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Bill C-23

Opening Remarks by Konrad von Finckenstein

October 2001

Introduction

Thank you Madam Chair and members of the Committee for inviting me to appear today. I always welcome the opportunity to discuss competition policy with the Committee and I am therefore pleased to be here today to discuss Bill C-23 - an Act to amend the Competition Actand the Competition Tribunal Act.

This Bill reflects the valuable work of this Committee's June 2000 Interim Report on the Competition Act; the amendment agenda advocated by the Bureau; initiatives taken by individual Members of Parliament (some of whom are on this Committee); as well as an extensive national consultation process conducted by the Public Policy Forum (a non-partisan, non-profit organization). The Public Policy Forum, which involved a broad range of stakeholders, received approximately 100 submissions and conducted twelve roundtables across Canada.

As you know, the Competition Act is designed to promote competition and efficiency in the Canadian marketplace to ensure that all Canadians enjoy the benefit of low prices, product choice and quality service. It forms a major part of the economic marketplace framework for business in Canada and applies, with few exceptions, to all industries and levels of trade.

Legislation of this nature and importance must keep pace with the rapidly changing global economy. One of the challenges is ensuring that the Competition Bureau has the right tools to do the job. In summary, the major amendments proposed in Bill C-23 will:

prohibit the sending of deceptive notices, including scratch and win cards, which suggest that a consumer has won a prize but require payment of additional costs;
enable us to gain access to evidence located abroad in relation to civil competition matters, where we are prepared to commit to doing the same;
streamline the Competition Tribunal process by providing for cost awards, summary dispositions and references; and
broaden the scope under which the Competition Tribunal may issue temporary orders.

Let me deal with these issues one by one.

Deceptive Notices

The Bureau receives thousands of complaints each year regarding cleverly-worded mail notices that deceive victims into believing they have won a prize and require so-called winners to incur additional costs in order to receive their prize. The costs that must be incurred invariably exceed the value of any prize received. In fact, in the vast majority of cases, no prize is ever received.

Canadians who are targeted for these mailings are often the most vulnerable members of our society -- especially seniors. Losses can amount to thousands of dollars.

Increasingly, these scams are international in scope, with fraud artists located in one country targeting victims located in others. Although various vulnerable groups of Canadians have been victimized by scams coming from abroad, Canada is gaining a reputation as a haven for scam artists as well. It is indeed most timely that you are examining provisions which reflect a targeted approach in addressing such objectionable activities while, at the same time, allowing legitimate businesses' genuine prize promotions to continue unimpeded.

This amendment would create a new offence that prohibits sending a notice by any means that: (a) leads recipients to believe they have won a prize; and (b) requires recipients to pay anything to receive the prize.

No offence would occur, however, if the recipient actually wins the prize and the notice satisfies disclosure requirements.

We believe that this provision will ensure two things. First, it will allow for more effective enforcement against these kinds of scams. Secondly, it will make it easier for Canadians to distinguish them from legitimate offers.

To elaborate on how we see the provision playing out in practice, I am distributing tentative draft enforcement guidelines for this provision to Committee members. These have been prepared as though the proposed amendment were passed into law. Of course, they would have to be revised in the event there are amendments made to the proposed new provision. The Bureau uses guidelines like these to provide greater transparency and predictability in relation to its enforcement policies. The guidelines are designed so that legitimate businesses will not be deterred from competing vigorously due to uncertainty in our approach to enforcing this new provision.

International Cooperation - Evidence Gathering in Civil Competition Matters

The ability to obtain evidence located in other countries is crucial in administering and enforcing competition laws in today's global economy. In order to inquire fully into abuse of dominance allegations concerning a large, multi-national corporation, we need access to relevant evidence which is often located beyond our borders. Currently, there's no way to obtain that evidence.

The proposed amendments regarding mutual legal assistance will facilitate evidence gathering on behalf of Canada regarding civil competition matters, such as abuse of dominance and mergers. This will ensure that enforcement decisions affecting domestic competition are made in Canada.

