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Annual Report of the Commissioner of Competition for the year ending March 31, 2003


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Promoting Competition

The Competition Bureau promotes competition in a variety of ways, including the following:

making regulatory interventions;
contributing to departmental and interdepartmental policy making;
providing comments to policy advisory bodies;
giving speeches and holding seminars;
conducting research and issuing publications; and
participating in international organizations, such as the Organisation for Economic Co-operation and Development and various trade bodies.

Interventions

As the statutory champion of competition, the Bureau has the right to intervene before federal bodies, and may do so with leave before provincial bodies. The Bureau's purpose in making these interventions is to be the objective voice of economic competition analysis.

Interventions on the deregulation of certain industries serve a dual purpose. First, they sustain and promote a competitive environment. Second, they ensure that when regulation is required it takes the form that least distorts competition and efficiency in the affected markets.

In 2002-2003, the Bureau made a number of interventions on issues ranging from rail, bus and marine transportation to telecommunications and broadcasting. The following pages summarize these interventions as well as their outcomes and potential benefits for Canadians.

**Competition Bureau Interventions, 2002-2003**
Industry Sector and Issue	Competition Bureau Intervention	Outcome and Potential Benefits for Canadians
Transportation: Rail, Bus and Water
Submission to the Canadian Transportation Agency	In April 2002, the Competition Bureau sent a letter of intervention to the Canadian Transportation Agency saying the following: that it supported in principle the application of Ferroequus Railway Company Limited for running rights over specified lines of the Canadian National Railway Company (CN) between Camrose, Alberta, and Prince Rupert, British Columbia; that captive shippers are major exporters of Canadian products and face strong international competition in their markets, so cost-effective transportation systems would be required to maintain current markets and expand into new ones; and that granting running rights would also be consistent with the recent recommendations of the Canada Transportation Act Review Panel.	The proposal by Ferroequus could have led to a viable alternative to CN, lower rates for transportation of grain to the Port of Prince Rupert, and more competitive CN rail rates than currently exist. On September 10, 2002, the Canadian Transportation Agency denied Ferroequus' application because there is "no convincing evidence" that there is any public need to improve existing railway rates or services by granting running rights. On October 8, 2002, Ferroequus filed a motion of appeal in the Federal Court, claiming that the ruling was incorrect and misrepresented the section of the Canada Transportation Act on running rights.
Submission to the Senate Standing Committee on Transport and Communications	On May 7, 2002, three members of the Competition Bureau appeared before the Committee and made a submission on the intercity busing industry, as follows: The submission reviewed the Bureau's long-standing interest in and position on intercity busing. It indicated that the industry had not prospered under regulation, that the regulatory diversity among provinces had increased the administrative burden on all carriers, leading to excess capacity and higher costs, and that the rationale for regulation (i.e. natural monopoly) did not exist. It recommended that the Committee deregulate extraprovincial and international bus services (i.e. scheduled and charter passenger and express parcel service) by reintroducing amendments proposed in Bill C-77 related to economic deregulation.	Deregulation could lead to numerous benefits: lower fares, increased service choice and perhaps a reversal or slowing of the decline in demand for scheduled services as a result of increased competition. The Committee released its report in December 2002. It recommended that the economic regulations for extraprovincial bus transportation be amended to require, at most, a reverse-onus test for entry into service, and that after five years a formal review be conducted to determine whether further deregulation might be appropriate. In addition, the Committee recommended that the federal government re-evaluate the need for consensus among all the provinces and players before initiating action on intercity bus policy. The matter has been referred back to the Minister of Transport for further action.
Submission to the Canada Marine Act Review Panel	In November 2002, the Competition Bureau made a submission to the Canada Marine Act Review Panel addressing three areas. 1. Canada Port Authorities (CPAs) The Bureau indicated that the existing not-for-profit and governance structure does not benefit the competitive position of Canadian ports compared to U.S. ports, since it does not encourage investment or offer CPAs the freedom to minimize costs. Therefore, the Bureau recommended the following: adopting a for-profit objective for CPAs; selecting directors for CPA boards either competitively or according to the interests they represent; removing regulatory constraints that reduce the freedom of CPAs to engage in non-port activities, restrict CPAs' ability to borrow money and prevent CPAs from merging (subject to the merger provisions of the Competition Act); limiting the Crown's financial liability to current levels; considering privatizing CPAs in the medium term to maximize profits; restraining the competitive advantages of CPA subsidiaries when competing for CPA business; and legislating access to CPAs and ensuring that no exemptions from the Competition Act are introduced for CPAs and marine terminal operators. 2. Pilotage and Ferry Services The Bureau was concerned about the absence of competition, cross-subsidization and an adequate mechanism in the Pilotage Act to protect users of pilotage services. It recommended the following: abolishing the statutory monopoly of the Pilotage Authorities in providing pilotage services; creating an accreditation body for licensing pilots; considering competitive forces when determining tariffs; applying the current limited liability requirements to all accredited pilots; and continuing the commercialization or privatization of ferries, and reducing subsidies. 3. Shipping in Domestic Waters To increase competition in this area the Bureau recommended the following: discussing with other countries the reciprocal removal of cabotage laws in domestic waters, where appropriate, so that U.S., Commonwealth and foreign ships would be allowed to trade in Canadian waters freely on a reciprocal basis.	Recommendations have been made to change the Canada Marine Act to create a more efficient and competitive transportation system. If implemented, these changes should reduce costs, stimulate demand and lead to an increase in trade. This would consolidate and build upon the progress achieved to date and help to further the restructuring process.¹
