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Address by Konrad von Finckenstein, Q.C., Commissioner of Competition

Speech to the Canadian Bar Association
Competition Law Section
Annual Meeting

September 21, 2000

Introduction

Let me begin by thanking the Competition Law Section of the Canadian Bar Association for again providing me with the opportunity to address its annual gathering. Of the many speaking engagements I have every year, I feel this is one of the most important and enjoyable. This annual exchange of information and views among members of the competition law community contributes significantly to the improved understanding of the importance of effective competition law enforcement and policy to Canada. The effective partnership of the Competition Law Section and the Competition Bureau is a vital prerequisite for the successful administration of the Bureau's mandate. I also want to congratulate the Organizing Committee on assembling an excellent program for this year's meeting; I am sure we all look forward to a productive conference.

The past year has been a full one, including both triumphs and set backs from the Bureau's perspective. There has also been a considerable amount of commentary on the role and effectiveness of the Bureau and the Competition Act. I want to stress that the Bureau is mindful of the need to adapt to changing circumstances and meet new demands. We are constantly seeking to improve the way we carry out our mandate.

I would also like to point out that we continue to emphasize that the Bureau's approach to the administration and enforcement of the Competition Act and the standards-based statutes is based on five basic principles: fairness, predictability, timeliness, transparency and confidentiality. This approach is discussed in detail in the recently issued Information Bulletin on the Conformity Continuum. Essentially, the Bureau uses a mix of general and specific application tools to achieve conformity with the law through education, facilitation and responses to non-conformity. Through the interdependent and complementary nature of these tools businesses are provided with the necessary information to comply with the law. This is done without compromising the notion that those who disregard the law or fail to take advantage of the opportunities for voluntary compliance will be faced with strong enforcement action by the Bureau.

In my remarks today, I want first to discuss some of the significant case matters and international activities of the past year. I then want to address some of the current issues facing the Bureau and discuss how we intend to deal with them in the coming year.

Year in Review

There have been significant cases and initiatives in all areas of the Bureau's operations and in my remarks today I can only provide an overview the past year. I will deal with each area in turn, focussing on selected highlights only. You should also know that the Annual Report of the Commissioner of Competition was tabled in Parliament by the Minister of Industry on September 18, 2000. Hard copies are available and the full text of the report and related statistical information are available on the Bureau's web site (http://www.competitionbureau.gc.ca).

Compliance and Operations Branch

The Compliance and Operations Branch provides policy development, administrative, communications and computer technology support to the Bureau.

In June 2000 the Bureau published the Information Bulletin on the Conformity Continuum, which sets out our approach to the administration and enforcement of the Competition Act and the standards-based statutes. The Continuum summarizes gradual developments over the past several years affecting how we do our job. It represents an integrated approach to the enforcement of our legislation, which balances the interdependent and complementary roles of education, compliance, and enforcement instruments.

We have re-designed our web site to improve the user-friendliness for visitors. The site is now easier to navigate and provides more useful information.

Several services for businesses and consumers are now available on-line. These include CA number registration under the Textile Labelling Act, requests for Advisory Opinions, and complaints and information requests. This is part of an ongoing process across the government to make more services available on-line and provides more convenient availability and accessibility of Bureau services.

Work is progressing on the conversion of all positions to the Universal Classification System being introduced by the government to ensure that employees are fairly compensated for their work. This system ensures that all aspects of a job are fairly considered in determining its classification and level.

Fair Business Practices Branch

The highlights of the past year include the effective use of the new civil track for misleading advertising, ongoing efforts to aggressively pursue deceptive marketing practices using direct mail and telemarketing, and the publication of warnings and guidelines to assist consumers and businesses.

To begin, the civil track for deceptive marketing practices established in Part VII.1 of the Act clearly provides the Bureau with the power to expeditiously resolve a matter and quickly prevent further harm. In April 2000, a consent order was registered with the Competition Tribunal against Universal Payphone Systems Inc. and its president, George Katsoulakis. This permanent order followed on a interim order that had been issued earlier. The Bureau alleged that Universal made several misrepresentations and grossly exaggerated the potential earnings of investors, who were required to pay approximately $10,000 to acquire individual pay-phone businesses. Under the terms of the consent order, Universal and Mr. Katsoulakis are prohibited from carrying out any marketing activities regarding their payphone business throughout Canada for a period of ten years.

These provisions were effectively used again in September 2000, when a civil consent order prohibiting the continued marketing of an electronic anticorrosion device was registered with the Tribunal against Gestion Professionnelle (Électroprotections) Inc.

Given the significant changes to the misleading advertising provisions of the Competition Act that came into force in March 1999, particularly the amendments to the ordinary price claims provisions, the creation of a civil track for certain matters, and the creation of specific provisions to deal with deceptive telemarketing, the Branch devoted considerable attention to ensuring that marketplace participants were aware of these changes through an information campaign directed principally toward major retailers, retail associations and industry groups. In the Fall of 1999, the Bureau prepared and issued four new information bulletins. These outline the new ordinary price claims provisions, the new telemarketing provisions, the Bureau's approach to selecting either the civil or criminal track for deceptive marketing practices, and the criteria for the use of the new wiretapping powers. The last bulletin also applies to the conspiracy and bid-rigging provisions of the law, which are not part of the responsibility of the Fair Business Practices Branch.

