Canada and the Internationalization of Competition Policy

Speech to the Canadian Bar Association by Dominique Burlone
Assistant Deputy Commissioner
Economics and International Affairs
Competition Bureau

September 21, 2000

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Introduction

It is a pleasure to be participating today in this discussion of the International Competition Policy Advisory Committee (ICPAC) Report. I appreciate the opportunity to provide you with the Bureau's views on some of the ideas in the Report. Based on my experience within the Bureau both in enforcement and policy development and particularly, over the past few years, as head of the Bureau's International Affairs Division, I feel that it is an exciting time to be involved in competition policy at the international level. During my remarks, I intend to bring you up-to-date on some of the Bureau's international activities that may be of interest to you.

The ICPAC Report involves a comprehensive examination of current thinking on competition policy in the era of internationalization and globalization. It will no doubt be an extremely valuable reference tool not only for policy-makers in the U.S. but, also as well, for many competition authorities worldwide as we continue to grapple with the issues it discusses. However, and perhaps not unexpectedly, it does reflect a predominantly American view of the world of antitrust law. And, despite what our American friends may think, this is but one among several useful models to examine.

This having been said, the same applies to the uniquely Canadian approach to competition law. Indeed, as I have been advocating for some time, in no small part due to the vision of the current Commissioner, since business is fully on the way to thinking globally, competition law and policy-makers ought to be thinking likewise. In both the business and enforcement contexts, if we hesitate, we may well be left behind.

We in the Bureau share many of the views set out in the Report and its recommendations. In many respects, the Report's discussion will be an engine for change for the better. Simply acting as a catalyst to examine the issues it discusses is worthwhile. I hope that my brief presentation today will similarly excite you to examine some of these issues further in the Canadian context.

Chapter 4 of the ICPAC Report deals with Anticartel Enforcement and Interagency Enforcement Cooperation. Recognizing that the past decade has witnessed a major upswing in the number of international cartels investigated by competition authorities in the U.S. and abroad, the Committee's recommendations emphasize the importance of enhancing inter-agency cooperation while suggesting to focus on three areas:

1.    The need to better assess and to increase public awareness of the scope and incidence of international cartels;

2.    The importance to foster transparency in the handling of confidential business information and to ensure that appropriate safeguards are put in place, and;

3.    The development of "positive incentives" to deepen cooperation by

Enhancing Cooperation

We support the Report's call "to encourage and further deepen cross-border cooperation" in merger review as well as in respect of international anti-cartel enforcement. Indeed, we are of the view that cooperation in respect of all of a nation's competition laws ought to be the rule, rather than the exception. Of course, this is assuming, among other things, that the laws are reasonably compatible and the confidentiality protections reasonably similar.

Insofar as the Report seeks to distinguish between information obtained in the context of merger review and information obtained in the course of other antitrust investigations, we believe that the former class of information ought not to be given a higher level of protection than other information obtained by competition authorities. So far, we have heard no convincing rationale to indicate that, as a category, mergers-related information is qualitatively more sensitive than, for example, prospective business plans we may obtain in the context of cartel, or any other, investigations.

Like the United States, Canada has developed ties, both formal and informal, with our foreign counterparts which have stood us in good stead when it comes time to consider matters of mutual interest. For over a decade now, Canada and the United States have had in place the Mutual Legal Assistance Treaty and enabling legislation which allows for "hard" cooperation in cartel and other criminal antitrust matters. The Bureau and its counterparts also utilize, almost on a daily basis, our "soft" cooperation agreement, the 1995 Canada-U.S. Agreement¹, to facilitate cooperation and coordination in cases involving, among other things, cross-border mergers, monopolization and deceptive marketing scams.

It is also worth noting that we are well on the way to deepening these ties with the United States in a number of ways:

• we are close to finalizing discussions towards a positive comity agreement which will supplement our 1995 Agreement. I trust you will find this particularly interesting as it promises both better opportunities for Canadian business to have access into the U.S. market where that access has been foreclosed by anticompetitive activities as well as a reduced potential for extraterritorial antitrust law enforcement; and 
• we continue to examine ways to work even more closely together on areas of mutual interest. Indeed, we have recently been engaged in discussions directed towards enhancing our mutual understanding of our respective enforcement policies and procedures with a view to fostering an even smoother and seamless cooperative relationship with respect to cross-border cartel investigations. For instance, the Americans' Amnesty Program has proven an invaluable example which we have followed.