Telephone Companies
Canadian Radio-television and Telecommunications Commission (CRTC) Hearings on Agreements and Consumer Safeguards Pertaining to the 900 Service: Public Notice CRTC 2002-2	In May 2002, the Bureau made a submission to the CRTC in response to its request for public input on proposed changes to agreements between telephone companies and service providers that offer information and entertainment services through 900-service numbers (users are billed by the telephone company or the service provider). The Bureau commented on two issues: "scratch-and-win" scams and "modem hijacking" scams (switching customers' modem connection from their usual Internet service provider to a foreign and very expensive one). The Bureau recommended that agreements about scratch-and-win promotions should mention that these promotions fall under sections 52, 53 and 74.01 of the Competition Act. This would ensure that a single law enforcement agency would respond to these scams. The Bureau supported the proposed changes in the area of modem hijacking to extend consumer safeguards to people using the Internet to access 900 services. It also recommended that the notice about the switch and rate change be a very short, accurate and clear message, displayed to viewers before the switch occurs. In addition, Internet service providers would allow ample opportunity for users to refuse the new connection.	These recommendations will give more protection to consumers. Participants in scratch-and-win contests will have an independent method of verifying that the offers made in the representation are in fact being fulfilled.
AT&T Canada Inc. Petition About Telecom Decision CRTC 2002-34: Regulatory Framework for the Second Price Cap Period	In August, 2002, AT&T Canada submitted a petition to the Governor in Council to vary Telecom Decision CRTC 2002-34. This Decision provided for a second price cap period to protect the interests of consumers and competitors from potential anti-competitive behaviour by incumbent local telephone companies. The Bureau opposed the petition on the grounds that it would hinder the development of facilities-based competition, encourage uneconomic entry and negatively impair the development of efficient competitive wholesale and retail markets. However, the Bureau noted that the petition raised important competition policy issues that were ruled outside the scope of the CRTC's review of price caps. It further agreed with AT&T that primary reliance on facilities-based competition did not reflect the policy objective of the Telecommunications Act to foster increased reliance on market forces. The Bureau preferred a hybrid model, balancing facilities and resale competition to ensure most Canadians benefited from local competition. The Bureau, therefore, recommended that the Governor in Council direct the CRTC to come up with complementary policies to facilitate entry into local telecommunications markets in the transition to facilities-based competition.	On March 25, 2003, the Governor in Council rejected Telecom Decision CRTC 2002-34, concluding that the CRTC had shown a commitment in recent months to ensure "real and genuine" competition in the telecommunications industry. The Minister of Industry stated that the Government expected the CRTC to maintain its pro-competitive policies to ensure that competitors thrived and consumers benefited from a competitive local telecommunications environment.
Application to the CRTC by Call-Net Enterprises Inc.	On January 17, 2003, Call-Net applied to the CRTC for an order directing Bell Canada, Telus and the other incumbent local telephone companies to provide high-speed Internet service to residential customers choosing a competitor's local service. At the time of this application, the policy of the incumbents was to require their high-speed Internet customers to take their local service. Call-Net argued that this policy was a barrier to new entry into the local residential telephone market and denied consumers the benefit of competition. On February 26, 2003, the Bureau filed a submission with the CRTC supporting Call-Net's view that opening up local residential telephone markets to competition was an important priority for the Government. The Bureau argued that the incumbents had a virtual monopoly over local residential telephone service, and that their requirement for high-speed Internet customers to take their service raised barriers to entry into local competition.	A decision by the CRTC in favour of Call-Net's application would make it easier for new entrants to offer local telephone service and provide residential consumers with competitive choices. As of March 31, 2003, the CRTC's decision was pending.
Application by Call-Net Enterprises Inc. in Response to Aspects of Telecom Decision CRTC 2002-34: Regulatory Framework for the Second Price Cap Period	On June 12 and 19, 2002, Call-Net asked the CRTC to clarify and make certain procedural changes in connection with Competitor Digital Network Access (DNA) Service. The CRTC had identified DNA Service as an essential service in its second price cap decision (Telecom Decision CRTC 2002-34). Call-Net's application included broadening the definition of DNA Service. New entrants in local telecommunications markets are required to offer services to customers located outside the downtown core of urban areas. In its application, Call-Net stated that the time frame set out in the Decision for the development and implementation of a Competitor DNA Service was likely to extend well into 2003. Call-Net proposed that the regulatory process be sped up to ensure competitors and consumers benefit as quickly as possible.	On June 27, 2002, the Bureau made a submission to the CRTC supporting Call-Net's request, noting it would allow earlier entry into local telecommunication markets, thereby providing consumers with competitive prices, services and quality. On August 9, 2002, in Telecom Public Notice CRTC 2002-4, the CRTC ruled that Call-Net's application merited further review and initiated a new procedure to address the issues Call-Net had raised.
