Remarks by John Pecman, Commissioner of Competition
The Competition Bureau: A Year of Internal Reform and Accomplishments
This is an expanded version of the remarks delivered at the 2015 Competition Law Spring Forum
June 9, 2015
Good afternoon and thank you for the opportunity to be here today. It is a pleasure to once again be providing the keynote address at the CBA Competition Law Spring Forum. As I have said before, this is an important event on the competition law calendar.
At the outset, I want to acknowledge the close and collaborative relationship the Competition Bureau (the "Bureau") has with the CBA’s National Competition Law Section. This past year alone we have worked together on a number of projects, including the innovation workshop and a number of roundtables. The CBA has also commented on draft guidance documents, including many that I will be referring to shortly. We value this relationship and look forward to growing it in the future.
While this year’s Spring Forum is focused on cartel‑related issues, my remarks today are about the future: the steps we are taking to make the Bureau a stronger and more effective agency. These remarks will be delivered in four parts:
- First, I will present an audio‑visual guide to the Bureau — a truly Canadian effort that I am certain you will appreciate.
- Second, I will provide an update on realignment and the associated work that we have been doing.
- Third, I will discuss three critical guidance documents, one of which has just been released for public comment.
- Fourth, I will provide a year in review — the foundations upon which we hope to build an even more robust Bureau.
II. Fair play — a guide to the Bureau
Those of you who attended the Spring Forum last year may remember that I began my remarks with a short video on corporate compliance. We have received a lot of positive feedback on this video, which illustrates the importance of complying with the Competition Act (the "Act").Footnote 1
I want to begin my remarks today with another short video — one that illustrates the work we do using hockey as a backdrop. I believe that this video describes our enforcement mandate in an innovative and easy to understand way.
Videos like this are a valuable resource and I hope you will share it with your clients or others who may be interested in learning more about the Bureau.Footnote 2
III. Realignment and associated work
I now want to turn to realignment and the associated work that we have been doing over the last year — work that will make us a more open, transparent, collaborative and effective agency. Broadly speaking, this work has three principal components. First, to help us work more collaboratively, we have reduced the number of branches. Second, to enable us to be more effective, we have put in place a new governance structure. Finally, we have developed a new three‑year strategic plan.
Effective April 1, 2015, the Bureau’s eight branches were combined into four branches — the Mergers and Monopolistic Practices Branch, the Cartels and Deceptive Marketing Practices Branch, the Competition Promotion Branch and the Corporate Services Branch.Footnote 3 This new structure will increase collaboration and organizational synergies within the Bureau, provide greater flexibility in allocating resources to strategic priorities, and establish a more complementary balance between the Bureau’s enforcement and competition promotion activities. It will create a stronger and more adaptive agency that will ensure Canadian consumers and businesses continue to prosper in a competitive and innovative marketplace.
Of course, all of this assumes that there is an effective senior management team in place at the Bureau. Jeanne Pratt, Matthew Boswell, Rambod Behboodi and Ana Maia have been appointed to lead these new branches. I am very pleased to have such strong and capable hands managing these branches as we move through this time of transition.
In addition to restructuring and the appointment of a strong senior management team, several other changes have taken place at the Bureau, including the creation of four new committees — the Major Enforcement and Advocacy Committee ("MEAC"), the Strategic Policy and Planning Committee ("SPPC"), the Practices and Procedures Committee ("PPC") and the Corporate Management Committee ("CMC"). Each of these committees is chaired by a senior manager and is comprised of managers from across the Bureau, which will increase horizontal decision‑making across the Bureau.
First, MEAC is responsible for overseeing the coordination and best use of the Bureau’s enforcement and advocacy resources in accordance with the Bureau’s established priorities and its Competition and Compliance Framework, which I will discuss shortly. Its primary roles include acting as the Bureau’s gatekeeper for, monitoring the progress of, and ensuring information sharing, coordination and collaboration across the Bureau concerning all major enforcement and competition promotion initiatives. Quite simply, it provides recommendations to the Commissioner on major enforcement and advocacy files. MEAC is chaired by Matthew Boswell.
Second, SPPC is responsible for setting the Bureau’s overall strategic, operational and policy priorities and directions. Its primary roles include developing the Bureau’s planning cycle and integrated multi‑year plan; developing the Bureau’s contributions to broad government policy initiatives; and overseeing the Bureau’s development, coordination and evaluation of a coherent communications, stakeholder engagement and outreach approach. SPPC is chaired by Rambod Behboodi.
