Speaking Notes for Gaston Jorré, Senior Deputy Commissioner of Competition

2003 Competition Law Invitational Forum
Langdon Hall
Cambridge

May 1, 2003

Check Against Delivery

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Thank you for the opportunity to speak to you this evening. The program developed for this conference covers a number of the major issues facing Canadian competition law today and includes presentations by representatives of the Competition Bureau on the forthcoming discussion paper for the next round of amendments to the Competition Act and international developments in competition law and policy.

I want to use this opportunity to take a broader look at the challenges that the Bureau and, by extension, many of you in the audience will face in the coming months and years. The ultimate goal is to ensure that the Competition Act and the Competition Bureau have the tools and resources to deal effectively with competition issues in the changing market place in Canada, North America and the world.

Clearly the Bureau faces a broad agenda that is driven by a number of difficult challenges that must be met. In my view, the six most important ones, not necessarily in order, are:

• dealing effectively with hard core cartel activity, telemarketing fraud and the negative image for Canada that results from the perpetrators operating in Canada and targeting consumers in other countries;
• the next round of amendments, for which we will use a widely based consultation process, allowing sufficient time and opportunity for all views to be expressed and considered without delaying the implementation of necessary legislative change;
• addressing the issue of the appropriate way to deal with efficiencies in the merger review process given the final resolution of the Propane case;
• ensuring that the Canadian regime for competition law and policy is coherent and meets accepted international norms in the area;
• having the Canadian regime take into proper consideration current economic thinking; and
• ensuring the proper institutional setting for the Bureau and assuring adequate funding of its operations.
  
  Let me address each of these points in turn.

Criminal Cartel and Telemarketing

The challenge posed to the Bureau and the harm done to Canadian consumers by the proliferation of hard core cartels among competitors and criminal telemarketing scams must be effectively combatted. In recent years, many cartels operating on an international level have been uncovered and dismantled, but many others continue to damage economies.

Increased deceptive telemarketing is earning Canada an international reputation as a haven for this type of criminal operation. Telemarketing scams often operate in one jurisdiction and target victims in another and it is incumbent on the Bureau to take strong action against it. Particularly with telemarketing scams, we are now regularly facing criminal activity which is more akin to commercial fraud than the normal competition law offences that we have traditionally confronted. In some cases, we are encountering criminal organizations and there is a pressing need for expanded law enforcement tools in this regard. One of the issues is whether Bureau officers need to have some of the powers and protections available to peace officers to more effectively carry out their enforcement duties.

Amendments

On the amendments front, the agenda is challenging, including not only the Bureau's legislative agenda for the next round of government amendments, but also important initiatives put forward in private members' bills. Regarding our own legislative agenda, Suzanne Legault has provided a detailed technical presentation on what can be expected in the forthcoming discussion paper. From my perspective, the key issues are bringing the civil regime up to modern standards and reforming section 45.

The key priority, in my mind, is strengthening the civil regime, especially section 79, the abuse of dominance provisions. To obtain increased compliance with the law, the civil provisions need to be backed up with effective remedies, not just the existing ability to obtain remedial orders from the Competition Tribunal. Under the present system, parties effectively have what has been characterised as a "free bite of the apple" whereby anticompetitive conduct can be carried out for considerable periods of time, doing significant harm to the market.

The Bureau has undertaken extensive work to educate the business community on our approach to the enforcing the law. In consultation with stakeholders, we have developed and published detailed guidelines on the abuse of dominance provisions, both generally and for the domestic airline and grocery sectors. Bureau staff have participated extensively in conferences and other educational fora delivering speeches on various enforcement and compliance oriented subjects. Advisory opinions on proposed conduct have been available for quite some time and, on April 1, 2003, these "Written Opinions" became binding on the Commissioner.

Given these efforts, I see little justification for businesses to engage in conduct that is contrary to the civil provisions of the Act without facing serious consequences beyond a remedial order to cease or alter the conduct at issue. At the end of the day, the perpetrator is told to cease or alter the conduct, which provides no real deterrent. Indeed, there is a considerable incentive to continue the behaviour until it is successfully challenged. As a solution, we are looking at amendments that would provide tools to strengthen the provisions, including administrative monetary penalties, extending the right to commence private damage actions, and providing for restitution under the civil misleading representations provisions. It is time to change to a rules-based system where failure to comply has clear consequences.

There has been extensive debate on whether we should amend section 45 and, if so, how to reform this core provision, which has not been significantly changed since its original enactment. In addition to the view that no amendment is necessary, a view held by several stakeholders, there are essentially two options on the table. One is to undertake a complete change of approach, creating a criminal sanction that more effectively deals with hard core cartel behaviour, such as price fixing and market sharing agreements, complemented by a civil review regime to address other forms of competitor arrangements. Several variations on this approach have been discussed at length. An alternative is to amend the existing provision to clarify its application to potentially beneficial forms of cooperative arrangements involving competitors, such as strategic alliances, perhaps implementing a form of pre-clearance process, and removing the present cap on fines. Such an approach would address the issue of "chill" on arrangements or agreements among competitors because of concern that they may be attacked under section 45 However, the essential aspects of the existing regime dealing with anti-competitive agreements or arrangements would remain.