Expansion of Local Calling Areas: Telecom Decision CRTC 2002-56	On April 27, 2001, the CRTC issued Telecom Public Notice CRTC 2001-47 and initiated a proceeding to establish a set of general principles and criteria for assessing applications for expanding local telephone calling areas (LCAs). On November 15, 2001, the Bureau submitted comments responding to the Public Notice. The Bureau identified a number of problems with expanding local calling areas through regulation, including the cost of ongoing regulation, the adverse impact on competition and the negative effect on consumers. In light of these concerns, the Bureau recommended the following: that local calling areas be determined by the interplay of competitive market forces; and that each service provider have the flexibility to offer a variety of price-geographic coverage plans to consumers, who would benefit from the freedom of choosing the most appropriate plan for themselves.	In its September 12, 2002, decision, the CRTC opted to maintain a regulatory approach. In particular, it maintained the existing expanded areas of service criteria where it continued to be appropriate and established a new framework to address changing circumstances, the competitive marketplace and the increased demand to extend toll-free calling areas over multiple exchanges (i.e. as a result of municipal amalgamation). The CTRC found that local telephone companies and competitors should be compensated for foregone toll revenues for expanded LCAs and that customers would be charged a surcharge to cover these costs. The CRTC also proposed that compensation for long-distance carriers be equal to three years of foregone revenues, and initiated a follow-up proceeding through which interested parties will have the opportunity to comment on this preliminary approach.
Broadcasting
Submission to the House of Commons Standing Committee on Canadian Heritage on the Study of the State of the Canadian Broadcasting System	On April 3, 2002, the Bureau made a submission to the Committee on its study of the state of the Canadian Broadcasting System, and on May 7, 2002, the Commissioner appeared before the Committee. The Bureau made three recommendations: First, ensure as part of Canada's broadcasting and regulatory policy that regulations: are efficient, effective and directed solely to realizing the Broadcasting Act's core cultural objectives; include increased reliance on market forces as an objective; and include enhanced efficiency and competitiveness of Canadian broadcasting services as an objective. Second, clarify the mandate of the CRTC as follows: specify that the CRTC has a responsibility to preserve a diversity of voices within the broadcasting system; and focus the CRTC's review of broadcasting transactions solely on the impact that the mergers would have on core cultural values and diversity of voices. Finally, ensure that foreign investment levels for broadcasting distribution undertakings parallel those for telecommunications carriers.	The Bureau's submission proposed various measures to reduce the scope of regulation and to increase reliance on market forces, while at the same time facilitating the realization of the Broadcasting Act's core cultural objectives. The benefits flowing from the above measures would be reduced costs both to the industry and the CRTC. Further, the reliance on market forces would lead to more competitive prices and increased product variety.
Remarks to the House of Commons Standing Committee on Canadian Heritage on the Study of the State of the Canadian Broadcasting System	On December 12, 2002, the Commissioner of Competition appeared before the Committee and presented his views on the future of broadcasting. Following a brief overview of the recommendation made during his appearance before the Committee on May 7, 2002, he commented on the issues of cross-media ownership and foreign ownership rules. First, he noted that while the Bureau had not created specific rules concerning cross-media ownership, it would analyze the impact of each proposed transaction on competition in the affected markets. The Commissioner observed that reviewing the effects on cultural objectives, such as diversity of voices, was not part of the Bureau's mandate and that Canadian content levels and other regulatory concerns could be dealt with under the existing or new CRTC rules. Second, with regard to foreign ownership issues, the Commissioner noted that access to capital is essential for a dynamic and efficient industry. He added that squeezing out foreign capital is inconsistent with an effective market, and that access to it would ultimately ensure a stronger Canadian industry. Finally, he said that importing foreign capital to Canada not only involves bringing in cash, but also financial ideas and influence, sources of technology, and management efficiency, which results in more competition and greater choice for consumers.	The expected benefits of removing obstacles preventing access to foreign capital would not only provide the industry with the large investment it needs, but would also ensure greater competition, new sources of technology and more choice for consumers. As of March 31, 2003, the Committee had not released its report.
Testimony to the House of Commons Standing Committee on Industry, Science and Technology	On February 24, 2003, the Commissioner appeared before the House of Commons Standing Committee on Industry, Science and Technology to discuss foreign investment restrictions applicable to telecommunications common carriers. The Commissioner described his responsibilities and his role as an advocate of competition, and reiterated and amplified the views he presented to the House of Commons Standing Committee on Canadian Heritage. First, he noted that access to capital is essential for a dynamic and efficient industry and that squeezing out foreign capital is inconsistent with an effective market. Foreign capital could help long-distance telecommunications and cable companies, together with those planning entry into local telephone markets. Second, he observed that foreign capital involves not only importing cash but also financial ideas and influence, sources of technology and management efficiency. Third, he pointed out that, since there is no difference between carrying telephone signals and broadcasting signals, both should enjoy the same access to capital and be bound by the same ownership rules. The Bureau does not believe that foreign ownership restrictions are necessary to achieve a healthy and vigorous telecommunications industry. Fourth, he noted that if the regulator's powers are insufficient, although he does not agree that this is the case, the Telecommunications Act should be amended. Fifth, with regard to broadcasting and related content issues, he observed that competition should not be ignored. Canada's broadcasting and regulatory policy should reflect greater reliance on market forces, enhanced efficiency and competition.	The expected benefits would not only provide the industry with the large investment it needs, but would also ensure greater competition, new sources of technology and more choice for consumers. It would also have a positive impact on the cable television industry.²
Nuclear Power
