretty close to the line. That's somebody who is distributed through all the hotels and tells you that you can get your GST back if you use this company. It has a nice looking logo on it that kind of looks like Tourism Canada's, and in fact you have to pay a fee. I get complaints saying, get my money from this government department, yet it's a private company. I'm concerned that we haven't addressed that in this piece of legislation.

Mr. Konrad von Finckenstein: We actually have cases on that. We don't address it in this legislation because that's just misleading advertising. That's what you're doing; you're putting yourself forward as something you're not.

In cases like that, if you have a maple leaf on there and you use lettering or format that basically gives the impression that this is a government agency, then you are in violation of the act as it is right now. There is no need for specific provisions to deal with it.

We have several cases ongoing on exactly that. I know whereof you speak. Unfortunately, as soon as we put one out of business, another one crops up.

Ms. Paddy Torsney: Again I'll search through my files and make sure you're going after all those guys, because it really is disturbing to my constituents, and I think it cheapens the government logo.

Mr. Konrad von Finckenstein: Absolutely. I couldn't agree with you more.

Ms. Paddy Torsney: Okay.

The Chair: Thank you very much.

[Translation]

Mr. Bergeron.

Mr. Stéphane Bergeron: Thank you, Madam Chair. As we say where I am from, my, how time flies when you are in good company.

I am sorry to come back to the issue of gas price-fixing, but we did not have enough time to do the question justice earlier, at least from my point of view. Besides, as I was saying before, to most people, the Competition Bureau is something far away, an ivory tower. But mention gas price-fixing in any riding, and ears prick up, light bulbs go on in the heads of all Canadians.

I did hear you say that written evidence was unnecessary, that oral evidence could also do the job. I did understand that, but I had already understood that earlier. Do you not see a problem with the complainant having to provide the evidence before it is possible to proceed? It is like asking a person whose home has been broken into to find evidence before going to the police to report a burglary. Should it not be the Competition Bureau's job to find or identify that evidence instead of asking the complainant to do it?

Now, if, as I understood, eliminating the word "unduly" in section 45 is not the way to go to give the Competition Bureau a freer hand in investigating cases like that, what do you suggest? If you feel the current rules are too strict, what do you suggest to give yourself a free hand so that you can investigate much more easily than with the restrictive rules you currently have?

Mr. Konrad von Finckenstein: My colleague will answer your question on evidence, and I will answer the question on section 45.

Mr. François-Bernard Côté: I would like to make section 45 of the Competition Act perfectly clear. It is an offence to agree to increase prices unreasonably, or to restrain competition unduly.

The first thing the Crown must prove beyond a reasonable doubt is that there was an agreement. However, agreements are usually secret, because that is the essence of conspiracy: the conspiring is secretive.

• 1020

Mr. Stéphane Bergeron: That is the essence of conspiracy...

Mr. François-Bernard Côté: Exactly. So evidence of this agreement must be found. How do we usually receive complaints? Gas prices all go up at the same time; so a complaint is made to the Bureau. A person will claim there was an agreement because the prices all went up at the same time. So we investigate. The fact that the prices all go up at the same time may be the result of an illegal agreement, but could also simply be the result of one dealer raising the price by two cents, thus prompting the dealer across the street to raise his price by two cents too. There is a reasonable explanation for the situation. To go from there to proving beyond a reasonable doubt that there was an offence—

You are asking me if we have to investigate. Yes we investigate, but absent reasonable grounds or suspicions, it is hard to rely on traditional methods of investigation, that is, search warrants and wire tapping. When someone files a complaint and says that prices went up, it is hard for us to investigate. To investigate properly, we would have to infiltrate and start up our own gas dealership to see how things work on the inside. In the absence of any indication that one of the conspirators might be willing to talk to us, it is hard, just from a practical point of view, to investigate.

Mr. Konrad von Finckenstein: In terms of reform to section 45, our white paper, which was released in May of last year, suggested a solution. I think that basically, we are going to try to build a consensus around this approach. Conspiracy to fix prices will be a criminal offence. As for all the other types of offence, we are going to try to deal with them as civil proceedings. The term "unduly" is in the act to provide flexibility. There are types of action that have an effect on prices, but where the main activity is not price-fixing, but possibly an arrangement between companies.

