Remarks by John Pecman, Commissioner of Competition

Speech to Borden Ladner Gervais

Toronto, Ontario

November 25, 2014

(Check against delivery)


Introduction

Thank you for the opportunity to be here. I’m joined today by my colleague Matthew Boswell, the Senior Deputy Commissioner for the recently merged Fair Business Practices and Criminal Matters Branches.

Matthew and I are going to share the stage today and we’ll try not to take up too much time so we can allow for some questions following our remarks.

Today, I'm going to focus on two areas — the importance of competition in creating an efficient marketplace and, in turn, economic prosperity, and the importance of compliance. Within these two subjects, I’m going to touch on some of the Bureau’s recent work and its future plans.

However, before I begin, I'd like to update you on some changes taking place at the Bureau — and how this fits in with my vision for the organization.

Recent appointments:

I'm very pleased that Rambod Behboodi has joined the Bureau as a member of my senior management team in the new role of Deputy Commissioner responsible for the Competition Promotion Branch. Rambod joined us from the Department of Finance, where he held the position of General Counsel and Executive Director, General Legal Services. Prior to this, Rambod worked in various government departments including the Privy Council Office, the Department of Foreign Affairs, Trade and Development; at the Competition Bureau; and in private practice.

I'm also pleased to share with you that we've appointed two new Deputy Commissioners in enforcement roles in the Fair Business Practices and Civil Matters Branches.

First, Stéphane Lamoureux has joined the Bureau as the Deputy Commissioner for the Fair Business Practices Branch. He comes to us from the Legal Department of Public Works and Government Services Canada and Shared Services Canada, where he held the position of manager and general counsel since 2011.

Second, Anthony Durocher, former Assistant Deputy Commissioner in the Mergers Branch, will be serving as the Deputy Commissioner of the Bureau’s Civil Matters Branch. Anthony joined the Bureau as a Competition Law Officer in 2004. He was appointed Senior Competition Law Officer in 2006, and led several major investigations and merger reviews in the telecommunications, broadcasting, natural resources, and financial services sectors, as well as a number of policy initiatives.

Finally, I’m pleased that Ana Maia was recently appointed Deputy Commissioner of the Compliance and Operations Branch. Ana is responsible for the Bureau’s resource management, administration and informatics activities, and will oversee the Bureau’s electronic evidence and conversion unit. Ana has been in the public service for almost 21 years, including eight years as a member of the Executive cadre.

I’m delighted to have these fine people join our team — they will be a tremendous support as we work towards realizing our vision.

Vision

Since being appointed Commissioner, I've spent much time thinking and speaking about how to make the Bureau an even better law enforcement agency. And by now, my vision for the Bureau should be no secret — I’ve been talking about it so often that my wife has heard me repeating it in my sleep.

My vision is that of an agency that's more open, balanced and transparent.

I believe that this is not only the right approach for the Bureau — it’s a necessary one. It’s not news to anyone in this room that transparency and openness are quickly becoming the mantra of governments and public and private sector institutions. It’s what the public expects and it’s the right thing to do.

The other key component of this is balance, which speaks to our ability to be a flexible agency, better prepared for the expectations of a changing world.

Realizing our vision

So, how do we at the Bureau accomplish openness, balance and transparency?

We do it by:

  • Creating a corporate culture that is more open and transparent;
  • Re‑aligning our organization to better leverage the Bureau’s resources; and
  • Placing a greater focus on using all of the tools available to us — advocacy, enforcement and compliance promotion.

I’d like to unpack each of these a little bit further.

First, creating a culture that is more open and transparent means:

  • More dialogue with parties under investigation;
  • Increasing the number of guidance documents; and
  • Enhancing our relationships with stakeholders, like you.

Second, re‑aligning our resources will allow the Bureau to: 

  • Improve the way we work together and perform as an organization;
  • Fully leverage all Bureau resources so as to maximize our contribution to a more competitive marketplace in Canada; and
  • Establish a better balance between our competition promotion and enforcement activities.

