Speaking Notes for Sheridan Scott Commissioner of Competition

Competition Bureau

"Equipping ourselves to be global leaders: the competition perspective"

Canadian Bar Association Annual Conference on Competition Law
Hilton Lac Leamy, Ottawa/Hull

October 11, 2007

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I am extremely pleased to be here and to have the opportunity to speak with you.

When we met at your spring meeting in Toronto, I reminded you of Robin Williams' suggestion that spring was nature's way of saying, "Let's party!" I hope you all took that to heart and had a great summer.

And of course, in Canada, when we think of summer, we think of beer. Coincidentally, I have been thinking about beer quite a bit recently, for a couple of reasons.

Of course, there is the Labatt-Lakeport merger issue. But that case of beer is still before the courts and the subject of an ongoing investigation, so you know we won't be getting into that here.

So if not Labatts, what else? Well, why not Molsons?

As it happens, during the summer I found myself reading the curiously titled book, "Why Mexicans Don't Drink Molsons", by Andrea Mandel-Campbell.

Now if the title sounds a bit frivolous, the book is anything but. It begins with the simple observation that Canada -- a grain growing land of abundant fresh water and beer drinkers – never established a big footprint in world markets, even those as close as Mexico. Indeed, the Mexicans have developed a better global reach for their premier brand, Corona, despite lacking our natural advantages.

This seemingly innocuous observation opens the door to a much deeper enquiry into Canada's global competitiveness: If we can't take on the world in a product where we start with so many advantages, can we really hope to compete in an increasingly global economy? As Mandel-Campbell puts it: "Canada has all the makings of a global leader. The question is whether it wants to be one."

Well, I think it does, and I would argue that all of us here have a job to do to help equip Canadians to take on the world.

I'll speak briefly about your role later, but first I want to talk about what the Competition Bureau is doing.

First of all, we have a global outlook. Over the past few years, we have been benchmarking ourselves against identified best practices around the world, learning from others, and, incidentally, sharing some of our best practices with interested audiences too.

Benchmarking and learning were important objectives of my visit to another beer drinking nation, Australia, earlier this year. As many of you may know, Australia has made competition a cornerstone of its economic development policy over the past 14 years, starting with a Committee of Inquiry chaired by Professor Fred Hilmer.

The 1993 "Hilmer Report" launched Australia on a national pro-competition campaign. And it has paid off.

In 2005, the independent Australian National Competition Council estimated that the policy had contributed to the highest Australian productivity growth rates in forty years, and had boosted average Australian household incomes by AUS$7000. This is no small feat to accomplish in just 12 years.

More recently, our quest to exchange ideas on best practices took me to Fordham Competition Law Institute's workshop for Heads of Agencies. There, I was asked to speak on a panel on developing enforcement priorities and maintaining quality control. My international counterparts were particularly interested in the Bureau's active programme of critical self-assessment, a recent example of which was published last week in the form of a post merger review study.

We believe that making the sorts of incremental improvements identified in this report can help our decision-making, to ensure that our interventions are limited to those with significant anti-competitive effects leaving companies free to pursue pro-competitive mergers. This is certainly one part of our helping Canadians to take on the world.

Now my involvement at Fordham is an example of other nations using Canada as a benchmark. We also look to other nations to benchmark against them, always with a clear question in mind: will following the lead of another agency lead to better, more innovative processes and outcomes here at home? And on that count, I am very pleased with our recent progress.

For instance, borrowing from both the US and the EU, we have implemented what we call our "red team/green team" initiative for cases where we are contemplating a challenge or have identified particularly difficult issues. Investigators and counsel involved in such a case are assigned to one of the two teams, to argue the relative merits of each side before a 3-member panel of senior Bureau officials. We have now used this internal, competitive forum on a number of occasions to help us gain a better understanding of, and to help narrow, important issues. We will continue to use this technique to challenge ourselves to do the best possible analysis. And, incidentally, to provide an outlet for the competitive fires that burn even in the hearts of public servants.Let me cite a second example of our quest for excellence, one much closer to home for those of us in this room.

Our frequent co-operation with our American colleagues made it obvious that the relationship between the Bureau and the bar was less effective than that experienced south of the border.

Looking to the US, we saw in the current interactions between the ABA and the Department of Justice and the FTC a more open, reciprocal relationship that ultimately benefited all stakeholders. We resolved to see what could be done here in Canada.

I'm pleased to be able to announce today that, after months of work with a joint Bureau-CBA committee, the Task Force on Collaboration has released a report recommending a number of protocols for collaboration, several of which have already been implemented. The agreement can be found on our website.

I believe that both will advance our principles of transparency and predictability and will enrich our analytical capacity, all with a view to making us even better at what we do, so we can help equip Canadians to take on the world.