Why don't we separate the two subjects? Price-fixing is a crime and action will be brought against those who are responsible for it. In the case of any other arrangement that might have an effect on prices, we will examine the provisions available in civil law, and if we find something that is unacceptable, we will issue an injunction.

People generally agree that this is the type of solution we require, but the devil is in the details. What is price-fixing, what are the criteria, etc.? That is why we have hired three experts. We have studied the issue and it will be discussed. This is the type of solution that we hope we will eventually come up with.

[English]

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

Mr. Volpe, do you have any questions?

Mr. Joseph Volpe (Eglinton—Lawrence, Lib.): No.

The Chair: Okay.

Mr. Bagnell.

Mr. Larry Bagnell (Yukon, Lib.): Thank you. I have a couple of quick questions.

As to the deception, prize-notice serving is great, wonderful. My first question concerns the part where the exception is that they actually win the prize. In that case, I just want to know whether it is possible under the way the legislation is proposed that the costs of getting it will amount to more than the value of the prize.

Mr. Konrad von Finckenstein: You have to describe in your original notice what the prize is and what the value of the prize is. If someone actually got the prize and the value corresponded to what had been described, then there would be no offence. If, however, the prize's value were very much lower than what it had been held out to be, then there would be a violation.

Mr. Larry Bagnell: The notice is only by mail. Does it cover phone?

Mr. Konrad von Finckenstein: It is notice in any form, but it would cover the Internet, etc. When you talk about phone, that's really deceptive telemarketing. That is already in the act; the last amendment dealt with that. This essentially takes what we have for phones and extends it to things that are done in a legible form, be it by mail, the Internet, flyer, or whatever.

• 1025

Mr. Larry Bagnell: The last thing is—you don't have to answer this now, at least not as to details—I'm just curious as to the amount of funds available to ensure competition and enforce the provisions. For instance, you might have the percentage of our GDP compared to that of the other G-8 countries used to enforce similar types of legislation. You don't necessarily have to answer that now.

Mr. Konrad von Finckenstein: Since you give me the opening, let me tell you that when compared to other G-8 nations, I'm underfunded on whatever basis you want to do it: per capita, GDP, or economic activity. We come out pretty close to the bottom.

The Chair: Just to make note, this is one thing we can't add to this bill because of the royal proclamation at the beginning.

Mr. Strahl, please.

Mr. Chuck Strahl: Thank you.

After Ms. Torsney's intervention about the use of that government logo, I just wondered if the Competition Bureau has ever investigated that bumper sticker, the one that says “Don't steal, the government hates competition”. Okay. That's not really related. I just thought it might be.

The Chair: Let's get back to the topic.

Mr. Chuck Strahl: I just want to follow up, and I realize we're talking about this international competition problem, merger issues, and the fact that we're in the embryonic stages of these international agreements. I'd just be interested to know if it first needs an example, the first example perhaps being an agreement with the United States. Maybe that's the way it has to go, but are there not any other serious discussions going on, say, with the G-8 or at the WTO?

It just seems to me that because we're dealing with world trade issues such as the free trade area of the Americas around the world, this is going to have to go hand in glove with that. International competition, mergers, and trading zones are going to be inextricably linked, and it just seems to me that discussions need to be bigger than just bilateral. They need to quickly...am I misreading something, or is this the way it has to go?

Mr. Konrad von Finckenstein: No. You're dead on. Competition is a big issue internationally. It's discussed in many fora. Actually, I'm not going to be here next week because I'm going to be in Paris to discuss exactly that subject at the OCDE.

The problem is you have to understand the nature of competition. In order to do it properly a competition authority needs information that's most sensitive to a company. It's about transmitting information and about getting strategic information and planning information. It's information about opening markets. They are very reluctant to share that. They will share it with us if they're forced to or if they need it as part of a merger.... But they only do it because they are assured that we will treat it confidentially, that it will not find its way into the hands of their competitors, and that it will only be released under a court order.