And, while the United States is our most important trading partner and, thus, our most important partner for cooperation and coordination on antitrust matters, we are also broadening our own net of cooperation to other jurisdictions that are important to Canada, in particular:

• with the European Communities, through our 1999 Cooperation Agreement, which we continue actively to implement while developing an effective working relationship with our European counterparts, the Directorate-General for Competition, as illustrated by the attendance by Bureau officers at the Commission's hearings involving the recent merger between Alcoa Inc. and Reynolds Metal Company and the one between Dow Chemical Company and Union Carbide Corporation
• through our soon to be signed interagency cooperation agreement with Australia and New Zealand, and our ongoing interchange program with Australia;
• with one of our free-trade partners, Chile, through an interagency agreement; and
• with several other jurisdictions, with whom we are at various stages of discussion with a view to commencing the negotiation of cooperation agreements.

Let me also mention that we regularly observe the use, both from the standpoint of a sending country as well as a receiving country, of the 1995 OECD Recommendation Concerning Co-operation Between Member Countries on Anticompetitive Practices Affecting International Trade. Let there be no doubt as to its value in encouraging cooperative efforts among competition authorities. I, personally, am active in networking with my counterparts in many other jurisdictions, particularly, these days, through my activities in connection with Canada's negotiations in the Free Trade Area of the Americas. It is noteworthy that we are trying to make use of ongoing trade negotiations in order to incorporate basic cooperation mechanisms within the ambit of competition chapters of potential future free trade agreements.

The Committee's recommendation to better assess and increase the awareness of the scope and incidence of international cartels has also already taken shape through several initiatives.

Bureau managers and officers also participated in the first-ever anti-cartel workshop hosted by the Americans in Washington, D.C., in December of last year. A follow-up to the Washington conference is scheduled to take place in Brighton in the U.K. in November of this year. The benefits of such conferences are clearly felt whenever one of our investigations leads us to a new jurisdiction in that we almost invariably know of at least a preliminary contact to facilitate cooperative efforts. We also benefit from the synergies and cross-fertilization of ideas with like-minded enforcement authorities who may have new or innovative means at their disposal to carry out their mandates. Our links continue to grow and I believe that such conferences may well become annual events, well-attended by competition officials from around the world.

But there is also no doubt that, despite all of these efforts, we can and must do more. For example, this past June, OECD Ministers endorsed a Report on the implementation of the 1998 OECD Council Recommendation Concerning Effective Action Against Hard Core Cartels. The comprehensive Report, which I encourage you to read, contains a proposed three year work program dedicated towards examining five key topics:

• the extent of overcharges and other harm done by hard core cartels;
• the real world impact of restrictions on co-operation against hard core cartels;
• optimal co-operation in hard core cartel cases;
• optimal investigatory tools for hard core cartel cases; and
• optimal sanctions in hard core cartel cases.

Central to our discussions will be how we can dispel many of the misconceptions about the nature of cooperation, the benefits and the risks associated with it. In my view, we ought to be well past the stage of blanket prohibitions on exchanges where the risks are appropriately addressed. There's clearly a lot of important work to do and the Bureau, representing Canada at the table, will continue to be an active contributor to the exercise.

The Review of Transnational Mergers

The ICPAC Report recommends that the United States continue to support OECD efforts to further develop a common framework for merger notification, including the development of common definitions. It also urges the OECD to continue to focus its efforts on identifying the minimum information necessary to identify whether mergers raise competitive issues as well as to specify categories of data that may prove useful to narrow or resolve potential issues early in the process.