To date, we have taken steps to align some of our existing branches, transforming seven of them into three primary lines of business. I’d be happy to elaborate on these changes during our Q&A session.

Where realignment is concerned, I want to be clear that we have not undertaken this process to decrease the size of the Bureau or to change the nature of the work we do — far from it. Our objective is to ensure that our agency is well prepared for the future.

I believe these first steps have brought us towards that goal.

And third, placing a greater focus on using all of the tools available to us — advocacy, enforcement and compliance promotion — allows us to use every vehicle at our disposal to promote maximum compliance with the Competition Act and the other legislation we enforce.

As you might expect, we'll determine what tools to employ based on the circumstances of each case.

To ensure greater clarity and transparency about the tools we use and the circumstances in which they may be used, we’re in the process of updating the Bureau’s Conformity Continuum — which explains the Bureau’s approach to promoting and enforcing compliance with the legislation for which we are responsible.

This renewed focus on using the full range of tools available to us includes a focus on compliance and, more specifically, shared compliance.

I am going to spend a fair bit of time speaking about the importance of compliance with competition law — the law that puts into practice effective competition policy. 

But before compliance comes competition — and so I think it's important to first look at why competition and, in turn, effective competition policy is important.

Competition & economic health

It is a well‑documented fact that competition is critical to the efficient functioning of the marketplace and that it benefits the economy, consumers and businesses alike.

But it's fair to say that the impact of competition on economic health can be underestimated and overlooked.

Canada’s own Competition Policy Review Panel, comprised of business experts, addressed this challenge in its 2008 Final Report — which strongly endorsed the role that competition and competition policy play. The report called competition “the strongest spur to innovation and value creation, leading to a higher standard of living for all Canadians”.

The Panel’s findings are backed up by other experts in the field and by empirical evidence.

In fact, in October of this year, the OECD released a fact sheet summarizing existing evidence on the links between competition enforcement and policy, and positive economic outcomes.

Furthermore, in his book, The Power of Productivity, William Lewis, Director Emeritus of the McKinsey Global Institute, identifies the problem of ignoring the role of competition policy in assessing economic performance.

In it, he says that much of the discussions around economic performance are overly focused on the role of macroeconomic policies and differences in labour and capital markets. Lewis asserts that this approach is flawed, pointing out that “policies governing competition in the product markets are as important as macroeconomic policies”.

Lewis also notes that the Washington Consensus, which prescribed specific economic policies as the gold standard for economic reform of struggling developing countries, “profoundly underestimated…the importance of a level playing field for competition in a country”.

Lewis’ former colleague, Ian Davis, in speaking at the 2006 Brussels Economic Forum, said: “…competition is key. Our research clearly shows that wherever competitive intensity is greatest, innovative products and practices proliferate and productivity grows”.  

For example, in the 1990s, following major economic reforms aimed at improving competition in Australia, the Australian Productivity Commission found that the reforms spurred price changes that increased Australia's GDP by 2.5%, and household incomes by $7,000.

All of this underscores the fact that competition policy has a well‑defined and well‑documented role to play in determining economic health. And, while we’re on the subject, the Bureau has a clear role to play in promoting and advancing the principles of competition in our economy. 

We owe it to Canadians and to the economic health of our country to explore all ways to bolster competition and realize positive benefits for our economy.

And while enforcement is a big part of this — and is, in fact, our bread and butter at the Bureau — there are other mechanisms through which we can increase competition and productivity in the Canadian economy.

It's my strong belief that the introduction of competitive forces within a market, through advocacy and smart regulation, can have as much, if not more impact, on the economy as enforcement.

And so, I was heartened in 2012 when the CD Howe Institute’s Competition Policy Panel endorsed this approach, saying that the Bureau should “actively engage in competition matters in regulated sectors of the economy”. 

