Remarks by John Pecman, Commissioner of Competition
Better Together — The Importance of Cooperation Amongst Competition Authorities
North American Antitrust Authorities Conference
Mexico City, Mexico
May 21, 2015
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Spoiler Alert! I’m going to talk about the importance of international agency cooperation.
Thank you for the opportunity to be here in beautiful Mexico to speak with you today. I’m pleased to be joining my colleagues from the Federal Economic Competition Commission of Mexico (COFECE), the United States Department of Justice (US DOJ), and the Federal Trade Commission (US FTC), and engaging with this North American audience – both with us in the room in Mexico, and tuning‑in from the United States and Canada via webcast. That’s quite a draw — a “blockbuster” — as they call it in the movie business.
Today’s conference is a first. For the TV fans amongst us – it’s a “pilot.” It’s our inaugural North American Antitrust Authorities Conference. This event was borne out of the collective interest of our four agencies to work together more closely to enhance cooperation in competition law and policy on our continent. In line with that goal, I have the pleasure of speaking to you today about the importance of international cooperation by competition agencies. The title of this episode of our conference – an event that I hope becomes a long running series — is “Better Together.”
I chose the title “Better Together” because that’s exactly what I believe. I believe we are better at fulfilling our mandates when we have an international cast that’s working collaboratively. In fact, we at the Bureau believe that we cannot hope to fulfill our mandate of promoting and protecting competition and competitive markets in Canada or deliver on our strategic priorities, without maintaining close working relationships with our partners abroad. Our continental colleagues, the United States and Mexican competition authorities are particularly important partners.
Like many popular shows, let me give you a sneak preview of what is ahead. I'll be touching upon three main areas – the North American relationship; the benefits of cooperation amongst competition authorities; and my thoughts on enhancing agency collaboration in the future.
The North American relationship
Our three nations have a strong history together and have developed increasingly integrated economies. As North Americans we share a common geography, democratic values, respect for the rule of law, free economic practices, and an environment where security, economic, and quality‑of‑life interests intersect. We North Americans are almost 530 million in number, and our region’s economies represent more than one‑quarter of the world’s GDP. Our North America Free Trade Agreement (NAFTA)—which is currently celebrating its 21st year – was the first comprehensive trade agreement of its type and it has set a valuable example of the benefits of trade liberalization for the rest of the world by creating a fair and predictable framework for increased trade and investment amongst our three countries. More recently, Canada, Mexico and the U.S. are collaborating on developing and implementing an evergreen “North American Competitiveness Workplan” to further advance North America’s global economic competitiveness on a variety of fronts. Geo‑politically, our countries’ leaders – “The Three Amigos” — as they’re known — work together at the Organization of American States, the Summit of the Americas and the G20, and they have been advancing regional policy objectives through trilateral meetings since 2005.
From an antitrust perspective, we’re also working together trilaterally and we share a common goal: active, effective competition policy and enforcement, contributing to a North American marketplace in which consumers and businesses can prosper. We tackle daily the realities of today’s globalized marketplace where borders are overcome by digital consumers and there is outsourcing of a variety of services and global value chains. If a script were ever written about our work, perhaps it would be called the “Avengers of Antitrust.”
Another pop‑culture icon, Lisa Simpson — that eight year old, “know‑it all,” middle child of TV’s famous family, “The Simpsons,” summed up our regional and global marketplace realities perfectly in the show’s episode where the family car is damaged in an accident. The Simpsons get a brand new one from their mechanic and Lisa said:
"I never dreamed an American car, designed in Germany, assembled in Mexico, from parts made in Canada could be so amazing."
It is amazing — the results of our integrated economies. NAFTA contributed to a fundamental change in the economic relationship between our nations, such that more than just making and selling goods to each other, our companies are increasingly making things together using North American production platforms with regionally integrated supply chains across sectors. Just as Lisa Simpson points out, we see, for example, that aircraft today are being designed in Canada, produced in Mexico, and finished in the United States. Our integration is ultimately what helps us maximize our capabilities and makes our economies more innovative and competitive.
Benefits of international cooperation
The increasing globalization of commerce and economic integration of countries around the world means that businesses and consumers are able to operate almost seamlessly across borders. With some 120 jurisdictions now having competition regimes, agency collaboration is essential for creating the right conditions for success. Collaboration amongst national and regional competition authorities allows us to more efficiently address competition issues wherever they arise for the benefit of businesses and consumers everywhere.
