Competition Law in a Global and Innovative Economy—A Canadian perspective
Session 1: Competition Law, Innovation and Economic Development: Experience Sharing by Mature Agencies
3rd BRICS International Competition Conference
New Delhi, India
November 21, 2013
The forces of globalization, innovation and deregulation, are shaping the future in Canada and around the world. The structure of the marketplace is changing in response to more numerous and complex mergers, vertical intergration, strategic alliances and international business relationships. Canadian competition policy must be able to meet the challenges these forces present. While Canada’s Competition Act (the “Act”) has evolved over a period of more than a century, the lessons learned in amending the legislation and enforcement mechanisms over time remain as pertinent today as they were more than 120 years ago. Beyond competition legislation, it is necessary to enhance the quality of the business environment with the purpose of promoting competition and market efficiency through a diverse set of policies that help create a competitive environment. This paper seeks to identify developments in Canadian competition law and policy that can be informative to the BRICS countries (i.e. Brazil, China, India, Russia and South‑Africa) in the implementation of their nascent competition regimes, mindful of the transformative role innovation can play in shaping markets and competition.
Evolution of Canadian competition law
In preparing for the future, it is instructive to look briefly at the past. Responding to forces of globalization and innovation is not new for Canadian competition. Faced with increased concentration of power during the industrial revolution, Canada was the first country to pass competition legislation in 1889, one year before the adoption of the United States’ Sherman Act. Much of the 20th century history of Canadian competition law involved expanding and finetuning the law’s powers.
From the period of 1910 to 1986, the law which was known as the Combines Investigation Act, was amended on a number of occasions to include mergers and monopolization activities, as well as the introduction of civil and misleading advertising provisions. The “modern” Competition Act (the “Act”) replaced the Combines Investigation Act in 1986. In addition to the renaming of the Act, the amendments introduced a purpose clause, or set of objectives to the legislation, in addition to new provisions related to mergers, pre‑notification of large merger transactions, abuse of dominant position, delivered pricing and specialization agreements. The criminal conspiracy provisions were also clarified and strenghthened. Finally, the scope of the Act was extended to cover the commercial activities of agent Crown corporations (state enterprises) in competition with other persons.
As mentioned, the “modern” Act contains a comprehensive statement of purpose (Section 1.1 of the Act) whose many facets reflect the years of debate that led to its enactment. The overall aim of the Act is to maintain and encourage competition, a term that is not formally defined. Rather, the remainder of the statutory purpose section describes several benefits that would flow from encouraging competition. “Efficiency” leads the list, in phrasing that is general enough to include both allocative and productive conceptions of efficiency. The benefit of “adaptability” recognizes the importance of dynamic efficiency. Another benefit, expanded opportunities for Canadian business in world markets, is linked to efficiency and adaptability. The notion of efficiency as stated in the purpose clause evokes the broader objective of public interest.Footnote 1 This is reinforced in the Act, which provides for an efficiency exception. When a merger creates, maintains, and enhances market power, the Act creates a trade‑off framework in which efficiency gains that are likely to be brought about by a merger are evaluated against the anti‑competitive effects that are likely to result. The statement of purpose also recognizes the role of foreign competition in Canada, perhaps to balance the implied export‑promotion goal that precedes it. The law shows concern for small businesses, assuring them that they will have an “equitable opportunity to participate”. Although consumer issues come at the end of the statute’s list, history shows that consumer interests were considered important from the outset.Footnote 2
These amendments represented a fundamental change to the former law and its procedures. The simultaneous enactment of an accompanying piece of legislation, the Competition Tribunal Act, also made serious enforcement possible by providing a more flexible enforcement and litigation process through the creation of a special civil court, the Competition Tribunal, which succeeded the Restrictive Trade Practices Commission.