Since I became Commissioner, in tandem with strong enforcement activity, the Bureau has been increasing its use of advocacy, particularly in regulated sectors of the economy. This move is in keeping with agencies in other jurisdictions around the world, including the US Federal Trade Commission and the United Kingdom’s Competition and Markets Authority.

Our efforts are focused in areas where we can have the greatest impact to Canadian consumers and businesses.

Bureau’s advocacy work

To date, the Bureau has made submissions to the CRTC in respect of its wireless roaming rate, wholesale mobile wireless services, and “Let’s Talk TV” reviews, as well as to the City of Toronto on its review of taxi services within the city. We know, based on numerous complaints that the Bureau has received regarding the taxi business, that there are issues within the industry that are impacting consumers.

The existence of these issues underscores the importance of ensuring that those who regulate industry access, licensing, and other competitive factors are appropriately considering the impact of their rules and policies on competition.

Our recommendations to the City of Toronto in February of this year were to:

  • ensure that the city’s regulatory framework facilitates new forms of competition;
  • consider increasing the number of licences issued; and
  • allow the use of innovative software applications that enable users to conveniently and efficiently order and pay for taxi services.

Having said this, should the Bureau uncover evidence that the taxi industry is engaging in anti‑competitive conduct to protect the “status quo”, we will not hesitate to take enforcement action.

The Bureau has also undertaken a review of restrictions on advertising among pharmacists, dentists and veterinarians, recognizing that the services these professionals provide directly impact the welfare of Canadian consumers and, as such, the Bureau has a responsibility to promote competition in these areas.

In addition the Bureau is actively working on a review of labour mobility restrictions within Canada. 

We've undertaken this review as we believe that reducing barriers to the free movement of workers can make a significant contribution to Canada’s economic growth, innovation, productivity and competitiveness. We also know that, despite recent progress in facilitating interprovincial labour mobility, barriers for regulated professions and skilled trades persist.

In keeping with the Bureau’s mandate, our review has been focused on the importance of eliminating barriers to mobility from a competition perspective. I expect to have something to report on this in the coming weeks.

We will continue to seek opportunities to advocate for frameworks that encourage competition in a variety of industries. On that note, I'm pleased to announce that today the Bureau launched a new publication entitled “The Competition Advocate”. This short commentary will be published periodically and will offer the Bureau’s views on industries that may benefit from increased competition.

The first issue of "The Competition Advocate" is focused on the taxi industry’s digital dispatch services and expresses the Bureau’s belief that innovative business models have the potential to offer important benefits to consumers through enhanced competition, including lower prices, greater convenience and better service quality. It will be shared on our website and I'd encourage all of you to have a look at it.

Foreign investment & competition

I mentioned earlier the Competition Policy Review Panel’s recommendations regarding competition and innovation. One of the other interesting conclusions of that panel was that foreign investment has the potential to be a major driver of competition.

In fact, the Panel recommended both changes to the Investment Canada Act to reduce barriers to foreign investment and the liberalization of investment restrictions in regulated sectors. It saw these as essential policy shifts that would increase competition.

In the past, the Bureau has spoken publicly about the fact that foreign ownership restrictions can present a significant barrier to entry for certain industries.

We also know that the federal government has expressed an interest in attracting increased foreign investment; Minister Oliver highlighted this in this month’s Fiscal Update and the 2013 Throne Speech noted its role in helping Canadian companies grow.

Where foreign investment is concerned, I will say this ‑ the Bureau supports policies that facilitate greater competition.

Canada‑EU Free Trade Agreement

On that note, the Bureau was pleased to see the release of the final draft of the Canada EU Free Trade Agreement, in late September. We are pleased to have played a role in drafting competition policy provisions included in the agreement.

