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Speaking Notes for Konrad von Finckenstein, Q.C., Director of Investigation and Research

To the Annual Meeting of the American Bar Association
Antitrust Section

August 3, 1998

Introduction

Good morning.

It is a pleasure to be here with you today. I think this is my first opportunity for me to meet many of you since my appointment as Director of the Competition Bureau last year.

As you know, I have spent a good part of my career to business and trade law, developing, among other things, agreements such as the FTA and NAFTA, in furtherance of the closer economic cooperation between our two countries. I am glad to see that the focus of cooperation is now concentrating on the anti-trust area. In the continental economy formed by the US and Canada, cooperation between anti-trust agencies in my view is a sine qua non.

As you know, it is the Competition Bureau’s role to combat anti-competitive activity so that businesses and consumers everywhere can enjoy the benefit of competition i.e. efficiency, product innovation and product choice. Under the Competition Act the Bureau examines mergers, pursues criminal activity such as price fixing and misleading advertising and civil cases (which we call reviewable matters) such as abuse of dominant position. We are also responsible for three statutes dealing with labelling requirements.

Canada and the US are each other’s most important trading partner. Our industries have grown both through trade, and through investing in capital projects that cross our long border. The advent of the FTA and NAFTA has brought both opportunities and dangers. Opportunities in terms of firms for instance becoming more efficient through greater economies of scale, concentrating on specific markets or forming strategic alliances. Dangers in terms of firms colluding on a North American scale to fix prices, share markets etc. These latter kind of activities by definition become the concern of both US and Canadian anti-trust authorities.

Speaking from Canadian experience I can point out that: our investigations of cartels involving foreign interests have more than tripled since 1994.

Clearly all of this means that a high degree of cooperation among antitrust authorities is essential. Today, I would like to elaborate on our three priorities for international antitrust cooperation in Canada and say a few words about telemarketing scams. The three priorities are:

(1) deepening our relations with foreign antitrust agencies including the US DOJ;

(2) expanding our existing positive comity framework;

(3) amending the Competition Act to allow us to cooperate under the IAEAA (the vowel act).

I will address each of these priorities in turn.

Deepening Relations

I am certain you are well aware that the Competition Bureau and the US Department of Justice and FTC, already keep each other well informed.

We cooperate with the DOJ and FTC under a formal agreement signed in 1995 (called the Canada-US Agreement (Regarding the Application of Competition and Deceptive Marketing Practices Laws)) – which was the result of a relationship of cooperation of many years' standing. The Agreement commits our two governments to more extensive cooperation in the enforcement of laws governing competition and deceptive marketing practices.

We recently initialled a similar agreement with the European Union and are awaiting ratification by EU member states.

We also exchange criminal information under the Canada-US Mutual Legal Assistance Treaty (implemented in Canada through the Mutual Legal Assistance in Criminal Matters Act (MLACMA)) .

Our cooperation has covered a wide range of enforcement activities including:

regular communications at all levels of our organizations,
discussions of case theories and market definitions
carrying out Internet sweeps together

And in criminal matters:

sharing evidence
coordinating searches
even conducting parallel coordinated investigations together from start to finish

The facts of the situation determine the level of cooperation and integration of our investigations. They depend on factors such as:

the particular conduct in question;
the evidence available and its location;
the witnesses and their individual interests;
the levels of culpability of those involved;
the location of all of the assets of the firms involved.

However, we must be realistic about the limits of cooperation. I believe I speak for both of us when I say that we each cooperate fully cognizant of the fact that our primary obligation is to protect our consumers and firms from anti-competitive behaviour regardless of where it emanates from. This being said, we believe that mutual assistance may be the most effective way to protect our national interests.

I value the relationship that has grown between the Competition Bureau and the Antitrust Division and the FTC. Because we believe that working together, we can both do our jobs more effectively, I have placed a high priority as Director on further deepening our existing relationships with the DOJ and with the FTC.

As you may know, I recently took over the Chairmanship of the OECD WP3 on International Cooperation -- which had until then been headed by Joel Klein on behalf of the US.

This working party has been a long been a useful way to promote cooperation between OECD Member countries' competition authorities. It is my intention to continue Joel’s valuable efforts to promote through the Working Party, mutual assistance in law enforcement and the sharing of confidential information.

At the Bureau we will continue to emphasize increasing the number of cases in which we coordinate our investigations – to continue to share evidence that would simply have been beyond our reach had we been acting alone. I’m sure you appreciate that this is a learning process. Case by case we will devolve ways to improve our cooperative efforts.