Speaking from the Canadian perspective, cooperating and strengthening our relationships with our antitrust partners is becoming increasingly important for two basic reasons, which are at the core of the Bureau’s mandate and long term strategic plan. First, cooperation in competition enforcement is essential as we strive to protect Canadians against international anti‑competitive conduct and transactions. Second, agency collaboration is imperative for promoting strong competition principles and best practices worldwide. With our enforcement and competition promotion efforts working hand‑in‑hand, we are contributing to competitive markets in Canada and promoting the right conditions for trade and investment for Canadian exporters and investors abroad.
Showbiz is about numbers – numbers of viewers and tickets sold. That’s what people remember. The same is true for antitrust cooperation and the numbers speak for themselves. Approximately one third of our cartel cases have an international dimension and one quarter of our complex merger reviews involve a significant level of cooperation with at least one international antitrust counterpart. The numbers neatly illustrate the need for competition agencies to routinely work together in our common interest.
The benefits of collaboration are undeniable. It increases the detection of anti‑competitive activities; creates opportunities for investigative coordination and information sharing; and allows agencies to share and compare perspectives, enforcement approaches, and substantive analyses – ultimately improving our investigations. With greater cooperation, the business community also benefits from increased convergence between agencies. Sharing best practices and establishing benchmarks for policy issues and practices creates greater predictability and transparency for stakeholders.
While it’s essential to emphasize the benefits of cooperation, it’s equally important to recognize that a dearth of collaboration can lead to real, tangible costs for competition agencies and businesses. As anti‑competitive conduct and transactions increasingly cross borders, the burgeoning of international antitrust concerns and enforcers has greatly expanded the potential for increased costs of compliance, the risk of inconsistent remedies, uncertainty over legal treatment, and duplication of resources. Cooperation between competition agencies thus also plays an important role in mitigating costs and avoiding conflicting outcomes. It increases the likelihood of consistent analysis being applied across jurisdictions, streamlines reviews and remedy processes, and reduces uncertainty for businesses. Basically, we can accomplish more together than if we were only working independently.
Our enforcement cooperation
The importance of cooperation is formally recognized by our governments and memorialized in the NAFTA, as well as the bilateral competition cooperation agreements between Mexico, the U.S. and Canada. NAFTA and our bilateral cooperation agreements emphasize the need for strong and collaborative approaches to competition law and policy and provide the tools and parameters to promote cooperation between competition agencies. NAFTA provides the framework for ensuring that the benefits of trade liberalization are not offset by anticompetitive business conduct and our bilateral cooperation agreements set out how our agencies will work together day to day on enforcement and policy matters. We continually reap the benefits of these agreements and of working with our North American partners. But, how have we benefitted, specifically?
Let me speak to this by telling you about our agencies’ recent enforcement cooperation achievements. As the famous Avengers movie tagline goes — “Avengers Assemble.” Well, we have assembled and we’ve cooperated on cases.
We cooperated with our counterparts at both the US DOJ and COFECE during the recent merger review for the acquisition by Continental AG of Veyance Technologies, Inc. Given that Continental and Veyance primarily supplied Canada from manufacturing and final assembly plants located in the US and Mexico, the Bureau greatly benefitted from coordinating its review with both partners. Though we had concerns that that the overlap in air springs for commercial vehicles would have resulted in a substantial lessening of competition in Canada, we were ultimately able to inform the parties that the Bureau would take no immediate action due to a settlement agreement reached with the US DOJ. The parties were required to sell Veyance’s North American Air Springs Business, which resolved our Canada‑specific concerns. This case is a good example of trilateral communication and coordination amongst our agencies, leading to an efficient review and consistent outcomes across the jurisdictions.
The Bureau and the US DOJ’s review of Louisiana Pacific Corporation’s acquisition of Ainsworth Lumber Co. Ltd. is an illustration of comprehensive cooperation. As the mills that would have been acquired served purchasers in both Canada and the United States, the Bureau cooperated and worked closely with the US DOJ throughout its review, including regular calls between case teams, information sharing, comparing theories of harm, attending each other’s depositions, and coordinating on reviews of remedies proposed by the parties. The agencies’ economists also worked closely together, notably, discussing the data provided by the parties and econometric models. The parties ultimately abandoned the transaction on account of our collective competition concerns with the proposed transaction. All of this collaboration resulted in a more efficient review of this transaction for both agencies.
The Bureau also worked very closely with the US FTC in its recent review of the proposed acquisition by Holcim Ltd of Lafarge S.A., which brought together two of the world’s largest manufacturers of cement and related products. Given an early offer by Holcim to sell all of its Canadian operations and the cross‑border flow of cement between the US and Canada, the Bureau worked closely with the US FTC to determine the acceptability of Holcim’s initial remedy proposal. With the Bureau’s ultimate conclusion that an appropriate remedy for Canada needed to include a particular US‑based cement plant along with the Canadian operations, strong cooperation between the two agencies was required to achieve effective remedies in both jurisdictions and to coordinate the implementation of the agreements reached with the parties.