Since 1986, the Act has continued to evolve. Over the past 15 years, the Government of Canada has made substantive changes to the Act, notably in 1999, 2002 and in 2009. The 1999 amendments introduced a civil law track to the provisions on misleading advertising and deceptive marketing practices, which previously had been solely criminal offenses. The 2002 amendments, while largely technical, significantly enhanced the effectiveness and reach of the Act by allowing the Competition Tribunal to issue interim orders in non‑merger civil reviewable matters and allowing private parties to apply directly to the Competition Tribunal to address matters regarding refusal to deal, tied selling, exclusive dealing and market restriction.
The 2009 amendments are generally considered to be the most substantive changes to the Act since 1986. These most recent major amendments included the introduction of new merger review procedures to allow for more timely, efficient and effective merger reviews. Also of significant importance was the strengthening of criminal provisions on cartels, collusion and bid‑rigging and the introduction of a civil track to allow the rule of reason to be applied to other competitor collaboration arrangements that can raise competition issue but, at the same time, can enhance competition, efficiency and innovation. These amendments also included the adoption of a provision on restitution and the repeal of criminal provisions on price discrimination, predatory pricing, geographic price discrimination and promotional allowances in favour of these practices being addressed under civil abuse of dominance provisions.
Today, the mandate of the Competition Bureau (“Bureau”) is to ensure that Canadian businesses and consumers prosper in a competitive and innovative marketplace.
Instituational framework and due process
The Bureau is headed by the Commissioner of Competition (the “Commissioner”) who is appointed by the Governor in Council. The Commissioner leads the Bureau, which is made up of four enforcement branches (i.e. civil matters, criminal matters, mergers and fair business practices) as well as branches dedicated to economic and enforcement policy, legislative and international affairs, public affairs and operations. The Act takes a two‑track approach to enforcement, with price‑fixing, market‑sharing and output restriction cartels being per se criminal offences while dominant firm conduct and mergers are assessed for harm to competition under a civil regime.
Both businesses and individuals across virtually all sectors of the economy are subject to the Act, and the Act applies to both domestic and international conduct, including both direct and indirect sales in Canada.
Canada has a bifurcated enforcement system for civil competition matters and a trifurcated enforcement system for criminal matters. For civil matters, the Bureau performs investigative and enforcement functions, while the Competition Tribunal performs an adjudicative function. The Competition Tribunal is a specialized tribunal that combines expertise in economics and business with expertise in law. It hears and deals with complex civil matters such as mergers, misleading advertising and restrictive trade practices as informally and quickly as the circumstances and consideration of fairness allow. The Competition Tribunal is a strictly adjucative body that operates independently of any government department. It does not have investigative powers nor does it provide advice to government. Its sole functions are the hearing of applications and the issuance of orders.
For criminal matters, Canada’s trifurcated system for the investigation, prosecution and adjudication of matters is made up of the Bureau, the Public Prosecution Service of Canada (“PPSC”) and the courts. All are independent bodies and free from political interference. The Bureau is responsible for investigating alleged criminal conduct under the Act.Where evidence of criminal behaviour is found, the Bureau refers the evidence to the Director of Public Prosecutions. The PPSC will have carriage of the matter from that point forward. Canada’s 2006 Federal Accountability Act guaranteed the institutional independence of Canada’s public prosecutors who make up the PPSC and are led by the Director of Public Prosecutions. The PPSC has the sole, independent discretion to lay criminal charges, to grant immunity or to engage in settlement discussions with a target. The PPSC also provides advice to the Bureau throughout the investigation of its cases and in particular with respect to the use of formal powers. Where charges are laid and no settlement is reached, the case will go to trial. Canada’s court system is open, proceedings are generally public and adversarial, with decisions made by the judge or by judge and jury. Prosecutors must prove their case beyond a reasonable doubt for a finding of guilt to be imposed. Counsel for the defence may cross‑examine prosecution witnesses and present arguments. The defence may, but is not required to, present evidence and the accused may, but is not required to, testify. While there are some limitations, court judgements can generally be appealed to a provincial court of appeal or to the Supreme Court of Canada on a question of law or fact, or mixed law and fact. The Act does provide for private actions, and follow‑on class action suits are becoming the norm in Canada.
