Speaking Notes for Sheridan Scott Commissioner of Competition

Competition Bureau

Canadian Perspectives on the Role of Comity in Competition Law Enforcement in a Globalized World
To Defer or Not To Defer? Is that the question?

American Bar Association's
Section of Antitrust Law
2006 Spring Meeting
Washington, DC

March 29, 2006

(Check against delivery)

PDF (86.3KB)

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Let me begin by saying how pleased I am to be here today to participate in this dialogue on comity.

While I accepted your invitation with pleasure, I was puzzled that Randy Tritell asked all of us to forgive him for the title of the session: "A World of Antitrust Enforcers: Tragedy or Comity?" A good pun is always welcome; and bad ones like this are even better.

And it nicely frames the challenge in our globalized world to establish effective comity approaches - without which we may have antitrust tragedy - while incorporating the variety of views of comity that exist in the global theatre of antitrust. This world of views creates great opportunities and challenges for agencies enforcing national laws¹ and for practitioners advising clients.

It also reminded me of Shakespeare. Don't worry, I won't express my views in iambic pentameter. But, I may indulge in the occasional Shakespearean quote as I explore comity from a Canadian setting - where we have been, where we are now and what we might strive for in the future.

Let me begin, per the Merry Wives of Windsor, with "the short and the long of it."²

The short of it is that comity took centre stage in antitrust circles only recently; yet it is now being discussed among academics, enforcers, policy-makers, legislators and judges. And the debate is far from settled. Just last month, at its hearing on International Antitrust Issues, the U.S. Antitrust Modernization Commission heard a variety of viewpoints on comity's role in antitrust enforcement, including recommendations for "enhanced comity."³ The recent landmark US Supreme Court decision in Empagran, a case addressing comity, caused jurisdictions around the world, including Canada, to state their views and contribute to the development of jurisprudence in this area.⁴ And there will be more cases to come, and much more discussion.

In my view, this discussion should be framed within the broader context of efforts on all our parts to increase the other three Cs of international competition effectiveness - cooperation, coordination and communication. Seen in this light, while I may differ in certain views from the positions set out by Bob Pitofsky and Eleanor Fox, we share some common ground, and I believe both their papers contribute significantly to advance the discussion.

If that is a short perspective on the situation, the long of it is playing out in our individual agencies as we attempt to put comity into practice while the debate rages around us. I will try to contribute to that longer debate by describing how we approach this issue in Canada. And I will do so in just three Acts - without intermission.

In Act I of "A World of Antitrust Enforcers," I will set the stage for our dialogue by looking at the foundations of comity principles in Canadian competition law and policy, and the context within which we apply them, including their linkages with the other three Cs.

In Act II, I will highlight the role of comity in the Bureau's enforcement work.

In Act III, I will consider the future, and provide my perspective on Eleanor's views, as well as on Bob's proposal for enhanced comity as they may apply on the Canadian stage.

Now without further ado, please turn off your cell phones and pagers, let's turn down the house lights, and let the play begin.

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Act I: Setting The Stage For Comity & Its Cast of Characters

The scene: the twenty-first century global economic village. A time of economic innovation, corporate turmoil and foreign entanglements that we call globalization. This is a place much changed from that which shaped many of our beliefs and practices.

In this scene, as in life, character is everything. And the characters in the comity debate are defined by a combination of international accords, national laws and jurisprudence, and a few odd characters in various enforcement agencies.

In this play, we must recognize that words and their meanings are important. Comity is a case in point. Let me digress from Shakespeare to one of my favorite children's books, Lewis Carroll's Through the Looking Glass, for help on something that is central to our debate today - the meaning of the word "comity." Humpty Dumpty and Alice thought about words and their meanings in this famous exchange:

"When I use a word," Humpty Dumpty said, in a rather scornful tone, " it means just what I choose it to mean—neither more nor less."
"The question is," said Alice, "whether you can make words mean so many different things."
"The question is," said Humpty Dumpty, "which is to be master —that's all."

In the case of comity, it would seem that there are many masters, each confident in their understanding of not just what the word means, but about its role in anti-trust enforcement.

Fortunately or unfortunately, I can't claim to be one of those masters. But I can draw on our experiences with the application of comity in Canada, and some jurisprudence to think about the meanings of comity.

The WTO defines comity as a term in international law signifying a reciprocal courtesy or mutual respect, which one member of the family of nations owes others in considering the effect of its official acts⁵. Comity also has a strong foundation in Canadian jurisprudence; Canada's highest court defined it in Morguard Investments Ltd. v. DeSavoye:⁶

Comity in the legal sense, is neither a matter of absolute obligation, on the one hand, nor of mere courtesy and goodwill, upon the other. But it is the recognition which one nation allows within its territory to the legislative, executive or judicial acts of another nation, having due regard both to international duty and convenience, and to the rights of its own citizens or of other persons who are under the protection of its laws…⁷

The Court went on to say that "the content of comity must be adjusted in light of a changing world order,"⁸ and referred to globalization of commerce, when it stated:

…the business community operates in a world economy and we correctly speak of a world community even in the face of decentralized political and legal power.⁹

In Connaught Laboratories Ltd. v. Medeva Pharma. Ltd,¹⁰ the Federal Court of Canada adopted, and built upon, the Supreme Court's reasoning in Morguard, and held that:

Comity is the name given to the general principle that encourages the recognition in one country of the judicial acts of another. Its basis is not simply respect for other nations, but convenience and necessity, recognizing the need to facilitate inter-jurisdictional transactions.

