I welcome the opportunity to join you today to promote the transparency of the work we do at the Bureau. It is critically important, of course, that the Bureau not only discharge its mandate in a principled and coherent fashion, but that we are accessible and ready to debate with our stakeholders whether there are ways that we can refine our policies and practices to better meet, among other things, the demands of best international norms, and the imperative that we be predictable. I am particularly pleased to have this chance to dialogue with the mergers and acquisitions community, given my responsibilities in the Mergers Branch and my keen interest in many of the issues that preoccupy you--from decreasing procedural burdens, to increasing convergence among jurisdictions in the context of international mergers, where appropriate.

As some of you may have less familiarity than others with our work at the Competition Bureau, let me briefly put us into context. The Competition Act (Act) is framework economic legislation applicable to virtually all commercial activity in Canada. Our job is to maintain and encourage competition in Canada. We perform our job in two principal ways: by enforcing the Act to protect competitive forces in the economy and by energetic advocacy promoting competition. I will address these two dimensions of our work in turn.

First, and the aspect of our enforcement work with which you are likely most familiar, the Act provides the Bureau with the right to review and contest mergers to prevent excessive market concentration. Only the larger mergers must be notified to the Bureau, and we carefully examine those mergers, ensuring that we only act where there is a likelihood of a substantial lessening or prevention of competition. Historically, over 96 per cent of all notifications have been approved without alteration. Where we do seek alteration, it is not with a view to returning to the pre-merger competitive situation, nor to impose what we might consider a desirable competitive dynamic; rather, we are constrained, and properly confine our attention, to identifying and seeking the remedy that we believe is likely to remove the substantiality from the substantial lessening of competition/substantial prevention of competition. In those rare cases where we have a concern that cannot be resolved, the Commissioner may bring an application to the Competition Tribunal, a specialized administrative tribunal whose members have expertise in business, economics and the law.

Second, the Act gives the Bureau the power to address certain potentially anti-competitive business practices, on a going forward basis. Such practices include the potential abuse of a dominant market position which, to be actionable, must be practised by a dominant firm and have a demonstrable substantial lessening of competition impact on affected markets. We recognize, certainly, that many aggressive pricing and bundled discounts can be perfectly legitimate and we are very careful to distinguish those which support and promote intense and vigorous competition from those which impede it, and do so substantially.

Third, and I will only touch on this facet of our work, you are perhaps aware that we enforce criminal provisions, such as those outlawing price-fixing and market allocation. In fact, the Commissioner's number one priority in her current mandate is the pursuit of such naked cartel behaviour, particularly in the context of domestic price-fixing schemes, in addition to those in the international domain. To that end, we have increased the budget for our criminal work by 50 per cent, and we have introduced new teams of local enforcement officers in regional markets across Canada to add to our local relevance, and to advance our "feet on the street" enforcement approach.

We have had some particularly notable successes in this area of late, including one matter you may have heard about involving $37.5 million in fines against the participants in the paper merchants' price-fixing case resolved earlier this year. In addition to the fine, and to advance the Bureau's commitment to deter such crime by bringing home to individuals the personal consequences of such conduct, certain personnel were required to be terminated and, in other cases, demoted. The economic reason for taking cartels so seriously is obvious: cartels and bid-rigging are capable of diverting enormous amounts of capital away from consumers, taxpayers and honest companies. In effect, these criminal acts destroy markets and destroy competitiveness.

Finally, the Bureau's mandate includes preserving the integrity of the marketplace and, in particular, marketplace information. To this end, the Act contains provisions denouncing false and misleading advertising. The reason such activity must be prosecuted is, of course, the distorting effect it has on the marketplace and the negative impact it has on legitimate market participants. These infractions can be pursued civilly or criminally, depending upon the egregiousness of the particular offending conduct and the nature of the impact on those affected.

In discharging its mandate, the Bureau's powers are what you would expect of an enforcement agency. For example, we can and do issue search warrants where appropriate; we can and do seek wiretap authorizations; and, we have an immunity program with respect to our criminal offences to encourage individuals and companies to bring us evidence of criminal conduct. On the civil side, we approach each matter--including merger review--on its own specific facts and, in those few cases which warrant it, we bring matters before the specialized Competition Tribunal.

In addition to our enforcement duties, we have an active advocacy role. While time does not permit me to dwell on this today, our advocacy priorities--with respect to which we actively seek out forums to communicate our messages--may be of interest to you. This year, our focus is on health and, in particular, pharmaceuticals; the self-regulated professions, including accountants, optometrists, opticians, real estate practitioners and, yes, lawyers; and, finally, telecom.