From Canada's standpoint, we are actively supporting such efforts. As many of you will no doubt be aware, Konrad von Finckenstein is Chair of Working Party No. 3 of the Competition Law and Policy Committee of the OECD. As such, he has sought to ensure that we keep such efforts front-and-centre on the agenda alongside our anticartel activities, and that the input of private sector stakeholders is sought and reflected in any such consideration as well. We believe real progress towards better understanding and transparency in members countries' merger review policies can and ought to be made.

The 1999 OECD notification framework for transnational mergers was a good first step. We are now turning our attention to a consideration of what would constitute clear and objective notification triggers.

The ICPAC Report also indicates that a significant problem in transnational merger review continues to be a lack of transparency and predictability in various jurisdictions. While the OECD may address this challenge, I believe there is potential for the private sector to "respond to the challenge" by engaging in a comprehensive review of the regimes in place around the world and to disseminate the result. Where regimes are unclear or unpredictable, local advocacy ought to be used to address the problem.

Global Competition Initiative

In the ICPAC Report, the Advisory Committee recommends the establishment of a Global Competition Initiative, a new multilateral competition organization that would act as a forum for intergovernmental consultations and enable competition policy officials to exchange views and experiences on a range of competition policy issues. This new Initiative would also include a non-binding mediation mechanism dedicated to resolving disputes over competition policy. The GCI was also "promoted" by Joel Klein at the EC Merger Control 10^th Anniversary Conference in Brussels last week.

As appealing as this proposal might seem on the surface, it is not something we entirely support, as advocated. First, the premise of the Initiative - that existing multilateral and plurilateral organizations do not provide adequate opportunities for antitrust officials to meet and talk about competition policy issues - is, in my view, for the most part, inaccurate. The OECD, UNCTAD, APEC, the numerous bar meetings in Canada, the U.S. and the European Community, such as this one, and the numerous conferences devoted specifically to antitrust issues offer significant scope for a meaningful exchange of views and experiences among competition policy officials. If desired, competition law enforcers could travel the world and never set foot in their offices. How many international institutions do we really need and what is the optimum number of meetings? We are concerned that we are reaching the saturation point. Moreover, if we are to ensure that less-developed and developing economies are fully included in any such initiative, we need to ensure that their involvement is not overly burdensome in view of their scarce available resources.

A second reason is that the Initiative appears to be exclusively for competition policy experts. While the Report does mention that there should be interaction between the Initiative and the WTO, we are concerned that this would be no more than ephemeral. Essentially, the Initiative may well not receive the type of widespread support needed to become a relevant, mainstream organization. Competition policy does not operate in a vacuum; an untethered, stand-alone institution in an increasingly integrated world would constitute an oxymoron.

The combined impact of technology, trade liberalization, privatization and regulatory reform is widening and deepening the economic space that global, private economic players can enter. Mergers, strategic alliances, joint ventures and other forms of business practices are providing firms with the opportunity to reach beyond national or even regional markets. These developments pose fresh challenges for competition law enforcers in terms of ensuring that this economic space is open to all. In our view, this calls for a multilateral approach to competition policy that is linked with trade.

We have long been on public record as to the reasons why we support the WTO as the vehicle to bring competition policy mainstream. We continue to believe that competition policy is a natural, if not necessary, fit within the WTO architecture: the WTO is dedicated to making the international trading system more competitive which is at the heart of competition law enforcement. It has been very successful in bringing down government barriers to trade and has been the "institution of choice" for the development of positive rule-making in non-trade policy areas such as government procurement and intellectual property. It is the institution that has the membership, the intellectual depth and breadth, profile and experience to engender support for the development of a framework agreement on competition policy. As well, the WTO has substantial experience in the establishment of special arrangements for developing and emerging nations. Finally, including competition policy in the WTO will bring to the fore the importance and relevance of competition policy as the key issue of the day in a globalizing world. This will undoubtedly help to capture the attention and focus the minds of key decision-makers who are in the position to make changes.

Despite the outcome in Seattle, we continue to believe that competition policy should be on the agenda of the next round. However, in launching negotiations, we need to adopt a gradual and realistic approach. The negotiations should not try to find instant solutions to all the problems and issues that might arise in the interaction between trade and competition policy. Instead, we will need to focus tightly on those topics that can find the greatest support amongst the members.