… The Supreme Court of Canada has said, in the context of a case involving the recognition in one province of Canada of a decision of the Courts of another province, that the context of comity must be adjusted in light of a changing world order. I see no reason why that principle should not apply on an international scale.¹¹

When defining comity, we must also appreciate its two distinct aspects, "negative" and "positive" comity. The OECD describes negative comity as the principle that a country should notify other countries when its enforcement proceedings may affect their important interests, and give full and sympathetic consideration to ways of fulfilling its enforcement needs without harming those interests.¹² The OECD describes positive comity as a principle of voluntary cooperation in competition law enforcement involving a request from one country that another country initiate or expand enforcement activities in order to remedy anti-competitive conduct going on in its territory that substantially and adversely affects the first country's interests.¹³

While positive and negative comity are key players, there are other actors in our cast. Think of them as the three leading ladies - communication, cooperation and coordination. These leading ladies are so strong that they may, on occasion, be mistaken for comity, or even take its part.

In our global economic theatre, anti-competitive conduct and transactions consistently cross borders. We have also seen a steady increase in the number of competition agencies enforcing antitrust laws. This burgeoning of international anti-trust concerns and enforcers has greatly expanded the potential for increased costs of compliance and administration, risks of inconsistent remedies, uncertainty over legal treatment, and duplication of resources.

The world of anti-trust enforcement has recognized this reality and responded with significant efforts to improve our ability to work together. The cornerstones of these efforts are our leading ladies, and they each do their part putting comity into action in Canada.

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The first "C", communication with our counterparts, is essential to our enforcement work, and is almost a daily occurrence at the Bureau. We speak informally with our foreign counterparts on matters of mutual interest, be they at the head of the agency or working level. Our dialogues on competition analysis - where we see eye to eye, and where we do not - help us generate comprehensive and informed analyses and decisions.

This leads me to my second leading lady, coordination. Communication with our foreign counterparts allows us to keep our enforcement efforts coordinated. Coordination is important for better enforcement and for reducing the burdens on increasingly international businesses. An important example of coordination is in the cartel area, when enforcement agencies engage in simultaneous raids or other evidence gathering in different countries. We coordinate our merger reviews internationally, and will continue to do so, in order to minimize procedural burdens on businesses. We also coordinate in other areas, such as telemarketing fraud, and involve our private sector partners, consumer and volunteer groups, government agencies and law enforcement organizations in our enforcement activities.

Regarding our third "C", cooperation, Canada has formal cooperation instruments with foreign partners around the world that are essential to effective enforcement of our laws in a global economy. While there is "no one size fits all" approach for these instruments, generally they are state-to-state, or agency-to-agency accords. State-to-state agreements typically are comprehensive and provide a regime for notification, enforcement cooperation, coordination with regard to related matters, positive comity and avoidance of conflicts, consultations, periodic meetings and confidentiality. Canada has state-to-state cooperation agreements with the United States, the European Union, Mexico, and most recently, Japan.¹⁴

Agency-to-agency cooperation arrangements are similar to state-to-state agreements but are limited to competition law enforcement interests rather than broader national interests. We have inter-agency arrangements with competition authorities in Australia, New Zealand, Chile, and the United Kingdom.

Both types of cooperation instruments include comity principles. For example, our 1995 Canada-US cooperation agreement tells us that, within the framework of our own laws, we must consider carefully the other jurisdiction's interests in all phases of our enforcement activities. These interests include notice of any developments of significance to those interests, when to open an investigation, the scope of our investigation and the remedies and penalties we seek. It outlines that we aim to minimize adverse effects of our enforcement activities on each other's important interests, and articulates a non-exhaustive list of comity factors which drive these decisions.¹⁵

Like other member states, Canada is also guided in its competition enforcement activities by the OECD's 1995 Revised Recommendation on Cooperation Between Member Countries on Anti-Competitive Practices Affecting International Trade. This Recommendation includes provisions similar to those in our cooperation instruments and is used for cooperation with OECD member countries with which no other formal accords are in place. The Recommendation also urges members to put principles of international law and comity into practice, calling on us to use moderation and self-restraint in the interest of cooperation in our enforcement against anti-competitive practices.¹⁶

Also on the multilateral stage, the Bureau is active in the work of the International Competition Network (ICN). Members of this virtual network of competition agencies and non-governmental advisors contribute to soft convergence through work on general principles and best practices. Through sharing enforcement experiences, members have created work products that have improved competition law enforcement around the world and reduced differences in competition analysis among nations. The ICN's recent work in the area of merger notification procedures is a good example of the ICN's achievements in this regard.¹⁷

The ICN's recommendations on merger notification procedures are a standard for jurisdictions to aspire to and assess themselves against. Notably, they promote the idea of consistent analysis in merger cases and urge competition agencies to seek remedies that cure domestic competitive concerns, but also avoid inconsistencies with remedies in other jurisdictions. They also seek to reduce unnecessary costs to businesses for cross border mergers.¹⁸ Of no less importance is the recently adopted OECD Recommendation in this area, which sets out internationally recognized best practices for the merger review process, including cooperation among competition authorities.¹⁹

The Bureau also regularly participates in the competition policy and advocacy work of the OECD. The OECD's Competition Committee plays a significant role in promoting international cooperation and coordination in competition enforcement, and by establishing best practices. For example, last year we participated in an OECD roundtable on cross-border remedies in merger review where we commented on our cooperation and coordination achievements since the mid 1990's and our efforts to put comity principles into practice.²⁰

Now that we have our cast and have set the scene, we can begin Act II, a Canadian perspective on the role of comity in competition law enforcement and whether, as Bob puts it, the promise of our bilateral agreements is being realized.

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Act II: Comity In Competition Enforcement in Canada: To Defer or Not To Defer? Is that the Question?

Most great plays engage the cast in a dilemma of one kind or another. Good or evil. Life or death. Or in the case of Hamlet, "To be, or not to be."²¹

The debate about how best to apply the concept of comity to antitrust action might be captured, with due apologies to Shakespeare, with the following: To defer or not to defer? Is that the question? In order to shed some light on whether that is indeed the question that Canadian authorities have posed, when comity considerations arise, the following section will discuss a number of cases where Canada chose not to impose its own distinct remedies.

