Canadian Perspectives on International Competition Cooperation

Sally Southey
Assistant Commissioner of Competition
Competition Bureau

2003 International Conference on Competition Policies/Laws

October 27-29, 2003
Taiwan

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Introduction

In today's globalized economy, with complex transactions, it is critical that competition agencies work together. In doing so, we can improve our ability to enforce national laws and to encourage soft international convergence.

In Canada, we place great importance on promoting international cooperation within a framework of national legislation.

The three main avenues of activity are firstly the OECD which encompasses mostly the advanced economies with relatively mature enforcement agencies; secondly the International Competition Network, a network of antitrust agencies, competition law practitioners and experts from developed and developing countries; and, finally, bilateral cooperation, which we see as paramount to enforcement cooperation.

Let me first speak about merger review to illustrate the benefits of soft convergence. As you are all aware, the number of mergers among large international companies has increased over the last decade.

At the same time, we have seen significant growth in the number of jurisdictions with some form of competition law. Of about 90 jurisdictions that have competition policy today, about two thirds of them have a merger review process.

This increase in the number of merger review regimes has resulted in increased costs for compliance and administration.

Like other agencies throughout the world, Canada's Competition Bureau supports efforts at substantive and procedural soft convergence in order to reduce those costs.

However, convergence through a single global agency that would administer a uniform and binding competition law is neither realistic, nor desirable.

We also do not favour a multilateral dispute settlement system that would prejudice the independence of the domestic competition authority by reviewing national competition law decisions.

Some practitioners have advocated picking the “best” approaches from different countries.

However, one cannot simply “mix and match” features from different merger review systems, super-impose them into an existing domestic legal and administrative culture and expect to create a coherent and effective review system.

The right approach is to encourage soft convergence on general principles and best practices while recognizing the need to adapt to the context of each jurisdiction.

While we believe that there can be quite a high degree of convergence it is useful to remember that there are some limits to what this can achieve.

First, convergence would not eliminate differences in the factual situations in various markets. As a result, the same transaction may lead to divergent outcomes in different jurisdictions.

In Canada we have, from time to time, found crucial differences in the underlying facts, as compared to other jurisdictions, in cases that one might not, on first impression, have expected. For example, in some cases, the ownership and use of intellectual property rights has been quite different in Canada than elsewhere, resulting in a very different fact situation.

Second, even with a high level of convergence, reasonable people applying the same analysis may reach different conclusions on similar facts. We see this, for example, in our federal system when courts in different provinces occasionally disagree on how to apply the same federal law.

Third, given that economic theory evolves over time, as does national competition policy, it would be unrealistic to expect global agreement on every aspects of merger review. Similar considerations may apply in other areas of competition law.

Organisation for Economic Co-operation and Development (“OECD”)

The OECD's Competition Committee has played a central role in promoting international cooperation in competition enforcement, particularly in the areas of cartels and merger review procedures.

Members discuss current issues facing agencies, share experiences on competition related issues and promote enforcement cooperation between agencies.

The OECD works by consensus. All thirty member countries agree to Recommendations before they are adopted by the Organization. The private sector is invited to make presentations and provide advice to Members.

Canada places great value on the work of the Competition Committee and is a committed participant in its important work. Our former Commissioner of Competition, Konrad von Finckenstein, chaired the Committee's Working Party on International Cooperation over the past five years and was an active member in the Bureau of the Committee.

The Competition Committee and its Working Parties have developed important mechanisms to enhance cooperation between Members. For instance, the 1995 Recommendation of the Council Concerning Co-operation Between Member Countries on Anti-competitive Practices Affecting International Trade supports closer enforcement cooperation between competition authorities. It includes provisions dealing with the coordination of investigations, mutual assistance, confidentiality and information sharing. While the recommendation is non-binding, it has been valuable in encouraging cooperation among competition enforcement agencies.

The 1998 OECD Recommendation of the Council Concerning Effective Action Against Hard Core Cartels is also an important achievement. The Recommendation establishes principles and practices to guide competition agencies in addressing illegal cartel activity – an issue that is a priority for Canada in its OECD work.