Ontario Energy Board Hearing on Ontario Power Generations Inc.'s Leasing Arrangement with Bruce Power LP	The Ontario Energy Board invited the Bureau to participate in the hearing on whether Ontario Power Generation's lease with Bruce Power constituted a decontrol measure under the Market Power Mitigation Framework in Ontario Power Generation's transitional generation licence. In particular, the Board wanted the Bureau's opinion on certain competition law and policy issues, namely the following: the reasoning behind the granting of an advance ruling certificate for the Bruce transaction; the concept of interdependent behaviour under Canadian competition law and policy; and arrangements that might facilitate interdependent behaviour under the merger provisions, and others, of the Competition Act. The Bureau commented on these issues as follows. It noted that a favourable advance ruling certificate should not be viewed as relevant to the matters before the Board. It outlined the factors it might consider when examining interdependence and coordination concerns that could raise an issue under the Competition Act.	The Bureau's participation in the hearing benefits all Ontario electricity consumers by providing an analytical framework for the effective decontrol of assets by Ontario Power Generation, leading in turn to a more competitive and low-cost electricity supply. The Board's decision was pending as of March 31, 2003.
Electricity
Alberta Electricity Industry Structure Review	The Alberta Department of Energy initiated this review in 2001 to evaluate how to structure the functions carried out by institutions with a primary role in the operation of the electricity industry. In 2002-2003, the Bureau continued its involvement through comments on a discussion paper on the recommended structure of the Alberta electricity industry and discussions with provincial officials. On March 27, 2003, the Alberta legislature entrenched the Bureau's key recommendations into legislation, including the following: setting up an independent system operator to control the operation of the Alberta Integrated Electricity System, subject to oversight by the Alberta Energy and Utilities Board; setting up a separate market surveillance authority with a budget authorized by the Alberta Energy and Utilities Board, and broad authority to examine electricity-related matters; allowing adjudication by an independent body of matters investigated by the market surveillance authority; and separating the unit responsible for electricity generation from the independent system operator.	The implementation of these recommendations will be instrumental to ensuring the benefits of competition in the Alberta markets for households and businesses in the province through the following: establishing effective market surveillance to help guard against competition abuses; and promoting an efficient supply of electricity based on market signals.
Ontario Electricity Market Joint Statement on Competition Oversight	In March 2002, the Competition Bureau signed an agreement with the Ontario Energy Board and the Independent Electricity Market Operator to work together to ensure effective competition oversight in Ontario's electricity industry. The agreement outlined each agency's role and responsibilities in the new markets and provided a framework for cooperation and coordination when overlap exists.	As noted in the agreement, the Bureau maintained regular contact with the Ontario Energy Board and the Independent Electricity Market Operator on competition-related matters. This played an important role in coordinating the agencies' competition-related actions over the year, such as their respective reviews of the Bruce Power lease referred to above. The result has been more effective and efficient management of competition issues in the Ontario electricity market among agencies, to the benefit of all electricity consumers in the province.
Trade
Canadian International Trade Tribunal Review of the Expiry of Duties on Jarred Baby Food	On February 12, 2003, the Bureau filed a submission with the Canadian International Trade Tribunal (CITT) about its review of its April 1998 findings of dumping of non-organic jarred baby food originating in or exported from the United States. At that time, the CITT concluded that dumping had led to material injury to Heinz Canada (the sole domestic producer), so it placed a duty on U.S. imports, effectively prohibiting foreign competition and protecting Heinz Canada from competition for five years. The CITT subsequently reviewed its findings to determine whether dumping was likely to continue and, if so, whether Heinz Canada would continue to suffer material injury. The review would help determine whether anti-dumping duties would be maintained for another five years or would expire in April 2003. The Bureau, the sole intervener in this proceeding, submitted that the evidence did not indicate a direct link between dumping and material injury. Rather, any economic harm to Heinz would result from the nature of competition in an increasingly segmented baby food market, self-imposed injury resulting from corporate agreements preventing Heinz Canada from competing in the U.S., and the lack of product innovation on Heinz's part. The Bureau also noted that Canadian regulations about jar sizes and food ingredients would prevent American firms from effectively competing in Canada for at least two years. Any injury that Heinz was likely to suffer would be due, for the most part, to the effect of the entry of renewed competition into the market, not to dumping.	On April 28, 2003, the CITT immediately rescinded its April 1998 findings. As a result, American companies are now free to enter the Canadian market and supply Canadian consumers and retailers, provided they meet Canadian jar and ingredient standards. The Bureau expects that American entry over the next two years will benefit consumers by bringing product choice, price competition, improved quality and innovation to the Canadian market.
CITT Safeguard Inquiry Into Imported Steel Goods	On March 25, 2002, the CITT launched a safeguard inquiry into certain imported steel goods. The purpose of the inquiry was to determine whether the increased imports of any of nine steel products since 1996 were the principal cause of serious injury, or a threat of serious injury, to Canadian steel producers. The CITT asked the Bureau to comment on the following: the likely effects of possible trade remedies on competition in the steel industry and downstream users of steel products in Canada; and how different types of trade remedies might be applied to the steel industry to ensure domestic producers are not injured, while minimizing disruption to other sectors of the Canadian economy. The Bureau made representations in support of free trade in steel products, while noting that the proposed remedies were likely to be very costly to the Canadian economy, particularly the downstream purchasers of steel. The Bureau recommended that, when action was warranted, trade remedies provided for domestic producers be as limited as possible, while still meeting the objective of reducing the injury.	On July 4, 2002, the CITT said that increased imports were a principal cause of serious injury to domestic producers of five of the nine subject goods. On August 19, 2002, the CITT recommended a tariff as well as a tariff rate quota for four of the nine subject goods.