Before we go any further, I should point out that, while deferral of action may be the result of the application of comity, not every deferral should be seen to be related to an exercise of comity principles. Positive comity does not come into play in the absence of a request made by an agency to its foreign counterpart to investigate. An agency may decide, however, not to act after it becomes public that its counterpart is investigating the matter. In this scenario, if the agency's inaction is the result of an exercise of enforcement discretion based on its own interests, its inaction does not involve any form of comity.²²

Our main focus today, however, is on negative comity - the art of ensuring our enforcement actions do not harm our counterparts' important interests. Bob and Eleanor have focussed some of their writing on negative comity on multi-jurisdictional merger reviews and abuse of dominance cases, and have commented on whether deference by enforcers is appropriate in these contexts. I will follow that script, and do the same.

My view on negative comity is essentially a pragmatic one, and can best be described by looking behind the scenes at the Bureau's enforcement work in multi-jurisdictional mergers and abuse of dominance cases. Our past actions on multi-jurisdictional cases and our enforcement approach can be described more as integrative and cooperative, rather than based on "deference." This approach achieves a balance between streamlining the resource-intensive enforcement process and ensuring appropriate resolutions of multi-jurisdictional cases.

In the merger context, our cooperation efforts with other jurisdictions, mainly the US and EU, start upon hearing about a transaction in the media or upon receiving a notification filing from merging parties, or a complaint. In multi-jurisdictional mergers, our cooperation agreements require at a particular point in time, that we formally notify our foreign counterparts, and they notify us, of transactions affecting important interests. This ensures the lines of communication and consultation are open.

The Bureau will generally coordinate with other competition authorities when a worldwide or multi-jurisdictional merger may have anti-competitive effects in Canada that are similar to the likely effects in other jurisdictions. Coordination can involve communicating as developments occur within jurisdictions, participating in joint discussions with the merging parties, and fashioning remedies in Canada that are parallel to those of other jurisdictions. We coordinate the timing of the review process and share views and information about transactions with our counterparts within the bounds of confidentiality constraints, views on the ambit of information requests and the appropriateness of potential remedies. We also discuss market definition, entry conditions and case theories, and determine if they are being defined consistently. As a result, we are almost always able to achieve consistent analysis. It goes without saying, but the more our competition issues are similar to those in other jurisdictions, the more likely we are to have effective coordinated remedies.

Such an integrative and cooperative approach has several advantages. Sharing perspectives, investigative techniques and enforcement approaches creates a wider and more diverse pool of information to draw on, increases the likelihood that analysis will be consistently applied across jurisdictions, streamlines the review and remedy process, reduces somewhat duplicative workloads, avoids frictions between reviewing jurisdictions, reduces uncertainty for businesses, and can lead to more effective resolutions than if we had proceeded independently.

This is very important for the many global mergers which affect Canadian markets. The extent of the "Canadian element" is always an important consideration, and while the Bureau can take independent action, it may be that no action beyond what is taken by foreign jurisdictions is needed.

While each case turns on its own facts, which are carefully weighed and analysed, we are more likely to formalize negotiated remedies within Canada when a matter raises Canada-specific issues, when the Canadian impact is significant, when the assets to be divested reside in Canada²³ or when it is critical to the enforcement of the terms of the settlement^.24 On the other hand, the Bureau may rely on remedies in formal proceedings of foreign jurisdictions when assets subject to divestiture, or conduct that must be carried out as part of a behavioural remedy, are primarily located outside of Canada. When there are competition issues in Canada and we rely on foreign remedies, the actions taken by foreign authorities must, however, resolve our concerns.

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When we are coordinating cross-border remedies, one of our primary objectives is to prevent conflicts that may arise when remedies are intended to address competition concerns in different jurisdictions. We will listen to the views of foreign agencies regarding particular remedies and, provided that the competition concerns in Canada are adequately addressed, we will make efforts to align ourselves.

So, it will come as no surprise that I agree with Eleanor that competition enforcers should recognize relief in other jurisdictions as contextual background and strive to avoid unnecessary burdens on business. Several of our recent multi-jurisdictional merger cases demonstrate this. There have been a number of mergers where the Bureau has declined to seek our own remedies because, after a thorough, independent and cooperative review, we concluded that Canadian interests were adequately addressed by another jurisdiction's actions.

Our enforcement approach does not, however, include a determination at the outset of a merger review to presumptively abide by the decisions of our foreign counterparts, without ascertaining the competition issues arising in Canada and how they ought to be addressed. But it does seek to avoid imposing unnecessary legal instruments and costs on merging parties.

For example, after a thorough review of the recent Procter and Gamble/Gillette merger, the Bureau found that the divestitures required by the US and European competition agencies adequately resolved concerns in Canada in the oral care markets for battery powered tooth brushes and teeth whitening products.²⁵

Similarly, in the recent worldwide merger between GE and Instrumentarium, the remedies required by the US and the EU adequately resolved concerns in Canada. To resolve competition concerns in Europe and the US, GE agreed to divest Instrumentarium's Spacelabs business and GE provided a formal commitment to the EU that it would maintain existing and future interfaces on patient monitors, therapy devices and clinical information systems to ensure that equipment from third party suppliers could effectively connect with GE equipment. When GE confirmed to the Bureau in writing that the European interface agreement applied globally and was available to third party suppliers in Canada and elsewhere, the Bureau was able to clear the transaction without the need for an independent remedy.²⁶

The Bureau also cooperated with the US Department of Justice and the European Commission on Alcan's acquisition of Pechiney, but decided there would be no substantial lessening or prevention of competition in Canada because of commitments made by Alcan to the US and the EU.²⁷ In this case, the geographic markets were mostly North American; however, the aluminum production technology was global. While Alcan had extensive assets in Canada, Pechiney did not control any physical assets in Canada that overlapped. In order to resolve concerns raised by the US and the EU, Alcan agreed to divestitures of facilities in the US and the EU²⁸ and made commitments to the EU regarding certain technologies and designs.²⁹ The Bureau determined that these measures preserved competitive options for Canadian customers as well, and did not take any further action.³⁰

The multi-jurisdictional merger review of Dow Chemical's acquisition of Union Carbide in 1999 also involved multiple products and geographic markets, and required extensive cooperation among the Bureau, the U.S. Federal Trade Commission and the European Commission. The Bureau identified significant competition issues in a number of product markets. As a result of competition concerns in several jurisdictions, the parties agreed to divestitures³¹ and the settlement was formalized by the FTC and the EC. Because the assets required to be divested to remedy the Canadian competition issues consisted primarily of worldwide intellectual property rights that were covered by the U.S. Consent Decree, the Bureau determined that no further action in Canada was required.