Deceptive telemarketing continued to be a priority for the Bureau as demonstrated by several high profile matters. These include:

In December 1999, 85 criminal charges under the misleading advertising provisions of the Competition Act were laid in the SS Viking matter against 3 telemarketing companies, their principal director, 2 managers and 11 individual telemarketers.
More recently, on August 2, 2000, the telemarketing company C.S.R.H. Heritage Group Inc. and the company's manager pleaded guilty to three criminal charges each under the misleading advertising provisions of the Competition Act. In addition, 8 telemarketers have also been charged. Heritage telemarketers misled consumers about the nature, value and quality of the awards offered and left out or only partially disclosed extra conditions and restrictions required for consumers to collect the awards.

We also continue to focus enforcement activities on deceptive marketing practices through direct mail operations. In October 1999, Cave Promotions Ltd., which ran a deceptive mail operation, was fined $75,000 and made subject to a prohibition order forbidding the company from engaging in similar conduct in the future.

As you know, the Internet is becoming an increasingly significant advertising medium and marketing tool for businesses. The Act applies on the Internet in the same manner as traditional marketing channels. The Bureau is increasingly focussing on this area and undertook several Internet sweeps this year, including:

A sweep carried out in December 1999 targeted approximately 30 multi-level marketing plans and related web sites. Concerns relating to possible deceptive practices were identified with approximately 20 of the plans that were examined. Letters have been sent to the companies alerting them to our concerns and requesting details on their marketing plans.
In February 2000, the Bureau participated in an international law enforcement project to address misleading representations on the Internet. The project targeted phony « Aget-rich-quick » schemes such as deceptive work-at-home offers, business opportunity scams and illegal lotteries. Warning e-mails have been sent to targeted sites where misleading practices are suspected.
The Bureau has recently conducted an Internet sweep of Canadian retail web sites to gauge the degree of compliance with the OECD Guidelines for Consumer Protection in the Context of Electronic Commerce and the Canadian Principles of Consumer Protection for Electronic Commerce-A Canadian Framework. These guidelines identify principles to ensure that consumers are provided clear and sufficient information to guide their purchasing decisions in the electronic marketplace. They also provide advice on what type of information and disclosure should be included in web site advertising by retailers. Targeted companies were sent an e-mail advising them of the existence of the guidelines, and provided links for further information and education.

Last fall, in order to respond to significant concerns from consumers and competitors, the Branch developed a conformity strategy for the retail jewellery industry. In December 1999, we published an information notice offering tips to consumers when purchasing jewellery. Consumers were warned to be cautious about situations such as sale prices which are in effect for an extended period, inflated regular prices, misrepresentations involving the use of terms such as « AAppraised Value » and « AManufacturer's Suggested Price », and misleading circumstance-related sales such as « AGoing Out of Business » sales. We have also sent in excess of 3000 individualized letters to jewellery retailers across Canada alerting them to the deceptive practices provisions of the law and offering assistance in complying with those provisions.

The Branch continued to work with stakeholders to develop voluntary codes and international standards for the marking and labelling of products. In the Spring of this year, we issued for public comment a document entitled Guideline for the Labelling and Advertising of Pet Foods. The Guideline will be finalized following review of comments received. As well, the Bureau, along with other government departments and concerned stakeholders, has been working to harmonize labeling requirements with respect to textile products. To that end, the Bureau has launched a process with the Canadian General Standards Board to consult on the revision of the current care labeling standard and associated testing methods and criteria. This work is being done pursuant to the mandate of the NAFTA Subcommittee on the Labelling of Textile and Apparel Goods.

Civil Matters Branch

The Civil Matters Branch undertook a number of major case initiatives in the past year. Several significant matters were satisfactorily resolved of without recourse to the Competition Tribunal, thus proving the effectiveness of the continuum approach.

In September 1999, following an inquiry into the marketing practices for its Roundup brand herbicide, Monsanto voluntarily introduced a new marketing program for the product. Our inquiry disclosed competition concerns under the tied-selling, exclusive dealing and abuse of dominance provisions of the Act. Accordingly, the Bureau indicated to Monsanto its intention to seek a remedial order from the Competition Tribunal. However, the concerns raised in the inquiry were addressed in the revised Monsanto marketing program. In particular, the new program did not restrict the ability of farmers to use particular brands of herbicide. Furthermore, Monsanto's revised volume-based distributors and dealer discounts will increase the opportunity for competitive suppliers of glysophate to gain access to channels of distribution serving the agricultural industry. Following a monitoring period to verify the effectiveness of the new program in alleviating the concerns raised by the previous marketing program, the Bureau's inquiry into the matter was discontinued in April 2000.