Now, when you apply this internationally, if you have a company that furnishes information here, it wants to make sure that if we give it to a foreign country, that foreign country will treat it with the same respect and will have this provision in its law to enable it to do it. That's why I say that for the U.S.A. there is no problem. With the EU, no problem. Some other countries have competition laws, but I don't think they would necessarily pass the tests set out in legislation for us to make a treaty at this time. That doesn't mean we won't do it in the future.

By the same token, all the international agreements we have negotiated, such as NAFTA, have a competition chapter. The new agreement with Costa Rica has a competition chapter, and the FTAA will have a competition chapter, but they're all in various stages of development.

The cooperation depends on the confidence you have in the agency on the other side, for the reasons I mentioned.

Mr. Chuck Strahl: Okay. Thank you.

The Chair: I have a couple more questions on this side, but just before I go to those, there are a few things I want to make sure we cover.

One is, as you mentioned, that you're going to be flying to Paris. Bill C-26 changes the framework of the Competition Act by providing an industry-specific types of power to you, the commissioner, because the tribunal didn't have the ability to issue cease and desist orders. Bill C-23 changes that, so should we not now be removing subsection 104(1)? I'm assuming members of the bar are going to raise that with us. I'd like some response to that.

• 1030

Mr. Konrad von Finckenstein: The provisions regarding the air industry were put in because of the very specific situation in the air industry. We have a dominant carrier, which has somewhere in the eighties...in an industry where the assets are highly mobile. Through a shifting of their priorities, Air Canada could literally drive somebody out of business before they got up and running, or, while they were up and running, seize.... So it was felt this was something of such urgency that the provision should be in there, and the commissioner should have the power.

As you know, we've only exercised it once so far. It has been litigated very heavily. It is still before the courts. We have so far won all rounds of the litigation. We've been litigating it on the merits. It's under appeal. It's also litigated on the constitutional grounds. The constitutional litigation is also under appeal. I don't think you need to amend it. As I say, it was very special for the airline industry.

The rest of our industry, fortunately, is not that concentrated. It's not that dominant. Therefore, the provisions that are here were meant to deal with those situations that are really not at the crisis point you had in the airline industry.

The Chair: If I understand correctly, that change was made because the tribunal didn't have that ability, and Bill C-23 now gives that same type of authority to the tribunal. I just want to make sure I'm clear on that. We are probably going to be questioned on it as we proceed.

Mr. Konrad von Finckenstein: You are absolutely clear, Madam Chairman. If the new provisions are enacted, one could argue that the airline provisions are no longer needed and should be deleted.

The Chair: The other question I have is there's normally a three-part test in law. Under proposed section 103.1, it's a different test. Can you explain to me why that is? Maybe Mr. Côté would be....

Mr. Konrad von Finckenstein: Normally, when you apply for an interlocutory injunction or something like that, you are trying to make sure it's irreparable damage and the situation is one that cannot be remedied. In a competition sense, basically the damage most often will be monetary, and that can be remedied. So getting interim orders, or interim injunctions, in the competition sense is very difficult. The reason the test here is slightly different is because you want to make sure the person who's a victim of an abuse is still around to be able to deal with the issue.

We are saying here loss of market share, being out of business, or something the tribunal can't repair, because the tribunal doesn't have the ability to give monetary awards. It is a very circumscribed and very limited power. As you know, the maximum is 80 days. It can't be extended beyond that. It's just if there were something that's so dramatic, we would go before the tribunal and say we feel this is going to do irreparable damage to competition, or this person will lose market share that you can't make up, therefore put a stop to it. And the stop can be at maximum 80 days.

It is a different test in a normal interim injunction. It's a different test on purpose, because we're dealing with a different situation. We want to maintain competition. It is not an issue of dealing with irreparable damages as you would normally—for instance, an interim injunction when somebody puts up a house and thereby ruins something in nature that's next to impossible to restore, or will take an awful long time to restore. That's why when it is pure money, courts are very reluctant to do it, because money, after all, can be replaced. We feel here it's not only money, it's the state of competition that will be jeopardized. Therefore it's a different test.

The Chair: Thank you. I now have Mr. McTeague, and then Ms. Torsney.