In the acquisition of Aventis by Sanofi-Sythélabo, worldwide divestitures accepted by the European Commission also dealt with our concerns.³²

There have been other cases through the years where the Bureau either took limited or no action in Canada due to remedies obtained by other competition authorities.³³ However, I should pause here to emphasize that the Competition Act provides for a three year period during which the Bureau can challenge a merger. In the unfortunate event that parties do not carry through with remedies applying to Canada, but enforceable only in foreign jurisdictions, the Bureau can challenge the acquisition before the Competition Tribunal during that time.³⁴

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This pragmatic approach is also present in our handling of abuse of dominance cases. In a case involving Microsoft a few years ago, we recognized that a global remedy was preferable to a patchwork quilt approach. In that matter, procedures in Canada would have likely resulted in a duplication of efforts, resources and remedies to achieve the same result. Given the integrated nature of the North American product market, we decided to await the outcome of the case in the United States. For me, this case exemplifies how we should act with moderation and restraint when proposed enforcement action has the potential to conflict with another jurisdiction's action, when there is a significantly greater nexus with that jurisdiction and when our concerns will be adequately addressed. Of course, this approach can only be taken where the foreign jurisdiction has similar competition law and investigative and remedial authorities to ours.³⁵

I do not see Canada as the only jurisdiction applying an integrative and cooperative approach to its multi-jurisdictional cases. As a result, clashes of analysis between competition authorities are rare. Eleanor and Bob refer to the most infamous cases in their papers: the FTC and EC decisions in the Boeing/McDonnell Douglas merger, the US DOJ and EC decisions in the GE/Honeywell merger and the US, EC and Korean decisions involving Microsoft.

But these are the exceptions to the numerous cases each year involving cooperative and coordinated investigations among reviewing jurisdictions and the application of consistent economic and legal analyses. Let there be no doubt that, through the application of comity principles, by means of continued communication, cooperation and coordination, competition enforcers can continue to ensure these remain highly exceptional cases.

But, this having been said, since such clashes do occasionally occur, as an enforcer I must ask myself: can we do better? If so, how? Is "enhanced comity", as Bob articulates it, the answer?

The answer lies in Act III: a Canadian view of how far an antitrust agency should go in "deferring" to a foreign authority.

Act III: We Know What We Are, But Know Not What We May Be - Canadian Perspectives on "Enhanced Comity"

Hamlet's dilemma was in part prompted by his uncertainty about what lay ahead, or as Ophelia said, "we know what we are, but know not what we may be."³⁶ Applying this to our antitrust context and paraphrasing slightly, we may know of a transaction within Canada but, if we take no action at all, we certainly will not know what the competitive effect may be.

The Bureau has not taken the position, in any of the cases outlined in Act II, that it should take no action at all and should instead defer presumptively in favour of another agency, regardless of outcome. At a minimum, the Bureau took steps to assess the likely competitive effects in Canada, for example by making initial market contacts or otherwise conducting its own research. An initial examination was, in some cases, sufficient for us to conclude that it was unnecessary to proceed to a more formal investigation, in order to craft a set of Canadian only remedies. However, it was at this point that the three leading ladies - communication, coordination and cooperation truly took centre stage.

Thus, the question is not: to defer or not to defer? Rather the question national competition authorities need to answer is how they can protect competition in their own countries in the most efficient manner, respond effectively to the challenges of our world of globalized commerce and its multiplicity of competition enforcers, and ensure that their decisions interfere as little as necessary with business operations and their counterparts' decisions.

This debate is certainly a complex one, and whether the solutions found in Bob's description of enhanced comity are of assistance, certainly merits further discussion. Let me try to package the proposals into five basic scenes.

Act III, scene i: Agree To A Presumptive Deferral Of A Remedy

Scene i of enhanced comity asks competition enforcers to agree to presumptively defer to the analysis and actions of the jurisdiction with a more substantial nexus to the transaction or conduct. The question for debate among the international antitrust community is whether a presumption of deferral is appropriate and whether countries should agree to presumptively defer.

Before we go any further, it would be useful to clarify what precisely is meant by presumptive deferral and how it would apply to multi-jurisdictional mergers. As noted earlier, if it means that we would decide to abide by the enforcement decision of another jurisdiction at the outset of a merger review, regardless of outcome, without having conducted our own fact-finding and competition analysis to determine whether competition concerns exist in Canada and how they should be efficiently and appropriately addressed, then this is not how the Bureau approaches multi-jurisdictional merger review. Furthermore, it would be difficult for the Bureau to agree to any such "blanket," presumptive deferral.

First, as our past merger cases show, my statutory duty to administer and enforce the law would not allow me, in advance, to presumptively defer or abide by the decision of another jurisdiction reviewing a merger, without assessing whether the transaction could harm competition in Canada and whether a Canada-only remedy might be necessary.

Second, there are too many variables to consider in our enforcement decision-making to support such a measure. While remedy clashes by competition authorities are rare, they remind us that reasonable people applying the same analysis may reach different conclusions on similar facts. We see this, for example, in our federal systems when courts in different jurisdictions occasionally disagree on how to apply the same federal law. Furthermore, given that economic theory evolves over time, as does national competition policy, it would be unrealistic to expect global agreement on every aspect of competition law enforcement.

