INST Committee Report

Over the past two years, the Standing Committee on Industry, Science and Technology has studied the Competition Act extensively, including several private members bills, the VanDuzer report, the Committee’s own interim report of June 2001, Bill C-23 and now a report from the Standing Committee. The Canadian Alliance commends the work of the members of the Standing Committee on this report and on their vigilance in studying the subject of competition policy in Canada.

Throughout these hearings, Canadian Alliance members of the Committee have consistently put forth the view that Canadian consumers and producers are best served not by a tribunal or by government interference in the marketplace, but by genuine, business-to-business competition. The focus of competition policy should not be to protect individual competitors, but should instead be to facilitate competition itself.

While the Canadian Alliance endorses the majority of this report, there are three areas where we disagree with the recommendations — specifically Chapters One, Three and Eight.

Chapter One recommends that conspiracy-related crimes against competition (i.e. price fixing) should be one of the most important concerns for the Competition Bureau. It also supports the idea that there should be no special rules for specific industries within overarching framework law.

In the opinion of the Canadian Alliance, the underlying theme of market regulation contained in Chapter One is fundamentally flawed. The Liberal party’s policy of tinkering with competition law and regulating the market place cannot replace the need for a healthy business environment.

The report acknowledges the monopoly-creating distortion of government policies, such as foreign ownership rules, which act as barriers to entry in the airline and retail book industries. Canada's small domestic market and large geography are usually used as justification for regulation, but the Canadian Alliance believes that these problems have been compounded by the Liberal government’s approach to industrial policy. There are too many sectors in the Canadian economy that escape market forces — telecommunications, wheat marketing, and transportation being examples. It is far better to have a proper business and tax environment for many competitors than regulation for a few.

Direct government interference in these sectors has resulted in reduced competition. The Liberal’s reaction is not to reduce regulations, but to compensate by amending the Competition Act. This approach compromises competition law and does not facilitate competition. For example, the government has amended the Competition Act to regulate the airline industry using cease and desist powers, monetary penalties and a consumer complaints referee. Yet, all these changes cannot discipline Air Canada like a competitive marketplace would. In addition, framework law such as the Competition Act is not the right place to regulate industry.

There is a belief that certain industries must be protected from foreign ownership or interference, but at what cost to the Canadian consumer— The National Energy Program made no sense for the Canadian oil industry and the Canadian Alliance suggests that mandated national ownership is not advantageous for other industries. Even if the situation could be corrected completely by the Competition Act, which is doubtful, it would certainly cost much more for the same result a market solution would produce.

In recent years, the Competition Commissioner has approved large-scale mergers in the airline or retail book industry, with caveats that certain assets be sold to other interests. In both cases, the deadlines passed with no prospective buyers coming forward due to government-imposed domestic-ownership rules. The end result in both industries has been a more concentrated monopoly and less choice for the Canadian consumer.

The Liberal government and the Minister of Industry should designate business-to-business competition as one of its highest priorities by making a concerted effort to reduce regulation and government interference in the marketplace.

Chapter Three attempts to deal with difficulties at the Competition Tribunal. The Canadian Alliance would like to call attention to undue delays in reaching a final decision. The abuse of dominance case that WestJet and now defunct Canada 3000 (CanJet) brought against Air Canada case is certainly an example where justice delayed is justice denied. This case will play a part in determining the future of the Canadian airline industry, and yet Air Canada has managed to secure two six-month adjournments. At present, the case is scheduled to resume in Fall 2002 — a full two years after the Air Canada seat sale at issue had taken place.

The Canadian Alliance is very concerned about these developments. Not only is Air Canada not being held accountable for its actions, but much needed clarity on competition rules has been put off again. Continuing ambiguity discourages new entrants into the market. Delays in the process mean that it is very difficult to entice investors to put money into new passenger air carriers.

The Canadian Alliance therefore recommends:

That the Competition Tribunal should increase its efforts to ensure cases
brought before it are heard in a timely manner.

Chapter Eight is particularly troublesome because the experts convened in preparation for this report did not raise the relationship between vertically integrated corporations and their independent retailers. Indeed, this Chapter is essentially based on one association’s point of view and from testimony delivered in October 2001 when the association appeared before the Committee's study of Bill C-23.

The inclusion of this issue in the Committee’s report serves to highlight the Liberal government’s predisposition to politicize competition law and policy.