We believe that including competition policy provisions in CETA is important to ensure that the benefits of trade liberalization are not offset by anticompetitive business conduct. The provisions include commitments that ensure that:

  • the parties maintain measures to forbid anticompetitive business conduct;
  • those measures are enforced in accordance with the principles of transparency, procedural fairness and non‑discrimination,
  • the parties cooperate on cross‑border competition enforcement matters in accordance with the terms of the existing cooperation agreement between Canada and the EU; and
  • the competition policy provisions are exempt from all forms of dispute settlement under the agreement.

Compliance

Having outlined the important role of competition policy in the economy, I want to turn now to the second piece of the equation: compliance with competition law — the law that puts in to practice effective competition policy. 

Promoting compliance with the Competition Act and the other legislation that the Bureau enforces will continue to be a focus for the Bureau.

As I've been discussing the importance of shared compliance publically for more than a year now, it is my hope that those in the legal and business communities understand the mutual benefit of this approach — and recognize their respective roles in promoting compliance with the law and, through this, an efficient marketplace.

Together, we're building a culture of compliance, within individual businesses, industries, and the marketplace as a whole.

I want to take a moment now to outline the benefits of compliance.

At its very core — compliance is about doing what’s right — for consumers and for businesses.

When businesses are compliant, they are in turn assuring that the market functions efficiently — to the benefit of all.

When I speak to businesses about compliance and building a credible and effective corporate compliance program, I liken it to preventative medicine. We all understand that exercise and good diet are the keys to preventing diseases that can disrupt our lives. And that, when we don’t do those things we run the risk of serious illness and requiring strong medicine to correct the problem.

Likewise, a strong corporate compliance program is “preventative medicine” for businesses — and when a company opts not to implement one, they put themselves at great risk of being on the receiving end of some pretty awful tasting medicine — medicine that's almost certain to disrupt their business.

And I’m sure that by now you know: the Bureau is not afraid to “prescribe” strong medicine to correct violations of the Act.

Now, we recognize that businesses need guidance and so, for our part of shared compliance, the Bureau ensures — through enforcement, publications, advocacy and suasion — that they understand what is expected of them in terms of compliance.

Corporate Compliance Bulletin update

To that end, as you may be aware, in September, the Bureau released an updated draft Corporate Compliance Bulletin for consultation. On November 17th, the consultation phase closed and we're now in the process of reviewing and, where appropriate, incorporating the feedback received.

For those who may not be aware, the Bulletin outlines how Canadian businesses can mitigate their risk of running afoul of the legislation enforced by the Bureau, as well as provides guidance about how to develop a credible and effective corporate compliance program. It includes hypothetical scenarios, for the purpose of providing greater understanding of the Bureau’s approach to certain compliance‑related issues.

The Bulletin covers a variety of subjects, including:

  • 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.

The Bulletin also includes the addition of an incentive program that would see reductions in fines for companies that qualify for leniency and that are found to possess a credible and effective corporate compliance program. 

Not surprisingly, this has attracted a considerable amount of attention.

It's important to note that this is not a “free pass” — it is a discretionary program.

Accordingly, the size of the recommended reduction in fines would be determined by the Bureau. Also, 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 is in fact credible and effective.

We believe this will be an important tool that will help us to increase compliance by rewarding companies with existing credible and effective compliance programs and encouraging companies without such programs to put one in place.

Finally, we continue the process of establishing a “Chief Compliance Officer” — the precise role is still to be determined, but — among the responsibilities of this position will be reviewing the compliance programs of companies seeking reductions in fines. 

As I noted, we’ve wrapped up the consultation phase and are now reviewing the comments and updating the Bulletin. It's my hope that we’ll have a revised Bulletin for release in the Spring.

Case update

Having spoken earlier about the advocacy side of competition promotion — I don’t want to leave you with the impression that enforcement has taken a back seat. I know that Matthew will have a number of updates to provide you with on the enforcement side, but before I turn it over to him I want to note a few recent cases in the Mergers and Civil Matters branches.