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There will also be multi-jurisdictional cases where consistent competition analysis among agencies may produce different results because of different facts in the various reviewing jurisdictions. In the merger context, we see this where the same merger is being reviewed by several jurisdictions, but the facts in Canada differ from those in other jurisdictions, and this leads to different results. An illustration would be where post-merger concentration levels in Canada are higher than in the US, as competitors in the US have decided not to establish themselves in Canada, in light of the fact that the Canadian market for the particular product is small and there are relatively high entry costs in relation to the potential size of the market. Our prospects of new entry might also be different for the same reason.

Another example where presumptive deferral based on the greatest interest might not be justified would be in cases involving market players essential to a nation's economy, society or machinery of government. Whether there is mutual confidence between nations on legal tools, resources and independence is also an important factor to consider regarding any proposal of presumptive deferral.

Finally, as I have mentioned, negative comity, through application of principles of communication, cooperation and coordination, is featured in the Bureau's enforcement approach and is, in my view, producing appropriate results.

This recommendation also raises a number of other questions warranting discussion. Several were raised by Randy Tritell last month in his testimony before the Antitrust Modernization Commission, and they are all extremely relevant from my standpoint as the head of a competition agency responsible for administering and enforcing the competition law of a medium-sized economy:³⁷

• "Does enhanced comity mean that smaller jurisdictions where anti-competitive effects will almost always be slight relative to the effects elsewhere should presumptively defer to the action or inaction of larger jurisdictions?"

This begs a further question. Should "slight" be defined in absolute or relative terms? If it is absolute, then small countries would almost always defer to larger ones. If it is relative, there may be far fewer cases of deferral.

Randy further queried, and I also wonder:

• "How is the lead jurisdiction determined, and what factors will be considered? Is it the location of the conduct, the parties, the evidence, the most affected consumers or some other criteria?
• How should jurisdictions reconcile enhanced comity principles with domestic statutory obligations to protect their consumers?
• If enhanced comity was applied to the few cases with enforcement conflict, would it have made a difference?"³⁸

The answers to these questions become less problematic if the proposal of presumptive deferral seeks to put into practice the pragmatic process I have described today, in such cases as GE/Instrumentarium and others. In these cases, as noted earlier, the critical variables have been whether the transaction raises issues that are specific only to Canada, whether the impact in Canada is significant, whether the assets to be divested are in Canada, and whether it is critical to the enforcement of the terms of the settlement.

Canada is more likely to step aside and rely on remedies imposed by foreign competition authorities where assets subject to divestiture, or conduct that must be carried out as part of a behavioural remedy are located outside of Canada, where a Canada-specific remedy is not critical to the enforcement of the terms of the settlement and where these remedies address any Canadian concerns.

That said, I think the recommendation begs a broader question of competition enforcers: can we do better putting comity principles into practice? I agree with Bob that we should be striving to do better. When Bill Kovacic was General Counsel at the Federal Trade Commission, he called upon competition agencies to engage in "critical self-assessment."³⁹ He meant that it is just not good enough for us to go about our enforcement work without continually asking ourselves how effective we are and how we can do better. I share this view.

Deciding on how we put negative comity into practice is a complex issue for competition enforcers. For me, the key is communication. But, communication is a two-way street. I agree with Eleanor's view that cooperating jurisdictions must listen to, and seriously consider, each other's perspectives. If enforcers sympathetically consider each other's important interests and fully discuss their respective views, it should help produce strong actions and decisions. This type of comprehensive communication and information exchange is the only way that enforcers will be in a position to put comity into practice, integrate their counterparts' views into their analysis and make decisions that minimize adverse effects on each other.

When it comes to information exchange and communication, I think competition enforcers should adopt Shakespeare's adage "what's mine is yours, and what is yours is mine,"⁴⁰ within the bounds of the law of course. This can be greatly enhanced, in the merger context, if merging parties and third parties provide waivers in order to allow foreign authorities to communicate confidential information that would otherwise be prohibited by the law of the foreign jurisdictions^.41

Bilateral cooperation instruments can also be used to facilitate and promote communication and consultation. These instruments allow either party to request consultations on any matter related to the agreement or arrangement in question. Each party will carefully consider the representations of the other, and be prepared to discuss the matter. These instruments also provide for regular meetings of officials to discuss matters of mutual interest relating to the application of our laws. The 1995 OECD Cooperation Recommendation has similar provisions.

Related to the issue of communication and process, Eleanor argues that, when a second enforcer's decisions are roughly similar to the first enforcer's, it should write a reasoned opinion engaging the first nation's perspective. At the Bureau, we generally publicly pronounce on our multi-jurisdictional cases in press releases or in our Annual Reports. In them, we identify inter-agency cooperation, markets of common concern, why actions taken by foreign counterparts satisfied Canadian competition concerns such that limited or no specific remedial action was required by the Bureau, or what separate Canadian-specific remedial orders were obtained, as the case may be.

Even with optimal communication and information exchange, it is of course, up to the reviewing competition authority to determine whether and how it will integrate - or not integrate - the information, views, analysis and conclusions of its foreign counterparts into its decision-making, and minimize any adverse effects of its decisions on its counterparts. However, in order to respond to the challenges of globalization and the ever-increasing number of agencies reviewing multi-jurisdictional anti-competitive conduct, the Bureau is committed to continuing, and improving where desirable, its early, regular and robust communication and cooperation with its counterparts. In so doing, we can maintain and further build the inter-agency trust and confidence that is necessary to apply comity principles to our competition law enforcement decisions.

Of course, this is more than a two-way street. It is incumbent upon businesses' counsel to ensure that they engage fully, and early on, with all jurisdictions implicated in respect of a merger. The reality is, the later you engage, the less likely comity's three leading ladies will be amused!

