Remarks by John Pecman, Commissioner of Competition
CBA Competition Law Fall Conference
Ottawa Convention Centre, Ottawa, ON
September 18, 2014
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Good afternoon. It’s a pleasure to once again be providing the keynote address at this year’s CBA Fall Conference.
It’s been a busy time at the Competition Bureau since we last met. We’ve reviewed several noteworthy mergers, received decisions in a number of high-profile cases and engaged in significant advocacy work. For example, we reviewed mergers in the grocery, telecommunication and pharmaceutical sectors; received important decisions in a number of civil and criminal cases; and made several submissions to the CRTC. I’ll have more to say on some of this activity later in my remarks and during the question and answer session.
I know that many of you were present at the Spring CBA Conference, where I started a new tradition of providing a "year in review" — what is effectively a highlight reel of the Bureau’s key cases and projects. While this format worked exceptionally well, and I plan to continue using it at future spring conferences, my intention today is to briefly update you on a few recent court decisions and policy initiatives, including those relating to advocacy and compliance, and then engage in a comprehensive Q&A session.
What I hope to do is use the Q&A session to foster the dialogue between the Bar and the Bureau and to continue building on what I believe is a strong relationship. This is a format that has worked well in the past and one that allows for a greater exchange of ideas.
I want to begin by providing an update on our case involving allegations of bid-rigging of Government of Canada IT contracts. As you may recall, in February 2009, following a Bureau investigation, criminal charges were laid against 14 individuals and seven companies accused of rigging bids to obtain Government of Canada contracts for IT services.
In October 2011, ten individuals and five corporations were committed to stand trial by Justice Alder and the jury trial in this matter is currently taking place.
Late last month, Justice Warkentin, the judge presiding over the jury trial, released a decision on a related application regarding the constitutionality of subsection 69(2) of the Competition Act. As you are likely aware, this provision creates an evidentiary presumption that actions taken by, or records written by, received by, or in the possession of a participant, are prima facie attributable to that participant.
Justice Warkentin concluded that subsection 69(2) violates sections 7 and 11(d) of the Charter and is of no force or effect in criminal cases brought under the Act against corporations or individuals. She found that this provision creates a reverse onus for the accused with respect to a material component of an offence, and that this is akin to an accused bearing the burden of proving his or her innocence. The PPSC, it should be noted, has provided notice of its intention to appeal following the conclusion of the jury trial.
I raise this case because I believe that it’s important to highlight that Justice Warkentin clearly stated in her decision that "nothing in these reasons prevents the use of section 69(2) in a Competition Tribunal proceeding" or presumably in civil marketing practices before the courts.
We’ve also had a significant development in our e-books case. As you may recall, in February of this year, Kobo filed an application under subsection 106(2) of the Competition Act seeking to rescind or vary the terms of the consent agreement reached between the Bureau and various e-book publishers. The Bureau subsequently brought a reference, seeking clarification on the Tribunal’s jurisdiction under subsection 106(2).
The Tribunal agreed to hear the reference and issued its decision last week. In particular, the Tribunal found that it can grant an application under subsection 106(2) only where one or more of the following conditions is met:
- The consent agreement includes terms that the Tribunal is not permitted to issue in respect of the reviewable trade practice in question.
- The consent agreement does not identify each of the substantive elements of the reviewable trade practice in question or does not contain a statement that the respondent either agrees or does not contest that these elements have been met.
- The consent agreement includes terms that are unenforceable or would lead to no enforceable obligation, for example, because they are too vague.
Significantly, it is not open to an applicant to attempt to establish that one or more of the substantive elements have not been met, such as whether there is an agreement or arrangement between competitors in respect of a consent agreement relating to section 90.1 of the Act.
We welcome this decision because it provides clarity as to what factors the Tribunal will consider when reviewing third party applications to rescind or vary a consent agreement.
Premium Text Messaging
Finally, in a significant development that speaks to our ability to build a "Bureau without borders", I am very pleased to report that in July ,the US District Court of Maryland ordered Aegis Mobile, LLC (Aegis), a company located in the US, to hand over information that will assist the Bureau in moving forward with its Premium Text Messaging case.
The US court compelled Aegis, who had provided advertising analysis to the Canadian Wireless Telecommunications Association, to produce documents to the US Federal Trade Commission pursuant to section 1782 of US Civil Code — a provision that allows US courts to provide assistance to foreign and international tribunals and to litigants before such tribunals. The FTC will, in turn, deliver those documents to the Bureau.