One of our key messages, and one I anticipate may resonate with this audience, is our conviction that regulatory barriers require constant and vigilant examination. We advocate for the removal of regulatory barriers that inhibit domestic competition when they cannot objectively be justified as necessary and effective, and to have been designed as narrowly as possible. We must continually question whether such restrictions are effective; whether they impose undue costs on business; and whether there are less intrusive approaches that could achieve the same regulatory goal. We are not competition zealots, but we do harp on these questions in examining new and existing policies and legislation in our advocacy role.

At this point, I would like to briefly address two areas that may be of particular interest to this group; they certainly are to me in the Mergers Branch: the recently released Bulletin on Merger Remedies, and the ever-provocative topic of efficiencies.

Our merger provisions have been in place for 20 years. We have sought remedies in over 50 cases and most have achieved what they were designed to do. Nonetheless, like all other jurisdictions, we have had our disappointments where, for example, an asset agreed or ordered to be divested to a new competitor had not been realized, and the asset was returned to the parties. ¹

In response, and as we have gained experience, we have progressively fine-tuned our approach and the principles that guide us in designing and implementing remedies. That is what is reflected in our recently released Bulletin. An important note to make is that we intend this document to be a "living document". In other words, we will continue to examine and re-examine our approach, and continue to refine it. As part of that process, we are engaged in two projects at the moment involving ex post review of the quality of our analysis and the efficacy of remedies imposed in past cases; we intend to share the results of these studies with the public once completed next year. Critical self-examination is a tough thing to do, but it is unquestionably, to my mind, the right thing to do.

I will note for this crowd only two points of particular interest in connection with the Merger Remedies Bulletin. Both are not just reflected in our Bulletin, but already in our practice.

First, we at the Bureau are sensitive to the need, in the context of multi-jurisdictional mergers where the anti-competitive effects in Canada are similar or related to those in other jurisdictions, to not only cooperate with foreign jurisdictions to expedite our reviews but to explore coordinating remedies in the various jurisdictions. While the Bureau would never "defer" per se to another jurisdiction, the Bureau recognizes that there can, in some circumstances, be real advantages to some form of coordination--advantages to the merging parties, and, indeed to the public interest protected by the Bureau, in the very efficacy and viability of the remedy. Accordingly, the Bureau is open to, and has on several occasions explicitly agreed to accept as sufficient, remedies secured in foreign jurisdictions as acceptable fixes for anticipated anti-competitive impacts in Canada.² For example, in Boston Scientific's acquisition of Guidant last year,³ the Bureau accepted the divestiture of Guidant's interventional cardiology business to Abbott, as had been required by the FTC, as sufficient to address the Bureau's concerns. Likewise, in the worldwide acquisition by GE of Instrumentarium, the interface facilitation guarantees required by the European Commission were considered sufficient for our purposes, once GE confirmed in writing to the Bureau that these commitments would apply globally, and would be available to third party suppliers in Canada as elsewhere. The Bureau did not require any further action or more formal recording of the remedy.

I should point out too that there is a spectrum here. Coordination can mean anything from cooperation, to ensuring that our remedies do not undermine or otherwise conflict with those imposed by others, to accepting with minimum memorialization the remedy as applied in Canada. It is fair to say that, the greater the extent of similarity in issues, the greater the likelihood of true coordinated remedies. In all cases, the remedy must adequately address the Bureau's concern but, if it could, then we will make efforts to align ourselves. This is in all parties' interest. Certainly, the facts of the particular case make coordination more or less appropriate for discharging our own Canadian mandate. Suffice to say, relevant factors in that assessment include (i) whether there are Canadian-specific issues; (ii) whether the Canadian impact is particularly significant; (iii) whether assets to be divested are in Canada; and (iv) whether it is critical to the enforcement of the terms of settlement to have a distinct Canadian deal.

I might take this opportunity to make a couple of observations related to the hostile merger environment. I listened with interest to the fascinating panels this morning on tactical considerations and defences in hostile scenarios. Believe it or not, parties have actually tried to use the regulatory authorities, including the Bureau, to advance their strategic agenda! Quite seriously, and likewise I expect no surprise to you, we at the Bureau must be vigilant to remain even-handed in such environments, applying our rules and policies consistently, so as not to disturb the contest being played out in the market. Necessarily, the principled and scrupulous application of our rules may, in effect, advantage one or the other party, but we trust that, while that may not please you at that particular moment, you would respect that we are, quite properly, ensuring that we do not impact or influence the contest in which we have no part to play other than to conduct the antitrust review.