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Act III, scene ii: Consultation at Request of Affected Entities

In scene ii of enhanced comity, enforcers are asked to agree to consult with each other where parties make a credible showing that they are potentially subject to inconsistent rules or divergent remedies that might impair their efficient operations in the global marketplace. I agree with Bob that this is an important consideration, and something we take into account at the Bureau. We consider all submissions we receive from affected parties and their counsel on multi-jurisdictional cases, including any on potential remedies. As part of our usual enforcement co-operation and efforts to coordinate remedies, where possible, we discuss with our counterparts differences and the potential for divergent remedies brought to our attention by parties. These discussions enable us to minimize the potential to harm the important interests of our foreign counterparts by our enforcement decisions.

But can we do better? For example, should private parties participate in discussions that enforcement agencies are having about potential remedies? Such participation could inject meaningful suggestions from those most familiar with the transaction and could assist in developing a common understanding about the implications of different remedies, including their impact on different jurisdictions. The advantages of this can be seen in the following scene.

Act III, scene iii - Agree to Fashion Remedies on a Joint Basis

In scene iii, the enhanced comity proposal urges agencies to agree to fashion remedies on a joint basis. In particular, we should avoid inconsistent obligations by using common definitions, drafting complimentary trustee provisions and consulting through the investigative process. I agree with Bob that all of these are desirable in multi-jurisdictional cases. This approach is a reality at the Bureau.

When coordinating cross-border remedies, one of our objectives is to prevent conflicts that may arise when remedies are intended to address competition concerns in different jurisdictions. An example might be where concentration levels in relevant markets in Canada and another jurisdiction are different and a single buyer must be approved for worldwide divestiture. Cross-border remedies may require us to coordinate with our foreign counterparts and ensure that a single trustee or monitor is appointed to oversee the divestiture of worldwide assets. Having a common trustee or monitor who understands the objectives of the remedies for each jurisdiction can reduce the potential for conflict to arise when determining acceptable buyers for the divested assets.

As noted in the previous scene, we have been involved in joint discussions with our counterparts and merging parties. In many cases, we have issued consent orders that substantially mirrored language of the consent instruments in other jurisdictions. The merger of Bayer/Aventis is an example of both. During this merger review, the Bureau participated in joint discussions with the merging parties and the US FTC and filed a Consent Agreement with the Competition Tribunal that not only substantially mirrored the Consent Decree of the FTC, but also contained similar elements to the Undertakings provided to the EC. To ensure the effectiveness of the remedy, the Consent Order also included the divestiture of assets and rights existing outside of Canada⁴². These assets were also part of the settlements formalized by the US and the EU. We also have jointly negotiated divestitures with other jurisdictions, such as the US, and the Lafarge/Blue Circle merger is an example.⁴³

But again, can we do better? Our draft Information Bulletin on Merger Remedies in Canada which we recently issued should be a useful tool, once it is finalized. It sets out the essential elements we will take into account in all merger cases where we require a remedy and provides clear guidance to other competition agencies on the essential terms of our consent agreements.

Act III, scene iv: Benchmarking Reviews Where Both Jurisdictions Impose Remedies

In scene iv of enhanced comity, agencies are called upon to agree to benchmark reviews where they have been unable to agree with other authorities about the appropriate treatment of a merger or anti-competitive conduct and to analyse the impact of their divergent decrees.

Again, I agree with Bob that competition agencies should look back on their work with a critical eye, and with a view to doing better. At the Bureau we have instituted a number of initiatives to improve our effectiveness. We have started thinking about how to benchmark our work, although our focus so far does not extend to examining issues that have arisen due to inconsistent remedies.

First, we have made analysing our approach to merger remedies a priority. We have published a discussion paper on merger remedies and are consulting on our policy on how we seek, design and implement such remedies. We are doing this because we believe that, to ensure that our remedies are effective, we must continually re-examine our approach to them. Naturally, this work will cause us to examine our approach to remedies in multi-jurisdictional cases.

A number of jurisdictions have begun to conduct ex-post reviews of antitrust decisions as a means of evaluating their analytical and investigatory processes, developing best practices and increasing transparency. We are also exploring this possibility. By examining the outcomes of the conclusions we reach on mergers, we hope to be able to determine whether our analysis of the impacts of a merger turned out to be correct and whether our remedies had the desired effect. This will involve analyzing current market conditions and assessing how the market has evolved following our decision to challenge or not challenge a transaction, as well as whether the factors we relied upon to make our decision were correct. While our benchmarking work has just begun, I hope that with time, we will be in a position to conduct post-merger reviews on cases with multi-jurisdictional dimensions.

Second, we have published a new policy on technical backgrounders. It sets out when we will provide details to the public of our analysis in individual investigations. While they are not precedents, and they do not bind us in future cases, our technical backgrounders will give the business community, their counsel, and other competition agencies, a better idea of what to expect in future investigations.

With our competition analysis published for all to see, our critics can also review our analysis. Therefore, our policy on publishing technical backgrounders disciplines us to act in an accountable way and makes our competition law enforcement more transparent. This is how it should be. Moreover, by providing more information on our analysis, we can continue to build upon the trust that our foreign counterparts and the public have come to have in our decision-making and, as a result, continue to avoid potential "surprises" in our decision-making. We have issued four technical backgrounders so far, and you can count on seeing more from the Bureau in the future.

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In future technical backgrounders meeting our publication criteria, it would be a good idea to explain our analysis in multi-jurisdictional cases, and outline the circumstances where the Bureau either took limited or no action in Canada due to remedies obtained by foreign competition authorities. In our analysis, we could elaborate on our competition analysis and reasons for the conclusions we reached.

Although this practice already has some momentum in other jurisdictions, it is my hope that it becomes more widely used by competition enforcers around the world. If our counterparts explain their competition analysis in multi-jurisdictional cases in detail in publicly available documents such as the Bureau's technical backgrounders, when our analyses are compared, the reasons for consistent or divergent remedies should become self-evident. I see the Bureau's technical backgrounders as an initiative broadly supporting Bob's call for competition enforcers to be more accountable, predictable and transparent in their decision-making in multi-jurisdictional cases and to explain the reasons for their consistent or inconsistent analyses.

