Annual Report of the Commissioner of Competition for the year ending March 31, 1999

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Modernizing Canada's Approach to Competition Law

Adapting to Change

In order for consumers and business to receive full protection under the law, it is important for Canada's Competition Act to adapt to the changing times.

To this end, the Competition Bureau set up a permanent Amendments Unit during 1998-99. This will speed up the amendments process and ensure continuity from one round to another.

Over the year, the unit helped to shepherd Bill C-20, an Act to amend the Competition Act, through Parliament. First introduced in November 1996 as Bill C-67, and reintroduced a year later as Bill C-20, the revised bill was passed by the Senate on February 18, 1999. It received royal assent on March 11, 1999, and came into effect a week later, on March 18, 1999.

Staying Relevant: Round I

The amendments contained in Bill C-20 modernize the Competition Act. As a result, Canada now has competition framework legislation that makes it easier for the Bureau and law enforcement agencies to deal with emerging business trends and current enforcement requirements in Canada and abroad.

For instance, Bill C-20 improves the Bureau's ability to deal with the following:

• fraudulent telemarketing;
• misleading advertising and other deceptive marketing practices, through the creation of a civil process to enable the Bureau to seek court orders to stop misleading advertising and deceptive marketing practices, while retaining criminal law for the most serious cases of deliberate misrepresentation; and
• ordinary price claims (comparison pricing), through the creation of two alternative tests and a civil process.

Both the Bureau and the business community will also benefit from further refinements to the merger notification process.

During the passage of Bill C-20 through Parliament, the House Standing Committee on Industry recommended some important changes to Bill C-20. They included the following:

• New provisions for narrowing the use of wiretapping to price-fixing and market-sharing conspiracies, and to the misrepresentation aspects of deceptive telemarketing. Wiretapping will also be available for investigations on bid-rigging. However, it will not be permitted for legitimate situations involving strategic alliances, joint ventures, mergers, benchmarking and other information-sharing arrangements. Any wiretapping arrangements first will require authorization from a superior court judge.
• The retaining of double-ticketing (whereby vendors must honour the lowest sticker price on store items) as a summary conviction offence.
• Clarification of what constitutes a business under the Competition Act. This will ensure that charities and other non-profit entities can be held responsible for the practices of telemarketers, marketing agents and any other activities carried out on their behalf.

In addition, the Senate and the House concurred on a whistleblowing clause that would apply only to the criminal law provisions of the Competition Act. (The maximum penalty for interfering with whistleblowers is two years in prison, as defined in section 126 of the Criminal Code of Canada.)

Staying Relevant: Round II

The amendments that came into force on March 18, 1999, have strengthened the Competition Act, but legislative review is a continuous process. Preparations for a second round of amendments to keep pace with enforcement requirements and expanding global markets began this year. The second round is designed to increase the effectiveness and efficiency of the processes used to enforce the Act. Details of the amendments will be developed in consultation with stakeholders.

Competition Policy and Intellectual Property Rights

Today's dynamic economy, driven by rapid advancements in information and communication technologies, relies increasingly on knowledge and innovation. The development of new technologies by firms and individuals allows ideas to be put to work in innovative ways that increase productivity and create employment and wealth. The commercialization of new ideas and technologies is facilitated by a well-functioning competitive marketplace that allows firms to enter business arrangements involving the use, assignment and licensing of intellectual property rights. Given the importance of these business arrangements, the Competition Bureau is striving to make the principles governing the enforcement of the Competition Act more transparent. This will remove any uncertainty that firms may have about the possibility of certain business practices, particularly the licensing of intellectual property, raising antitrust concerns.

In October 1998, the Competition Bureau joined other sectors of Industry Canada to publish a research volume entitled Competition Policy and Intellectual Property Rights in the Knowledge-Based Economy. One of its two general editors, Robert Anderson, was chief of economic policy at the Bureau prior to his joining the World Trade Organization as Counsellor, Intellectual Property.

The publication assesses competition policy as well as intellectual property rights in Canada, and attempts to find an appropriate balance between the two. In examining these complementary instruments of government policy, the authors urge policy makers to look beyond our borders at developments abroad.

Since 1989, the United States, the European Community and Japan have revisited the treatment of intellectual property under their respective competition laws. Subsequently, all three jurisdictions provided guidance regarding enforcement policies in this area.