Notes for an Address by Konrad von Finckenstein, Q.C., Director Of Investigation And Research, Competition Bureau

To the Canadian Bar Association
Competition Law Section
Annual Competition Law Conference
Aylmer, Quebec

September 19, 1997

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INTRODUCTION

Thank you for inviting me to speak to you today. It is a pleasure to be here and to meet with the people whom the Bureau deals with on a daily basis.

As you know I was appointed to this position six months ago. Coming from a background of primarily trade law and commercial law, I decided almost as soon as I was appointed that I needed to get an in depth appreciation of the competition world. So I took every Friday off and arranged to meet with stakeholders - members of the Bar, members of industrial organizations, umbrella groups and anybody interested in competition. I am glad I did this because the meetings gave me good feel for the concerns of stakeholders in the competition and consumer labelling fields.

During these meetings many of you asked me about my goals and aspirations for the Bureau -- about what I intend to be the principles underlying the Bureau. My standard answer was "It's too early to answer that question." Today, I would like to answer those questions.

First, I would like to repeat the principles that I would like to see govern the Bureau's daily activities. I mentioned them at every stakeholders meeting. They are:

• Transparency
• Fairness
• Timeliness
• Predictability

By transparency, I mean that we are going to be as open in our dealings as the law permits, develop appropriate service standards, develop performance standards, and be prepared to be judged according to these standards.

This is what I mean by fairness: We should continue to be fair in our decisions and try to strike the right balance between compliance and enforcement.

What I mean by timeliness is that we should strive to deal with issues in a timely manner. If we realize that our inability to come to a decision quickly can cost the industry real money, decisions as to whether to proceed or discontinue a matter will be made as quickly as possible.

This is what I mean by predictability: we should provide appropriate background information on Bureau decisions, and publish our position on as many issues as possible, both in print and electronically. This should make Bureau reaction more predictable and allow business to arrange its affairs in such a way as to be in compliance with the law.

I have repeated these 4 principles ad nauseam -- and can assure you that they do govern the day to day actions of the Bureau.

Of course all of this is only possible if there continues to be close collaboration between the Bureau and the Bar. This must be based on a system of mutual trust and respect. Although we are on opposite sides on many files, I believe that on the whole, we all try to deal with issues in a fair, objective and professional manner.

I hope this mutual trust will continue. Given that mutual trust is based on mutual understanding, I thought this might be a good time to address the issue of undertakings.

Although the Bureau does not accept undertakings as permanent remedies to competition issues (we prefer the Tribunal's Consent Order process) , undertakings are often absolutely vital to reaching practical interim solutions. We have to be able to rely on undertakings from members of the Bar and their clients and you have to be able to rely on our undertakings. Otherwise, the whole system of cooperation breaks down. I would like to remind you that I attach fundamental importance to undertakings -- I expect you and your clients to live up to them.

Recently, we had a situation where an undertaking was withdrawn at the last minute. This caused considerable difficulty for the Bureau --since the undertaking was an important part of our decision in that case. I hope this was an aberrant, isolated incident that will not be repeated in the future; that the Bureau will be able to rely on undertakings given by members of the Bar and their clients.

That being said, let me now talk about a long term view of the activities of the Bureau -- where I think we will be going and what direction will guide us. For simplicity, I would like to divide my thoughts into four challenges the Bureau is facing. They are ensuring that our work, and the legislation we work under remain:

1. Effective;
2. Balanced;
3. Relevant; and,
4. Forward Looking.

I will address each of these in turn.

1. EFFECTIVE

What do I mean by effectiveness?

It is obvious that as Director I have to make sure that we at the Bureau get maximum bang for our buck. With the money and resources available, in this age of government austerity and cutbacks, we have to enforce the Competition Act and labelling statutes (the Precious Metals Marking Act, the Textile Labelling Act, the Consumer Packaging and Labelling Act) as well as possible.

Conformity

We at the Bureau have adopted an approach aimed at ensuring maximum conformity with the law. I should pause for a moment to explain some terminology. In Bureau parlance, compliance means any activities, short of contested hearings, that encourage people to conform with the law. Enforcement refers to contested hearings to compel people to conform.

By conformity with the law, we mean a continuum that starts with education and goes up the scale from education to guidelines, advisory opinions, information contacts, voluntary codes, settlements, consent orders, charges, guilty pleas, fines up to imprisonment at the other end.

I assume that most business people do not go out to break the law, but would rather like to conform with it. I assume that they will arrange their affairs so as to comply with the law. Obviously, there is a small minority that do not have that attitude and it is our responsibility to remind that minority of their obligations and to prod them, or compel them to comply. However, the vast majority of business people are willing to comply. In some cases, we will very quickly find ourselves in contested proceedings. In other cases, we may not have to push very hard to get conformity with the law. The continuum must include an extensive system of public education and advice designed to help people to conform with the law, be it by way of voluntary codes, education, warnings etc.

