Remarks by Melanie L. Aitken, Commissioner of Competition

Thank you, Mark, for your kind introduction, and to the Economic Club of Canada for organizing this event.

I am very pleased to be here today to discuss the importance of competitive markets to Canada's continued growth and productivity; briefly describe some recent complementary amendments to our laws that matter to those carrying on business in Canada; and touch on our recent enforcement activities and my priorities.

I am a firm believer that effective competition policy and enforcement has a positive and meaningful impact on the economy. There is broad consensus that policies that foster competition lead to substantial increases in investment and innovation, which, in turn, improve productivity in all economic sectors. This relationship between competition, innovation and productivity will come as no surprise to this audience, and it has only been reinforced, with some intensity, by our recent experiences.

For example, a report prepared for the Competition Bureau in 2008 noted that U.K. research revealed "a competitive environment is beneficial to productivity growth and innovation because it provides strong incentives for firms to adopt best-practice techniques and engage in innovative activity." The same report cited studies carried out by the Australian Productivity Commission, which found that, in 2005, 10 years after the introduction of Australia's National Competition Policy, the country had experienced significant productivity "surges" and growth in household incomes. The National Competition Policy was found to have been a major factor in reducing the price of goods and services, and stimulating business innovation through increased competitive pressures on both private and government businesses.

Here in Canada, following several failed attempts at legislative reform to Canada's competition regime, the Ministers of Finance and Industry announced the creation of the Competition Policy Review Panel in 2007 to assess Canada's competition and foreign investment policies. The Panel heard from more than 150 individuals and organizations, received 155 written submissions and commissioned more than 20 research papers.

The Panel identified a strong relationship between innovation and productivity in the Canadian economy. What was troubling to the Panel was its finding that a major cause – if not the cause – of a growing productivity gap between Canada and other nations is a relatively weak record of innovation. This finding was consistent with other recent research that indicated Canadian firms lag behind their counterparts in major industrialized countries on innovation. For example, Canada's poor performance in innovation earned a grade of "D", and a rank of 14th out of 17 countries in a recent report by the Conference Board of Canada. Just yesterday, TD Economics weighed in with its report entitled, perhaps not too inaccurately, "Innovate or Perish".

Of great interest, particularly to the Competition Bureau, was the Panel's conclusion that some of these productivity issues could, in part, be fairly attributed to outdated or ineffective competition laws. The Panel concluded that effective competition laws "are key elements in ensuring the competitiveness and efficiency of the Canadian economy" and "long–term improvements to Canada's productivity could be achieved by amending certain outmoded or ineffective provisions of Canada's competition laws".

As many of you are aware, in March 2009, the Government acted on the Panel's report, bringing about substantial changes to the Competition Act. These changes:

• amended the criminal conspiracy provision to provide for more effective prosecution of "hard core" cartel conduct, while creating a new, civil provision for reviewing all other forms of competitor alliances;
• established a new, two–stage merger review procedure, allowing for a more direct and effective mechanism for the Bureau to obtain information required to responsibly evaluate the competitive effects of a merger and design a remedy, if necessary;
• authorized the Competition Tribunal to impose financial consequences on firms that abuse their dominant position by preventing new and innovative entrants or disciplining competitors;
• decriminalized a number of pricing practices, including resale price maintenance; and
• strengthened the consequences for fraudulent and misleading market practices.

The rationale for these amendments was simple: to ensure that legitimate businesses and consumers do not fall prey to anti–competitive activity and, if they do, to make certain that the law can be enforced and that the associated penalties are sufficient to deter future illegal activity.

I see a recognition from Parliament in passing these changes – the most significant to the Competition Act in a quarter–century – that competitive markets play a key role in ensuring a growing, and more productive, Canadian economy. Indeed, I see a clear set of marching orders to the Bureau to enforce these newly amended laws for the benefit of all Canadians.

I would imagine that two of the key amendments that I mentioned previously are of particular interest to this audience: significant changes to our merger review process, and dramatic (although debated for many years) changes to our conspiracy regime.

As to mergers, our merger review process is now more aligned with that of the United States. Let me be clear: we have not changed our analytical approach, which is focused on competitive effects rather than presumptions based on market share, or otherwise. Nor has our general goal altered: we strive to protect competition in affected markets, to the extent possible, while acknowledging and promoting the business imperative to grow and to be rewarded for success.