Third, PPC is responsible for developing, implementing and evaluating the effectiveness and efficiency of the Bureau’s guidelines, practices and procedures (the "Bureau Documents").
Its primary roles include identifying and justifying the need for developing or updating specific Bureau Documents; preparing, promoting and overseeing the implementation of approved Bureau Documents; and monitoring, reviewing and reporting on the effectiveness and efficiency of approved Bureau Documents. PPC is chaired by Jeanne Pratt.
Finally, CMC is responsible for assisting in fulfilling the Bureau’s corporate management responsibilities and addressing internal management issues. Its primary responsibilities include assessing the potential impacts of government and departmental corporate management initiatives; ensuring the coordinated implementation of major Bureau management initiatives; and ensuring the coordinated implementation of continuous workplace improvement strategies flowing from government, departmental or Bureau initiatives. CMC is chaired by Ana Maia.
In addition to creating these new committees, I have delegated additional responsibilities to my senior managers, allowing the Bureau to take full advantage of their expertise to lead, support and coordinate a broader range of complementary enforcement and competition promotion functions. Through this delegation, we have streamlined the approvals process, resulting in more efficient and effective operations.
(c) Three‑year strategic vision
To serve Canadians better, the Bureau published its 2015‑2018 Strategic Vision on June 2, 2015.Footnote 4 This Vision, which will guide the Bureau’s activities over the next three years, will help improve the effectiveness and efficiency of the Bureau’s competition enforcement and competition promotion activities.
As stated in the Vision, competition enforcement will continue to be the Bureau’s primary focus. We will do so, however, in a more strategic way, while complementing our enforcement activities with advocacy and competition promotion to produce the maximum benefits for Canadians. More specifically, the Vision identifies the following five strategic objectives for 2015‑2018:
- Pursue Compliance — Use all available tools to increase compliance with Canada’s competition laws and prevent and deter anti‑competitive or deceptive conduct that could threaten the health, growth and confidence in the Canadian economy.
- Empower Canadians — Create an environment of competitive prices, greater product choice and informed decision‑making for the benefit of all Canadians.
- Promote Competition — Promote and advocate for a more competitive marketplace, emphasizing smart regulation focused on achieving legitimate regulatory objectives.
- Collaborate with Partners — Collaborate with domestic and international partners to promote strong competition principles and expand opportunities for Canadian participation in world markets.
- Champion Excellence — Promote a culture of excellence throughout the Bureau founded on openness, collaboration and engagement, and securing tangible results.
At the same time the Bureau published its 2015‑2018 Strategic Vision, it also published its 2015‑2016 Annual Plan, entitled "Protecting and Promoting Competition for the Benefit of All Canadians".Footnote 5 This forward‑looking plan sets out the activities through which the Bureau will deliver on each of the objectives in its Vision during the current fiscal year.
The publication of these documents supports the Bureau’s Action Plan on Transparency,Footnote 6 which promotes the development of a more cost‑effective and responsive agency, while providing Canadians with more opportunities to learn about the Bureau’s work.
IV. Guidance documents
I now want to turn to three critical guidance documents — the Intellectual Property Enforcement Guidelines, the Corporate Compliance Programs Bulletin and the Competition and Compliance Framework Bulletin.
(a) Intellectual Property Enforcement Guidelines
I announced at the 2013 Annual Competition Law Fall Conference that the Bureau would be undertaking a two‑phase update of its Intellectual Property Enforcement Guidelines (the "IPEGs").
The first phase involved updating the IPEGs to reflect the amendments to the Act that have occurred since they were first released, to incorporate enforcement experience and to ensure consistency with other Bureau enforcement guidelines. Draft IPEGs were issued for public comment on April 2, 2014 and they were published in final form on September 18, 2014.Footnote 7
The second phase involves updating the IPEGs to address additional IP‑related issues, including the Bureau’s enforcement approach with respect to patent litigation settlements, the conduct of standard essential patent owners and the activities of patent assertion entities. Draft IPEGs were released for public comment today and interested parties are invited to provide comments until August 10, 2015.Footnote 8 We look forward to receiving the CBA’s comments on the IPEGs.
