Core International Competition Issues in Canada

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

International Competition Policy Advisory Committee
(To The U.S. Attorney General and The U.S. Assistant Attorney General For Antitrust)
Washington, D.C.

November 2, 1998

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Good Morning.

I am very pleased to have the opportunity to address this Committee. I sincerely hope that my international colleagues and I can assist you in developing a clear picture of the current international antitrust issues facing all of us and where we all are in addressing these various issues.

Canada is a strong supporter of international antitrust cooperation. The FTA and NAFTA have brought Canada and the United States opportunities in terms of firms becoming more efficient through greater economies of scale, concentrating on specific markets or forming strategic alliances. However, these same agreements have also brought us increased risks in terms of firms colluding on a North American scale to fix prices, share markets, etc. These latter kinds of activities, by definition, become the concern of both U.S. and Canadian antitrust authorities.

Since 1991, we have seen a vast increase in multinational conspiracies and in mergers involving more than one jurisdiction. As a corollary it is clear that a high degree of cooperation among antitrust agencies is essential for effective antitrust administration and enforcement.

I would like to set out for you the three Canadian priorities for international antitrust cooperation. Given that I am speaking in Washington, I will concentrate on cooperation between Canada and the United States. The three priorities are:

(1) deepening our relations with U.S. antitrust agencies;

(2) expanding our existing positive comity framework with the US;

(3) amending the Competition Act to allow us to cooperate under the International Antitrust Enforcement Assistance Act (IAEAA).

I will address each of these priorities in turn. In addition I would like to share with you the Bureau’s view of the place of antitrust in the WTO context.

Deepening Relations

We value the relationship that has grown between the Competition Bureau and our U.S. counterparts. As a result of the FTA and NAFTA, businesses work on a continental scale and consequently antitrust administration, be it merger review, anti-cartel activity, or combatting abuse of dominant position, needs to be done on the same scale. As we need to respect our boundaries and separate jurisdictions, this can only be done through active cooperation. I have placed a high priority on further deepening our existing relationships with the DOJ and with the FTC.

By deepening our relationship, we mean such things as:

• more coordinated or parallel investigations;
• coordinated searches where appropriate;
• sharing information within the limits set by our respective laws, especially: non- confidential information, market definitions, case theories, and views of industry;
• timing our activities so as not to interfere with each other;
• assisting each other to obtain necessary evidence through the MLAT process.

All this, of course, is a continuous learning process. Case by case, we will learn more about each other’s way of doing business and how to improve our cooperative efforts. During our second session today, I hope to expand on our experience of bilateral cooperation with the United States, and to elaborate on ways we might be able to foster even better cooperation.

Expanding Positive Comity

In addition to deepening our existing cooperation relationships, we would also like to pursue the expanded use of positive comity -- the notion that where anti-competitive activity takes place in another country and hurts both that country and one’s own market, it may be most effective to defer one’s own enforcement activity and instead let the other country investigate and deal with such anti-competitive behaviour.

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 U.S. and will be part of our cooperation agreement with the EC that should enter into force in 1999. However, in essence the current procedure only requires each country to consider a request from the other country, and to inform the other of its decision to pursue the relevant matter.

I believe we can go much further. The US/EU agreement on positive comity in my view is a valuable precedent. It sets out a basic framework dealing inter alia with such points as:

• the grounds for invoking positive comity;
• the conditions of deferment;
• the timetable to deal with requests;
• the necessity of accepting remedies worked out by the requested party;
• a reservation for the requesting party to commence its own investigation after prior notice, if circumstances so demand.

This latter point is particularly important as it is unrealistic to assume that any country will completely rely on its partners in respect of the enforcement to its economic interests.. 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.

We hope to work with the US on establishing a positive comity agreement analogous to the US/EU agreement.

Amending the Competition Act and Cooperation under the IAEAA

The third priority area for the Bureau in the area of international cooperation is to broaden the mechanisms for cooperation to allow the same extensive cooperation and evidence sharing in civil matters that is currently permissible for criminal matters. We are currently considering amendments to the Competition Act that would permit us to enter into international mutual assistance treaties with other countries, particularly those contemplated under the U.S. 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.

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. The fear of exposure to US treble damages is the single largest impediment to any IAEAA agreement.

It is important for this committee to examine the actual and potential negative impacts that the availability of treble damages for private litigants in the U.S. can have on cross-border cooperation in antitrust matters. It will be extremely difficult to reach an IAEAA type agreement with US unless these strong concerns regarding treble damages can be addressed or at least alleviated. Facing the possibility of huge financial liability in the U.S., can also result (and does result) in potential cooperative parties in Canadian proceedings being more reluctant to come forward with information that they believe could or will be shared with American antitrust authorities and subsequently will result in private action in the U.S.

Competition Policy and the WTO

Bilateral cooperation is essential, but does not solve all of our concerns. On the multilateral front, and speaking solely from a competition point of view, I believe that the WTO should play an important role. In my view the time has come for the next round of trade negotiations to address the issue of anti-trust.

Rather than continuing to allow the haphazard approach to competition policy that we have in recent WTO agreements, we should work toward establishing a sound multilateral competition framework at the WTO to advance competition policy internationally.

The key building blocks are already in place or in the process of being worked out in the OECD. These blocks merely need to be grouped together and be spelled out in more detail. I refer to:

• the 1998 recommendation on hard-core cartel prohibitions;
• the framework for a common pre-merger notification adopted just this month;
• work in progress on the rights of parties; and
• work in progress on the principles of positive comity.

We need to add to these items, a formalization of the developing OECD consensus on:

• a common approach to abuse of dominance;
• core principles; and
• elements of a minimum competition law institutional infrastructure required for effective antitrust enforcement (e.g. an independent investigative agency, an independent judicial review/appeal mechanism, and fair adjudication).

The principles developed at the OECD (or in the process of being developed) could be easily moved into a plurilateral agreement and combined with a dispute settlement mechanism solely designed to ensure that members implement these minimum commitments in accordance with their jurisprudence and their legal traditions. The dispute settlement should not go any farther and should in no way question the way countries apply their antitrust laws.

Such a plurilateral agreement would serve three purposes:

• it would serve as a guideline for underdeveloped countries as to how to develop antitrust systems;
• it would provide acceding members with the opportunity, at the time of accession, to remove anomalies of their antitrust laws; and
• it would provide members of the WTO, which are also members of the plurilateral agreement (and I expect these would include most OECD members) with a mechanism to deal with constraint issues caused by private arrangements that cannot be addressed under the current provisions of the WTO.

For all these reasons I strongly believe that it is realistic to pursue discussions on a competition framework in the next round of WTO negotiations, and I do not share the U.S. reservations regarding such negotiations.

This brings me to the end of my remarks. I look forward to hearing the views of others and to our discussions today on these important topics. Thank you.