The proposal sets minimum standards for treaties and essentially mirrors the existing tools with respect to criminal matters under the Mutual Legal Assistance in Criminal Matters Act.

To give members of the Committee a clear understanding of how a formal cooperation treaty would look, I have also brought a model treaty - (PDF: 82.7 KB) which reflects the main elements of the cooperation provisions in Bill C-23. I trust this will illustrate how the balance would be struck between the interests of those providing evidence and the effective enforcement of the Competition Act. This document has been prepared as though the proposed amendments were passed into law. Of course, it would have to be revised in the event there are amendments made to the proposed new provisions.

In combination, the new Part III and the model treaty make it crystal clear that such authority cannot be used on behalf of another country without significant safeguards established to the satisfaction of the Minister of Justice and without two orders of a superior court judge. Moreover, this proposal does not in any way affect our existing practices regarding confidential information, nor does it require any revision to section 29 of the Act. Part III, as proposed, is a self-contained code which in no way impacts on the regime set out in section 29.

One final point on this subject: nothing in the proposed new provisions authorizes the Bureau to send information already in its possession to be used as evidence abroad -- whether it was obtained voluntarily or compulsorily.

Streamlining Competition Tribunal Processes

Litigation before the Competition Tribunal has proven to be very costly and time consuming. The proposed amendments will allow the Tribunal to:
hear "references," or questions involving a specific aspect of a case or interpretation of the law, rather than going through the entire costly and time-consuming litigation process;
award costs, if warranted, to deter parties from engaging in frivolous or strategic behaviour intended to delay Tribunal proceedings; and
make "summary dispositions" or dispose of a case quickly, if the Tribunal finds no merit to the case or no genuine defence.

Collectively, these amendments will allow for better use of Tribunal time at less cost to litigants before it.

Interim Orders

The ability to act quickly to prevent irreparable harm to the market is a key issue in today's fast-paced economy. While the Tribunal can currently issue interim orders under special circumstances involving merger review, or uphold interim orders issued by the Commissioner in respect of airlines, it cannot currently issue an interim order under most circumstances until the Bureau has applied to the Tribunal. Collecting the necessary evidence for such an application can take time.

The proposed amendments include provisions which would allow the Tribunal to issue interim orders if it found that, if such an order were not issued, there would be irreversible injury to competition; a competitor would likely be eliminated; or a person would likely suffer significant loss of market share, revenue or other harm that could not be later remedied by the Tribunal. An interim order would only be effective for a limited amount of time; the matter would still need to be litigated, based on the current law, prior to the issuance of a final order.

Other "Housekeeping" Amendments

I wanted to refer briefly to some miscellaneous amendments included in the Bill. These include the proposed revisions to the consent order process, revisions to the temporary order provisions in respect of deceptive marketing practices and making advisory opinions binding on the Commissioner. While essentially of a housekeeping nature, these amendments would nevertheless prove invaluable to the smooth functioning of the Act.

Private Access

Turning now to an important subject which is not in Bill C-23. In addition to proposing amendments related to streamlining Competition Tribunal procedures, Mr. McTeague's Bill C-472 also proposed allowing private parties to apply directly to the Tribunal for remedies concerning refusal to deal, tied selling, market restriction and exclusive dealing (conduct reviewable under sections 75 and 77 of the Competition Act that often involves essentially private matters between buyers and sellers). The proposal contemplated permitting such applications only with leave of the Tribunal to guard against strategic litigation; remedies in the nature of injunctions only (i.e., damages were not provided for) and costs. Referring Bill C-23 to Committee before second reading has provided the Committee with an opportunity to explore private access and whether consensus on the subject can be found.

Consultations undertaken by the Public Policy Forum revealed diverse views among stakeholders on this proposal but found that "consensus might be possible if changes were made to the proposal."