In November 1999, in response to the Bureau's concerns under the abuse of dominance provisions of the Act, the Insurance Corporation of British Columbia agreed to remove the « AMost Favoured Customer » clause from its agreements with automobile body shops that participated in the Corporation's Alternative Transportation Program. Under the program, repair shops provided courtesy cars to ICBC's customers in return for specified payments. Information obtained by the Bureau showed that the « AMost Favoured Customer » clause, which required the repair shop to charge ICBC no more than what was charged to other insurance companies, discouraged selective discounting and might substantially lessen competition in markets for insured automobile body repair services. ICBC co-operated fully with the Bureau and, with the change in their conduct, the Bureau concluded its examination.

In August 2000, H.J. Heinz Company of Canada, currently the sole supplier of jarred baby food in Canada, signed a binding undertaking designed to encourage competition in the baby food and infant cereal markets. Our examination of the matter concluded that Heinz used its dominant position to create barriers to entry for competitors by making large, up-front payments to retailers to stock only Heinz products and by offering multi-year contracts and discounts for exclusive supply. Heinz has agreed to stop these practices as well as to limit the terms of its supply arrangements to one-year except when meeting competitive offers of a longer duration. It will also advise all users of Heinz gravity feed racks that they may display any brand of jarred baby food in them.

These cases demonstrate the Bureau's commitment to resolving matters of exclusionary and abusive practices that harm market competition.

This year also saw continued activity by the Bureau in significant regulatory matters. First, following discussions between the Competition Bureau and the CRTC, an interface document was released. It clarifies the respective responsibilities and authority of both organizations and describes the overall regulatory and legal framework governing the telecommunications and broadcasting sectors which have been characterized by rapid change and incre asing reliance on market forces. A range of competition issues including access, merger review, competitive safeguards and various marketing practices are covered by the document.

Also, the Bureau filed formal interventions under the Act before the CRTC on telecommunications issues, the Ontario Energy Board in the matter of pricing and procurement of standard supply for electricity under competitive market conditions and the New Brunswick Board of Commissioners of Public Utilities in hearings regarding rules and regulations for the conduct of natural gas distributors and marketers.

The Bureau also intervened at the Canadian International Trade Tribunal on a number of occasions. In particular, we filed a written submission in the contrast media dumping case. In its final decision the CITT imposed tariffs of approximately 12% and 22.5%, substantially lower than the original tariff of 74% imposed in May 2000.

These actions demonstrate the importance and effectiveness of our authority to intervene before federal and provincial regulatory boards to argue for the benefits of competition and against using regulatory barriers to establish monopoly situations in deregulating markets in Canada.

Criminal Matters Branch

Criminal investigations, supported by the effectiveness of our immunity program, have led to several important convictions of both domestic and international corporations and individuals. Between September 1, 1999 and August 31, 2000 fines imposed in matters handled by the Branch totalled approximately $114 million. On a fiscal year basis fines in 1999-2000 totalled over $102 million compared with the total of $40.6 million in 1998-1999.

We continued to vigilantly pursue parties to international conspiracies which have had a substantial negative impact on the Canadian economy. Following on the convictions of a number of companies in the vitamin and citric acid cartels, a number of individual convictions have been registered in the matter. Dr. Roland Brönnimann, former president of the Vitamins and Fine Chemicals Division of F. Hoffmann-La Roche was fined $250,000. Mr. Andreas Hauri, the former Head of Global Marketing for F. Hoffmann-La Roche was fined $175,000 for his role in the bulk vitamins cartel and $75,000 for his role in the citric acid conspiracy. These fines represent a commitment by the Bureau and the Attorney General to have individuals who play a central role in the establishment and implementation of these cartels face serious penalties for their actions.

In addition, other prosecutions of firms involved in international cartels continued. In March 2000, a prohibition order and a fine of $5.2 million was imposed on Takeda Chemical Industries after they pleaded guilty to participating in the conspiracy to fix prices of riboflavin and vitamin C between 1991 and 1995. The Federal Court also imposed a prohibition order and a fine of $1 million against Merck KGaA for its part in a conspiracy involving vitamin C and biotin. In October 1999, the Federal Court imposed prohibition orders and fines of $2.5 million against Hoechst AG of Germany and $780,000 against Eastman Chemical Company of the United States after these firms pleaded guilty to participation in a conspiracy to fix the prices of sorbates, chemical preservatives used in processed foods. On September 19, 2000 further guilty pleas and fines were entered against Daicel Chemical Industries Ltd. ($2.46 million) and the company's former Director of Organic Chemicals ($250,000).

Also in the international arena, on July 18, 2000, SGL Carbon Aktiengesellschaft of Germany pleaded guilty under section 46 of the Act to implementing pricing directives through its Canadian subsidiary, S.G.L. Canada, as part of an international conspiracy to fix prices and allocate markets for graphite electrodes. The company was fined $12.5 million, the largest ever imposed under section 46. The court took into consideration the accused's agreement to cooperate with the Bureau's ongoing investigation, their limited ability to pay an amount already paid in restitution to affected Canadian companies. This follows the earlier conviction of UCAR Inc. Our investigation is ongoing as we will not tolerate foreign-driven conspiracies which harm Canadian companies.