This approach, based on Bob's enhanced comity principles, reflects a world of multi-jurisdictional merger enforcement where each enforcement agency determines, for itself, how to address possible anticompetitive behaviour in the most efficient and effective manner, relying on foreign authorities where that serves this goal.

Eleanor's approach differs in some ways from the enhanced comity proposal that was discussed in scenes i-iv. Therefore, to complete Act III, it might be useful to add a fifth and final scene, which will provide a brief Canadian perspective on her model.

Act III, scene v: Eleanor Fox's Future of Deepened Cooperation

For Eleanor, the future of multi-jurisdictional merger review involves implementing ways to enhance cooperation and eliminate unnecessary conflict. In her testimony before the Antitrust Modernization Commission, she highlighted a number of ICPAC's recommendations, including one regarding multi-jurisdictional work sharing in merger review, which stated:

At this advanced level of work sharing, the coordinating agency would be required to accept the mantle of parens patriae for world competition. Accordingly, it would endeavor to evaluate procompetitive and anticompetitive effects of a proposed transaction on a global scale, taking into account all of the merger's costs and benefits to competition, not only the net effects within its borders. This approach arguably is superior to an approach in which each jurisdiction analyzes the effects of a proposed transaction within its own borders and ignores the harms or the benefits that the transaction may generate elsewhere. Multimarket assessment would position the coordinating jurisdiction to account for what had previously been viewed as externalities, thereby enabling it to assess the net effects of the proposed transaction (under a neutral welfare standard) on a global scale. The coordinating jurisdiction could then design remedies to address the concerns of all interested jurisdictions.⁴⁴

She further explained that:

Under this advanced work sharing arrangement, the coordinating agency would perform a centralized information gathering function following initial notification by the merging parties to all reviewing agencies. The coordinating agency would then assess the competitive effects of the proposed transaction in all relevant product and geographic markets. Each interested jurisdiction would be invited to submit comments to the coordinating jurisdiction regarding its particular concerns. The assessment of the coordinating agency would be binding on the coordinating jurisdiction but could either serve as a recommendation to other interested jurisdictions (with a presumption in favour of accepting the recommendation) or be binding on those jurisdictions as well.⁴⁵

This proposal raises a number of questions worthy of debate.

• How would the parens patriae carry out its investigation in numerous jurisdictions? For example, what would be the role of the foreign jurisdiction, particularly if there is a need for the parens patriae to reflect the concerns of all the other jurisdictions? Would this not require parallel investigations, as is presently the case in multi-jurisdictional mergers? Would investigators for the parens patriae also need to conduct interviews, or meet with local experts in the foreign jurisdictions? If so, does this approach make for a timely and efficient process?
• If a merger is negative on balance in a particular jurisdiction, but positive globally, how would that jurisdiction's concerns be addressed?
• Does the parens patriae have the final say with respect to the remedies that will take effect in a foreign country? If so, is this compatible with nations' sovereignty?

While I have no doubt there are many viewpoints on this proposal, and I wonder whether it is a realistic goal, I think the idea contributes to the debate we are having today over the future of competition enforcement in our globalized world.

Epilogue

As we know from King Henry the Fifth, "men of few words are the best men,"⁴⁶ or in my case, women of few words. So I will spare you Juliet's "parting is such sweet sorrow"⁴⁷ oration and take my cue here.

Our discussion today on comity and its role in competition law enforcement is an important one. I have provided you with my Canadian perspective based on the Bureau's enforcement work. I have highlighted areas not only where I share Bob and Eleanor's views, but also where our opinions diverge. I hope that the variety of viewpoints we represent will spark continued dialogue on comity within the international antitrust community, going forward. I look forward to hearing your viewpoint, and to responding to your questions.

And I can only hope that, in this case, "All's Well That Ends Well".

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Foonotes

¹ Supranational agencies enforcing supranational regulations, as well. (Return to Text)

² Merry Wives of Windsor, Act II, scene ii. (Return to Text)

³ The enhanced comity recommendations were presented during the testimony of James R. Atwood, Partner, Covington & Burling, before the Antitrust Modernization Commission, Hearing on International Antitrust Issues, Washington, DC, February 15, 2006 and are available online at http://www.amc.gov/commission_hearings/pdf/Statement_Atwood.pdf. (Return to Text)

⁴ In addition to Canada, amici curiae briefs were filed by the governments of Germany, Belgium, United Kingdom, the Netherlands and Japan. The Brief for the Government of Canada as Amicus Curiae Supporting Reversal at the Supreme Court of the United States is available online at http://www.competitionbureau.gc.ca/epic/site/vwapj/Amicus_Brief.pdf. (Return to Text)

⁵ World Trade Organization, World Trade Report 2004: Exploring the Linkages Between the Domestic Policy Environment and International Trade. (Return to Text)

⁶ (1990) 3 S.C.R. 1077. (Return to Text)

⁷ Ibid. at 1096. (Return to Text)

⁸ Ibid. at 1097. (Return to Text)

⁹ Ibid. at 1098. (Return to Text)

¹⁰ (2000) 4 C.P.R. (4th) 508. (Return to Text)

¹¹ Ibid. at 518. (Return to Text)

¹² Organisation For Economic Co-Operation and Development, Working Party No. 3 on International Cooperation, CLP Report on Positive Comity: Note by the Secretariat (14 June 1999) at 18. (Return to Text)

¹³ Ibid. at 6 and 17. (Return to Text)

¹⁴ Copies of each of these instruments can be found on the Bureau's website at http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/h_00128.html. (Return to Text)

¹⁵ The agreement is available on the Bureau's website at http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/01592.html. (Return to Text)