All information provided to the Bureau is confidential in nature and investigations are conducted in private. The Bureau has a variety of investigative tools at its disposal to gather information, including applying to courts for warrants to search premises and seize records and seeking authorization for the use of wiretaps. In order to obtain such authorizations, the Bureau must disclose, on an ex parte basis, all relevant information about its investigation to the judge who will then make his or her decision. In the case of a search warrant, which is seen as highly intrusive, the Bureau must convince the judge that it has reasonable grounds to believe an offence has or may be committed and that records will be found at the premises that it seeks to search. At this stage of the proceedings the Bureau will typically seek to seal confidential information disclosed to the judge. The tools, once authorized, are broadly used and very effective. In a recent gasoline cartel case thousands of phone calls were intercepted and over 90 search warrants were issued.
In addition to the Bureau’s own efforts to ensure due process, Canadian law, and specifically the Charter or Rights and Freedoms (the “Charter”), guarantees a broad spectrum of legal rights to all citizens. Since the coming into force of the Charter in 1982 each of these rights has been interpreted by the courts. Investigations and prosecutions must be carried out accordingly or risk being fatally challenged in court. From a competition law perspective, this means ensuring that searches and seizures are pre‑authorized by a court, requiring Bureau investigators to demonstrate they have both reason to believe that an offence was committed and reason to believe that there is evidence located at the premises for which they seek a search warrant, advising individuals of their right to counsel, recognizing the privileged nature of conversations between a lawyer and his client, ensuring a right against self‑incrimination, guaranteeing the entitlement of individuals to full disclosure of the case against them, and trying cases according to reasonable timelines.
The benefits of due process are many, but the system is not without its challenges. Since the coming into force of the Charter in 1982 and throughout the development of the body of case law, the Bureau has been required to continually adapt its investigative processes to ensure that its enforcement activities are consistent with the Charter. While this has ultimately made the Bureau’s processes better, it requires continuous work to maintain. In that light, and following the 2009 amendments to the cartel provisions that removed the competition test, the Bureau undertook a major study of its internal processes. The end result was a re‑engineering of its investigative processes with a view to ensuring that its internal processes were as streamlined as possible and that its case handling speed could be improved.
Due process requirements under the common law and the Charter mean that the Bureau’s investigative processes are intensely scrutinized by defence counsel after charges are laid, and unfortunately overshadow at times the merits of the case. From the moment the Bureau begins an investigation it must ensure that it acts fairly, impartially, and in accordance with strict evidence handling standards so that it is prepared to withstand the inevitable scrutiny.
Perhaps one of the Bureau’s biggest challenges is ensuring that when cases are presented they are presented in a manner that is understandable to criminal courts that are often unfamiliar with competition law cases. Education of judges regarding the harmful nature of these crimes and their detrimental impact on the economy and likewise on consumers is particularly important. With the 2009 amendments to the Act, the Bureau has been moving toward higher fines and increased sentences for individuals.
Due process can add to the challenges in preparing a case. That being said, high evidentiary standards and requirements for procedural fairness have positively contributed to the credibility of the Bureau and its enforcement actions and has ensured that investigations and processes are subjected to the questioning and debate that they rightly deserve.
In carrying out its mandate and enforcing the Act, the Bureau is committed to operating in a fair, predictable, transparent manner. The Bureau regularly publishes enforcement guidelines and bulletins in an effort to explain its approach to enforcing the Act and regularly engages in consultations with the private competition law bar and with the broader public. The Bureau aims towards promoting a more cost‑effective, efficient and responsive agency, while providing Canadians with opportunities to learn about the Bureau’s work. Recently the Bureau commited to increasing its level of transparency and has undertaken a number of initiatives to meet this commitment.
Among these initiatives, the Bureau recently announced consultations on its draft Information Bulletin on Communication during Inquiries. The draft bulletin summarizes how and when the Bureau generally communicates during an inquiry with parties under inquiry, other stakeholders and the public. Through the consultation, the Bureau seeks to receive input to help identify potential areas where communication efforts during an inquiry might be improved.