On the domestic competition front, there were also a number of prosecutions for illegal bid-rigging activities in several different markets. In March 2000, our investigation into bid-rigging by Toronto-area electrical contractors came to an end when the Superior Court fined King Pape Holdings $300,000, Standard Electric $65,000 and VanJohn Ltd. $12,500 for their part in a large illegal bid-rigging scheme between 1988 and 1993. Six other electrical contractors had been previously fined a total of $2.67 million. In April 2000, Shakemaster Manufacturing Inc. pleaded guilty to bid-rigging for the purchase of commercial timber permits in Alberta and was fined $15,000. The Court also imposed a prohibition order. Finally, there are the recently announced guilty pleas and fines imposed against five Montreal area snow removal companies and a consulting firm relating to a market sharing conspiracy. We hope that the convictions and penalties imposed on these companies and individuals convicted will provide an effective deterrent to those that would attempt to subvert the competitive bidding and public tendering processes.

In matters involving the service sector of the economy, in April 2000, the Notaries Association of Rivière-du-Loup pleaded guilty to fixing the prices of real estate services and were ordered to pay a fine of $25,000. A prohibition order included the requirement for notaries to attend training sessions on the application of the Competition Act. In May 2000, we closed our inquiry into the issuance and administration of taxi owner licenses in Toronto when it was determined that the city's authorization to control the issuance of licenses meant that the regulated conduct defence applied. We also found that allegations of conspiracy could not be substantiated.

In January 2000, after meeting with travel agents, their associations, travel wholesalers and consolidators and participating in several industry forums, we completed our investigation into allegations that air carriers conspired to fix commission rates paid to travel agents for international flights from Canada. We found that these rates were determined by competitive market pressures in an evolving marketplace. During the course of our investigation, the IATA amended a resolution dealing with commission rates to specify that it does not apply in Canada.

Also in February 2000, in response to reports that national brand clothing suppliers were pressuring Hudson's Bay Company to stop its discounting policy, the Bureau issued a warning to major suppliers of brand-name clothing to observe the price maintenance provisions of the Competition Act. The price maintenance provisions of the law are designed to encourage price competition at the retail level and ensure that businesses are free to determine their pricing policies without interference from suppliers.

Mergers Branch

Once again, we undertook several high-profile and important merger examinations, the most obvious of which is the acquisition by Air Canada of Canadian Airlines.

You will recall that when I spoke last year, the government had invoked section 47 of the Canada Transportation Act, effectively suspending the operation of the Competition Act in the domestic airline industry for a period of 90 days.

On October 22, 1999, I provided a letter to Minister Collenette setting out the Bureau's views on the competitive aspects of a re-structuring of the domestic airlines industry. Assuming the emergence of a dominant carrier, the letter provided recommendations on possible terms of the restructuring, changes in government policy, and possible regulatory and legislative changes that would assist in maintaining a competitive domestic market.

In November 1999, following the expiry of the 90 day period, a full review under the merger provisions of the Competition Act of the proposed acquisition by Air Canada of Canadian was commenced. The Bureau's review consisted of two stages. First, it was confirmed that Canadian was facing imminent financial failure and would likely run out of cash by year end. Second, in light of such failure, the issue became whether there existed any competitively preferable alternative to the merger, given that Air Canada was prepared to offer certain commitments (« AUndertakings ») attached to the merger.

Ultimately, on December 21, 1999 the Bureau decided that the merger, with the Undertakings, was competitively preferable to forcing Canadian into liquidation through bankruptcy proceedings. In the Undertakings, Air Canada agreed to:

surrender slots at Pearson Airport,
surrender gates, loading bridges and counters at certain airports across Canada,
delay commencing a discount carrier in Eastern Canada to allow other Canadian air carriers the opportunity to establish themselves,
allow other Canadian air carriers to participate in its Aeroplan program,
base its domestic travel agent commission overrides only on volume and not on market share,
enter into interline and joint fare agreements with other Canadian air carriers
offer Canadian Regional Airlines Limited for sale.

Following the completion of the merger, to address the concerns stemming from Air Canada's dominant position in the domestic airline industry, amendments to the Competition Act and attendant regulations have been passed. These amend the abuse of dominance provisions to provide more effective tools to deal with abusive or predatory behaviour by a dominant air carrier, including provision for interim orders by the Commissioner.

In other merger matters, in December 1999, after an extensive examination, the Bureau decided not to challenge the acquisition of The Oshawa Group Limited by Sobeys Inc. This examination included an analysis of both the affected retail markets involved in the merger and the food service distribution market. In the latter market the examination focussed on the Ontario, Maritime and Newfoundland geographic markets. The Bureau concluded that the merger would result in a substantial lessening of competition in the Maritimes. This concern was effectively remedied by the sale of certain assets of the Maritimes foods service distribution businesses. This action prevented the creation of a monopoly in the affected market.

The Bureau's examination also focussed on a number of local retail markets. For a large part of the merger no issues were raised because the acquisition represented entry into new markets for Sobeys. In a few local markets in Ontario and Quebec, the Bureau concluded that the merger would result in a substantial lessening of competition. Again, these concerns were resolved by undertakings to divest Sobeys' interest in particular assets in those markets. Consumers should benefit from increased head-to-head competition resulting from the major expansion of Sobeys into markets where it previously had little to no presence.