Voluntary Codes

Scanner Price Accuracy

On June 11, 2002, the Bureau endorsed the Scanner Price Accuracy Voluntary Code, which provides participating retailers of four major associations with a mechanism to provide redress to consumers when there is a scanner error.

When the scanned price of an item without a price tag is higher than the shelf price, or any other displayed price, the customer is entitled to receive the item free when it is worth less than $10, or receive a $10 reduction for more expensive items.

The Bureau regards scanner price accuracy as an important element of maintaining consumer confidence.

Authenticating Canadian Diamond Claims

In 2002, as a result of the Bureau's information bulletin on the marketing of Canadian diamonds, an industry working group developed a voluntary code of conduct that sets a minimum standard for validating Canadian diamond claims, based on documentary evidence and a series of warranties. The non-profit volunteer group comprised representatives from the diamond mining sector, cutters and polishers, diamond traders, jewellery retailers, jewellery manufacturers and industry associations.

Prior to endorsing the voluntary code, the Competition Bureau sought feedback from the jewellery industry, provincial stakeholders and consumer groups. Results of the consultation revealed that 82 percent of respondents from the industry indicated they would subscribe to the code. In light of this feedback, the Bureau and the Canadian Diamond Code Committee finalized the Voluntary Code of Conduct for Authenticating Canadian Diamond Claims and launched it on November 6, 2002.

Targeting Telemarketers

The Bureau worked on an initiative in the Atlantic Region to inform federal, provincial and municipal economic development organizations about the risk of inadvertently funding the establishment of deceptive telemarketing operations. The screening of applications and granting of seed funding for start-up operations is a primary goal for these organizations. The Bureau's initiative was intended to inform them of the legislative requirements of the Competition Act when screening applications for economic support, and so to stop government economic assistance to deceptive operations.

Partnerships

Fraud Prevention Forum

The Bureau chairs the Fraud Prevention Forum, a partnership of law enforcement and government agencies, consumer groups, the volunteer sector and private sector firms. The Forum was established to improve the awareness and education of small businesses and individual Canadians about fraudulent and deceptive marketing activities.

In 2002-2003, the Bureau did extensive research and focus group testing to develop new messages about deceptive telemarketing, deceptive mail and deceptive Internet representation, which victimize all segments of society. A new campaign based on this research will be designed to increase consumer vigilance and reduce victimization and loss. The Forum expects to launch the campaign in the fall of 2003.

Award-winning Toronto Strategic Partnership

The Toronto Strategic Partnership, of which the Bureau is a member, won the Bronze Award for Innovative Management at the 2002 National Conference of the Institute of Public Administration in Halifax. The award recognizes public sector excellence and organizational achievement in the private sector. The Toronto Strategic Partnership is effectively combating deceptive telemarketing and other fraudulent cross-border scams.

Northwest Netforce

The Competition Bureau collaborated with Northwest Netforce to warn Canadians participating in an e-mail chain letter that it appeared to contravene the deceptive marketing provisions of the Competition Act. Northwest Netforce is an international initiative targeting deceptive spam (unsolicited e-mail) and Internet fraud. Its partners include the U.S. Federal Trade Commission, the Alaska Attorney General, the Alaska State Troopers, Alberta Government Services, the B.C. Securities Commission, the B.C. Solicitor General, the Idaho Attorney General, the Montana Department of Administration, the Oregon Department of Justice, the Washington Attorney General, the Washington Department of Financial Institutions, the Wyoming Attorney General and the Competition Bureau.

Special Constable Status for Competition Law Officers

Special constable status has now been granted to Competition Bureau competition law officers in six provinces. Competition law officers in Nova Scotia, P.E.I., Quebec, Ontario, Manitoba and B.C. now hold this designation, which allows them to serve summonses and subpoenas as part of their duties under the Competition Act, the Consumer Packaging and Labelling Act, the Textile Labelling Act, the Precious Metals Marking Act and the Criminal Code.

Regulatory Issues

Precious Metals Marking Regulations

In the summer of 2002, the Bureau launched a preliminary consultation with manufacturers of precious metals, jewellery, hollowware and flatware, and their associations, to identify possible improvements to the Precious Metals Marking Regulations. As a result, several recommendations were made concerning amendments to clarify existing regulations and reduce the regulatory burden. A more extensive consultation will be carried out in 2003-2004.

Textile Labelling and Advertising Regulations

The Competition Bureau commissioned the Conference Board of Canada to study possible amendments to the Textile Labelling and Advertising Regulations to require that the addresses of manufacturing sites be included on labels of clothing sold in Canada. Several social action groups and some apparel retailers, who believe this amendment would be a major step in helping to curb "sweatshop labour" in the apparel industry, asked the Minister of Industry to look into this issue.

The Conference Board completed its report in March 2003. There will be further consultation under the auspices of the Public Policy Forum to address the concerns raised in the report and to craft strategic recommendations for how the Government should address the issue of fair labour practices in the apparel industry.
The Standing Joint Committee for the Scrutiny of Regulations made several recommendations to amend the Textile Labelling and Advertising Regulations. The Bureau examined the proposed amendments and agreed to recommend that some of the regulations be changed.
The Bureau was instrumental in securing agreement among members of the NAFTA Subcommittee on Labeling of Textile and Apparel Goods on harmonized care symbols (voluntary in Canada). It is expected that a formal agreement will be finalized in 2003-2004.

Advisory Opinions

Competition in Airline Services

In December 2002, a new carrier asked the Competition Bureau to review its business plan to use an airport located in Ontario and to provide an advisory opinion on whether the agreement to do so would contravene any elements of the Competition Act.

The Bureau reviewed the matter under sections 75, 77 and 79 of the Competition Act, concluding that the agreement would not contravene these provisions and that the Commissioner would not have grounds to launch an inquiry.