The International Competition Network (“ICN”)

The Canadian Competition Bureau and other partner agencies were instrumental in the creation of a new forum for international convergence in competition law and policy, the International Competition Network (ICN).

Our former Commissioner of Competition, Konrad von Finckenstein was the founding chair of the steering group and co-chaired the first two ICN conferences in Italy and Mexico. Our Acting Commissioner, Gaston Jorré, is a vice-chair of the ICN , I am the co-chair of the Advocacy Subgroup and the Canadian Bureau currently provides Secretariat services for the organization.

Unlike the OECD, the ICN is a network with membership at the agency level from both developed and developing countries. Nearly all the existing competition agencies are members. For countries that have more than one competition agency, such as the US and Brazil, each agency is eligible for membership.

The Network also includes members from the private sector, legal and academic communities, and officials from international organizations such as the OECD.

The ICN represents “all competition, all the time.” Its members discuss their experiences and insights to develop best practices, to which each competition agencies worldwide can aspire.

The ICN's open approach has had great success in both substantive and procedural convergence. In addition to Working Groups on Funding and Memberships, three substantive Working Groups exist at present:

• Mergers;
• Capacity Building and Competition Policy; and
• Antitrust Enforcement in Regulated Sectors

There are more than ten smaller Sub-Groups under these Working Groups including one on advocacy which I co-chair with Brazil.

The ICN's Mergers Working Group was set up to analyse national merger requirements, diverse notification thresholds, schedules and waiting periods in order to promote best practices, improve review mechanisms, facilitate convergence and reduce the costs and other burdens of multi-jurisdictional review on the private sector.

The Notification and Procedures Subgroup has drafted Seven Recommended Practices for Merger Notification Procedures all of which have all been approved by the ICN and can be found on its Web site at www.InternationalCompetitionNetwork.org.

Already several countries have used these recommended practices to form the basis of their new merger review procedures. Korea, Romania, Equador, Serbia and Brazil are some of the countries who have turned to the ICN best practises as they endeavour to modernize their legislation .

In addition, the EC credited the ICN with its changes on timing in its Green Paper which will come into effect in May of next year. Clearly the network is working!

Let me take this opportunity to encourage all of you to participate actively in the ICN. The third annual conference will be held in Seoul, Korea in April, 2004. It promises to build on the accomplishments and successes of the previous two in Naples, Italy and Merida, Mexico and I would be pleased to answer any questions about it which you might have. There's no need to wait until April to get involved, working groups are always looking for people to get involved and I suggest that you check the website to find which area interests you.

Cooperation Through Bilateral Arrangements

The third type of international cooperation is the bilateral arrangements between competition law agencies.

While many of the issues we face today are global, competition laws are by necessity national. Competition agencies have had to focus on developing better enforcement tools by cooperating with each other in order to stop transborder anti-competitive activities.

Canada has comprehensive bilateral cooperation agreements with the:

• United States, the European Commission and Mexico;
• as well as similar inter-agency arrangements with competition authorities in Australia;
• New Zealand;
• Chile; and
• the United Kingdom.

These agreements have led to a “culture of cooperation” which creates synergies, provides alternative perspectives for investigative techniques and approaches and creates a larger pool of information relevant to a particular matter.

It also increases the diversity of information available to investigators, improves the efficiency of investigations and merger reviews, improves familiarity with international law, promotes better relationships among competition agencies and eliminates the shield of the international border for anti-competitive activity.

Given our close proximity and level of economic integration, Canada and the US have developed a very close relationship on competition matters.

Our bilateral relationship builds on the 1995 Canada-US Cooperation Agreement, which, like our agreements and arrangements with other partners, has a number of fundamental obligations.

These include notifying each other of enforcement activities affecting each other's important interests, for example where enforcement activities involve anti-competitive activities that are being carried out in the other country.

We must also cooperate in the detection and enforcement of anti-competitive activities, for example through enhanced inter-agency communication and information sharing, consistent with confidentiality laws. We are pleased to report that this relationship is working well.

Another important bilateral tool, is the Mutual Legal Assistance Treaty or MLAT which has been extremely useful since it came into force in 1990.

It allows competition enforcement authorities in either jurisdiction to ask for assistance from the other in criminal investigations. Upon receiving such a request, court processes can be used to request searches and other evidence-gathering on both sides of the border.