In January 2000, the Bureau completed its competition analysis of the merger between Toronto-Dominion Bank and Canada Trust. Our conclusions were provided to the parties with a copy to the Minister of Finance. On the basis of available evidence, we concluded that the transaction would substantially lessen or prevent competition by leading to higher prices and lower levels of service and choice for branch banking for consumers in three local markets: Kitchener-Waterloo-Cambridge-Elmira, Port Hope and Brantford-Paris. The Bureau also concluded that the merger would substantially lessen or prevent competition in the general-purpose credit card networks market in Canada. In response to the Bureau's concerns, Toronto-Dominion and Canada Trust provided undertakings to sell branches in the three identified markets. They also undertook to either sell the Canada Trust MasterCard credit card portfolio, with the exception of Powerline accounts, or convert Toronto-Dominion's Visa credit card portfolio to MasterCard. It is the Bureau's view that these proposed remedies, once fully implemented, will address the anti-competitive impact of the proposed merger. On the basis of these undertakings, we advised the Minister of Finance that the merger should be approved from a competition perspective. These are the first divestitures of assets required to remedy competition concerns in a bank merger.

The Bureau also conducted a thorough investigation of Lafarge's proposed acquisition of Blue Circle Industries, including working closely with the FTC. In April the Bureau concluded that the proposed merger would result in a substantial lessening or prevention of competition for cement and related products in Ontario. To address this concern, Lafarge agreed to sell Blue Circle's cement business and the majority of its related construction materials business. The divestiture was to include certain distribution assets in the United States. Ultimately Lafarge's bid for all the outstanding shares of Blue Circle was not successful. However, during the course of the bid Lafarge did acquire a significant interest in Blue Circle. To address the remaining competition concerns, Lafarge agreed to reduce its interest in Blue Circle to less than 10% and not participate on the board of directors. This case is a good example of the Bureau's increasing cooperation with other antitrust authorities.

Finally, in matters resolved without using the Tribunal process, as announced on July 26th, the Coca-Cola Company and Cadbury Schweppes agreed to terminate their agreement whereby Coca-Cola would acquire Cadbury's carbonated soft drink business in Canada. While this was a decision that the parties reached independently of the Bureau, they cited competition concerns by the Bureau as the reason for their decision. One of our concerns was the fact that the transaction would lead to increased concentration in an already very concentrated industry, which likely would have had a significant impact on competition in certain distribution channels in the industry, in particular as the fountain segment. Another concern was that as a result of the transaction, Coke would inherit Cadbury's current supply agreements with Pepsi and become one of Pepsi's principal suppliers for a considerable length of time into the future. This case involved extremely complicated questions of market definition, the analysis of which unfortunately caused us to miss our service standard in completing our examination. There were also prolonged negotiations with the parties in an attempt to resolve the competition issues. Nevertheless, the length of time taken in this examination was unacceptable. We will make every effort to ensure that this experience will not be repeated.

There were also a number of significant merger matters before the Competition Tribunal. The most significant of these was, of course, the Superior/ICG matter. The Tribunal issued its decision on August 30, 2000, finding that the merger would substantially lessen competition in some markets and prevent competition in others. Notwithstanding this conclusion, the Tribunal allowed the merger to proceed on grounds of the efficiency defence afforded by section 96 of the Act. We have appealed this decision and I will discuss that in my remarks on the year ahead.

In April 2000, the Bureau filed an application with the Tribunal challenging the acquisition by Canadian Waste Services Inc. of the Ridge landfill in southern Ontario. We are challenging this acquisition because, after conducting a thorough investigation, we have concluded that it will result in a substantial lessening or prevention of competition in disposal markets and higher prices for customers in southern Ontario. Other competition issues raised by the transaction had been resolved. Thus, we were able to focus the Tribunal hearing on a specific aspect of the transaction, albeit on an adversarial basis.

In February 2000, in response to the announced purchase of Coastal Canada Petroleum Inc. by Ultramar Ltd., we filed an application for a Consent Order with the Competition Tribunal. Our examination of the proposed acquisition concluded that removal of Coastal as the largest supplier of petroleum products to independent marketers in the Ottawa market would likely substantially lessen or prevent competition. To address these concerns, Ultramar agreed to a draft consent order containing several measures to ensure continued access to a competitive source of supply to the independent marketers. In addition, Ultramar agreed to refurbish and reactivate its Ottawa terminal and offer for sale the Coastal terminal in Ottawa at fair market value if it failed to abide by the terms of the Consent Order. On April 26, 2000, the Tribunal issued its decision refusing to grant the order as it was not convinced that the terms were effective or sufficiently clear to be enforceable. Following the Tribunal decision, Ultramar and Coastal decided to abandon the proposed transaction.

As a result of the Tribunal's decision, we are considering recommending the adoption of a process of registration of consent orders similar to that provided for by section 74.12 in Part VII.1 of the Act, the civil track for deceptive marketing practices.

Economics and International Affairs Branch

In the past year the Bureau continued its active involvement in a number of international fora. In an increasingly globalized marketplace, I see the development and promotion of coordinated competition laws and policies as an important aspect of the Bureau's mandate.