The duty to enforce
To continually promote competition in Canada, competition policy and law must play two roles:
- set the marketplace framework that best enables new markets to develop; and,
- promote efficient operation of those markets by ensuring that the Bureau’s analytical framework, the Act and related legislation, and the Bureau’s approach to conformity remain relevant and effective.
In delivering on its mandate, the Bureau cannot always rely on the knowledge acquired from past cases. The current economy allows for the continual creation of new value, which has implications for how the Bureau identifies efficiencies, evaluates competitive effects and defines markets.
Competition has a key role in promoting the efficient allocation of resources for research and development and the commercialization of new knowledge, because competitive markets generate more accurate information on where firms should allocate their resources. These forces present new enforcement challenges. Factors creating those challenges are internationalization and deregulation which lead to increasing complexity of markets and products. As a result, it is critical to recognize the effects that competition law enforcement may have on innovation.
In an ever increasing deregulated environment, the transition from government regulation to competition as regulator carries important responsibilities for competition enforcement agencies. It is not obvious where the distinction between regulation and competition lies, nor what are the appropriate regulatory institutions. Competition enforcement agencies have a continuing role to play in managing the transition to competition as champion of regulatory restructuring and forbearance. After deregulation, there are often relatively few firms and high barriers to entry requiring monitoring and enforcement under merger and abuse provisions.
Approaches to competition enforcement oscillate along an axis flanked on one end by pure enforcement of legislation and the other by competition advocacy and policy elaboration. The right mix of enforcement and advocacy can vary. In Canada’s experience, the introduction of new or amended legislation require that the competition enforcer focus primarily on enforcement actions that test the new legislation. These enforcement actions confirm the powers and legitimacy of the competition enforcer, sending a strong message to the business community. Enforcement actions will also clarify the forms of conduct prohibited under the competition law. Once the powers of the competition enforcement agency and the scope of the legislation have been confirmed and clarified, greater focus on advocacy, policy elaboration and market studies can take place to allow for a fully integrated enforcement model.
Following the 2009 amendments to the Act, the Bureau focused on taking cases that tested the newly enacted merger, civil and criminal provisions. While the Bureau was not always succesful in litigation, the jurisprudence from these cases have clarified the scope of the new provisions, the powers of the Bureau in enforcing the new legislation and signalled the Bureau’s intent towards upholding measures that proscribe anti‑competitive business conduct in Canada to Canadian businesses and consumers.
Almost four years after the latest legislative amendments, without relenting on its enforcement mandate, the Bureau is now increasing its advocacy efforts to promote a competition culture. In fact, the Bureau’s advocacy mandate is enshrined in the Act. Provisions in the Act afford the Commissioner of Competition a defined mandate to present his views or evidence in relation to competition, to bodies or persons carrying on regulatory functions. This advocacy mandate has been interpreted broadly by the Bureau and has been relied upon in the Bureau’s work on market studies.
The Bureau’s Conformity Continuum illustrates how the Bureau promotes compliance through a combination of enforcement, advocacy and education, as well as tools to assist the corporate community.
|General Application||Specific Application|
|Conformity through Education||Facilitating Conformity||Responses to Non‑Conformity|
|Speeches||Interventions||Information Centre||Advisory opinions||Warning letters||Negotiated settlements||Prosecutions|
|Policy development /
|Corrective notices||Product seizures|
|Discussion papers /
|Media contacts||Partnerships||Contacts /
Enforcement cannot fall solely on the shoulders of competition enforcement agencies. Compliance must be a shared responsibility between enforcers and the business community. Viewing compliance as a joint endeavour and shared responsibility further enhances the reach and effectiveness of competition law.
The Bureau’s philosophy is that most companies in Canada wish to comply with competition law and regulations. The motivations to comply are the combined result of intrinsinc incentives that are internal to the company and its officials to “do the right thing and to be seen as doing the right thing” and the extrinsic incentives to comply because of the financial repurcussions, loss of reputation, embarassment and other penalties that result from being caught “doing the wrong thing”.