With respect to cartels, the Bureau continues to cooperate closely with the US DOJ in our ongoing investigation into the motor vehicle components industry. This international investigation is the Bureau’s largest bid‑rigging investigation to date, and is being coordinated with a number of jurisdictions. Cooperation between the US DOJ and the Bureau has included regular contact through telephone calls and e‑mails, as well as the coordinated use of formal powers. This cooperation has been crucial to the Bureau’s advancement of our investigation. To date, there have been 7 guilty pleas in Canada related to this investigation, with fines totalling over CAD$56 million.
These “smash hits” show how our good working relationships with our American and Mexican counterparts are creating positive results. However, there’s more we can be doing to collaborate. Our goal is simple – deepen our working relationships with key international partners — and Mexico and the United States are core partners for Canada. With that in mind, I believe that to maximize benefits of international cooperation, it is necessary to cooperate more strategically than a mere case‑by‑case basis. We need to go back to our creative departments and develop a longer term strategic plan. As Captain America said to Iron Man “… [W]e need a plan of attack.”
Our recently published Best Practices on Cooperation in Merger Investigations with the U.S. DOJ and FTC is a case in point on how we’re trying to build on our plan to enhance our cooperative efforts. Developed upon years of increasing collaboration in merger review, the best practices promote effective coordination amongst the agencies when reviewing mergers that impact both countries. It also serves to increase transparency for the business and legal communities by outlining common cooperation practices as well as providing guidance on how they can work with agencies to further enhance the coordination of merger reviews. This document will guide and propel our Canada‑US merger collaboration into the future.
Coordination and alignment of merger reviews with our American counterparts was greatly facilitated by the amendments made in 2009 to our Competition Act. At that time, we modified our investigatory powers to include a Supplementary Information Request — similar to the American Second Request — and aligned our timing procedures such that we both make decisions to issue these requests after an initial 30 day review period. We both have a second 30 day period after full compliance with the request to conclude our reviews before parties can close a merger. This act of harmonization with our major economic trading partner has greatly facilitated the ability of merging firms to align their notifications, responses to information requests, and potential remedies in both jurisdictions. As an agency, we benefit from the increasingly aligned timing as we often find ourselves in the same stages of merger review as our American partners, allowing us to realize the full benefits of a collaborative review.
We also look forward to working more closely with COFECE, especially given Mexico’s recent constitutional amendments and new Federal Law of Economic Competition. For example, in Mexico’s new merger review regime, though our timing requirements are not identical, we think there are commonalities that can be successfully exploited to the benefit of the agencies and merging parties. I further congratulate Mexico on the implementation of these reforms and applaud Mexico’s initiative and perseverance in proactively seeking the best means to effectively fulfill its new mandate. I believe that closer cooperation amongst our agencies can further those goals.
In this vein, I’m a firm advocate of international fora like the International Competition Network (ICN) and the Organization for Economic Cooperation and Development (OECD) which work to bring international competition agencies together on a regular basis to discuss best practices and promote soft convergence. The project‑based work and meetings allow for conversations on practical topics and relationship‑building with international counterparts which often translate into improved advocacy and enforcement efforts domestically. Aligned with our international goals, we’re expanding our efforts in Latin American‑focused fora and I continue to support our agency collaboration in the OECD’s Competition Committee and the ICN’s working groups. We will continue to take every opportunity to engage with our North American counterparts in those fora and to deepen our partnerships.
Speaking of deepened partnerships, the rise in hemispheric or regional antitrust networks has shown openness on the part of international agencies to strive towards convergence in the spirit of best practices on cooperation. The International Chamber of Commerce publicly supports moves in the direction of enhanced regional or bilateral cooperation, including the creation of regional authorities. Just last week, the competition agencies of Brazil, Russia, India, China and South Africa (BRICS) announced that they expect to sign an agreement later this year to facilitate information exchanges. As encouraged by the OECD, we should think beyond our capacity as enforcers and be leaders in policy‑making as well. To that end, I’ve been a proponent of exploring whether one day we might be able to formalize the work that is going on between our four agencies into a regional network that provides more structure and direction to our efforts on issues of common concern in North America. That would ultimately allow us, our stakeholders and our economies to reap the maximum benefits of cooperation. While we’re not there, we have made strides in a positive direction and I would like to continue evaluating the feasibility and value of formal and informal cooperation mechanisms and exploring options to best address our cooperation challenges. Let me explain.