Rather, the amendments to our merger review process introduced a balanced framework that allows the Bureau to access the information it requires in those few potentially problematic transactions to conduct a sufficiently thorough review in a timely manner, and before parties can close. I say "sufficiently thorough" quite deliberately. We do not seek to turn over every rock or to examine exhaustively every conceivable issue. Instead, in our reviews of those few transactions that have the potential to raise serious competition concerns, we seek to identify, expeditiously and with the assistance of parties and their counsel, key issues and to front–end–load the documentary responses with respect to potentially dispositive issues, so as to arrive at a final view as quickly as possible.

While this was always the philosophy of the Mergers Branch, we had an unnecessary distraction, operating as we did under a regime where parties could simply wait out a 42–day statutory review period to close. Where additional information was required, the Bureau was forced to seek cumbersome production orders that did not stop this 42–day clock, all while assessing the prospect of, and preparing for, possible litigation. That was not a framework that promoted responsible, timely or focused reviews. Although counsel and the Bureau typically worked collaboratively to ensure "things worked", it was in the toughest deals where the rubber hit the road, and the public interest in competitive markets was most seriously at risk.

Now, we have a framework that is not arbitrary, turning on the risk tolerance of the parties to close without comfort. And now, parties benefit from certainty, and certainty much sooner. In the vast majority of cases, we are able to advise parties of our decision within 10 days. In the few cases where serious concerns arise, parties are advised within 30 days of their filing that a so–called "supplementary information request" (or "SIR") is required. In these few cases where a SIR is required, we adopt a surgical approach based on a tailored request for information, and engage in dialogue with the parties before we send out the SIR to narrow it where appropriate, and to ensure we understand how the parties' information and data are maintained so that the SIR can be drafted constructively.

Clearly, we must prove over time that this is our practice through our actions, not just our words. But, in fairness, we faced a pretty complex and highly scrutinized review in the merger of Petro–Canada and Suncor just weeks after the new process came into force, and the report card we received was not only that we got it right, in the view of players and the market, but also that we did so in an impressive timeframe (fewer than 4 months). We are committed to continuing to over–deliver on expectations in terms of doing all we can to ensure that the process is timely and efficient, but never at the expense of protecting Canadian businesses and consumers.

To help with that, I would like to mention that we are very pleased with the recent addition of a new Senior Deputy Commissioner heading up our Mergers Branch. It is Paul Collins, who has been the chair of the Stikeman Elliott competition group for a number of years. We are delighted that Paul will be joining us as a senior member of our strong team, and we are grateful to Stikeman Elliott for facilitating this important interchange.

Aside from changes to our merger review process, the amendments eliminate an anomaly that left us alone among our major trading partners in having to prove more than just the presence of a bare cartel to fix prices, allocate markets or restrict output in order to secure a conviction. At the same time, the amended Competition Act removed a chill from the old law that saw all forms of competitor collaborations potentially subject to the threat of criminal sanction. Our new framework imposes criminal sanctions for the most egregious forms of anti–competitive agreements among competitors, while other forms of collaborations will be assessed under a companion civil provision.

Let me be crystal clear: if an agreement among competitors does not constitute a naked agreement to fix prices, allocate markets, or restrict output, that agreement will be subject to – at most, and only – a separate, civil review requiring proof of economic harm.

This brings me to our response to these very significant developments in our law.

I firmly believe that these amendments, which enhance our ability to foster competitive markets and encourage innovation and productivity, are positive for Canada. And while I am pleased that we have manifestly better tools to do the job Canadians and our international counterparts expect of us, they come with a significant responsibility. Like so many institutions around the world today, particularly in light of current economic challenges, the new Act underscores the importance of engaging with, and being appropriately accessible to, the community impacted by our work.

In the wake of the amendments, we reached out very quickly to stakeholders, their counsel, and consumer and other groups. Our objectives were clear: to calm, to educate, to listen and to engage in a constructive dialogue on how to establish effective enforcement policies and practices with respect to these new laws.

Within two weeks of Royal Assent for the amendments, we issued draft guidelines on our new merger review process, articulating our "made in Canada" approach to implementing the new merger review regime. By that, I mean an approach that is sensitive to our context and tradition, where flexibility and creativity (necessities under our former regime, which didn't fit the demands of the process for the parties or the Bureau) have played a significant role in merger review. As well, six weeks from the date of the amendments, we issued draft guidelines on the new cartel and civil agreements provisions. I dare say – and I believe it was the right thing to do – we have been bold and non–bureaucratic in the approach set out in our guidelines. For example, we have explicitly removed whole categories of agreements from the scope of criminal enforcement action, such as dual distribution agreements, franchise agreements and non–competes, unless, of course, the agreement is just a sham. We are doing our best to put a fence around the conduct we would consider investigating as criminal, and to paint that fence in bright, bold colours. This will, I believe, promote the healthy, aggressive, competitive initiatives that we so badly want to encourage.