Mr. McTeague.

Mr. Dan McTeague: Thank you, Madam Chair.

Mr. Commissioner, a lot of members around the table may not be aware of the fact that when one is looking at the civil track for relief, or looking to you for help, particularly in instances where they can't hire big lawyers or they don't have huge accounts, certain conduct that you deem to be off limits, or conduct that is deemed to be anti-competitive, may not be enjoined, in other words, may not have a general application in law.

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A lot of other countries will say that if a certain conduct is subject to a prohibition order by yourself or by the tribunal, and the order office would be the tribunal in the first case, unless we're able to get some kind of an agreement prior to taking this to the tribunal, it is done on a case-by-case, individual basis. In fact there's probably the wrong signal being sent to the business community that there is no prohibition on a particular activity unless so ordered.

So we have a scenario where a lot of businesses may go under, may be subjected to the same kind of anti-competitive activity, and yet without the ability for you to intervene, Mr. Commissioner, they may not have an opportunity to raise significant and important issues such as the ones that have been expressed by my colleague from the Bloc Québécois with respect to the question on conspiracy and the question on the gasoline industry.

It was with this in mind, Mr. Commissioner, that I presented Bill C-472 with limited areas that I thought would touch on significant areas of the industry, particularly refusal to deal, market restriction, tied selling, and exclusive dealing. I have heard from others, and there's no doubt that this committee, Commissioner, will hear from people in the future who say that this simply isn't true, these things don't exist, it's a fantasy, and we should take an approach of see no evil, hear no evil, speak no evil.

Commissioner, I've spent a lot of time on this, and a lot of other members are now becoming aware of the problems that exist out there and that our competitors may very well have a situation where certain conduct in other countries is not illegal until so found in Canada. I'm wondering, because it's going to be specifically important to tell this committee where you stand heretofore, are there instances where you believe good points may be brought forward but cannot be resolved because of a question of resources, because of a question of a lack of perception of an issue, or because your Competition Act was written in 1986, arguably, some say, by the very people it was meant to police?

Mr. Konrad von Finckenstein: That's a whole host of questions.

The Chair: Five minutes.

Mr. Konrad von Finckenstein: First, the civil sections are, as I mentioned, difficult to apply, but they are specifically written in this way because you want to draw a distinction between anti-competitive conduct and vigorous competition and you don't want to shackle the economy, or put down a rigid code, etc. We have far too many activities in our economy for you to make global rules. The act has this flexibility built in it that says the commissioner may investigate and if he feels the conduct is anti-competitive in light of the facts and in light of the provisions of the law, which are written in very general wording, then bring a case before the tribunal.

I think that's a good system. I think it gives us the benefit of both sides, a maximum flexibility, encouragement of the economy, by allowing entrepreneurs to see how they can maximize their profits. Yet there is a control that we can go in and stop. Are the penalties sufficient? Should there be damages as well as injunctive relief? That's a question one can argue about. Obviously, legislators had decided in 1986 that damages were inappropriate. Some voices now say maybe it's time to change that.

There was a suggestion in our white paper, and it went before the PPF, that purely private conduct between mostly two businessmen or companies doesn't need the attention of the whole apparatus of the Competition Bureau, etc. There should be an ability to resolve them. There may be instances where there are legitimate complaints that do not get resolved because of different priorities or restraints on resources.

I am fully in agreement with those voices saying that to round out the Competition Act, something along the lines of what was proposed to the PPF should be in the Competition Act. And I guess it's your job to decide whether now is the time to do it on the basis of the submissions before you come up with the necessary consensus.

Mr. Dan McTeague: Thank you.

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

Very briefly, Ms. Torsney.

Ms. Paddy Torsney: There are two things. One of the other places for a lot of these scam artists to send letters is from Nigeria. Are you working with the Nigerian government in stopping these kinds of letters?

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Mr. Konrad von Finckenstein: Those are really frauds, and they are basically loan frauds. The RCMP deals with those. When I get them, I send them over to the RCMP. To what extent they enjoy cooperation from the Nigerians, I just don't know.