While I do not intend to discuss all of the changes that have been made to the IPEGs, I want to talk about our approach to patent litigation settlements — an area where there is already ongoing dialogue between the Bureau and its stakeholders. While such settlements allow parties to avoid costly litigation, they also have the potential to prevent or delay timely entry of lower cost generic drugs and result in consumers paying higher prices and having less choice. As a result, like other agencies around the world, we have a keen interest in these types of agreements.
On September 23, 2014, the Bureau released a white paper describing its preliminary views as to how Canadian competition law could apply to patent litigation settlements.Footnote 9 Among other things, this paper noted that the Bureau would review potentially anti‑competitive patent litigation settlements under the criminal conspiracy provision or the civil provisions (civil agreements or abuse of dominance) in the Act. The decision on whether to pursue alleged anti‑competitive behaviour under the criminal or civil provisions would be based on the facts and evidence available.
The CBA and other stakeholders subsequently provided submissions in response to our white paper. In particular, they raised concerns with our approach to patent litigation settlements and asked that we include clearer guidance in the revised IPEGs. We carefully considered these comments and took them into account when drafting the revised IPEGs, which has resulted in an improved guidance document.
In summary, the draft IPEGs provide that patent litigation settlement agreements that involve a "payment" from the brand to the generic will be reviewed under section 79 or 90.1 of the Act, unless the parties’ intent in entering the agreement is to fix prices, allocate markets or restrict output. In such cases, agreements may be reviewed under section 45 of the Act, especially where they seem to be nothing more than "naked restraints" on competition. I think that would happen on a limited basis, but where the facts support us doing one of these cases criminally, we will not hesitate to do so.
This approach is consistent with the provisions in the Act and the Bureau’s Competitor Collaboration Guidelines.Footnote 10 While the Bureau respects the legitimate exercise of intellectual property rights, in cases where firms go beyond the mere exercise of such rights, the Bureau has a responsibility to prevent conduct that negatively affects competition to the detriment of Canadian consumers and businesses.
Some have suggested that our approach to patent litigation settlements could chill legitimate settlements in Canada. I do not accept this for two reasons. First, issues may arise under the Act only in the case of "reverse‑payment" settlements. Second, the U.S. Federal Trade Commission (the "FTC") recently found that of the 145 final patent dispute settlements filed in FY2013, only 29 created potential "pay‑for‑delay" agreements between branded and generic drug companies.Footnote 11 The vast majority of these disputes — in this case 80% — were resolved without compensation to the generic manufacturer. There is clearly scope to resolve such disputes in ways that do not raise antitrust concerns.
(b) Corporate Compliance Programs bulletin
On June 3, 2015, the Bureau released its revised Corporate Compliance Programs Bulletin.Footnote 12 This Bulletin provides updated guidance for the private sector on how to develop and maintain credible and effective compliance programs, including the need to conduct a thorough risk‑based corporate compliance assessment. It also reflects a more modern, incentives‑based approach to such programs by providing for the possibility of fine reductions for companies with a credible and effective program, but who are nonetheless involved in a violation of the Act.
The CBA provided a number of substantive comments to the Bureau, many of which are reflected in the Bulletin. For example, the Bulletin has been reordered and is now shorter, more streamlined and less prescriptive. Duplication and topics that are not central to compliance programs have been eliminated. In our view, these changes have resulted in a significantly better guidance document — one that is more accessible and understandable.
In order to operationalize the Bulletin, a Compliance Unit (the "CU") will be created to administer the Bulletin. In achieving its proactive external compliance objective, the CU will, among other things, develop a suite of policy, communication, educational and other materials; engage with the Bar and the business community with a view to promoting the widespread adoption of credible and effective compliance programs across the country; and provide advice to the Commissioner and senior managers on compliance matters.
We will be rolling out the revised Bulletin, along with other complementary compliance tools for small and medium‑sized businesses, such as SME Fact Sheets, a SME Pamphlet and a SME "placemat" summarizing the Bulletin, on a cross‑Canada compliance roadshow. This initiative is part of a deliberate effort to promote compliance directly to a broader range of business communities, including those in Western Canada and the Maritimes.
(c) Competition and Compliance Framework bulletin
Businesses are encouraged to put in place credible and effective compliance programs and to fully comply with the Act and the other legislation we enforce. Where this does not happen, we are committed to using all available options to address non‑compliance, including advocacy, outreach, suasion and enforcement. The option used in a particular case will depend on a variety of factors, such as the gravity of the alleged conduct, previous anti‑competitive conduct and the willingness of the parties to resolve the matter.