Finally, a matter of personal conviction that informs how I interpret my role as Commissioner: I am committed to engaging in major matters and appearing at key milestone events. And I have been. This does not mean every case, or every meeting. We need to be mindful of the value to the right balance being struck between my ability to act as a final internal decision-maker, and being accessible so as to inspire confidence in parties that I am briefed and appropriately guiding the process. And, even if parties don't like my ultimate position, my experience is that simply knowing that I have been participating, even if not fully within view, enhances acceptability.

I will turn now to touch on my priorities for enforcement. For obvious reasons, my key concern is to get off to a solid start with our new laws. In that context, it is important to acknowledge that there are important areas – some new, some not – where there is little case law and that call out for clarification. As one looks around the world, one sees competition authorities willing to step in and be very clear about their commitment to establish the boundaries of where they will enforce. Canadians should expect no less. But what does this rhetoric mean in practice?

It means to me that we will:

• First, continue to develop enforcement guidelines that, to the greatest extent possible, clarify the bounds of lawful and unlawful conduct. In this regard, we are currently working to complete updated enforcement guidelines on abuse of dominance and more detailed guidance for trade associations that clarify the impact of the recent amendments; and
• Second, not hesitate to enforce the law by bringing responsible cases in areas where we believe it is important to establish and clarify applicable ground rules. While our overwhelming preference will always be a consensual resolution without litigation, I won't be afraid to bring responsible cases that are prepared and conducted in a principled and measured way. In doing so, we clarify the law, we are transparent, and we effect deterrence. In my view, nothing effects deterrence among those contemplating anti–competitive conduct like showing that we have the will and the courage to proceed where necessary.

This brings me to a few brief remarks on what is currently our highest-profile case: our challenge to certain rules of the Canadian Real Estate Association.

As some of you may know, our challenge targets rules imposed by CREA that restrict consumer choice and innovation in residential real estate services across Canada. In our application, we have asked the Competition Tribunal to order CREA to do away, once and for all, with rules that severely limit the ability of consumers to select which real estate services they want and to pay only for those services.

In Canada, the overwhelming majority of real estate transactions make use of the Multiple Listing Service (MLS) system. CREA's restrictive rules protect their ability to require any agent who lists a property on the MLS system to offer a specific set of services pre–determined by CREA. This means that consumers seeking to have their property sold using the MLS system can be forced to purchase all of the services required by CREA, whether they want those services or not.

We believe that increased choice in the residential real estate services market should result in substantial savings on the most significant financial transaction most Canadians make in their lifetime. More competition generally means lower prices, downward pressure on whatever pricing structure is used and, for all models, better product quality, more consumer choice and innovation – all of which benefit not only individual Canadians, but the economy as a whole.

As many of you may also have heard, CREA recently amended its rules governing the use of the MLS system. Unfortunately, those changes do not solve the problem. Specifically, and as we have noted publicly in the past, the rule changes are inadequate because they explicitly protect CREA's ability, at any time, to reinstate anti-competitive restrictions, and possibly more anti–competitive ones.

The Bureau has always preferred taking the time to seek a negotiated resolution. CREA has been aware of our concerns for over three years and we have negotiated with them in an effort to reach a settlement. We are convinced that a legally binding Consent Agreement or Competition Tribunal decision is necessary in order to achieve a lasting, permanent solution that will ensure consumer choice and provide real estate agents with the flexibility to offer innovative service and pricing options.

Clearly, as this matter is ongoing before the Tribunal, I do not intend to engage in a public debate on the merits of the case. However, I would encourage you to review the filings in this case for a more detailed discussion of the Bureau's position. All of these documents are available on the website of the Competition Tribunal.

In closing, with the introduction of the amendments to the Competition Act, and a revitalized mandate from Parliament to enforce this legislation, it is an exciting time for competition law in Canada. We have a very significant challenge before us to ensure that we do the most we can with this opportunity for the good of Canadians and all who carry on business in Canada. In this regard, I can assure you that we are open for business at the Bureau, and will continue to work diligently to realize these goals.

Thank you for your attention.