That being said, the Bureau is keenly aware of the incentive of market incumbents to protect their market power. The pressures posed by these firms can lead to the introduction and adoption of the wrong kinds of competitive rules or the uneven application of these rules. In Canada, this desire of market incumbents to protect their market power was illustrated over the summer months of 2013 by the reaction of incumbent canadian wireless providers to speculation on the possible entry in Canada of the largest U.S. wireless carrier. Incumbent firms launched coordinated lobby efforts and a public relations campaign in an attempt to influence decision makers into protecting the market position of Canadian wireless providers.Footnote 3 To ensure that markets remain open, and to respond to this inherent desire by firms, competition enforcers must pursue advocacy and strengthen their enforcement efforts.
Within Canada, the Bureau’s focused and principled approach to enforcement and the efforts of its many government, business and other partners has increased awareness of anti‑competitive activity and harm to businesses, consumers and other stakeholders. This further increases the risk of detection and penalization for non‑compliant businesses. The legal, economic and reputational risks of non‑compliance far outweigh any perceived advantages. In this age of real time, consumer driven communications, the true risk of engaging in anti‑competitive behaviour is that it can quickly demolish a business reputation that took decades to build.
The Bureau recognizes this strong desire to comply and implements compliance promotion, education, information, advocacy, outreach and related programs in order to ensure that companies understand very clearly what is expected of them by the law. Through its Compliance Bulletin (the “Bulletin”), the Bureau provides companies with the information, guidance and other tools they need to assist them with developing their own corporate compliance programs. First published in 1997, the Bulletin emphasizes that a credible and effective corporate compliance program can not only avoid risks associated to non‑compliance, but can also benefit corporations in more favourable sentencing and in detecting contraventions early, thus better positioning them to request immunity from prosecution. While the tools provided in the Bulletin have been well received by the business community, we believe that more can be done. As such, the Bureau is currently reviewing its approach to compliance promotion. Specifically, the Bureau is undertaking to:
- build more in‑house corporate compliance and ethics expertise to help the Bureau better understand compliance ethics and compliance programs and incentives;
- collaborate with subject matter experts and industry stakeholders to review the Bureau’s current guidance and Bulletin, and consider movement towards the development of standards or best practices that promote compliance with competition law; and
over the long‑term, examine the Bureau’s enforcement approach to ensure we are making the best use of instruments in the Conformity Continuum.
Economic development and innovation
The 21st century is proving to be a period of change that, some say, challenges, or even, surpasses that which occurred in the later part of the 19th century. Globalization, innovation and deregulation continue to be key drivers of competition policy, and these forces are dynamically related. Transportation and communication technologies have transformed local markets into national and/or international markets. Innovation is changing our economy through the creation of new technologies, products, business models and markets. Advances in industrial organization economics and competition law enforcement has shed light on how businesses are likely to acquire and exercise market power in the current economy. Behaviour that was previously thought to be competitively benign or positive is now seen to lead to an increase or preservation of market power under certain circumstances. In this context, the Bureau constantly evaluates its application and enforcement of competition policy and law in Canada. Areas of particular interest to the Bureau relate to intellectual property issues and the challeges of network industries.
A higher degree of innovation activity boosted by dynamic competition to promote higher growth is desirable.Footnote 4 Intellectual Property (“IP”) is recognized as an important instrument for economic and technological advancement. In theory, IP and competition policy and law have the same aim, which is, to promote innovation. However, there are efficiency trade‑offs to be made between the need to provide protection against free‑riding, in the form of IP rights, and the fact that firms are more likely to innovate when they face competition. Today, competition agencies recognize the benefits of IP licensing arrangements wherein previous decades, such arrangements were regarded with suspicion and subjected to an extensive and rigid set of rules by competition agencies. The current economy challenges the Bureau to rethink some components of the analytical framework and to reinforce others, such as in the area of IP.
In 2000, the Bureau published the Intellectual Property Enforcement Guidelines (“IPEG”). In publishing these guidelines, the Bureau sought to articulate how it approaches the intersection between competition policy and IP rights. The IPEGs describe how the Bureau will determine whether conduct involving IP raises issues under the Act, and explain how the Bureau distinguishes between those circumstances that warrant a referral to the Attorney General under the IP provisions (i.e. section 32) of the Act, and those that will be examined under the general provisions.