The Bureau's representatives continue to actively participate in the various initiatives of the Competition Law and Policy Committee and working parties of the Organization for Economic Cooperation and Development. This has included a leading role developing the Report on Positive Comity by Working Party 3 on International Cooperation. The report sets out principles for a country's full and sympathetic consideration of another country's request to initiate or expand a law enforcement action in order to remedy conduct that is affecting that country's interests. The Working Party also spearheaded the report to the OECD Council entitled New Initiatives, Old Problems: A Report on Implementing the Hard Core Cartel Recommendation and Improving Co-operation. The report identifies ways in which competition authorities can work together to better address these unequivocally harmful activities through both enforcement and legislative improvements.

On the trade front, the Bureau the Bureau played a leading role in helping to evolve the Canadian position for the Seattle meeting of the World Trade Organization. We conducted roundtable discussions with competition policy and trade experts in Toronto, Ottawa and Montreal on the implications for Canada of possible negotiations on competition policy at the World Trade Organization. These discussions focussed on the Bureau's background paper Options for the Internationalization of Competition Policy, which outlined a suggested approach to the internationalization of competition policy.

The Bureau also led the Canadian delegation in meetings of the Free Trade Area of the Americas Negotiating Group on Competition Policy. The meetings led to the development of an annotated outline of the potential issues for negotiation to conclude a chapter on competition in the agreement establishing the FTAA. Presently work is ongoing on a draft chapter to be submitted to the Trade Negotiations Committee.

The Branch's economic analysis group was instrumental in clarifying the Bureau's position on the efficiency issues raised in the Superior/ICG matter.

Another important area of international activity is the provision of technical assistance to countries without competition laws, those drafting or implementing them, or those seeking to enhance their institutional capacity. When resources are available, the Bureau actively provides technical assistance both independently and in partnership with the private sector, academic community and international non-governmental agencies. Bureau representatives have also participated in seminars, workshops and conferences to provide information on the Canadian law and policy. Countries that have received such assistance in the past year include Mexico, Thailand, Korea, Vietnam, Taiwan, China, Latvia, Lithuania, Morocco and Jamaica.

Amendments

There has been an ongoing discussion on the adequacy of a number of the provisions of the Competition Act to deal with certain marketplace behaviours. This has focussed particularly on sections dealing with predatory pricing, price discrimination and collusive behaviour.

We raised a number of concerns about Bill C-235, which was introduced last year, as we felt it was not effective in addressing the perceived issues and, by protecting a specific class of competition, would have been fundamentally at odds with the purpose underlying of the Competition Act. Given the review of the Competition Act which arose from the Industry Committee's study of Bill C-235, the Bureau commissioned the VanDuzer report to address concerns raised by that review. The report is a comprehensive study of the history and adequacy of the pricing practices provisions of the Act. Given the importance of these issues, we released the report to the public.

In the mean time, there have been a number of private members' bills proposing amendments. These led to the release, in April of this year , of a discussion paper entitled Amending the Competition Act: A Discussion Paper on Meeting the Challenges of the Global Economy, which addresses the issues raised in the private members' bills and seeking public comment. We have engaged the Public Policy Forum to conduct consultations/ roundtables --which I will discuss in more detail in the Year Ahead portion of this speech.

Issues for the Year Ahead

As can be seen from the foregoing, the past year has seen significant development on a number of case matters and on the legislative and policy fronts. These developments set the scene for a number of initiatives that will occupy a considerable part of our energies in the coming year.

Compliance and Operations Branch

The Bureau remains committed to providing improved services through on-line access. This includes the ability to receive and process pre-merger notification filings and requests for advisory opinions and advance ruling certificates electronically. We expect that, in part because of the Tribunal's pilot project to receive exclusively electronic filings, more parties will respond to s. 11 requests electronically. The waste matter is being used by the Tribunal as a pilot project for electronic filing the use of technology in litigation.

We are aware of several concerns that arise with this initiative. Encryption and security must be integral to conducting business electronically. As well, to handle the large volumes of information and data we must provide adequate and proper portals, bandwidth, and transmission line. However, the Bureau is committed to participating fully in the government wide initiative to ensure the « Aconnectedness » of Canadian businesses and consumers.

We will also be establishing a centralized evidence handling unit in the Bureau to be housed in the Compliance and Coordination Directorate. The objective is that all evidence received by the Bureau, regardless of the format, is handled in an efficient and consistent manner. The unit will complement our existing electronic evidence gathering and processing capability.

The Compliance and Coordination Directorate of the Bureau has spearheaded an initiative to benchmark our merger review process against those of other jurisdictions. The first phase began with a comprehensive exercise aimed at determining best practices and learning from the experiences of other competition authorities. This was followed by extensive, in-depth consultations with private counsel. We thank many of you for your participation in this important exercise. From these discussions, we confirmed that timeliness and efficiency are paramount and that transactions which raise competition concerns should be quickly distinguished from those that do not and efforts made to ensure a timely decision as to how to proceed. Consistency, openness, transparency and accessibility were identified as other important factors. We will also examine the existing service standards policy in light of concerns that have been expressed

We are considering the draft report and hope to finalize it in the near future. We will be implementing recommendations to provide improvements to decision-making, planning and management as well as operational changes to ensure that Canada's merger review process is modern, flexible, effective, efficient and relevant in the global economy.