Ms. Paddy Torsney: There is a second thing I wonder if you could explain to me. Canada Post has a process, I assume, where they have a way to check before large volumes of mail are distributed by them. Do they get companies to either submit something saying they have been approved by you or they are in compliance with the Competition Bureau guidelines on game cards? Or should there be a process? Frankly, it would certainly assist you to not have so many frauds or so many cases to investigate if these things weren't delivered in the first place.

Mr. Konrad von Finckenstein: It's one way to deal with the issue. It's not the way the whole system is set up right now.

We are basically an investigative agency dealing with complaints. We're not in the process of approving people beforehand or suggesting that they are in compliance or not. We have a program of compliance, so the companies worried about it can come to us and say, this is what we want to do. We'll give them advice, etc. But it's on a voluntary basis.

Ms. Paddy Torsney: You charge them a fee?

Mr. Konrad von Finckenstein: Yes.

Ms. Paddy Torsney: What would be the fee to get some letter of indication that the game card, for instance, would be in compliance with your guidelines?

Mr. Konrad von Finckenstein: It's very little. It's $4,000, I believe. I can get you the exact number.

Ms. Paddy Torsney: Specifically on game cards, could you get back to this committee, if that's possible, on how difficult it would be? What would be the total cost in terms of the volumes of these cards if somebody spent whatever it is, one day a week, saying, check, this is acceptable; or this will not work, this is not in compliance, so that we can prevent...? It's a bit like the environmental example. You don't want to keep dealing end of pipe. Let's prevent it. Let's turn it off at the source.

Canada Post is primarily the one that distributes these things.

Mr. Konrad von Finckenstein: Yes, but you're now turning us into regulators, and that's really not our job.

Ms. Paddy Torsney: Just one half a person, once a week.

Mr. Konrad von Finckenstein: Obviously, if the legislation requires us to do it, we will be doing it. But right now we are investigators; we are not regulators.

Ms. Paddy Torsney: But your job would be so much easier if you could investigate the really big stuff and leave this one to the side.

Mr. Konrad von Finckenstein: So what exactly would you like from us on this point?

Ms. Paddy Torsney: What would it cost? What would you charge a company that wanted to distribute these kinds of things? Do you have any idea of what kinds of volumes are out there? How would it affect how much it would cost you guys?

Mr. Konrad von Finckenstein: I will attempt to get you that information.

Thank you.

Ms. Paddy Torsney: Thank you.

The Chair: Thank you, Ms. Torsney.

I have Mr. Bagnell, and then Mr. Rajotte.

Mr. Bagnell.

Mr. Larry Bagnell: Is it possible under the present provisions that you can be entered in a contest that you don't either choose to be entered in or that you enter by default by not putting in a form? Could Reader's Digest enter everyone who has a subscription, or send you a card that says, “If you don't send this back, you're automatically entered”?

Ms. Paddy Torsney: Negative option.

Mr. Konrad von Finckenstein: You want to know whether they can do it, or whether it would be in violation of the Competition Act?

Mr. Larry Bagnell: Yes, whether it's in violation of the new proposals.

Reader's Digest is a good example. All these seniors get all these cards saying they've been entered in a contest. I don't think they ever filled out a form saying they entered the contest.

Mr. Konrad von Finckenstein: Is any payment required from them? Was there any cost imposed upon them?

Mr. Larry Bagnell: That's not really my point. It turns out they have to mail back about 20 times to see if they get to the next stage. That's 20 stamps, which is a lot of money for a senior.

Mr. Konrad von Finckenstein: Where's the deception?

What we're trying to deal with here are where people are being deceived, where they are being led to believe they have won something and they haven't and they're being charged for something in advance.

In the situation the way you posit it, I don't see that there's any cost imposed upon them. They're not being misled, etc. If Reader's Digest or any company—I have no idea which one—chooses to enter its subscribers in a contest, there's nothing stopping them from doing it. It doesn't cost anything to the subscriber. The subscriber can ignore it or not.

So I am not quite sure who is victimized and how.

Mr. Larry Bagnell: I'll leave that one for people to think about for a while.