Expanding our existing positive comity framework

Besides deepening our existing relationships, we are also pursuing other avenues of cooperation.

One such avenue is positive comity -- the notion that if anti-competitive conduct in another country hurts both us and the country in which it is taking place, and the other country is prepared to act under its own antitrust laws, deferring to that other country’s enforcement efforts may be the most effective way to restore competition in both markets.

Adopting the notion of positive comity has several advantages:

it saves resources and,
avoids the pitfalls of extraterritorial orders which can affect the enforcement efforts of another jurisdiction.

The principle of positive comity has already been incorporated into our agreement with the US and will be part of our agreement with the E.C. In particular, those agreements:

acknowledge our common interest in using positive comity where appropriate;
provide the basis for making positive comity requests;
require the parties to consider requests carefully and inform the other of its decision to initiate or expand an investigation.

As you know, the US and EU negotiated a new agreement, which goes further. It elaborates on the principles and terms of the positive comity process including terms which:

clarify when positive comity requests can be made;
spell out the framework under which positive comity requests will be handled by the other country;
specify a detailed deferral or suspension mechanism under which one party would defer or suspend its own enforcement activity in reliance upon enforcement by the other;
ensure that both nations can be confident that anti-competitive conduct which harms their country will be investigated satisfactorily and that if justified, action will be taken to restore competition in their home market.

Of course, we realize that it is not realistic for any country to entrust all of its interests in enforcement to its economic partners. Practically speaking, any agreement on positive comity must include a safety valve (or override) which reserves for each party the right to step in and enforce its own laws at any time should the need arise.

I notice that such a safety valve is spelled out clearly in the EU - US agreement. It states that the agreement does not preclude the competition authorities of a party which has deferred or suspended its enforcement activities from later reinstituting those activities.

We will want to explore the feasibility of adapting this approach to apply to the Canada - US relationship.

Expanded cooperation under the IAEAA

The final priority area for the Bureau in the area of international cooperation is to broaden the mechanisms for cooperation outside criminal matters (to cover what we refer to as civil matters). We are exploring the possibility of enacting a structure to allow the same extensive cooperation and evidence sharing in civil matters that is currently permissible for criminal matters.

Related to this issue is a 1996 decision concerning a letter from the Canadian Justice Department to Swiss authorities requesting their help in a criminal investigation. In response to the letter, the Swiss authorities issued an order for seizure of documents and records related to an individual’s bank accounts. Prior to the Canadian letter, no judicial authorization had been sought in Canada.

The lower Courts decided that the Canadian standard of judicial authorization for the issuance of a search warrant was required before evidence could be requested in this way from a foreign jurisdiction.

On May 28th of this year, the Supreme Court of Canada overturned this decision and clarified the terms under which Canadian law enforcement agencies can request evidence from foreign jurisdictions. In a nutshell, they found that a request to a foreign agency requires no prior Canadian judicial authorization.

The decision paves the way for us to consider amendments to the Competition Act that would permit us to enter into international mutual assistance treaties with other countries, particularly those contemplated under the US International Antitrust Enforcement Assistance Act (IAEAA).

In order to implement such an agreement, we must address a number of issues mainly concerning the limits of the existing provisions of our legislation -- particularly the confidentiality provisions. This is an area that we, in Canada, have been grappling with as a part of our on-going amendments to the Competition Act and which we will give priority in the next round of amendments.

The key concern of Canadian firms and our competition bar is that our confidentiality provisions will be amended to allow us to send information to the US which will expose Canadian firms to US civil actions and treble damages. Any amendments that we might consider will have to take these strong concerns into consideration.

Illicit Telemarketing

Allow me to make a few remarks about one irritant to our cooperation namely the problem of fraudulent telemarketing.

This issue has become an increasing international problem as operators and owners of so-called “boiler rooms” (rooms filled with people seated at telephones and computer screens) are deliberately set up on one side of the border to target victims on the other side of the border to frustrate the investigative and prosecutorial process.

As I mentioned we already have excellent cooperation with the FTC pursuant to the Canada -US Agreement and the agreement Establishing theTaskforce on Cross-Border Deceptive Marketing Practices.

We are also currently amending our Act to enable us to approach deceptive telemarketing industry with a single set of rules. At present we can’t effectively prosecute them unless we can establish an offense of misleading advertising. This is often difficult given that all the evidence is oral. The amendments presently before Parliament set out a rigorous code for what telemarketers may not do. Their enactment will allow us to pursue boiler rooms with equal rigour on both sides of the border.

We believe that the single law approach is the best and surest way to tackle this domestic and international problem.