We are reviewing Bureau policies to make sure all the tools on that continuum fit together and that we use the right tools for the task at hand. With the recent publication of the Corporate Compliance Bulletin (issued on June 30, 1997) we are encouraging business to adopt a more proactive compliance oriented approach. The idea is to prevent trouble before it starts and help businesses avoid future violations.

This brings me to my last point on conformity. I cannot emphasize enough that this approach does not mean more leniency for those who engage in serious anti-competitive behavior. In civil matters where reasonable solutions cannot be worked out by consent orders or other means, I will not hesitate to take the matter to the Tribunal. In cases where there are eggregious and serious violations of criminal provisions, I will not hesitate to refer cases to the Attorney General and recommend that she prosecute with the full rigour of the law.

You are all aware that we are continuing to work on our sentencing principles. These internal principles were developed to ensure that our recommendations on penalties to the Attorney General are based on a consistent and meaningful set of principles which can be applied to all cases. I attach fundamental importance to this initiative -- I believe it signals that when we lay charges, we mean business.

User Fees

I would like to discuss another project we have undertaken to improve our effectiveness, namely, user fees. As you know, the Bureau intends to put a system of user fees in place on November 1 for merger prenotification, Advance Ruling Certificates and Advisory Opinions. The proposed fees range from $25,000 for Premerger notification and ARCs to $500 for certain advisory opinions.

We realize that we cannot ask for user fees and give nothing in return. Consequently, we have structured our user fee system so that we couple user fees with performance measurement and maximum turnaround times based on the complexity of the case.

Of course the fees are subject to final approval by the Minister. We will be announcing the details shortly -- once I have obtained that approval.

As you know, we are putting in a system of user fees for Advisory Opinions. These will only be given in respect of proposed conduct. As for merger review, the time limits for Advisory Opinions will depend on the complexity of the Opinion.

We will standardize the type of Advisory Opinion letter we will give and will publish opinions with the consent of the requestor in the original form or on a no name or generic basis.

I would like to tell you how user fees will make the Bureau more effective.

First, we will have new increased resources to deal with merger review. We will be able to hire additional experts and staff so we can meet the time limits we are imposing on ourselves.

User fees will emphasize the client service element of merger review.

The information checklist that we will publish as part of our user fee system will make clear what information we require and will allow the profession to be more focused in their submissions.

The annual review process and publication of our performance will act as a meaningful incentive to meet performance deadlines and will also point out the areas where we have encountered unexpected difficulties.

The publication of Advisory Opinions will add to the transparency and predictability of the Bureau's decision making process and will lead to greater conformity with the law.

Finally, we will establish an annual forum of stakeholders to discuss our performance on user fees and find ways in which to improve our service as well as benchmark ourselves against other jurisdictions.

2. BALANCED

Ensuring that the application of the Competition Act and the labelling legislation remains in balance is another challenge I would like to discuss today. Of course, balancing is a process -- and not something with a foreseeable end.

Achieving balance is what the Bureau is all about -- after all, the Competition Act is based on the premise that, where possible, the process of competition should decide market outcomes. Competition balances the interests of consumers and producers, wholesalers and retailers, dominant players and minor players, the public interest and the private interest.

I think it is very important that the Bureau never forgets that it is its job to find the proper balance within the four corners of the Act. The Act gives us a lot of discretion and leeway to find that balance. Section 125, which allows the Director to intervene in federal regulatory hearings, is an excellent example I will use to illustrate my point.

How should the Director exercise this right? In my view, the Director should make maximum use of this power -- to shape policy so that enforcement activities are enhanced by a well structured policy. But our interventions have to be balanced.

We should not promote pure competition no matter what the consequences. We should realize that when industries such as telecom, financial services or energy are deregulated, there are major transition issues. In making our interventions, we have to take into account he interests of the incumbents, new competitors, the regulated and the unregulated as well as the customers.

Markets evolve over time and may not be ripe for completely open competition until the market power of the dominant incumbent has been eroded. That transition should take place in a way that maximizes the benefits of competition but which also ensures the continued viability of the industry as well as protecting new entrants (through regulation) from the market power of the incumbent. The amount of regulation should decrease as more of the industry is opened up to market forces. This constantly changing balance is an important, if difficult, task for the Bureau and regulators to maintain.

In other cases, adopting pure competition principles is not realistic because of competing social policy objectives (e.g. life line access to telephones). Reciting pure competition principles adds little to such a proceeding. In such cases, the Bureau's interventions before administrative tribunals should advocate specific market-based solutions. Ideally, such solutions use the competitive process to achieve the particular social policy objective or advocate solutions which distort competition and efficiency as little as possible.

3. RELEVANT

The third challenge for us is ensuring that our work and legislation are relevant. Laws that do not deal with the problems of the day are of little use.