Fair Business Practices Branch

As an example of effective use of the many aspects of the Conformity Continuum, of special interest is the Fair Business Practices Branch's project in the jewellery retailing business which will carry over into this year. This initiative underlines the importance of accurate market information to both consumers and industry members, who may be at a disadvantage if competitors are able to use deceptive practices in an unimpeded fashion.

In August 2000, we launched a consultation process relating to the issue of how the Bureau enforces the Act when reviewing claims that diamonds are « ACanadian » or « Aof Canada ». A consultation was issued that outlines our current approach and asked for comments by September 23, 2000.

As part of the continuing harmonization process for standards and labelling under NAFTA, this year we will be commencing a review of some of the regulations under the standards based statutes, such as those under the Precious Metal Markings Act, to determine if any changes are needed. It is important that these regulations be up-to-date and reflect the current market place.

Fair Business Practices Branch will continue its active development of policies and techniques to deal with misleading marketing practices using the medium of the Internet. There will be more sweeps and continued cooperation with international agencies. This latter point is particularly important given the ease with which the new technologies allow parties to operate across borders.

Finally, we will continue our effort in respect of matters such as deceptive mail solicitations and ordinary selling price claims.

Civil Matters Branch

In May 2000, we released for public comment and consultation our draft Abuse of Dominance Guidelines. Supported by jurisprudence and economic theory, these guidelines outline the Bureau's intended approach to the enforcement of the abuse of dominance provisions of the Act. The period for public comment on the draft guidelines ended on August 31 and we are in the process of reviewing the comments and making appropriate revisions to the document. The final version of the guidelines will be published later this fall.

The Branch will also be heavily engaged in monitoring developments in the domestic airline industry. This fall we will be issuing for public consultation draft enforcement guidelines, which will set out the Bureau's approach to enforcing the abuse of dominance provisions of sections 78 and 79 of the Act in the Canadian airline industry. Given Air Canada's dominant position, it is important that new entry, service expansion, and competitive pricing by smaller carriers is not stifled by predatory or abusive conduct. We will not hesitate to use the available powers in the Act, including the new provisions in section 78 and powers for temporary orders, to protect a fragile competitive situation in this important industry.

On the regulatory front, it is our intention to intervene in two CRTC proceedings this fall. We have already filed our intervention in the matter dealing with extension of the sunset rule for access to essential facilities. We will also intervene in another hearing dealing with deregulating services offered by the major incumbent telephone companies outside their traditional operating territories. We also plan to remain active as an intervenor before the CITT. We are participating in the current hearing dealing with dumping duties on sugar imports.

Criminal Matters Branch

In the Criminal Matters Branch our commitment to combatting anticompetitive activities involving international and domestic cartels and bid rigging will not waver. To this end we are releasing today the final version of the Immunity Information Bulletin. The Bulletin explains the distinct roles of the Commissioner and the Attorney General and the conditions under which the Commissioner will consider recommending immunity. It provides a more clear and transparent explanation of the process through which parties must agree to cooperate to be considered for immunity. This policy is consistent with those of the American and European competition authorities. I believe its application in the coming year will be a useful weapon in the continued fight these hard core violations of the law.

We also will be issuing revised guidelines on our approach to the enforcement of section 50(1)(c) of the act dealing with unreasonably low pricing. These will replace the existing Predatory Pricing Enforcement Guidelines.

Mergers Branch

We intend to continue ensuring that merger review is conducted in as efficient a manner as possible.

As I noted earlier, the Competition Tribunal issued its decision in the Superior/ICG merger last month. This is probably the most important decision made by the Tribunal to date in a merger matter, focussing as it does on the interpretation of the efficiencies exception of section 96 of the Act. I am pleased that the Tribunal readily found that the transaction will likely substantially lessen and prevent competition, accepting our arguments on important issues such as product and geographic market definition, entry barriers and effective remaining competition. As most of you know the Tribunal panel split 2 to 1 on whether the efficiencies resulting from the merger would be greater than and offset this lessening of competition. The majority, adopting the total surplus interpretation to the trade-off aspect of section 96, found that the merger should be allowed to proceed notwithstanding the clear substantial lessening or prevention of competition seen to result from the merger. The dissenting member strongly urged that anti-competitive effects beyond the simple « Adead-weight » loss are important in making the trade off decision. She also questioned the methodologies used in calculating the likely efficiencies and the lack of evidence on the issue under section 96 of whether the efficiencies could be attained in a manner other than the merger, stating strongly that this issue needs to be examined and the onus for doing so rests on the parties to the merger.

Given the importance of the issue of the interpretation of section 96, we have filed an appeal against the decision in Superior/ICG. There are four grounds for the appeal. In our view the Tribunal erred by:

failing to give proper consideration to the purpose clause of the Act when interpreting s. 96 and concluding that efficiencies are paramount;
concluding the s. 96 can apply in the circumstances of a merger to monopoly;
concluding that the Commissioner bears the burden of demonstrating the effects of any prevention or lessening of competition for the purposes of a defence under s. 96;
adopting an unnecessarily narrow and incorrect definition of effects by concluding that the total surplus standard is the complete approach for analysing efficiencies and that redistributive effects cannot be considered.