¹⁶ Organisation for Economic Cooperation and Development, Revised Recommendation to the Council Concerning Cooperation Between Member Countries on Anticompetitive Practices Affecting International Trade (July 1995), C(95) 130/Final. (Return to Text)

¹⁷ ICN Recommended Practices for Merger Notification Procedures (June 2005) available online at http://www.internationalcompetitionnetwork.org/mnprecpractices.pdf. (Return to Text)

¹⁸ Ibid. (Return to Text)

¹⁹ Organisation for Economic Co-operation and Development, Recommendation of the Council on Merger Review (23 March 2005), C(2005)34 available online at http://webdomino1.oecd.org/horizontal/oecdacts.nsf/linkto/c(2005)34. (Return to Text)

²⁰ Organisation for Economic Co-operation and Development, Working Party No. 3 on Co-operation and Enforcement Roundtable Discussion on Cross-Border Remedies in Merger Review (11 February 2005). (Return to Text)

²¹ Hamlet, Act III, scene i. (Return to Text)

²² Supra note 12 at 6. In a discussion about "informal positive comity - a term applicable to informal processes for making and considering positive comity requests, the OECD provided a useful illustration of positive comity: "For example, assume that Country A regards its consumers as being injured by conduct in Country B. If Country A has requested law enforcement action and agreed to defer action if Country B grants its request, Country B's consideration of the request would be positive comity and Country A's inaction would be part of a positive comity arrangement. But assume that Country A has made no request. Rather, since Country B is publicly pursuing the alleged conduct, Country A has taken no action. In this situation - where no request has been made – it is inaccurate and misleading to refer to Country A's inaction as "informal" (or any other form of) positive comity. If Country A's inaction constitutes an exercise of prosecutorial discretion based on its own interests, the inaction does not involve any form of comity. If its inaction is based in part on its desire not to conduct an investigation to which Country B might object, the inaction is a form of negative comity." (Return to Text)

²³ While we all tend to think of physical assets first, the assets may be of any kind, including intellectual property rights such as brand names. (Return to Text)

²⁴ This could arise in circumstances where issues with a multi-jurisdictional merger are the same in Canada as a foreign jurisdiction. In one case, the foreign jurisdiction may conclude that because of costs or the size of markets, it should order the sale of a business, including intellectual property rights, on a worldwide basis. In a different case, the foreign authority might conclude that because of costs or scale of business, it would be sufficient to simply order the sale of the business, including the intellectual property rights, within its own jurisdiction. In the latter case, Canada would need its own Canada-specific remedy. (Return to Text)

²⁵ Government of Canada, Competition Bureau's Concerns Resolved in Procter & Gamble's Acquisition of Gillette (September 30, 2005), available online at http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/01953.html. (Return to Text)

²⁶ Government of Canada, Bureau Resolves Competition Concerns With Medical Equipment Merger (September 16, 2003), available online at http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/00379.html. (Return to Text)

²⁷ Government of Canada, Alcan's Offer for Pechiney Cleared by the Competition Bureau, (October 14, 2003), available online at
http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/00383.html. (Return to Text)

²⁸ Ibid. Alcan agreed to divest Pechiney's aluminum rolling facility in Ravenswood, West Virginia, and other rolling mills in Europe. (Return to Text)

²⁹ Ibid. Alcan also made commitments to the EC related to alumina refining technology, aluminum smelter cell technology and anode baking furnace designs. (Return to Text)

³⁰ Ibid. (Return to Text)

³¹ The parties agreed to divest certain polyethylene technology assets and intellectual property rights, Dow's global ethyleneamines business, its global ethanolamines business and its methyldiethanolamine-based gas treating products business. Annual Report of the Commissioner of Competition, Competition Bureau 2000-2001, available online at: http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/01484.html. (Return to Text)

³² S. Scott, Commissioner of Competition, Competition Bureau Canada, "C Is For Competition: How we get things done in a globalized business world", Remarks at Insight Conference (Montreal: June 17, 2005). (Return to Text)

³³ Supra note 20. See for example, Guinness plc/Grand Metropolitan plc and Kimberly-Clark Corporation/Scott Paper Company. (Return to Text)

³⁴ Competition Act, R.S.C. 1985 c. 19 (2nd Supp.) s. 19 s. 97. (Return to Text)

³⁵ Supra note 32. (Return to Text)

³⁶ Hamlet, Act IV, scene v. (Return to Text)

³⁷ Statement by Randolph W. Tritell, Assistant Director for International Antitrust, Federal Trade Commission, Antitrust Modernization Commission, Hearing on International Antitrust Issues, Washington, D.C., February 15, 2006 available online at http://www.amc.gov/commission_hearings/pdf/Statement_Tritell.pdf. (Return to Text)

³⁸ Ibid. (Return to Text)

³⁹ W. E. Kovacic, Achieving Better Practices in the Design of Competition Policy Institutions, Remarks before the Seoul Competition Forum, Seoul, Republic of Korea (20 April 2004). (Return to Text)

⁴⁰ Measure For Measure, Act I, scene i. (Return to Text)

⁴¹ See, e.g., ICN Recommended Practices for Merger Notification Procedures, Recommended Practice X, Interagency Coordination, Comments D.1 and 2. Under the Competition Act, we do not need such waivers to share confidential information. (Return to Text)

⁴² Supra note 20 at 5. (Return to Text)

⁴³ Ibid at 6. (Return to Text)

⁴⁴ Testimony of Eleanor M. Fox, Walter J. Derenberg Professor of Trade Regulation, New York University School of Law, Before the Antitrust Modernization Commission Hearing on International Issues, Washington, D.C., February 15, 2006 available online at http://www.amc.gov/commission_hearings/pdf/Statement_Fox_final.pdf. (Return to Text)

⁴⁵ Ibid. (Return to Text)

⁴⁶ King Henry the Fifth, Act III, scene ii. (Return to Text)

⁴⁷ Romeo and Juliet, Act II, scene ii. (Return to Text)