Faced with emerging competition, patent law and other IP issues, the Bureau is also collaborating with stakeholders to guide its work on examining the interface between competition policy and law and IP. Among these stakeholders, the Bureau has been working more closely with the Canadian Intellectual Property Office (“CIPO”) and is in the process of negotiating a Memorandum of Understanding with CIPO.
The Canadian health care system is a vital component of the Canadian economy and the well‑being of millions of Canadians. However, some pharmaceutical companies employ strategies throughout various international markets that aim to maintain their existing market shares and frustrate competition from generic substitutes. To date, antitrust regimes around the world have individually made significant efforts to address competition concerns in the pharmaceutical industry. However, there are inter‑dependencies and limitations with respect to what individual jurisdictions can achieve on their own.
In early November 2013, the Bureau hosted a workshop and signalled to the pharmaceutical industry that competition issues in the health care sector are a current priority. The event brought about greater awareness of the competition issues in the pharmaceutical industry in Canada and abroad, and encouraged international convergence on approaches for addressing these issues. The workshop focused on three main themes:
- international trends in pharmaceuticals and antitrust;
- pay‑for‑delay settlements; and
- life‑cycle management strategies and intellectual property. Through this important dialogue, the Bureau strengthened its relationships with stakeholders, including the U.S. Federal Trade Commission, the European Commission, other federal departments, industry members and associations, public and private insurers, consumer associations, and members of the legal community.
In addition, the Bureau recently announced that it will modernize its IPEG in two phases. The first phase will involve administrative and technical changes to the 2000 IPEG to make them consistent with the 2009 legislative amendments and enforcement guidelines. The second phase will focus on substantive issues with the objective of
- examining the aptness of the IPEG to tackle the challenges currently faced by the Bureau and
- assessing whether further changes are required to the IPEG. In this phase, the Bureau will consult other competition agencies, other Canadian federal government departments, interested members of the Canadian legal and business communities and consumer associations.
Network industries — from telecommunications to broadcasting, energy, financial services, transportation services — are a large part of the world economy. Most key network industries are regulated, some in part, others quite significantly. Adding to the importance of networks, from a public policy point of view, is the fact that network industries often provide necessities. Monopolization in such a setting can have significant social and political implications.Footnote 5 As such, it is not surprising that competition authorities are playing an increasingly active role in these industries. The restructuring of network industries presents the challenges of distinguishing between efficient and anticompetitive behaviour in the potentially competitive segments initially dominated by the incumbent firm, and controlling the incentives and ability of the vertically integrated incumbents to raise the costs of its competitive rivals (competitive safeguards).
Competition law enforcement is likely to have an effect on the level of innovation in these industries and the Bureau is paying increasing attention to finding the appropriate remedies. The speed of economic and technological change can make remedy design (to address actions that were the cause of an inquiry) appear moot by the time a court or the Competition Tribunal renders a decision. Remedies are neither simple to find nor apply when both tangible and intangible assets must be taken into consideration and IP is a factor. In finding remedies, the Bureau must consider the effect on incentive to innovate. When network effects are strong, anti‑competitive conduct may play a significant, perhaps decisive role in making a firm’s standard the de facto industry standard. When the public benefits from a single standard, it may be very difficult to find remedies that take back the “ill‑gotten gains” without also hurting public welfare.
Errors in the Bureau’s enforcement action may have greater consequences if they affect innovation. Failure to intervene in order to preserve competition and stop private behaviour that reduces or stifles innovation could entail large public welfare losses. Protecting against making these errors has always been a concern of the Bureau, and its importance has intensified in the current economy.