A related observation that should not be, but may be more of a surprise to you: there is scope for you as counsel, or the client, to bring to us not only coordinated remedy proposals per se, but to alert us to challenges that you may be facing elsewhere owing, for example, to demands of foreign exchanges. We cannot always find ways to relieve such pressure, and must always remain as neutral as possible, by applying our rules as agnostically as possible. That said, we are certainly open to and do want to hear what your challenges are and what you would like us to consider doing to ease the associated burden.

The second point of interest in connection with the Remedies Bulletin is what, as a general matter, we are looking for in those few cases where we are satisfied that there is a likely substantial lessening or prevention of competition--because, of course, that is the only time we seek a remedy.

In the broadest terms, we prefer what we call a standalone structural divestiture to a single buyer, accomplished in a timely way. By structural, we mean a remedy that addresses the
anti-competitive effects arising from a merger by directly intervening in the competitive structure of the market; take out a player, put one back (or expand the capacity of an existing competitor). Such structural remedies are good because they promote certainty that the package is viable and will attract buyers, and they decrease integration risk. They have the further advantage of decreasing the risk of an exchange of confidential information in the interim, however unwittingly.

We prefer not to have what we call standalone behavioural remedies, and by that I mean a remedy that does not address squarely the structural change to the market effected by the merger, with a structural fix. A true behavioural remedy purports to address the anti-competitive terms stemming from a merger by modifying or constraining the behaviour of the merged firms; however, such remedies are difficult to design so as to replicate the outcomes of a competitive market. Moreover, they typically require a substantial amount of monitoring and enforcement. Rather than offering a permanent "fix", these remedies most often impose ongoing costs and other burdens on the parties, the Bureau and other market participants as well; worse still, they may have unintended anti-competitive impacts themselves.

That said, there are remedies that may appear to be behavioural but which, in fact, have a structural impact. In appropriate circumstances, we will consider such remedies--we label them "quasi-structural"--as they can have the capacity to adequately address competitive issues. Examples of such remedies include licensing of intellectual property rights; removing anti-competitive terms, such as non-competition clauses, from contracts; and granting non-discriminatory access to critical networks.

Finally in this regard, it is not accurate that we would never accept a behavioural remedy. We may. We certainly would still have to be satisfied that there was no "appropriate" structural remedy available, and that there would be no or only minimal monitoring required. To date, consistent with the nature of those requirements, there are only a few examples of cases we have resolved on the basis of a pure standalone behavioural remedy.⁴

One matter with which some of you may have passing familiarity is the CN/BC Rail merger, where the prospect was to challenge the multibillion dollar proposed merger on the basis of seemingly real, but as best as we could model and anticipate, modestly sized anti-competitive impacts. In that case, we developed, with the parties, a rather complex web of behavioural commitments. A key factor in our conclusion that such an approach could be acceptable was the significant monitoring role assumed by the BC Government and other players outside the Bureau.

The final issue that I will address is efficiencies.

As some of you may know, there is an explicit defence in the Competition Act for mergers which, while they are likely to have anti-competitive impacts, would generate efficiencies that are greater than and offset those negative effects.

There has been only one court case testing the provision—the Superior Propane purchase of ICG Propane. I have to be a bit careful here, as I was counsel to the successful merging parties against the Bureau; as such, I have to take some measure of responsibility for the state of the jurisprudence on the issue. What I can say is that we at least now have some guidance from the courts.

The test is as follows. If the true efficiencies generated by a merger (and here I exclude mere transfers such as synergies realized by the exercise of market power), when compared to the anti-competitive effects of the merger, are bigger, the merger must generally be allowed. There is a caveat, and this caveat poses a bit of a challenge--for the merging parties and the Bureau alike; that is, in addition to the anti-competitive effects, the Tribunal will add any "socially adverse" wealth transfer to counter the efficiencies. In other words, where applicable, the Bureau may invite the Tribunal to determine that a dollar is worth more in the hands of the particular group or groups of affected consumers or buyers, than in the hands of the particular merging parties (or their shareholders).

I don't believe I am giving away anything to say that is a tall order. That said, there are principled ways of approaching that balancing exercise, and the Bureau, as well as the merging parties, can conduct work in an appropriate case to reasonably anticipate the outcome of such an analysis so as to factor the matter into their initial decision to merge, or to respond if challenged by the Bureau.