The four North American competition agencies have worked together as a trilateral group for some time and we all stand to benefit from continued regular interaction to discuss experiences in areas of shared concern, to identify cases where there are opportunities for cooperation and to work together to promote cohesive application of competition law in North America. As such, we’ve established a Canada‑U.S.‑Mexico trilateral working team to guide our trilateral work going forward to strengthen our cooperation, both at the case and policy levels. While the Bureau cooperates regularly with the U.S. agencies because we share a border and the U.S. is our largest trading partner, our enforcement cooperation with Mexico has been less frequent. To address this, all of our agencies have contributed to an initiative to better understand our merger regimes and our ability to exchange investigative information. We have also participated in bilateral staff exchanges and technical cooperation – all for the purpose of promoting a more informed approach to case cooperation amongst the agencies and identifying opportunities for future development. As a trilateral group, we’ve also worked to enhance our collaboration efforts with this conference and regular agency head meetings — most recently, our meeting this morning.
While agency head discussions are important, I believe that the practical implementation of cooperation necessitates regular discussions at the case‑handler level. Staff who conduct merger reviews and investigate anti‑competitive conduct form the backbone of effective enforcement and it is essential that they are able to take full advantage of strengthened relationships with our international partners such that they can utilize this in their day to day work. I am a strong advocate of having “pick up the phone” relationships and encouraging an internal culture of cooperation with partner agencies. For example, moving beyond case‑by‑case cooperation, Competition Bureau staff take part in regular meetings with case handlers at US DOJ and FTC to discuss enforcement approaches and lessons learned. These meetings result in increased understanding of each other’s processes, provide opportunities for information sharing, and help to deepen ties between our agencies. New and innovative topics of discussion will advance these discussions in the future, and we would welcome more discussions with COFECE going forward.
Building off the Best Practices document I mentioned earlier, I think one area to consider for enhanced cooperation is future joint investigations in civil matters, particularly merger reviews. The logical extension to achieving more effective, efficient and timely enforcement is to align coordination in the actual investigation process, facilitated by continued communication and an agency’s ability to share information. Internationally, the OECD explicitly envisions this type of cooperation in its 2014 Recommendation of the OECD Council concerning International Co‑Operation on Competitive Investigations and Proceedings. In it, the OECD encourages the adoption of legal provisions allowing for the exchange of confidential information between competition authorities without the need to obtain prior consent from the source of the information – essentially information gateways like the one we have in Canada today, which we find beneficial. To this end, the trilateral team’s work that I mentioned earlier on information sharing should prove very useful to inform our staff going forward and I would encourage all competition authorities to work towards the goals laid out in the OECD recommendations.
Information sharing can also be facilitated through bilateral and multilateral cooperation instruments, of which we are seeing more all the time. We at the Bureau are establishing new partnerships, as well as looking at our cooperation instruments and moving toward enhanced levels of cooperation with partners around the world. We currently have cooperation instruments with 13 jurisdictions with the recent signings of cooperation MOUs with India’s competition authority and China’s State Administration for Industry and Commerce (SAIC) and Ministry of Commerce (MOFCOM). Looking down the road, we are also working to complete MOUs with China’s National Development and Reform Commission (NDRC) and agencies in Latin America.
However, more and more we are seeing a trend toward deeper agency cooperation and second generation cooperation agreements being put in place to promote enhanced information exchange. The Bureau is in the process of negotiating a second generation agreement with our European partners and finalizing an arrangement with the New Zealand Commerce Commission that would improve our ability to exchange information. With the recently announced second generation cooperation agreement between Japan and Australia in April, I believe it’s important for the Bureau to proactively seek opportunities to develop second generation agreements where legal frameworks allow, especially with our established cooperation partners. Such agreements could allow us to exchange information more easily and to work towards our enhanced cooperation goals.
With that, I’m at the end of my script. Before you say “cut,” I’ll leave you with the message that cooperation amongst competition authorities is crucial and we at the Bureau are investing strategically in building stronger international relationships within North America and beyond. We look forward to continued good work together with COFECE and the US agencies and to contributing to more collaborative, efficient and effective competition enforcement and promotion within North America in the future.
I’d like to congratulate COFECE on its leadership in organizing this conference. I hope to see you all at a sequel to this pilot in Canada as I look forward to hosting the next Canada‑US‑Mexico trilateral agency heads’ meeting where we will continue to promote and embrace North American connectedness in antitrust.
As they say in showbiz — “That’s a wrap.”
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