In my view, the decision, if upheld, will mean that, in cases where the parties can establish even modest efficiency gains, it will be nearly impossible to prevent mergers in markets characterized by high concentration, entry barriers, ineffective remaining competition, and the absence of effective foreign competition. These are exactly the type of proposed mergers the law was enacted to deal with in the public interest. Beyond noting the obvious importance of this matter to the Bureau, it is not appropriate to comment further at this time. Regardless of the outcome of the appeal, it is clear that the Merger Enforcement Guidelines will have to be clarified on the issue of efficiencies.

Three other matters we will be dealing with in the coming year are of particular interest. First, we will be holding a second stakeholder forum early in 2001 to consider the Bureau's performance in merger review and hear your comments and suggestions for improvement. Second, after carefully reviewing the issue of raising the threshold levels for notifiable transactions, we have decided to recommend an increase in the size of transaction threshold before the end of the fiscal year. Third, on a pilot basis, we intend to expand the pre-notification unit of the branch. A senior officer will be put in charge with responsibility for performing triage on incoming files, setting complexity levels and ensuring a greater degree of consistency in how this part of the branch's work is executed.

Economics and International Affairs Branch

As mentioned above, I am convinced of the importance and necessity of international cooperation in the effective enforcement and administration of competition laws. To this end we are pursuing positive comity agreements with other nations. In particular, we will sign an agreement with the United States this year.

We will be working to establish cooperation agreements with foreign agencies, e.g. Australia, New Zealand, Chile and Mexico, and are very active on behalf of Canada in the ongoing negotiations for a competition framework in the Free Trade Agreement of the Americas.

We are also releasing today the final version of the Intellectual Property Enforcement Guidelines. This document sets out the Bureau's view toward the interface between intellectual property law and competition law. It explains our analytical framework and discusses the circumstances in which the Bureau would restrain anti-competitive conduct associated with the exercise of IP rights in order to maintain competitive markets.

Amendments

In conjunction with the discussion paper on amendments to the Act, and at the request of the Minister of Industry, the Public Policy Forum has been hired to conduct cross-country consultations with stakeholders. To date, seven public forums have been held and there will 3 technical forums conducted in the near future. The Forum's report and our own internal analysis of these issues will form the basis for recommendations to the government on the need for and nature of future amendments to the Act. The participation of members of the CBA Competition Law Section is important to the development of a balanced set of recommendations that can have the support of a broad range of stakeholders.

In my view, the proposed revisions in these bills have considerable merit and deserve serious discussion. Any recommendations we make would focus on the following issues:

International cooperation: The ability to address situations of abuse of dominance is vital in today's global economy, but we do not have an effective regime for the exchange of information with other jurisdictions for civil matters. Any regime would include provisions to balance the need to maintaining confidentiality of information while allowing a meaningful reciprocal exchange between antitrust agencies.
Improvements in the Competition Tribunal process: In my view, the current Tribunal process, especially in both contested and consent merger matters and abuse of dominance matters, is too cumbersome and expensive to deal with the business reality. We must develop processes that allow hearings to focus on significant issues and enable matters to be dealt with as expeditiously as possible, including in light of the Ultramar/Coastal decision, a process for the registration of consent orders.
Private Actions: Private actions (for sections 75 and 77) can be an effective complement to Bureau applications to the Tribunal, but caution is warranted to avoid strategic use of legal action. Summary dispositions would allow the Tribunal to bring a case without merit to a quick close. Cost awards would act as a lever to discipline delay tactics and strategic litigation.
Strategic Alliances: It is also important to ensure that the Act does not discourage strategic alliances and other business behaviours that do not negatively affect competition. Clearly anti-competitive criminal behaviour such as price-fixing and market sharing must be distinguished from other arrangements among competitors, where the agreements' effects might be better assessed under civil law. Our objective would be for a more focussed section 45 combined with a civil track, including a clearance process, for other collaborative activities between competitors.

I see amendments in these areas as vital and the Bureau will spare no effort to see them enacted provided there is sufficient consensus.

Concluding Remarks

An important part of the Bureau's work is to ensure that Canadian competition law and policy remain at the forefront of developments and continue to meet Canada's needs. To that end, we will be holding a conference in May 2001, in partnership with the University of Western Ontario, to address the issue: Competition Law and Policy for Canada in the 21st Century. Hopefully, together we can ensure that competition law continues as an effective and efficient instrument of public policy.

As you can see, the coming year does not lack for challenges for the Bureau. The past year has been exciting and productive. I am proud of the achievements we have made on both the enforcement and policy fronts, particularly our balance of educational and compliance-oriented activities, reinforced by effective enforcement action when appropriate. Any progress made by the Bureau is due to two major factors: the hard work and dedication of all staff of the Bureau, and the partnership between the Bureau and the CBA Competition Law Section. These are the cornerstones on which our success rests and we will continue to build on it.

Thank you for inviting me to address you and for holding the annual meeting in Ottawa so that many members of Bureau staff are able to attend.