On May 20, 2015, the Bureau released a draft version of the Competition and Compliance Framework Bulletin for public comment,Footnote 13 which updates and replaces the former Conformity Continuum Information Bulletin.Footnote 14 This Bulletin outlines the various outreach, enforcement and advocacy instruments used by the Bureau in a comprehensive, integrated approach to promoting compliance with the legislation it enforces. It is not intended to — and does not in any way — fetter the Commissioner’s discretion. Interested parties are invited to provide comments on the draft Bulletin to the Bureau by July 20, 2015. As with the IPEGs, we hope that the CBA will provide comments on this important guidance document.
While I am on the subject of our compliance framework, I want to emphasize that we are increasingly using various forms of alternative case resolutions ("ACRs"), such as information contacts, information letters, warning letters, compliance meetings and undertakings, to address concerns under our legislation. In fact, ACRs were used to address our concerns in seven non‑merger investigations in FY2013‑14 and 25 non‑merger investigations in FY2014‑15 — an increase of more than 250%. While ACRs are not appropriate in all cases, we will use them where it makes sense to do so.
V. Year in review
As I did last year, I now want to take some time to provide a "year‑in‑review", starting from late May 2014. This is a great opportunity to summarize the tremendous amount of work done by the Bureau over the past year for the benefit of Canadians.
Let me begin by saying that it has been a very busy year at the Bureau and we see no signs of it slowing down anytime soon. On the competition enforcement side, we received a number of important court decisions, including in Tervita,Footnote 15 Parkland,Footnote 16 Kobo,Footnote 17 Direct Energy,Footnote 18 Durward,Footnote 19 Jacques,Footnote 20 Thouin,Footnote 21 NestléFootnote 22 and Beliveau.Footnote 23 We also obtained significant fines in criminal cases, significant penalties and restitution in deceptive marketing practices cases, and resolved a number of complex mergers. Similarly, on the competition promotion side, we released a number of new guidance documents, continued to increase our advocacy function in different sectors of the economy, and advanced our relationships with foreign agencies and other stakeholders.
Before I discuss these developments, I want to share a few additional statistics with you, which provide a good sense of how busy we have been at the Bureau:
- The number of investigations and examinations we commenced increased from 270 in FY2013‑14 to 309 in FY2014‑15 — an increase of more than 14%.
- The number of investigations and examinations we concluded increased from 261 in FY2013‑14 to 294 in FY2014‑15 — an increase of almost 13%.
- We made greater use of formal powers in non‑merger cases. In particular, the number of section 11 orders issued increased from 7 in FY2013‑14 to 19 in FY2014‑15 — an increase of more than 170%.Footnote 24 Similarly, the number of search warrants issued increased from 35 in FY2013‑14 to 42 in FY2014‑15 — an increase of 20%.
- We obtained increased administrative monetary penalties ("AMPs") and restitution. In particular, AMPs increased from $500,000 in FY2013‑14 to $10 million in FY2014‑15 and restitution increased from nothing in FY2013‑14 to $1.69 million in FY2014‑15.
(a) Water heater cases
Our work to protect competition in Ontario’s water heater industry provides an excellent example of the collaboration and benefits that can be achieved through our internal realignment exercise. First, the Bureau reached resolutions with Reliance and EnerCare regarding alleged anti‑competitive water heater return policies and procedures. These resolutions ensure that consumers and businesses are no longer subjected to these policies and practices by either Reliance or EnerCare. Reliance was also ordered to pay an AMP of $5 million — the first ever AMP under the Act’s abuse of dominance provision.Footnote 25 Second, the Bureau cleared Reliance’s acquisition of National, a significant competitor with respect to water heaters and other home ventilation and air conditioning products in Ontario. The Bureau concluded that this transaction was unlikely to result in a substantial lessening or prevention of competition due to, among other things, the consent agreement that Reliance had reached with the Bureau in the abuse of dominance matter.Footnote 26 Finally, the Bureau reached resolutions with National and Just Energy following an investigation into false or misleading door‑to‑door water heater promotions. This remedy included an AMP of $5 million and restitution of $1.5 million. National was also required to appoint an independent compliance monitor — the first time this has occurred in a non‑merger case.Footnote 27 All of these resolutions occurred over an 18‑day period. The case teams responsible for these matters met regularly to coordinate their reviews, resulting in outcomes that benefit all Ontarians.