Tim Hortons / Burger King

As you will no doubt be aware, the Bureau recently approved the merger between Tim Hortons and Burger King. After a thorough review it was determined that the transaction was unlikely to result in a substantial lessening or prevention of competition. This was due to, among other things, the existence of a large number of competitors and the low barriers to entry in the fast food industry.

Bell Aliant / Ontera

Also in the area of mergers, we recently concluded our review of Bell Aliant Regional Communications Inc’s (Bell Aliant) proposed acquisition of O.N. Tel Inc (Ontera).

Following an investigation, the Bureau determined that the transaction would likely substantially lessen and/or prevent competition in the sale of wireline telecommunications services.

After advising the parties of our serious concerns, Bell Aliant worked cooperatively and constructively with us to address those concerns and has agreed to a long‑term lease along a significant portion of Ontera’s network to a third‑party telecommunications provider, Bragg Communications Inc.

This agreement means that consumers and businesses in Northern Ontario will continue to benefit from vigorous competition in the provision of wireline telecommunications services.

And, it is another example of the Bureau’s ongoing vigilance when it comes to competition in Canada’s telecommunications sector.

Water heaters

We’ve also obtained resolution on several cases involving providers of water heaters in Ontario. These resolutions will ensure that consumers have the freedom to switch and in turn, the freedom to choose their water heater provider.

Among these resolutions is a consent agreement with Reliance Comfort Limited Partnership that prohibits Reliance from, among other things — requiring customers to obtain authorization before returning a rented water heater, unreasonably restricting when and where water heaters can be returned, and engaging in aggressive retention tactics. It is also required to pay an administrative monetary penalty of $5 million and contribute $500,000 to the Bureau’s investigative costs.

We’ve also received written assurances from EnerCare, the company that recently purchased Direct Energy, that it will refrain from engaging in Direct Energy’s anti‑competitive practices.

Lastly, yesterday we reached a consent agreement with National Energy and its parent company that prohibits National from misleading consumers into believing that their existing water heater is unsafe or is eligible for a no-cost upgrade. It also requires the respondents to provide $1.5 million in restitution to all impacted customers, and to pay an administrative monetary penalty of $5 million and $500,000 towards the Bureau’s investigative costs.

Notably, the agreement also requires National to implement a Corporate Compliance program and to put in place and pay for an independent monitor, whose role will include monitoring and reporting on National’s compliance with the agreement.

These steps will protect Canada’s most vulnerable consumers who were at risk of becoming victims of these anti‑competitive practices. These changes represent the possibility of substantial savings for consumers, including those who wish to purchase new water heaters instead of continuing to pay rental fees.

Price gap

On the legislative side — I know that many of you in this room are anxious to hear from me about the government’s proposed price gap legislation.

What I can tell you is that the Bureau’s legislative framework and mandate are determined by Parliament. While, at present, there are no specific provisions in the Competition Act allowing the Bureau to properly examine cross‑border price parity issues, if the Bureau becomes aware that Canadian prices are being affected as a result of anti‑competitive behaviour, the Bureau can and will take action.

As far as any specific comments on proposed legislation, like you, we are anxiously awaiting the Government’s final plans and we'll have more to say about this once legislation has been introduced and passed by Parliament.

Conclusion

I want to leave some time for Matt to talk about recent and future developments in the Fair Business Practices and Criminal Matters Branches, so I am going to wrap things up here.

Before I do, I want to leave you with a couple of thoughts. We know that competition — more specifically healthy competition — has the potential to accrue significant benefits for the Canadian economy and for the consumers and businesses that exist within it.

Virtually no Canadian or Canadian business is untouched by the benefits of robust competition.

Knowing this, it is our collective responsibility to advance competition — to ensure that our marketplace is functioning efficiently. The Bureau plays a significant part in advancing healthy competition in Canada, but we cannot do it without your support. You, as legal practitioners and as representatives of the business community, also have the power to further healthy competition through compliance. This is what we at the Bureau expect from you and we hope that you will continue to work with us to advance this goal.

Thank you.

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