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

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Maintaining a Modern Approach to Competition Law

To ensure that Canadian consumers and businesses receive the full benefit of an innovative and competitive marketplace, the Bureau regularly reviews the Competition Act, as well as its own policies and enforcement guidelines, to ensure they are consistent with developing jurisprudence and economic thought. A modern, up-to-date legislative framework also enhances Canada's ability to compete internationally and to attract foreign investment.

When changes are proposed to the legislation or to the Bureau's approach to enforcing it, the Bureau actively seeks the views of its stakeholders and the public.

Section 11 Challenge Function

In March 2001, the Bureau implemented an internal challenge function with respect to the use of orders under section 11 of the Competition Act. This function continued to be in place in 2002-2003.

Section 11, a key investigative tool under the Act, allows the Commissioner or an authorized representative to apply to specified courts for orders requiring people to appear before a hearing officer to give testimony, produce records or provide written information as specified in the order. The principal objective of the challenge function is to ensure that applications and orders under the provision are consistent and that they seek records and information necessary for an inquiry in as clear and efficient a manner as possible. All section 11 applications are subject to review and approval by the Strategic Policy Advisor, Compliance and Operations Branch, whose responsibility it is to ensure that requests for records and written returns are clearly worded and seek only necessary information and records. This procedure must be completed before case officers and counsel can bring the matter before the courts.

Since the introduction of the challenge, the quality of applications and orders under section 11 has improved. Consistent procedures are in place and the roles of case staff, legal counsel and review officers have been tailored to their specific expertise. Ongoing development of this function will be carried out through internal training and procedure manuals.

During the year, section 11 orders were obtained in 12 inquiries, many of which involved multiple orders sought either simultaneously or at different stages of the inquiry.

Modernizing the Competition Bureau

On June 21, 2002, Bill C-23 (now C. 16, S.C. 2002) and its changes to the Competition Act and the Competition Tribunal Act came into force. This vital economic legislation strengthens Canada's competition law in a number of important ways that were discussed in detail in the 2001-2002 Annual Report. They include the following:

• prohibiting companies from sending out deceptive notices about prize winning;
• providing a framework to allow the Bureau to request assistance from foreign states in obtaining evidence from abroad on non-criminal competition matters;
• allowing the Tribunal to issue interim orders prior to litigation to prevent irreparable harm to a business;
• giving the Competition Tribunal the authority to hear references, award costs and make summary dispositions;
• allowing private parties to apply directly to the Tribunal to address matters regarding refusal to deal, tied selling, exclusive dealing and market restrictions (sections 75 and 77 of the Competition Act); and
• providing measures to protect competition in the Canadian airline industry.

As a result of these new provisions, the Bureau now has better tools to enhance compliance with the Act for the benefit of both consumers and businesses.

Section 124.1 of the Competition Act, which relates to written opinions (formerly known as advisory opinions), did not come into force until April 1, 2003. This section allows an individual to seek a written opinion from the Commissioner of Competition on the application of any provision or regulation of the Competition Act. Written opinions are legally binding on the Commissioner of Competition when all the material facts have been submitted and these facts are accurate. They remain legally binding provided the material facts remain substantially unchanged and conduct is carried out substantially as proposed.

In May 2002, the Senate Standing Committee on Banking, Trade and Commerce reported that it would hold hearings within two years of the passage of the Bill to review the following provisions:

• those dealing with the airline industry and the powers of the Commissioner of Competition to issue interim orders, namely section 104.1;
• those dealing with private access to the Competition Tribunal; and
• those dealing with mutual legal assistance of foreign jurisdictions for civil reviewable matters.

House of Commons Committee Review of the Competition Act

In 1999-2000, the House of Commons Standing Committee on Industry, Science and Technology began hearings to review the anti-competitive pricing provisions of the Competition Act. The Committee subsequently expanded its review to include the Competition Act as a whole. The Committee tabled its final report, A Plan to Modernize Canada's Competition Regime, in the House of Commons on April 23, 2002. The committee's 29 recommendations covered a wide range of issues, such as conspiracies, enforcement, the airline industry, price maintenance and discrimination, abuse of dominance and mergers, and include the following:

• that the Bureau designate conspiracies as one of its highest priorities and that it amend the conspiracy provision to allow for a dual-track approach;
• that the Government of Canada make changes to the provisions dealing with predatory pricing, price maintenance and price discrimination;
• that the Government of Canada allow the Competition Tribunal to impose administrative monetary penalties for civil reviewable matters;
• that the Government establish an independent task force of experts to study the role that efficiencies should play in all civil reviewable sections of the Competition Act; and
• that the Government provide the Competition Bureau with the necessary resources to ensure the effective enforcement of the Competition Act.

On October 1, 2002, the Government tabled its response to the Committee's report in the House of Commons. The response recognized that effective competition law enforcement is essential to building a fair, efficient and competitive economy. Highlights of the response include the following:

• the Government's commitment to issue a discussion paper in 2003-2004 addressing specific proposals for consultation with a wide range of stakeholders on the next round of competition law amendments;
• proposed amendments to the conspiracy provisions of the Competition Act to be made a priority in the next round of amendments;
• consultations on the next round of amendments to address the proposed changes for administrative monetary penalties, price discrimination and predatory pricing;
• the Government's commissioning of a study on the treatment of efficiencies in merger review; and
• the Government's promise to ensure adequate funding of the Competition Bureau.

The consultations on the next round of competition law amendments will take place in 2003-2004.

The Government commissioned an independent study on the treatment of efficiencies in merger review in Australia, the United Kingdom, the European Union and the United States. This study was tabled in Parliament in March 2003 and is available on their web site.

Lawful Access

On August 26, 2002, the Government of Canada announced that it would be holding consultations with a broad range of stakeholders about the lawful interception of communications and the search and seizure of information by law enforcement and national security agencies. The Competition Bureau is among the federal partners involved in the lawful access consultations.

Rapid developments in information and communication technologies are posing challenges to conventional lawful access methods. Law enforcement agencies such as the Competition Bureau must often overcome a variety of technical hurdles before they can access the information they are legally authorized to collect. The consultations will provide stakeholders with an opportunity to consider options for policy and legislative changes, including changes to the Competition Act.

Private Members Bills

Bill C-249, previously known as Bill C-248, proposes to amend the Competition Act to clarify the efficiency defence. The Bill was referred to the House of Commons Standing Committee on Industry, Science and Technology on February 25, 2002.⁵

In addition to Bill C-249, some new private members bills on competition issues were introduced in the House of Commons during 2002-2003. Listed below are those bills introduced in the second session of the 37th Parliament that propose amendments to, or would affect the application of, the Competition Act.

Second Session, 37th Parliament

• Bill C-353
  • Proposes an commission to regulate the wholesale and retail price of energy (motor fuels including diesel and propane, heating oil and electric power)
    
• Bill C-379
  • Proposes an oil and gas ombudsman to investigate complaints about the business practices of oil and gas suppliers
    
• Bill C-381
  • Proposes to prohibit vertically integrated gasoline suppliers from operating in the retail market (vertically integrated gasoline suppliers are corporations that supply more than five percent of total retail gasoline sales in a province or Canada and that manufacture more than 20 percent of the gasoline sold at the retail level)

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Footnotes

⁵ Following its consideration of Bill C-249, the Committee adopted it with amendments on April 28, 2003. On May 13, 2003, Bill C-249 was adopted by the House of Commons and referred to the Senate for consideration.