Proposed Waste Management Program

On January 8, 2003, the Bureau provided an advisory opinion to a corporation seeking guidance on a business proposal. The corporation planned to develop a national program for waste management of certain products in Canada, and asked the Bureau for help ensuring the plan complied with the Competition Act.

The Bureau reviewed the matter under sections 79 and 45 of the Act. Section 79 applies to dominant companies exploiting their market power in a way that prevents or substantially lessens competition in the marketplace. The Bureau received no information to suggest that the corporation controlled the product market in question or engaged in activities that impeded entry into the market or had other exclusionary effects. For this reason, and because it was felt that competition would not be prevented or substantially lessened, the Bureau found that the proposal would not contravene section 79.

Section 45 deals with the criminal provisions of the Act. The information the Bureau received included no evidence that the corporation would restrict a business from entering or continuing to compete in the market. Because of this, the Bureau found that the proposal would not contravene section 45 of the Act.

Misleading Representations and Deceptive Marketing Practices

The Bureau issued 35 advisory opinions about the misleading representations and deceptive marketing practices provisions of the Competition Act (e.g. multilevel marketing, false or misleading representations and promotional contests).

Cross-subsidization of Others' Operations

The Bureau provided an advisory opinion to a corporation seeking to expand its service offerings or increase its ownership of existing ones, with plans to make some of its services available at its full-service retail outlets across Canada. Its purpose in so doing was to gain control of or facilitate the service of other corporations in which it had a financial interest.

On reviewing these matters under the civil provisions of the Competition Act, the Bureau found no reason to believe that the corporation would cross-subsidize the operations of others, or commit any other acts with a substantial impact on competition.

Policy Making

Policy making plays an important role in the Bureau's overall activities. The Bureau is collaborating more and more in this area with federal departments and agencies. This year, the emphasis was on interdepartmental consultation.

The increase both in consultations between the Bureau and other federal government departments, and in the resources dedicated to this activity, was most evident during 2002-2003 in the transportation sector. The key issue in this sector was the treatment of transportation mergers that would be allowed by the Canada Transportation Act. Officials from the Bureau and Transport Canada worked to resolve this issue, as well as to clarify how any exceptions to the Competition Act should be worded in the Canada Transportation Act.

Other interdepartmental meetings about transportation occurred in such areas as airports, the future of the port divestiture program, vulnerabilities in Canada's marine security, and international shipping.

Conferences and Seminars

Conferences and seminars have become increasingly important methods of promoting compliance with the Act, thereby enhancing competition. From time to time, the Commissioner and Bureau staff are invited to present their views and participate in conferences both within Canada and abroad. In addition, a number of Bureau experts in the anti-trust field are asked to present the findings and results of some of their most challenging cases, as well as to review the developments in anti-trust literature that are relevant to the work of the Competition Bureau.

Conferences

On April 9 and 10, 2002, members of the Bureau attended the 2002 Strategic Alliances Conference in New York.
On April 24, 2002, a Bureau representative addressed the Windsor Better Business Bureau's annual general meeting. Presentation topics included deceptive telemarketing scams, the Competition Act's dual criminal-civil approach, the Bureau's recent focus on Internet advertising and the new provisions in Bill C-23.
On May 9, 2002, a Bureau representative gave a presentation to the Law Invitation Forum at Langdon Hall in Cambridge, Ontario, on the legislative process for reforming competition law in Canada. The speech covered the history of reform, recent initiatives and groundwork being laid for future improvements.
On May 9, 2002, the Commissioner addressed the Competition Law International Forum in Cambridge, Ontario, on challenges facing the Bureau, such as changes in the way it delivers services, the interpretation of the efficiency defence in the merger provisions, changes in the amendments process, and the next round of amendments.
On May 12 to 15, 2002, members of the Bureau presented papers to the Canadian Transportation Research Forum at its 37th annual conference in Newfoundland and Labrador. Topics included the U.S. Open Skies Agreement and the need for a more liberal agreement, the recent amendments to the Shipping Conferences Exemption Act and the status of rotary wing aviation in Canada.
On May 31, 2002, a Bureau representative spoke at the Canadian Institute's conference on advertising and marketing law in Toronto on such subjects as civil and criminal misleading advertising and the Bureau's various law enforcement partnerships, providing as well an overview of recent cases the Bureau pursued.
On June 13, 2002, a Bureau staff member gave a paper on the Competition Bureau and the airline industry at the 16th annual Insight Conference on Canadian airline investment. The paper discussed the Air Canada-Canadian Airlines merger, amendments to the Competition Act and current litigation.
At several points during the year, Bureau staff gave lectures on industrial organization and other topics to students at the universities of Calgary and British Columbia. The courses were provided online from boardroom to classroom.
On October 3, 2002, Bureau staff gave a presentation on domestic and international bid rigging to certified fraud examiners in Ottawa.
On October 3 and 4, 2002, Bureau staff presented papers at the annual fall conference on competition law of the Competition Law Section of the Canadian Bar Association. The papers were on the application of competition law to deregulated industries, the legislative process for amending the Competition Act and a review of the reforms proposed for section 45.
On October 8, 2002, a Bureau staff member gave a presentation to the Global Forum in Washington, D.C., on the challenges of assuring equal opportunity for access to digital technology.
On October 18, 2002, Bureau staff gave a presentation on domestic and international bid rigging to financial auditors at their annual meeting in Niagara Falls.
On November 12, 2002, a Bureau staff member spoke at the Competition in Difficult Times Conference in Toronto on unreasonably low pricing policies.
On November 25, 2002, a Bureau staff member spoke at the Industry Canada Managers' Leadership Forum in Mont Tremblant, Quebec, on thoughts to consider on becoming an executive in the public service of Canada.
A Bureau representative gave a presentation at a conference of fraud investigators in Toronto on December 3, 2002, concerning the provisions of the Competition Act, as well as recent Bureau initiatives on public education and partnering with other law enforcement agencies.
On December 11, 2002, Bureau staff gave a presentation on bid rigging to the Ontario Regional Office of Public Works and Government Services Canada to heighten the awareness of public procurement officials and enable them to detect and prevent bid rigging on federal and provincial tenders.
On January 28, 2003, Bureau staff gave a presentation to, and participated in, a panel discussion at the Conference Board of Canada's Toronto conference, Best Practices in Market Design: A Report Card on North American Electricity Restructuring. Bureau participants spoke about the Bureau's evolving role in newly opened electricity markets in relation to the competition roles of industry regulators.
On January 31, 2003, a Bureau representative addressed the Canadian Institute's conference on advertising and marketing law in Toronto. The presentation covered recent Bureau cases involving advertising and marketing complaints, the Consumer Packaging and Labelling Act, the ordinary selling price provisions, Bill C-23, deceptive telemarketing, the Scanner Price Accuracy Voluntary Code and the information-sharing protocol between the Bureau and the U.S. Federal Trade Commission.
At the 5th annual Insight Conference on advertising and marketing law, held February 18, 2003, in Toronto, a Bureau representative gave a presentation on the Bureau's Internet advertising bulletin, examining enforcement tools and relevant issues and challenges.