Quite recently, the Commissioner has communicated a couple of other messages in connection with efficiencies which clarify, we hope, the Commissioner's approach in this important area.

First, we encourage parties to bring in efficiencies cases; to bring them in as early as possible and in as substantiated a form as possible. Common sense is powerful. If there is a true efficiencies rationale to a proposed merger, that fact alone may go a good distance to quelling concerns that may otherwise be brewing over whether the goal is really to accumulate and exploit market power, rather than to compete more effectively. Accordingly, while the defence itself may not be triggered, efficiencies can be an important factor in our review of your merger in a more environmental way. The US Department of Justice appears to have taken efficiencies into account in this way.⁵

Second, we sought to remind the Bar that we do not draw any conclusions about an anti-competitive effects problem by the mere presentation of an efficiencies case. Quite the contrary. It is a responsible approach to provide us with all relevant information that we should have to properly discharge our mandate under the Act, and we urge parties to do just that.

In that specific regard, we had one more message to the Bar and business community. Specifically, contrary to what may have been the past posture of the Bureau, the Commissioner recognizes that a clear reading of the Act requires us to consider efficiencies, at least within the specific defence provision of the Act, if not elsewhere. In other words, the Commissioner will not necessarily require a case involving a significant efficiencies case to go to the Tribunal for clearance. Specifically, we could, in an appropriate case, responsibly approve the merger on that basis alone.

Admittedly, such a case will be rare. And, indeed, I am not convinced that this is the sea change some have suggested. I personally don't believe that the Commissioner wasn't open to analysing efficiencies submissions in the past; accordingly, I do not think this message signals a new world order. However, it does confirm that we formally recognize that our mandate includes a consideration of efficiencies and that we want to, and will, hear parties out on that issue.

A parting word, and a return to my expression at the outset as to being grateful for having this opportunity with this particular audience.

Our goal at the Bureau is to ensure that our markets deliver the benefits of competition, including low costs, high quality and choice to consumers and businesses. In our efforts to deliver on that goal, transparency, and its first cousin, predictability, have long been two of the Bureau's central values. We have made a particular effort under our current Commissioner, Sheridan Scott, to advance those vital objectives, and we believe we have made real progress in this regard. We regularly publish technical backgrounders, describing our analysis on cases of interest, and are engaged in very public critical self-assessment projects that expose our work without cover. We believe we have that responsibility, and that through those mechanisms and others we can advance our analysis and move ever closer to the best practices adopted worldwide in fostering competitive markets in Canada.

But certainly there is always room to improve, and in that respect we look to you as well as to ourselves.

To that end, the Commissioner has convened a number of what we call "sector days", gathering representatives of all related constituencies for a day of frank exchange, free from the positioning that a live case necessarily elicits. Further, we wish to broaden the work that we do with those counsel in the room and their competition colleagues across the country. In fact, we are currently engaged in a joint task force with the Canadian Bar Association Competition Law Section, with a view to promoting greater collaboration. We are convinced that we share the same fundamental values with their clients in the promotion of fair and competitive markets. Why not work together to advance that overriding and important goal so necessary if we want innovation in Canada to be stimulated, Canada's rate of productivity growth to recover and flourish, and for Canadian companies to continue to have competitive markets in which to participate.

With that invitation, let me thank you for inviting me to join you today. Should you have any questions, I would be delighted to try to respond.

¹ For example, in Abitibi / Donahue (2001), the divestiture of a newsprint mill was not completed; in Air Canada/Canadian Airlines (1999), the divestiture of the regional airline of Canadian was not completed; in Chapters/Indigo (2001), the divestiture of various bookstores was not completed.

² 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/internet/index.cfm?itemID=1953&lg=e.

Government of Canada, Bureau Resolves Competition Concerns With Medical Equipment Merger (September 16, 2003), available online at http://www.competitionbureau.gc.ca/internet/index.cfm?itemID=379&lg=e

³ http://www.competitionbureau.gc.ca/internet/index.cfm?itemID=2090&lg=e

⁴ See, for example, Consent Agreement re CN purchase of BC Rail, July 2004; Consent Agreement re merger of the electronic television audience measurement operations of BBM Canada and Nielsen Media Research Limited, June 2006.

⁵ See, for example, the Department of Justice Press Release in connection with the Whirlpool acquisition of Maytag, March 29, 2006: http://www.usdoj.gov/atr/public/press_releases/2006/215326.htm