INST Committee Report

            These economic phenomena and the competition concerns that they raise can be seen as the main causes of a flurry of government and Private Member’s bills that have made it to the Order Paper of the House of Commons. Indeed, one of the best barometers a democratic country has for measuring the public’s dissatisfaction with what is going on in the marketplace may be found in the number of bills or amendments for change. In the case of amendments to the Competition Act and the Competition Tribunal Act, nine Private Member’s bills and two government-sponsored bills (Bill C-26 of the 36th Parliament and Bill C-23 of 37th Parliament) have arisen in the last two years alone.

            The Committee suggests that the almost simultaneous appearance of these bills and the above-cited economic trends are no accident; there is a causal relationship flowing from economic trend to Competition Act amendment. For example, the local telephone network is the perennial case of a "network economy or externality." Cable television, rail freight services, electrical power and natural gas distribution also belong to this special industrial species, as is the recently deregulated airline industry. Some of the technologies used by airline companies also display very low incremental unit costs relative to total costs. The traditional way of handling these cases of near or "natural monopoly" has been to regulate them. Since the late 1980s, however, airline, rail freight, long distance telephone and international telecommunications services have been partially deregulated because technology developments suggest that they no longer harbour the natural monopoly characteristic. Only the deregulation of the airline industry has proven controversial. Here, the relatively small Canadian market and the federal government’s maintenance of foreign ownership restrictions on the operation of air carrier services have conspired to produce a highly concentrated market, frustrating both the travelling public and would-be start-ups in the industry. Bill C-26, an amendment passed in the 36th Parliament in 2000, was an attempt to address this problem subsequent to the imminent failure of Canadian Airlines International Inc. and its merger with Air Canada Inc. The failure of many smaller airline companies in the past few years (Royal Airlines, Greyhound Airlines, Canjet, Canada 3000) and the sheer dominance of Air Canada in the Canadian market were the stimulus for an amendment to Bill C-23. This amendment would give the Competition Tribunal the power to assess an administrative penalty of as much as $15 million if an air carrier is found guilty of abuse of dominance. As such, the government is departing from the traditional approach of arming the industry’s regulator with the necessary powers to directly control these aspects of competitive behaviour. The government has instead taken a "special rules for special industries" approach, which calls into question the claim that the Competition Act is framework legislation, justifying it on the grounds that this industry comes under federal regulatory jurisdiction.

            Bill C-23 addresses the increasing internationalization of commerce in two important ways. First, this bill would facilitate cooperation between the Competition Bureau and foreign competition authorities for the enforcement of civil competition matters now that monopolization practices can transcend country boundaries. Second, the Committee amended this bill to give private parties access to the Competition Tribunal for resolving disputes on a limited number of business practices that are considered civilly reviewable by the Acts. This amendment should comfort many small and medium-sized businesses that may have to combat large multinational enterprises which attempt to abuse their dominant position.

            Finally, increased innovation across most sectors of the economy demands quicker resolution of disagreements between private parties and the Bureau on controversial competition issues. Bill C-23 responds to such demands by proposing to streamline the Tribunal’s administrative processes through the provision of cost awards, summary dispositions and references.

            Bill C-23 will provide a good first step to strengthening the Competition Act. More steps, however, must be taken. Industry and competition experts complain that the law is over-inclusive in some areas of antitrust, but under-inclusive in other areas. The typical example of over-inclusiveness has been the law’s inability to properly distinguish between a strategic alliance and a conspiracy to raise prices to the detriment of the public, which has a "chilling" effect on some profitable and competitively benign opportunities that the business sector would otherwise undertake (despite the development of the Bureau’s bulletin: Strategic Alliances Under the Competition Act). Conventional thinking suggests that a strategic alliance is preferred to a full-blown merger as a means of gaining cooperative behaviour between rival companies with distinct core competencies. The perennial example of the law’s under-inclusiveness is found in the term "unduly" in section 45 of the Act — again dealing with a conspiracy — which makes it hard to obtain a conviction in a contested case; this is true even when the case is, for all intents and purposes, a "naked hard-core cartel" with no redeeming social value.