Seminars

A number of antitrust experts were invited to present their findings to staff in the Competition Bureau:

Professors Alan Love and Oral Capps of Texas A&M University (January 2002): "bootstrapping techniques" -- new developments in econometrics;
Professor Jeff Church of the University of Calgary and Professors Alan Love and Oral Capps of Texas A&M University (January 2002): seminar on specification issues and confidence intervals in unilateral price effects analysis;
Marcel Boyer of the University of Montreal and CIRANO (January 2002): abuse of dominant position, a new concept of avoidable cost;
Daniel Rubinfeld of the University of California (June 2002): merger simulation, a simplified approach with new applications; and
Professor Stephen Ross of the University of Illinois (November 2002): the political economy aspects of the efficiency defence.

On July 18, 2002, members of the Bureau held a seminar in Washington, D.C., for lawyers and economists at the U.S. Federal Trade Commission. The seminar was on the qualification and measurement of efficiencies arising from mergers.

International Activities

In an increasing global market, one of the Bureau's goals is to promote effective international competition enforcement and advocacy. To advance this goal, the Bureau actively participates in a number of international organizations and various trade negotiations.

International Competition Network

The International Competition Network (ICN), a network of private and public sector competition practitioners from around the world, continued to gain momentum this year. Since its launch in October 2001, the network has grown significantly by promoting inclusiveness, informality and relevance to all competition players. Currently, it includes 77 member agencies from 67 jurisdictions.

The ICN held its first annual conference in Naples, Italy, in September 2002. This highly successful event was hosted by the Italian competition authority and co-chaired by Canada's Commissioner of Competition.³ Representatives from 59 anti-trust agencies attended the two-day conference, during which members confirmed the Commissioner as chair of the ICN Steering Group.

The ICN released four detailed publications at the conference: Guiding Principles for Merger Notification and Review, Recommended Practices for Merger Notification Procedures, a report on advocacy and competition policy, and a report identifying issues to consider when establishing or amending an analytical framework for merger control. Each of these documents, contact information for ICN members, and links to information about the merger laws of many of the members' jurisdictions are available on the ICN Web site.

Organisation for Economic Co-operation and Development

Representatives of the Competition Bureau actively participate in work by the Organisation for Economic Co-operation and Development (OECD) on competition. The Commissioner of Competition continues to chair the Competition Committee's Working Party 3 on International Cooperation. This group has been focussing on international cooperation in the fight against hard-core cartels, as well as examining merger control procedures in OECD member jurisdictions.

The OECD released its final report on Canada's regulatory system, Maintaining Leadership Through Innovation, in October 2002. The report made specific recommendations on strengthening the contribution of competition policy to regulatory reform and market openness, including an enhanced advocacy role for the Bureau. The recommendations addressed the scope of the Commissioner's decision-making independence, the processes and procedures of the Competition Tribunal, the conspiracy provisions in the Competition Act, and the Bureau's resources. For additional information, see the October 29, 2002, information notice.

Asia-Pacific Economic Cooperation

Canada has been active in providing technical assistance and cooperation to other Asia-Pacific Economic Cooperation (APEC) member economies. The Competition Bureau participated in two seminars on regulation and competition organized by Mexico, in the electricity sector in May 2002 and in the transportation sector in September 2002.

In February 2003, APEC members reviewed Canada's 2002 Individual Action Plan. The purpose of the review was to monitor progress towards the targets set in Indonesia in 1994 for freer and more open trade and investment in the APEC region. The report stemming from the review stated that Canada maintained an effective and adequate competition policy and that the Competition Bureau ensured the transparency of that policy. For additional information, see the February 20, 2003, media release, "Canada has Progressed Substantially Towards Free Trade Goals".