This case is important because it marks the first time a US court has granted this kind of investigative assistance to obtain information on behalf of the Competition Bureau. It is an example of the Bureau’s ability to reach beyond Canada’s borders when enforcing the Competition Act, and highlights the strong working relationship between the FTC and the Bureau.
Perhaps one of the biggest shifts at the Bureau in the past year and a half has been our incremental increase in the use of advocacy.
Since I first began speaking about competition advocacy, almost two years ago, I have been clear that I believe the Bureau has an important role to play as the principle voice in government advocating for more competitive markets in Canada, through both regulatory interventions and enhanced collaboration and communication with stakeholders. The Bureau will continue to advocate for increased competition to regulators, policy makers and stakeholders and will do so in areas where the impact is greatest to Canadians. Not only is it within the Bureau’s mandate to do this, it’s our firm belief that, in doing so, we can advance the notion of greater competition much more than we ever could through enforcement alone.
Not surprisingly, the Bureau’s small advocacy team has had an extremely busy year and it’s fair to expect that our advocacy work will continue to be on the front burner in the coming year.
Within the last year, we’ve undertaken advocacy projects in areas that we believe have a strong impact on Canadians, including providing submissions to the CRTC on a number of areas related to the wireless and broadcasting industries and to the City of Toronto in response to its review of the taxicab industry.
Also, as you may be aware, in February of this year, at the request of the Minister of Industry and the Minister of Natural Resources, the Bureau worked with the National Energy Board to undertake a review of the propane industry. The government determined that propane pricing was an issue for Canadians and asked the Bureau to investigate — which the Bureau did.
The examination found that while propane consumers did experience price fluctuations, based on the information collected there was insufficient evidence to conclude that anti‑competitive behaviour had an impact on recent propane price spikes on consumers. The examination also found that last winter’s prices and supply shortages were not indicative of long-term supply-demand imbalances in the Canadian propane industry.
We also initiated a review of the differences between the beer industries in Ontario and Quebec and are exploring the effect that these differences have on competition in each province. In addition, we have undertaken a review of the restrictions on advertising among pharmacists, dentists and veterinarians. We expect to have more to report on both of these initiatives later this year.
Advocacy isn’t the only area where the Bureau has been busy in the last year. We’ve also been actively working on documents that are intended to provide greater guidance to our stakeholders, including the CBA. These are in keeping with our commitment to provide greater transparency into the Bureau’s work and they support the Bureau’s goal of becoming a more cost-effective, efficient and responsive agency.
As you may know, a few days ago, the Bureau released its Price Maintenance Guidelines, following a period of public consultation. The final guidelines outline the Bureau’s general approach to enforcing section 76 of the Competition Act. They address common business practices, such as minimum resale pricing and minimum advertised pricing. I would like to thank the CBA for its contributions to the development of these guidelines. Your feedback was a critical part of our consultation and is very much appreciated.
While we believe guidelines such as these are critical to fostering greater transparency, it’s also important to recognize that there are limits on how much guidance the Bureau can provide and in no way can this guidance be seen to be definitive or to fetter my enforcement discretion.
Late last month we also released draft Guidelines for the Production of Electronically Stored Information for public consultation. These guidelines set out the Bureau’s preferred standard format for receiving electronically stored information in the context of both compulsory and voluntary processes during the course of an inquiry or investigation. Again, this was accomplished through joint work with the CBA, and I would like to acknowledge that now.
As you can see, through these guidelines, the Bureau has been making significant strides in its ongoing efforts to increase transparency.
For some time, I’ve been speaking about shared compliance, which is effectively recognizing that we all — the Bureau, the business community and the legal community — have a role to play in promoting compliance with the Act and the other legislation that the Bureau enforces.
Shared compliance is about working collectively to ensure an efficient, competitive and open marketplace — and this shared approach enables us to accomplish together much more than we could individually. It’s a "fix it first" approach that encourages parties to come to the Bureau with issues and solutions identified and to work with the Bureau on a solution.
Now, while it’s very easy to talk about shared compliance in theory, it’s quite another to put it into practice. That is why I’m so pleased to report that, over the past year, we’ve achieved success through a shared normative and ethical values approach to case resolution.
Our JYSK case is a prime example of this shared compliance approach. In this case, JYSK Canada discontinued the sale of certain duvets, following Bureau inspections which found that these duvets did not meet minimum down requirements under the Textile Labelling and Advertising Regulations. Further, JYSK is now proactively working to resolve other labelling issues identified by the Bureau. This approach saw the Bureau and JYSK working together to resolve this issue and avoided the use of costly litigation.
We’ve put this shared approach into action in a number of other cases as well, and I expect to have more cases like these to report in the coming year.