A higher profile example of our role in contributing to Canada's prosperity – and one I am particularly proud of – can be found in our recent involvement in a number of interrelated merger cases in the grain handling industry. All of these cases had the potential to effect- the operation of Canada's primary gateway to Asia, the Vancouver Port. In July, we announced the finalization of a series of remedies that not only allowed several efficiency enhancing mergers to proceed but also protected and promoted competitive Canadian markets.

In particular, the negotiated outcome will contribute to the more efficient movement of grain across our country and through our ports.

And this outcome was accomplished on an extraordinarily expedited timeline, and with an unusually creative process, all in an effort to provide parties with certainty as soon as possible, so as to allow the market to choose the best outcomes.

Indeed, the Bureau was able to review Saskatchewan Wheat Pool's hostile bid for Agricore United and negotiate a Consent Agreement in the short period of time necessary to allow the Wheat Pool - to complete its public bid for the shares of Agricore. At the same time we were reviewing the series of transactions which that hostile bid -gave rise to, as well as an ongoing trustee sale process for a facility in the Vancouver Port and an ongoing Tribunal proceeding relating to another joint venture in the Port.

Now those of you who have been listening closely will realise that some of the words I have used to describe this successful resolution are taken directly from the Bureau's new mission statement. It states that we contribute to the prosperity of Canadians by protecting and promoting competitive markets and enabling informed consumer choice. And we take our mission very seriously. In fact, to properly carry it out, we have identified key drivers to place us at the forefront of competition authorities around the world over the next five years-, including enhanced intelligence gathering and analytical capacity.

Our priorities, which I spoke to you about in the spring, also directly reflect our mission. As you will recall, we are making sure that we focus our resources on activities with no pro-competitive effects – cartels and mass marketing fraud. Securing a combination of fines close to $3.5million and prison sentences in four separate prosecutions of mass marketing fraud in less than 6 months is certainly strong evidence of success on this front.

At the same time, we are pursuing our goal of clearly articulating and communicating the enforcement principles that guide our merger and abuse of dominance work.
Here, too, I am pleased to report progress with the recent release of our proposed guidelines on predatory pricing.

These revised guidelines bring together several documents to ensure that our approach to aggressive pricing in the marketplace is consistent and is clearly rooted in economic principles, so that the pro-competitive effects of such behaviour are not chilled. As you will see, the draft guidelines adopt the widely accepted avoidable cost and recoupment standards which will ensure that firms competing vigorously with rivals will not be detered.

We are also intending to publish a technical backgrounder on our approach to monopsony power. This issue has arisen in - several forestry mergers and, indeed, will be the subject of a panel discussion tomorrow.

Meanwhile, we have also finalized two documents that govern many of the discussions we have with you in this room: our confidentiality bulletin and our immunity programme.

I hope these will attract much comment in the corridors here..

Just as later this year we will beinterested in your reaction to two groundbreaking studies we will release on barriers to competition – one on generic drugs, the other on several professions, your own included. Now that should be interesting.

All of this work is aimed at readying the Bureau, and Canada, to learn and adapt to meet the changing times and tides of our economy, business practices, legal experiences and economic understanding. It is a task, I dare say, that faces you as well.

Of course, not all the re-engineering is within the exclusive purview of those of us in this room. As you know, the government struck a competitiveness panel in the spring to examine, among other topics, the Competition Act. It's still too early to know where the panel will land on the issues before it, but we certainly hope it will emerge from its deliberations with a report and a prescription for competition every bit as powerful and effective as that of Professor Hilmer in Australia.

I said earlier that I would come back to your role in equipping Canadians to take on the world. By "you" I am referring to the broad business community and the part businesses play in putting Canadian companies on the world stage. Now Mandel-Campbell devotes close to 300 pages to this topic - reserving just 30 for her prescriptions for government- but I will not be so presumptuous as to tell you or your clients how to do your job, unless of course you act anti-competitively. Instead, I will implore you, as I have on many previous occasions, to continue to promote the benefits of competition to your fellow Canadians.

To do this, we must overcome the reluctance of many to move from the false security of regulation to a reliance on competition.

Equally, we must question those who advocate a domestic monopoly in order to compete abroad.

As Michael Porter has observed: "Toughened by domestic rivalry, the stronger domestic firms are equipped to succeed abroad. It is rare that a company can meet tough foreign rivals when it has faced no significant competition at home.

So I hope you will join with me and my international counterparts in pursuing the maxim of the former Chair of the Steering Group of the International Competition Network, Ulf Boge: All competition. All the time.

Now I began today talking about beer. And as we enter Canada's second season – the hockey season – beer is still a relevant subject.

We may have some distance to go before Mexicans are drinking our metaphorical Molsons. But we are making great progress in other areas – if they don't drink our beer, they certainly enjoy our Blackberries.

And with the continued efforts and attention of all of us here today, it is more than possible to imagine the heady sensation of enhanced competition spreading even further, globally, and at home.

Thank you.