CRTC/Competition Bureau Interface

Bulletin

2001


Introduction

As the transition of the telecommunications and broadcasting industries from regulated monopolies to competitive markets continues, it would be beneficial to describe the authority of the Canadian Radio‑television and Telecommunications Commission under the Telecommunications and Broadcasting Acts and that of the Competition Bureau under the Competition Act.

This is particularly so given the complementary roles of the two organizations and the fact that the Commission is now moving beyond opening markets to competition and is exercising its powers to forbear from regulation in the area of telecommunications.

Industry stakeholders, including the general public, need greater clarity and certainty as to the overall regulatory and legal framework in which telecommunications and broadcasting firms must conduct their affairs.

Nothing in this document is intended to limit the responsibility or authority of the Commission or the Bureau to administer the respective legislation for which they are responsible. It is recognized that in addition to competition issues, the Commission has many other statutory objectives, while the focus of the Bureau is on matters related to competition.

Issues of authority with respect to competition can be grouped into four areas:

On this page

  1. Where the Commission has forborne or exempted from regulation
  2. Where the Commission and the Bureau both have authority
  3. Where the Commission is exercising exclusive authority
  4. Where the Bureau is exercising exclusive authority

1. Where the Commission has forborne or exempted from regulation

Background

Under the Telecommunications Act, the CRTC has authority to exempt classes of carriers from application of the Act. Exemption orders may be subject to conditions. The Commission also has the power to forbear in whole or in part from most regulatory responsibilities where it finds, for example, that services or classes of services are subject to sufficient competition to protect the interests of users and that forbearance would not likely unduly impair the development or continuance of a competitive market. Forbearance orders may also be conditional, and can be varied or rescinded.

As a law of general application, the Competition Act has an established administrative framework, jurisprudence and a market test standard of "substantial prevention or lessening of competition" with which to deal with competition issues. However, it is generally accepted that during the transition to competitive markets, competition safeguards beyond those available under the Competition Act are required.

Modus operandi:

  • Where the Commission has unconditionally exempted or has forborne from regulation in whole and unconditionally, until such time as it exercises its authority to review, rescind or vary its exemption or forbearance orders and decisions, the Competition Act would apply.
  • Where the Commission has forborne only in part or has exempted or forborne conditionally, the Bureau considers that the Competition Act would apply to the activities exempted or conditionally forborne from regulation.
  • To the maximum extent possible, the Commission identifies in its orders and decisions the powers and duties which the Commission will no longer exercise.

Transitional safeguards

As all markets are not yet subject to effective competition, the Commission will continue to enforce regulatory safeguards to deal with issues such as bundling of services by the telephone companies, contract and access issues for multi‑dwelling buildings, and exclusive programming rights practices. During the transition to competition, the Commission can deal with these issues more efficiently than a case‑by‑case approach under the Competition Act.

One notable issue in the transition to competition is anti‑competitive cross‑subsidization. Until all telecommunications markets are subject to effective competition, the Commission will need to guard against incumbent carriers cross‑subsidizing services offered in highly contested markets with revenues from services where effective competition does not exist. Imputation tests and bundling restrictions imposed by the Commission are intended to address this issue. Safeguards imposed by the Commission seriously diminish the likelihood of anti‑competitive cross‑subsidization.

When the Commission deems that markets have become sufficiently competitive and the Commission forbears from regulation, the Competition Act would address anti‑competitive pricing issues should they arise.

2. Where the Commission and the Bureau both have authority

(a) Merger review

Background:

Under the Telecommunications Act, prior approval of telecommunications mergers is not required. However, the CRTC has specific responsibility under the Telecommunications Act for ensuring compliance with foreign ownership and control rules and has broad regulatory authority over the Canadian telecommunications system. Under the Competition Act, all mergers are subject to review and those which exceed proscribed economic thresholds must be formally prenotified to the Bureau.

Under the Broadcasting Act, prior approval of the Commission is required for changes of control or ownership of licensed undertakings. Whereas the Bureau's examination of mergers relates exclusively to competitive effects, the Commission's consideration involves a broader set of objectives under the Act. This may encompass consideration of competition issues in order to further the objectives of the Act. The Bureau's concern in radio and television broadcast markets relates primarily to the impact on advertising markets and, with respect to broadcast distribution undertakings, to the choices and prices available to consumers. The Commission's concerns include those of the Bureau except that its consideration of advertising markets relates to the broadcasters' ability to fulfill the objectives of the Act.

It is generally Government and Commission policy to encourage competition in broadcasting, particularly in the distribution of broadcasting services.

Modus operandi:

Consequently, with respect to merger review:

  • there is parallel jurisdiction.
  • any transaction must comply with the legislation administered by both organizations.
  • the merger and related pre‑notification requirements of the Competition Act apply to telecommunications and broadcasting mergers.
  • review by the Commission under the Telecommunications Act deals with ensuring compliance with foreign ownership and control limitations and may include other regulatory issues that may arise as a result of the transaction ‑ prior approval, per se, is not required.

  • review by the Commission under the Broadcasting Act applies to changes in ownership or control of licensees under the Act.

(b) Marketing practices

Depending upon the specific circumstances, marketing practices can be addressed by the Commission or the Bureau.

The Commission will, for example, deal with slamming complaints in the telephone market. However, the Bureau may act in cases where the slamming practice involves an element of false or misleading advertising. The Competition Act applies to all false or misleading advertising in the communications industry, as well as to telemarketing fraud.

The Bureau considers that the Competition Act will apply to exclusive dealing, tied selling and other trade restraints not covered by regulatory safeguards imposed by the Commission.

Both the Commission and the Bureau would support the appropriate use of industry codes of conduct or ombudsman models as complementary vehicles to deal with consumer concerns. As appropriate, the Commission and the Bureau will review industry codes to ensure compliance with their respective legislation.

3. Where the Commission is exercising exclusive authority

Background

Interconnection and access are critical for telecommunications competition. They require a high degree of technological and economic expertise, as well as flexible and timely dispute resolution. While the Competition Act applies to access and interconnection issues in unregulated network industries, they have been a primary focus of economic regulation in telecommunications by the CRTC.

Modus operandi

  • The CRTC will continue to deal with issues related to interconnection and access.

4. Where the Bureau is exercising exclusive authority

Background

Activities such as conspiracies to fix prices or otherwise prevent or lessen competition unduly, bid rigging and price maintenance are subject to criminal prohibition under the Competition Act.

Modus operandi

  • The Bureau will deal with price fixing, bid rigging and price maintenance.
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