The Bureau attempts to apply the Act in a flexible, responsive and innovative manner. The need for flexibility in dealing with innovation‑related issues is illustrated by the Bureau’s recent response to Interac Inc.’s request for an amendment to the Consent Agreement that was originally issued by the Competition Tribunal in 1996. Interac Inc. is responsible for operating Canada’s debit payment system. The original Consent Agreement openened up the Interac network beyond the charter bank members and removed barriers to competition between the network participants. The Consent Agreement required as well that Interac be managed on a not‑for‑profit basis. Faced with the rapid pace of innovation in the payment sector, including the introduction of mobile and contactless payments by competitors, Interac approached the Bureau in 2013 seeking a variation of the Consent Agreement to allow it to invest into research and development of new technologies and products and remain competitive in the payments marketplace.
Recognizing the importance to Canadians of a dynamic and competitive payments industry, the Bureau conducted a comprehensive assessment of Interac’s request. This included obtaining information from Interac and numerous market participants, as well as an extensive analysis of the rapidly evolving payments industry. Special emphasis was placed on the changes since 1996 in technology, actual and potential competing networks, payment methods and related products, consumer behaviour, and network governance. With the Commissioner of Competition’s support to amend the Consent Agreement, the Bureau and Interac worked together throughout the variation process — including drafting a joint response to the Competition Tribunal’s questions. The amended Consent Agreement, approved by the Competition Tribunal in September 2013, provides Interac the greater flexibility it required to remain a viable low‑cost payment alternative for merchants in an increasingly competitive marketplace, while retaining the safeguards that ensure continue open and non‑discriminatory access to the Interact network.
While highly innovative markets require a flexible approach to remedies, when circumstances allow it, competition enforcers should also look at the possibility of taking preventative measures. For example, in 2012, pursuant to its role as advocate for the benefits of competition, the Bureau prepared submissions as part of the Canadian Radio and Telecommunications Commission’s (Canada’s telecom regulator) announced proceeding to establish a mandatory code of conduct for mobile wireless service providers (the “Wireless Code”). Notwithstanding increased enforcement in this sector over the past few years, certain competitive impediments continue to diminish the effect of competition forces in this industry. As part of its submission, the Bureau noted that the costs associated for switching from one wireless provider to another inhibited competition. The Bureau proposed that wireless contracts should be limited in duration, handset locking should be prohibited and termination fees should be minimized. The Bureau also proposed that consumers require accurate information to make informed choices. As such, the Bureau recommended that advertised prices should disclose all mandatory costs and that limited plans should not be advertised as ‘unlimited’. Finally, recognizing the rapid pace of innovation in the wireless sector, the Bureau proposed that the Wireless Code be reviewed after three years to ensure its effectiveness.
The breadth and complexity of innovation poses challenges for competition enforcers. In particular, understanding emerging technologies and quantifying their economic impacts is time and resource intensive. The transformative impact of antitrust decisions can have on a given market sector requires that competition enforcers balance between the need for enforcement and advocacy, seek and acquire the necessary industry and economic expertise and dedicate the necessary financial and human resources when deciding to challenge or litigate such complex matters.
The role of international cooperation
In today’s global economy, companies engaging in anti‑competitive conduct face an increasing regulatory risk, not only in Canada, but around the world. Competition policy and enforcement efforts do not stop at the Canadian border. Decisions made by companies outside of Canada affect Canadian consumers and companies and mergers with an international dimension have competitive implications in more than one country. Furthermore, in some cases, certain decisions by foreign competition authorities can have impacts in Canada.
The number of countries with competition laws is now at about 110 and is increasing each year. Competition enforcement agencies are meeting the challenge of internationalization by working towards closer coordination among themselves to achieve harmonization of rules in order to minimize the regulatory burden associated with multi‑country review and to promote efficiency‑based competition analysis. Through international fora such as the OECD, the International Competition Network, the International Consumer Protection Enforcement Network and regional competition networks, competition authorities work towards soft convergence of our competition regimes. In fact, Canada’s substantive 2009 amendments were greatly inspired by the OECD peer reviews of Canada’s competition policy and law, leading to a greater alignment of our competition regime with those of our major trading partners. Also, many of the Bureau’s enforcement guidelines are inspired by international “best” or “recommended” practices.