In addition, Canada's Competition Act was amended in 2002 to allow Canada to enter into MLATs in non-criminal matters, such as merger reviews. We hope that this innovative change will lead to improved evidence-gathering in civil matters.

Staff exchanges among competition agencies are yet another example of this “culture of cooperation.” Canada has participated in staff exchanges with the Australian Competition and Consumer Commission and its predecessor since 1988.

Last year, an extended visit of mergers personnel took place between the Bureau and the European Commission.

Both initiatives provided the participants with hands-on experience with the laws and practices of the other jurisdiction and the opportunity to share and compare experiences about enforcement and policy matters. Most importantly, they served to strengthen the cooperative relationships among the agencies.

Close cooperation has become a fundamental part of the review of international transactions and the investigation of cartels by the Bureau and other agencies around the world.

The Bureau keeps in regular contact with other major agencies and key trading partners to discuss general issues, such as best approaches to combat particular types of anti-competitive activities.

On the merger front, we:

• routinely share views and information about transactions with other reviewing jurisdictions within the bounds of confidentiality,
• coordinate timing of the review process to the extent feasible and
• almost always achieve consistent remedies.

In many cases, parties wishing to facilitate and expedite the review process have chosen to execute waivers allowing Canadian and US officials unrestricted information exchange.

Through sharing their views on substantive matters such as relevant market definitions, entry conditions and potential remedies, US and Canadian competition agencies have been able to streamline multi-jurisdictional merger reviews.

In recent years, Canada has experienced effective coordination and cooperation with the US, Europe and Mexico on numerous high profile mergers such as GE/Instrumentarium, Lafarge/Blue Circle, Bayer/Aventis, and Alcan/Algroup/Pechiney. In the merger review of Guinness and Grand Metropolitan, four jurisdictions worked together – Canada, the US, Europe and Mexico.

Anti-Cartel Activity

Cooperation in the area of cartel investigations has involved coordination on timing of formal investigative actions such as searches, subpoenas, interviews and document production.

International cooperation has played an important role in several cartel investigations over the years such as bulk vitamins. One recent case, saw cooperation among four jurisdictions – Canada, the US, Europe and Japan.

Canada is also proud of its immunity program, which was established in the fall of 2000. It has been an effective mechanism for fighting domestic and international cartels and for promoting cooperation between countries.

It allows the Bureau to recommend immunity for a party to a conspiracy that comes forward to the Bureau first. Immunity will be offered when we are not aware of a crime. It can also be offered when the party who is first to come forward with information does so and we are aware of an offence, but we do not have enough evidence to refer the case for prosecution.

However, immunity does not apply to the instigator of the conspiracy. It is fundamental to the program that the cooperating party terminate its illegal activity and that cooperation is full, continuous and expeditious.

Canada's immunity policy has resulted in the break-up of numerous cartels. At the moment, we have more than twenty ongoing investigations under this program.

When the Bureau is contacted, it urges the applicants to go to other jurisdictions with information about their illegal activities in those jurisdictions.

In one case, the Bureau started an inquiry on the basis of an immunity application and it resulted in coordinated searches in Canada and abroad.

In another case, where a number of countries received an application for immunity from a single party, the party waived confidentiality and significant sharing of information took place.

Coordination of enforcement actions in the area of cartels is critical. The ability of agencies to offer immunity or reduced penalties in exchange for cooperation is crucial to our success.

Agencies must work alongside each other in appropriate cases to ensure that actions in one country do not jeopardise those in another and that our borders are not used as a shield for illegal activity.

Conclusion

In conferences such as today's, we are collectively reflecting on two basic challenges – how to better solve practical enforcement-related problems and how to achieve a reasonable degree of substantive and procedural convergence in enforcement across a wide range of economies, competition regimes and legal cultures.

I believe that the Canadian experience I have just outlined, can be broadly applied and yield good practical results.

I am confident that our continued commitment to international cooperation will help strengthen competition enforcement around the world.

Indeed, I would argue we already have achieved a good deal of cooperation and convergence.

Thank you for giving me the opportunity to speak to you today.