While the objectives and details of legislative change have been discussed at length, it is also important to consider the process we follow for amendments. The process used in previous legislative initiatives has met with some criticism from stakeholders. We want to ensure that consultations on proposed changes are widely based. I am concerned that the voice of the legal community, while of great benefit, often overpowers that of other stakeholders in the amendments process. The circle of participants needs to be expanded to ensure that all voices are heard and considered. The approach of using an independent body such as the Public Policy Forum to conduct consultations based on detailed drafts of policy proposals and to summarize and analyse views in an attempt to achieve consensus for legislative proposals is a good one. There also needs to be a balance between allowing sufficient time for issues to be properly debated and analysed and not unduly extending the amendments consultation process. Several concerns about the PPF process have been voiced and will be taken into consideration in the upcoming consultation exercise. You can be assured that every effort will be made to meet these objectives.

Efficiencies in Merger Review

On the issue of efficiencies after the Superior case, there is currently a private member's bill, C-249, before Parliament which proposes amendments to the Act. In an appearance before the Standing Committee on Industry, Science and Technology on March 31, 2003, the Commissioner of Competition stated that the bill was consistent with the objectives of the Bureau to promote and maintain fair competition so that Canadians can benefit from lower prices, product choice and quality services. The bill seeks to ensure that consumers are not left out of the equation when mergers involving efficiency claims are reviewed. With the amendment proposed by the sponsoring member, which would make it one of the factors, the bill strikes a balance between protecting the interest of consumers and the importance of efficiencies in merger review and would bring the treatment of efficiencies in Canadian law closer to that of our international counterparts.

In my view, the outcome in the Propane case is unacceptable from a policy perspective. It establishes that an anticompetitive merger that generates sufficient efficiencies will be allowed notwithstanding substantial harm to consumers in the form of significant price increases. Moreover, the interpretation provided for section 96 condones the creation of monopolies, which is a perverse result for the application of the Competition Act. There needs to be a clear resolution to how efficiencies should be dealt with in merger review and my preference is that they should be considered as a factor in the overall assessment.

International Developments

Aside from legislative change, the Bureau is actively engaged on a number of fronts to ensure we are prepared to deal with rapidly changing environment for the enforcement of competition law on both a national and international scale. It is important that the approaches remain consistent with accepted norms internationally.

On the international scene, a number of initiatives are under way aimed at achieving a degree of cooperation on critical enforcement issues faced by all competition law authorities. Through the formal committee system at the OECD and the more inclusive International Competition Network (ICN), progress is being made in areas such as cartel enforcement, merger review and the exchange and communication of information for enforcement purposes. Chris Martin will provide a review of recent international developments during tomorrow morning's panel, but I can tell you that the ICN has made significant progress in the short time since its creation. The membership of the ICN currently includes the majority of competition agencies around the world, and we hope that it will include all of them within a reasonably short time. There is also active participation from private stakeholders and other interested parties. Its strong point is that it deals only with competition issues. Our mantra is "all competition all the time."

Increasingly competition issues must be addressed by more than one agency, which requires us to maximise the effectiveness of cooperation with our counterparts. We have already established cooperation agreements with the United States, the European Union, Mexico, Costa Rica, Australia/New Zealand, and Chile. They have helped assure a more transparent and predictable framework for relations between counterpart agencies in these jurisdictions.

I spoke earlier of the challenge of confronting international cartel behaviour and cross-border telemarketing scams. Effective enforcement on both these fronts involves lengthy investigations and close cooperation with our counterparts in other countries. There is ongoing information sharing within established legal and treaty regimes with appropriate confidentiality protections and, when needed, joint investigations of criminal activity.

Overall, these initiatives are critical to the ongoing effort to ensure that our legislation and policies remain up-to-date and conform with the best practices as they are developed and identified.

Economic Approach

We also want to be sure that the economic foundation of our enforcement initiatives is sound and consistent with current thinking in the area. This is especially true in the area of network industries. Our approach to competition law and policy cannot be out of the economic mainstream with respect to areas such as the treatment of efficiency issues in merger review, how to approach issues such as unreasonably low pricing and abuse of dominance, and the appropriate way to treat cartel activity. Economics are the bedrock of competition law and competition law and policy are integral framework issues in a modern economy. Executing them in a consistent fashion is crucial to maintaining a strong investment climate in Canada. We are not alone in stressing the importance of economics; there is a worldwide trend to give renewed emphasis to economic input, e.g., the appointment of a chief economist by the EU. Canada cannot lag behind and our challenge is to ensure the Bureau continues to have access to the best thinking on competition policy and enforcement, both in Canada and internationally.

Bureau Status

The final challenge that needs to be addressed is the ongoing perception regarding the independence of the Bureau and the requirement for adequate funding. With the Bureau being administratively housed within Industry Canada and notwithstanding the Commissioner's annual report is made directly to the Minister and tabled in Parliament, there remain those who question whether the Bureau is truly independent with respect to the enforcement and administration of the law. This concern has been noted in both the Global Competition Review surveys and the OECD country review that was completed last year. I believe the issue could be best put to rest by having the Bureau established as a full partner within the Industry Canada Portfolio. This will give the Bureau a separate identity from the Department of Industry and put to rest any questions of perceived lack of independence. In addition it needs its own statutory appropriations rather than having funding channelled through the department, so that Parliament can explicitly decide how many resources will be devoted to competition administration and enforcement.

Conclusion

In conclusion, I believe all these challenges can be met if all stakeholders work together and make the needed effort. The Bureau needs to clearly communicate and explain our goals. If we do this we can gain the support of stakeholders and with careful timing and prioritization make significant, needed improvements to Canada's competition law regime.

Thank you again for the opportunity to speak with you this evening.