The Competition Act and labelling statues are framework laws. They are essential to making sure we have a well functioning system of government, that we are an attractive spot for investment, and to ensuring that our economy remains innovative and competitive

We have to address the problems of the day. The perfect example of this is the problem of deceptive telemarketing. Telemarketing is a relatively new phenomenon which only surfaced with the deregulation of the telecom industry. Deceptive telemarketing is now a major problem -- and frankly -- we do not have the proper tools to deal with it.

Bill C-67 (which I hope will be reintroduced this fall) contains the necessary provisions to deal with deceptive telemarketing -- it will make sure that telemarketers make full disclosure, that they do not demand money for prizes and that they do not sell products at unreasonable prices. It will also give the Bureau the tools (convictions, fines, interim orders) to deal with telemarketers who do not comply.

These provisions will make sure we can deal with something that is a big problem for consumers today. We have to deal with it now.

Furthermore, we have established a permanent amendments unit to make sure the provisions of the Competition Act and labelling legislation remain relevant. Previously, the government dealt with amendments by sending huge bills to Parliament, every 10 years or so, dealing with a cluster of issues. The disadvantage was that a backlog of business would build up - including new and pressing issues - and the huge bill would be difficult to pass.

We have decided that to remain relevant, amendments to the acts should be made an ongoing process that we will conduct on a three-to-four year cycle. By moving to a shorter amendment cycle, hopefully we will keep our laws up to date and increase the prospects for easy parliamentary passage.

4. FORWARD LOOKING

The final topic I would like to talk about is the challenge of continuing to be forward looking. I think it is essential to place the Act in the proper context. We live in the age of globalization and trade liberalization. We have seen a tremendous expansion of trade. Any one who follows the trade scene will know that the intersection of trade, deregulation and competition law is upon us.

The recent agreement on Basic Telecommunications Services is as much an agreement on competition as it is on trade liberalization. If there is a further agreement on financial services, it will also deal substantially with competition.

It is clear competition is on the international agenda. It is not surprising that it surfaced in the Singapore declaration. I am convinced that it will be part of the next round at the World Trade Organization (WTO) and it will form a chapter in the Free Trade Area of the Americas (FTAA) , such an agreement is concluded.

The fact that we rely so heavily on trade means Canada has an especially big stake in lowering barriers to trade and gaining access to new markets.

Progressively through several General Agreement on Tariffs and Trade (GATT) rounds, and finally with the establishment of the WTO many tariff and non-tariff barriers to trade have been removed. We have also successfully expanded the rules on technical standards.

What is left are non-governmental impediments to trade -- that is barriers (such as restrictive business practices) put in place by the private sector. The only way to remove may of these barriers is through the enforcement of domestic competition laws in cooperation with other countries and the development of minimum competition law standards.

The development of international antitrust minimum rules -- if we can accomplish it at all -- can only be achieved in small steps.

The first step is to develop international bilateral cooperation agreements on:

• enforcement,
• notification,
• information exchange,

To this end, I plan to build on the Bureau's history of excellent cooperation under our agreement with the United States. As well, we are currently finalizing a cooperation agreement with the European Union.

The second step is to continue the Basic concept evolution at the OECD (Organization for Economic Cooperation and Development) (through study and research). The OECD - which is comparable to a crucible or think tank -- is a useful forum for the discussion and development of ideas -- but, given its limited membership, it is not the ideal place to negotiate an agreement or to enforce it.

The third step, once the basic concepts are developed, will be negotiation at the WTO.

In my view, the best forum to deal with private barriers and for reaching an agreement is the WTO. An agreement that forms part of the WTO offers the potential of real remedies and enforcement.

I do not think it realistic that these rules will take the form of an international Competition Code or even more controversially, an international antitrust authority with the power to substitute its decision for those of a national competition law authority.

I think the intellectual property model is more realistic -- a set of principles or minimum rules for competition in each domestic economy coupled with procedural rules and border measures.

Once established, each WTO member nation would implement and enforce these minimum principles on their own -- tailoring them to fit into their own particular system. The rules would be backed by the existing WTO dispute resolution machinery -- if a member country's laws did not meet the minimum standards it could be asked to amend its laws.

If we get this far -- it will be a major breakthrough. And we will have achieved the twin goals of spreading competition principles world wide and increasing access to foreign markets for Canadian firms.

CONCLUSION

That brings me to the end of my remarks. Thank you for inviting me to speak to you and giving me the opportunity to share my thoughts on our four main challenges with you. I hope the foregoing has given you a taste of the long term orientation of the Bureau, of the aspirations and objectives we have set for ourselves.

I would be remiss if I did not point out that we cannot meet these challenges by ourselves. Bureau cooperation with the Bar is a vital part of making competition policy work in this country. We very much appreciate this cooperation. The recent consultations on the amendments to the Competition Act demonstrate the value of close cooperation. As you know, the final product was changed and improved thanks to those consultations. I hope you will support our Competition Act amendments if they are reintroduced in Parliament this fall.

I am certain that in partnership we will all be able to meet the exciting challenges of tomorrow.