In addition to the convergence work in multilateral fora, cooperation between countries with competition laws is also taking place through formal and informal bilateral arrangements. The Bureau works cooperatively with a number of international enforcement partners that are within and outside of government. These relationships enhance the Bureau’s own expertise, the effectiveness of its enforcement activities, and the enforcement activities of its partner agencies abroad. Canada currently has formal cooperation arrangements with 11 other jursidictions and has informal relationships with competition authority officials in many other countries.
Over the past thirty years, these formal and informal arrangements have helped Canada to address and resolve many complex cross‑border mergers, cartels, misleading advertising, deceptive marketing and other competition policy and consumer protection matters. They have also provided guidance and best practices that have helped Canada and other jurisdictions to improve enforcement activities, enforcement guidelines and practices and analytical methods. For example, April 2013 saw the announcement of the largest fine ever ordered by a court in Canada for a bid‑rigging offence under the Act. As part of an ongoing investigation by the Bureau, a Japanese supplier of motor vehicle components was fined $5 million by the Ontario Superior Court of Justice for its participation in an international bid‑rigging conspiracy. During the course of the Bureau’s investigation, invaluable assistance was provided by its antitrust partners in Australia, Europe, the United States and Japan, and by connecting with other competition agencies around the world. This cooperation allowed the Bureau to reach beyond Canada’s own borders and played a pivotal role in the succeess of this case.
Canada’s free trade agreements also play a role in supporting competition and international cooperation. Most of Canada’s free trade agreements include competition policy provisions aimed at ensuring that the benefits of trade liberalization are not offset by anti‑competitive business conduct. To this end, Canada and its free trade partners typically recognize the importance of cooperation and coordination by their competition authorities, and some treaties include commitments for the competition authorities to negotiate cooperation instruments that addresses such matters as notification, positive and negative comity, technical assistance and information exchange.
The Bureau will continue to negotiate cooperation instruments with foreign governments and competition agencies and seek other opportunities to deepen its collaborative relationships with foreign competition enforcers. As the BRICS nations continue their rapid economic growth, the Bureau welcomes the opportunity to strengthen its ties and collaboration with BRICS competition enforcers, in the hopes of advancing our respective competition policy and enforcement goals. These cooperative relationships are all the more important in a world of rapid borderless technological innovation. Owing to the fact that the complexity and resource intensiveness of innovation related matters can be prohibitive for some competition enforcers, increased collaboration amongst enforcers can allow for a sharing of knowledge and tools, which in turn can help us all in better understanding and addressing the competitive effects of transformative innovation.
The Bureau’s review of the new and amended competition laws of India and other BRICS economies seems to indicate that these countries have also benefitted from the same processes of soft and voluntary convergence in competition law and policy.
The new economy, characterized by forces such as globalization, innovation and deregulation, is demanding effective responses from competition enforcement agencies. This entails continuing efforts to keep the legislation up to date and relevant to market conditions and advocating for shared compliance. In particular, competition policy will have to demonstrate its ability to adjust and deal with the high‑technology economy and the rapidly changing world we live in, the increasing role of IP rights and freer markets, together with enterprises operating in more global industries. As industries find themselves in new circumstances, facing rapid changes, they need to know where they stand in terms of the competitive strategies to which they may turn to survive and prosper. When faced with the pressures of rapid changes, some parties may see competition legislation as an impedement to new business practices. Firms need to know what is permissible under competition legislation so as to remove any chill upon the legitimate business conduct to promote compliance with competition legislation. This involves engaging the competition community in a dialogue on competition enforcement to:
- develop a common understanding of the nature of economic change;
- learn what forms of business conduct are permissible and which are not;
- foster confidence in competition legislation and the competition law analytical framework;
- provide, more pro‑actively, sufficient guidance on the law and enforcement approach to avoid any chill that uncertainty places upon pro‑competitive business conduct.
At the 3rd Interational Competition Conference, leading experts in competition law and policy, business and consumer affairs will be engaged in a dialogue on the innovative and global economy and the impact on competition law enforcement and policy. Such a dialogue will ensure that competition is maintained and encouraged in the interests of consumers, businesses and the economy as a whole.
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