You may also recall that I announced earlier this year that, to support shared compliance, we would be updating the Corporate Compliance Bulletin. Well, I am pleased to announce that today we’re releasing an updated draft Corporate Compliance Bulletin for consultation.
The Bulletin outlines the steps that Canadian businesses should be taking to mitigate their risk of contravening the legislation enforced by the Bureau. It also provides valuable guidance about the development of credible and effective corporate compliance programs.
This is a broad document that covers a vast number of subjects relating to corporate compliance, the responsibilities of companies and the Bureau’s approach. More specifically, the Bulletin covers the following major areas:
- The appropriate role of a company’s chief compliance officer;
- The use of risk-based tools to illustrate competition risks; and
- Increasing incentives to reward credible and effective programs.
With regard to the role of a company’s chief compliance officer, the Bureau’s belief is that chief compliance officers should be both independent and empowered by senior management and/or their board to deliver on their role. The Bulletin outlines this and provides suggestions regarding the appropriate levels of seniority and independence for those serving in this role. It also provides recommendations for companies as to how they can foster an environment that empowers employees to report contraventions of the Act without fear of retaliation.
On the subject of risk-based assessment tools — corporate compliance programs should accurately reflect the risks posed to the company in question. A corporate compliance program that is broad, non-specific and does not accurately reflect a company’s risks for non-compliance is not a credible and effective program. Likewise, neither is a program that is too narrow in its scope. A credible and effective program must be reflective of the company, its role in the market place and the associated risk.
The Bulletin recommends that compliance officers work with senior management to perform a risk assessment for their company and then tailor their compliance program appropriately. The Bulletin also encourages companies to address risks posed by third parties, like suppliers. It’s incumbent on businesses to ensure that the companies with which they do business are not putting them at risk of non-compliance.
Finally, the change in the Bulletin that will likely garner the greatest attention is the addition of an incentive program, which would see a discretionary reduction in fines for companies that qualify for leniency and that are found to possess a credible and effective corporate compliance program. The size of the recommended reduction in fines would be at the discretion of the Bureau. We believe that this is an important incentive — one that will reward companies with existing credible and effective compliance programs and encourage companies without such programs to put one in place.
While this incentive is an important tool, it is by no means a "free pass" for companies simply putting a compliance program in place. For starters, this incentive will only be available for companies that have applied for a leniency marker under the Leniency Program. Additionally, the mere existence of a corporate compliance program alone will not merit qualification for this incentive. In order to qualify, companies will be required to demonstrate, based on a thorough review, undertaken by the Bureau, that the compliance program in question was in fact credible and effective.
To that end, and this is noted in the Bulletin, the Bureau is moving toward establishing a "Chief Compliance Officer". While this role is still being fleshed out, reviewing the programs of companies that are seeking a reduction in fines will be among the responsibilities of this position.
Finally, I would be remiss if I did not point out that the Bulletin also contains a number of hypothetical scenarios designed to provide greater understanding of the Bureau’s approach to certain compliance-related issues. We have done this to increase transparency and provide more predictability for parties. There is a particular focus on hypotheticals that small and medium-sized businesses could face. I believe this will be an important resource for smaller businesses that may be less familiar with the potential risks of non-compliance and I ask those of you who represent small and medium-sized businesses to encourage them to make use of this section of the Bulletin.
As indicated, this is a draft bulletin that is being put forward for comment and input for the next 60 days. I strongly encourage all of you to review the Bulletin and I would also encourage you to take the time to provide your feedback — it is a critical part of increasing the dialogue and the level of collaboration between the Bureau and the Bar.
I’ve discussed several initiatives today, but I have to say that if there is one common thread weaving through all of them, it’s the Bureau’s commitment to greater transparency.There’s good reason for that — this is the guiding vision for the Bureau. As we pursue this vision, we’re developing an agency that is cost-effective, efficient and responsive.
I highlight transparency and collaboration so frequently because I believe they’re critical components of any successful modern organization. Anywhere you turn — in government, in business, in the non-profit sector — organizations are moving toward a culture of transparency. Our international counterparts, led by the good work of the International Competition Network and the Organization for Economic Cooperation and Development, are also making progress on due process and transparency. I believe that in order to continue to be successful, the Bureau must do the same.
As we move forward with this vision, we will look to you, our partners, to support us in this goal — by supporting our shared compliance approach, by providing your feedback on items like the Compliance Bulletin and by continuing to work with us toward a more collaborative relationship.
With that, I’m looking forward to hearing your thoughts and questions. So, without any further delay, let’s move to the Q&A portion of our session.
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