International Marketing Supervision Network

Representatives of the Competition Bureau participated in the September 2002 meeting of the International Marketing Supervision Network (IMSN) in Sydney, Australia. The IMSN, which celebrated its 10th anniversary at that meeting, is a voluntary organization of the trade practices law enforcement authorities of more than two dozen countries, most of which are members of the OECD. IMSN's mandate is to share information about cross-border commercial activities that may affect consumer interests and to encourage international cooperation among law enforcement agencies.

At the meeting, the Bureau supported a name change for the IMSN (to International Consumer Protection and Enforcement Network, or ICPEN) and a shift in focus from general policy formulation to greater cooperation on cross-border law enforcement.

ICPEN is a key partnership for the Bureau as it fights telemarketing, mail and Internet scams that annually result in billions of dollars in losses to consumer and business victims, and are increasingly occurring across international borders. The Bureau is a major contributor to ICPEN, which is focussed on finding ways for agencies to cooperate and deal more effectively with this growing problem. The commitment to ICPEN reflects the Bureau's resolve to take action against illegal operations in Canada and avoid the stigma that Canada is a safe haven for consumer fraud and deception.

Exchange with the Merger Task Force of the European Commission

In recognition of the Bureau's close cooperative relationship with the European Commission's Directorate General for Competition, an exchange of merger review staff took place between July and December 2002. This exchange is a first for the agencies and is considered to be a logical and positive next step in the evolution of Canadian-European enforcement cooperation following the formalization of ties in a 1999 agreement on the application of competition law.

The purpose of the exchange was to expand and enhance cooperation between the respective agencies, to promote a shared understanding of Canadian and European merger control regimes, and to facilitate the sharing of experiences and best practices through firsthand experience.

Technical Assistance

The Competition Bureau provides technical assistance to a number of countries in the process of drafting their own competition laws or in various stages of implementing them. Technical assistance may include providing information on Canadian policy, law and practices, welcoming visitors from foreign governments and competition authorities, helping develop or refine foreign competition laws, and providing advice on how to deal with specific investigations. This year, the Bureau welcomed visitors from the Congo, Vietnam, China and South Africa.

Cooperation

International cooperation can be seen most prominently in the areas of merger review, international cartels and cross-border deceptive telemarketing and mail solicitation.

Regarding the last, Canadian and U.S. law enforcers announced on June 10, 2002, in Washington, D.C., increased efforts to cooperate in targeting cross-border deceptive telemarketing. The Competition Bureau and the U.S. Federal Trade Commission formalized their sharing of complaint and investigation data to catch cross-border fraud operators faster and more efficiently. This protocol streamlines and enhances cooperation under agreements adopted in 1995 and 1996.

In merger reviews, the Bureau has been involved in many multijurisdictional merger transactions in which it has had to work closely with its foreign counterparts (see chapter 4, Reviewing Mergers).

In international cartel cases, the Bureau has cooperated with the United States, the United Kingdom, the European Union and Japan. Some noteworthy cases involved bulk vitamins and methylglucamine.

The Bureau announced on June 26, 2002, that negotiations were under way between Canada and Japan on a cooperation agreement regarding competition law. The proposed agreement is expected to provide a framework for coordination and cooperation to deal effectively with anti-competitive business activities affecting both countries.

Trade Negotiations

Free Trade Area of the Americas: Negotiating Group on Competition Policy

Substantial progress was achieved in the Free Trade Area of the Americas (FTAA) negotiations on competition policy over the last year, as shown by the draft chapter on competition policy published in November 2002.

Canada, led by the Competition Bureau in partnership with the Department of Foreign Affairs and International Trade, continued to contribute significantly to the development of a framework for the adoption and implementation of competition laws in all FTAA countries. However, several key issues remain, the main ones being to persuade countries without a competition law of the benefits of a sound competition policy and to ensure that the framework takes into account differences in levels of development. In addition, countries bring to the table differing views about what constitutes appropriate national competition law and policy. As a result, Canada has been advocating non-binding processes, such as consultations and peer review, rather than binding dispute settlement, as a means of facilitating dialogue and promoting convergence and compliance with competition obligations in the FTAA.

A copy of the draft chapter on competition policy can be found on their web site.

On the domestic front, the Competition Bureau contributed to the Government's environmental assessment of the FTAA chapter on competition policy and participated in multistakeholder consultations organized by the Department of Foreign Affairs and International Trade.

World Trade Organization

The World Trade Organization (WTO) is currently exploring the interaction between trade and competition policies. Discussions are currently in a clarification phase and are focussed on potential elements for a multilateral framework on competition, including such core principles as transparency, non-discrimination and procedural fairness, hard-core cartels as a serious breach of competition law, voluntary cooperation, and ideas for supporting competition institutions in developing countries. The WTO Ministerial Conference scheduled for September 2003 will consider whether to launch competition negotiations.

Other Trade Agreements

Canada is currently involved in free trade negotiations with the Central American Four (El Salvador, Guatemala, Honduras and Nicaragua) and Singapore, and is seeking to include competition policy provisions in these agreements.

Footnotes

¹ The Canada Marine Act Review Panel presented its report, the Canada Marine Act: Beyond Tomorrow, to the MInister of Transport, who tabled it in the House of Commons on June 4, 2003.

² The Committee released its report, Opening Canadian Communications to the World, in April 2003.

³ The second annual ICN conference, to be hosted by the Federal Competition Commission of Mexico and again co-chaired by Commissioner Konrad von Finckenstein, will be held in Mérida, Mexico, in June 2003.