In a nutshell, a framework agreement should include: the obligation for members to adopt a competition law incorporating the principles of transparency, national treatment, non-discrimination, and basic guarantees of procedural fairness. The framework should also include a common agreement on the kind of anticompetitive behaviour to be prohibited by domestic laws (initially this would cover hard core cartels) as well as mechanisms to facilitate cooperation between competition authorities. It should also provide for a peer review mechanism along the lines of the existing Trade Policy Review Mechanism. Dispute settlement procedures would not apply -- period. In terms of timing, a multi-staged approach could be employed to reach final consensus on a fully elaborated framework agreement.

This being said, there certainly could be value in bringing all competition authorities, including those that are not part of the OECD, together in one forum. Perhaps one could borrow from the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions? As some of you may know, the Convention was developed by an enlarged group of the OECD and invited nations. It thus could use the structure and funding of the OECD without being limited to the OECD's current membership. It strikes me as worthwhile to examine such an alternative and, if the ICPAC proposal of a Global Competition Initiative is the impetus for such a development then more power to it. It might also be turned into a useful "stepping stone" along the path to the WTO. If competition authorities around the world, regardless of the level of development in their competition policies and laws, were to have an opportunity to meet together and discuss issues of common interest, on a cost-neutral basis, and based on broad membership criteria, such a forum could prove extremely useful, especially when it comes to optimize the delivery of technical assistance, while we await developments at the WTO.

Technical Assistance

Achieving a multilateral framework agreement on competition policy would require those countries with mature competition law systems to coordinate with UNCTAD, the OECD, the World Bank and our national counterparts in the delivery of technical assistance to help developing countries build their capacity in the competition law and policy field. In this regard, I believe all such countries should heed the timely call in the ICPAC Report to enhance their roles in providing technical assistance to other jurisdictions. We cannot realistically begin to develop a global web of competition law enforcement, let alone an eventual network of cooperation, without significant, up front, investment in technical assistance. Unfortunately, the Bureau's current mandate and funding do not naturally come to the support of technical assistance to the degree we would like. Technical assistance can often be a time-consuming exercise, involving human and financial resources which are already stretched to the limit.

I believe that any approach for technical assistance should be based upon a partnership between experts in the field of competition policy in academia, the private sector and within the Bureau, drawing upon the comparative expertise of each. It is also critical to ensure the support of international, regional and domestic development funding agencies.

Conclusion

In closing, I would like to do a little crystal ball-gazing and indicate where I hope we'll be in five years' time:

• Canada will have "up and running" soft cooperation agreements with the most significant of our trading partners, adding two or three more than at present;
• we will have negotiated a comprehensive competition policy chapter in the FTAA agreement, which includes provisions which facilitate cooperation and coordination within the free trade area;
• we will have made significant progress at the WTO in convincing members of the unequivocal long-term benefits of effective competition policy and the importance of developing a multilateral framework in the WTO;
• we will have "exported" many of the OECD's ground-breaking developmental work to those jurisdictions around the world who have recently established competition laws and authorities in particular with respect to the negative impact of cartels and the most efficient means to combat them including active cross-border cooperation;
• we will have established a technical assistance program, in cooperation with academia, the private sector and foreign counterparts, to aid in spreading the legal, economic and technical expertise to implement modern competition laws;
• in OECD member countries, we will have objective merger prenotification triggers as well as transparent and predictable merger review regimes, due in no small part to a collaborative effort with the private sector to reach out and establish partnerships with a view to creating up-to-date databases on the systems of all jurisdictions with merger review;
• we will have entered into a mutual legal assistance agreement regarding civil antitrust matters with the Americans pursuant to new enabling legislation; and
• we will be continuing to extend our web of contacts, both formal and informal, with our foreign counterparts.

In short, I hope and expect the antitrust enforcement world will seem a little smaller and closer in five years' time.

Thank you for your attention.

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FOOTNOTE

¹    Agreement Between the Government of Canada and the Government of the United States of America Regarding the Application of Their Competition and Deceptive Marketing Practices Laws, 1995.