Supporters of private access argue that it would address a number of perceived deficiencies in the Canadian system. These include:

A belief that limited resources available to the Bureau may mean that some legitimate cases are not being taken to the Tribunal. For example, a case which was very local in nature, or one whose impact on the economy was very small, could be given a low priority by the Bureau. Therefore, it is argued that private access has the potential to complement public enforcement.
Under the current system, a complainant is also left without an alternative if a case is given a low priority or if the Competition Bureau does not believe that the facts provide grounds to refer a matter to the Competition Tribunal. Supporters of private access believe that people or companies should have the option of pursuing their own cases in these instances.
There is very little jurisprudence related to reviewable matters and it is argued that private access would result in additional case law. This, in turn, would allow the business community to have a better understanding of how the law applies.

Arguments against allowing private access include:

A strongly held belief by some that it will be used for strategic litigation. For example, a large firm with significant resources could initiate one or more applications against smaller firms with limited funds. Alternatively, it is also possible that firms of any size could initiate or threaten legal proceedings in the hope that they will deter aggressive competition. This could be part of a negotiating strategy or be designed to harass a rival.
Those opposed to strategic litigation also argue that the safeguards which are being proposed to deter strategic litigation (such as allowing the Tribunal to award costs if appropriate) will not work - and it is doubtful that any safeguards, no matter how stringent, would work.
Finally, in response to one of the points advanced in favour of private access, it is argued that expansion of case law is not a sufficient reason to expose Canadian businesses to the costs and disruption of more private litigation.

The Bureau continues to believe that some form of private access is necessary in order to round out the provisions of the Competition Act. Whether the time is ripe for this now, and the form such amendments should take, is something this Committee will study. As the Minister has stated, major changes to framework law, such as the Competition Act, require broad consensus. I expect this Committee will hear from all sides and will be well-placed to determine, on the basis of the submissions, whether the required consensus to enact private access with substantial safeguards, along the lines examined during the PPF process, has been reached.

Conclusion

Other issues which were part of the consultation process included the conspiracy and abuse of dominance provisions of the Competition Act. As you may recall, participants in this consultation process expressed a desire to modernize the Act's conspiracy provisions but generally felt that more discussion, analysis and consultation was required on such an important subject. Since then, three independent studies by Rob Russell of Borden Ladner Gervais, Al Gourley of Macleod Dixon, and Yves Bériault from McCarthy Tétrault, have been undertaken with respect to the conspiracy provisions of the Competition Act (these studies can be found on our web site); a conference on this very subject initiated by the private sector on amending section 45 is taking place on October 12th; and further consultations, with a wide range of stakeholders, are planned by the Bureau for this winter and spring.

On the issue of possible abuse of dominance in the grocery sector, the Bureau commissioned studies by Dr. Stephen Ferris of Carleton University's Department of Economics, Dr. Guofu Tan of the University of British Columbia's Department of Economics and Dr. Jean-François Wen of the University of Calgary's Department of Economics to gain a better understanding of the current situation in Canada. Following these studies, enforcement guidelines on abuse in the grocery sector will be released this Fall for public review and comment.

Last year, I appeared before the Committee to discuss the VanDuzer Report. Following up on commitments I made to members at that time, the Bureau has issued abuse of dominance enforcement guidelines and substantial progress has been made in developing guidelines on unreasonably low pricing policies.

In closing, I would reiterate that the amendments in Bill C-23 are indeed timely. We need to take concrete steps to address the growing problem of illicit contest scams targeted at Canadians and, from Canada, such scams targeted at our friends in other countries. We need the necessary tools to obtain evidence located abroad to make informed decisions about competition in Canada. And, finally, we need to ensure that the Competition Tribunal process is streamlined to meet the needs of those who appear before it. Ultimately, Bill C-23 is about ensuring Canada has modern and responsive framework legislation that promotes healthy and vigorous competition for the benefit of all Canadians.

I would like to thank the Committee for this opportunity to discuss Bill C-23. I would be pleased to answer any questions you may have.