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Secondly, is it possible under the present proposal that they very well advertise a prize—a car is a prize and there are 10,000 one-dollar key chains as a prize—and that you'll have to call a 1-900 number to win, and they send a notice out and say you've won and it doesn't say which, the car or one of the key chains, and then they could keep you on the line for over a minute and they keep talking to you so it costs more than a five-dollar key chain? Is there anything in here that prevents the cost of claiming a prize to be more than the prize? And would that be a good idea?

Mr. Konrad von Finckenstein: Yes, that is explicitly in the provision that the cost of the prize has to be displayed.

Mr. Larry Bagnell: I know it has to be displayed, but I'm asking about the cost of collecting it. Is there anything that prohibits the cost of collecting being more than the prize?

Mr. Konrad von Finckenstein: You have to disclose the value of the prize. If there is a cost in collecting it, you have to disclose the value of the cost of it. If the prize is $20 but the cost of collection is $30, you've got to disclose that. Now, if somebody still wants to enter into it, so be it, but they do it fully realizing what the odds are.

Mr. Larry Bagnell: Someone mentioned earlier the 1-900 numbers. Depending on where you live in the country, the cost would be different, and you're never going to know that. You phone the number and you don't know how long the person's going to keep you on the line.

Mr. Konrad von Finckenstein: If you're using a 1-900 number then you have to point out that the 1-900 costs the caller money. It's not a 1-800 number, it's a 1-900 number, which means there will be a charge for making that phone call. That has to be disclosed.

Mr. Larry Bagnell: Okay. All I'm suggesting to think about is the fact that you just prohibit that the cost of collecting is never more than the prize. It would save some grief, I think, for people who don't understand these things.

Thank you.

Mr. Konrad von Finckenstein: Well, Mr. Bagnell, we issued these guidelines, and there will obviously be consultation on them. If they're not clear enough or if there are lacunas that need to be addressed, we will certainly do that. The idea is basically that people know what the risks are to enter this contest.

The Chair: Thank you.

Mr. Rajotte, please.

Mr. James Rajotte: Thank you, Madam Chair.

Commissioner, I think one of the concerns with businesses if private access is included in this bill is protecting their business information that they consider confidential. I'm wondering if you could provide some advice or guidance to the committee on ways in which we can ensure that confidential business information is protected if they are brought before the Competition Tribunal on a private access matter.

Mr. Konrad von Finckenstein: It would be in the same way as is in any other litigation they are involved in, whether it's under the Competition Act or not. If you are being sued civilly, then there is a process called discovery whereby you basically have to deliver to the opposing party essential documents on claims. However, there are provisions built into our court procedures for confidentiality in how it's handled and what you have to disclose and what you don't have to disclose, and they will equally apply in a private access. So using private access as a source to obtain competitors' information would be no more or no less used than it is right now by starting any other kind of civil action by one company against another.

François, do you have anything to add?

Mr. François-Bernard Côté: That's absolutely right. What exists right now for the protection of any confidential information would apply. It's generally done through a directive of the court or the tribunal, if you justify that this is important strategic business or trade information.

Mr. James Rajotte: But isn't it possible that one company could use this as a method to find out how weak or how strong a competitor is? How do you protect against that?

Mr. François-Bernard Côté: It's difficult to answer the question in a hypothetical situation. The protection is there for the person to claim and to obtain. I don't know in all cases whether that could never happen.

Mr. Konrad von Finckenstein: When we deal with mergers, especially contentious mergers, we are dealing probably with the most sensitive information a company has. It's pricing information, it's strategic information, and it's market information. The present process works to protect that information from third parties. That same process would apply when there's private access.

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The court has a very elaborate procedure to deal with confidential information and to make sure that one competitor cannot use the court process to gain information that he should not have. I've never heard anybody make the allegation that private access could somehow be a route to obtain information that you otherwise can't obtain.

Mr. James Rajotte: It wasn't a case brought before the Competition Tribunal, but a lot of former Canadian Airlines employees allege that in discussions with Air Canada years ago in having a merger, the books were open and Air Canada then saw the situation that Canadian Airlines was in and it decided to back away and wait until Canadian was in a more desperate situation so that they could then step in.

Now, it's not a specific case before the Competition Tribunal, but are there enough safeguards to ensure that something like that does not happen?

Mr. Konrad von Finckenstein: You see, that's a different situation. That's where two companies want to merge, and the company to be acquired always takes a risk when it starts entering into merger negotiations. The other side wants to kick the tires and wants to know what shape it is in. It may reveal too much and therefore make itself vulnerable to hostile takeovers, or the other company decides not to go ahead because it feels the price is too high, but on the other hand has obtained valuable information, which will help it in the competitive game.

This has nothing to do with court proceedings. These are the dangers inherent in playing the merger game.

Mr. James Rajotte: Yes.

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

Commissioner, we are in the process of reviewing Bill C-23, and as we're undergoing that process we're looking at possibly some other aspects, such as private access. I guess I'm trying to get at a timeframe from you on your next round of amendments. When we talk about your next round of amendments, will that be in the form of actual legislation that we'll see them, or will there be another discussion paper? Maybe you can just give us some idea of where you're going.

Mr. Konrad von Finckenstein: We believe the Competition Act, the framework legislation, should be amended incrementally to make sure it stays up to date, and there are no major see-saw changes. After all, it has a tremendous impact on the industry across the country, and these changes need to be absorbed; we need to know the impact. And it's often very difficult to reverse some changes once they are made.

So our aim is to make sure that the Competition Act remains up to date. We have an amendment unit headed by Mr. Morin here, which constantly researches issues to make sure we are up to date.

The issues before you are all ripe for enactment, and basically there is consensus, except for the issue of private access, which we will discuss. We would prefer to see those enacted very quickly. We know the next round will have to deal with section 45. It's already on the table as a result of the PPF. As a result of your discussions and the testimony that you will hear, and also your final report on competition, you can suggest other areas that you feel need to be addressed.

For instance, let's say for argument's sake that you feel that abuse of dominance should result in monetary awards, not only injunctive relief. That's something you may very well put on the table. We would then incorporate it in the next round.

We always do the same thing: we start with a white paper, laying out the groundwork and saying what's involved, as we did in this one. Sometimes we attach private members' bills to it, because they raise issues that are very relevant and should be addressed. We hold consultation and then get the necessary cabinet approval and come back to you with legislation.

The Chair: Okay.

Just so everyone knows, the bells are for a quorum call, not for a vote.

Just to be clear as a committee, as we're undertaking our review of Bill C-23 and so as not to cloud all the issues, we've had some discussion on how to proceed. I know the minister has outlined in his letter that we look at private access.

One of the proposals we have before us right now is to deal with Bill C-23 and the issue of private access, and then possibly to deal with our interim report, so we can finalize that before you come out with your next round.

So what you're telling us today is that your next round will not actually be legislation, it will be another paper. Am I clear on that?

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Mr. Konrad von Finckenstein: It will be both. It will be papers followed by legislation.

If you ask me, from our point of view the best thing would be if you concentrate on Bill C-23 and pass it with or without private access. You then could continue your report on the Competition Act, which we would then use for the next round of amendments and add it to what is already on the table, which is section 45.

The Chair: Okay. And do you have a timeframe for your next round?

Mr. Konrad von Finckenstein: It depends how quickly you enact Bill C-23. If, for argument's sake, Bill C-23 would be enacted by Christmas or by Easter, something like that, that's the kick-off for the next round, as far as I'm concerned.

The Chair: Okay. So from a committee standpoint, if there's consensus, then what we would probably do is in the next several weeks look at Bill C-23 and private access and then look at our interim report to be finalized, possibly with round-table discussions, as soon as we've completed Bill C-23, so as to continue to move the process along, if everyone's in agreement with that.

Thank you very much, Commissioner. I do want to invite you back at the end of the hearing stage, possibly, once we've heard from all of our other witnesses, if you have anything to add. I'm sure you'll follow these meetings with some interest.

Mr. Konrad von Finckenstein: Thank you very much. I'll gladly come back. And if in the interim you hear from other witnesses who raise issues on which you'd like some information from the bureau, we'll be only too pleased to furnish it to you.

The Chair: Thank you very much. We appreciate this.

The meeting is now adjourned.