Our work in the water heaters industry continues as the Tribunal recently issued a decision allowing the Bureau to move forward with its case against Direct Energy.Footnote 28 The Bureau is seeking an AMP of $15 million and an order prohibiting Direct Energy from engaging in anti‑competitive water heater return policies and procedures in the future. This decision is an important development, as it means that the Bureau can proceed with an abuse of dominance application even if the entity alleged to have abused its dominant position has exited the market. Direct Energy has appealed the Tribunal’s decision to the Federal Court of Appeal (the "FCA").
I would now like to discuss some of the other competition enforcement, competition promotion and advocacy work done by the Bureau over the past year.
(b) Mergers and Monopolistic Practices Branch
The Mergers Directorate, formerly the Mergers Branch, reviews mergers to assess whether they are likely to substantially lessen or prevent competition in the marketplace. During FY2014‑15, it completed 244 merger reviews, up almost 5% from the 233 reviews completed during FY2013‑14. The number of mergers designated as "complex" also increased year‑over‑year, from 46 in FY2013‑14 to 55 in FY2014‑15 — an increase of almost 20%. At the same time, the average time to review these mergers decreased by almost 8% — from 36.09 days in FY2013‑14 to 33.35 days in FY2014‑15. The Mergers Directorate met the service standard in over 90% of these complex reviews during the last fiscal year. I am very proud of these results.
Before referring to some of these reviews, I want to briefly discuss the "efficiencies defence" found in section 96 of the Act, which has now been considered by the courts in both the Superior PropaneFootnote 29 and TervitaFootnote 30 cases. In each of these cases, mergers that were found to result in a substantial lessening or prevention of competition were allowed to proceed, resulting in the creation or maintenance of domestic monopolies. Remarkably, the efficiency gains in Tervita were negligible, representing less than the yearly salary of a half‑time junior employee.Footnote 31
It is questionable whether the outcomes in Superior Propane and Tervita reflect the intent of Parliament in 1986 when the efficiencies defence was introduced in the Act. The debates in the House of Commons and statements of the then Minister of Consumer and Corporate Affairs stressed the importance of promoting economic efficiency and market forces to advance Canada’s position in an increasingly competitive world economy. This is underscored by Justice Rothstein’s statement in the Supreme Court of Canada’s (the "SCC") decision in Tervita:
While the efficiencies defence applies in this case under the terms of [section] 96 as written, this case does not appear to me to reflect the policy considerations that Parliament likely had in mind in creating an exception to the general ban on anti‑competitive mergers. … [T]he evidence suggests that the efficiencies defence was created in recognition of the size of Canada’s domestic market and with an eye toward supporting operation at efficient levels of production and the realization of economies of scale, particularly with reference to international competition. By contrast, this case deals with competition on a local scale and where the operational efficiencies obtained do not appear to have been central to the acquiring party’s ability to realize economies of scale to compete in the relevant market. Although I tend to think that this case may not represent one that Parliament had in mind in creating the efficiencies defence, I nonetheless find that the statute as currently drafted supports a finding that the defence is available in this case.Footnote 32
The Tervita decision also raises a number of important issues relating to the quantity of information that the Bureau will need to obtain from both the parties to a transaction and third parties when the efficiencies defence is in play. As was discussed in more detail at the CBA Mergers Committee Roundtable on May 29, 2015, the Bureau is considering the guidance provided in this decision and will make adjustments to its merger review process.Footnote 33
While these adjustments are still being contemplated, I can say with certainty that the Bureau will prioritize the use of advanced econometric analyses given the SCC’s direction that anti‑competitive effects should be quantified wherever possible. This is not a new priority coming out of the Tervita judgment; rather, we have been focused for some time now on enhancing our ability to complete advanced economic modelling given that is where antitrust has been trending already. In line with this, the Bureau is committed to investing further in in‑house resources to better situate us to do sophisticated empirical analyses quickly and cost‑effectively.
That said, Tervita certainly amplifies the importance of this work and this work is fed by data. Data requests to merging parties are a given. While I do not anticipate that these requests, as they relate specifically to information required to quantify anti‑competitive effects, will differ significantly going forward from those in past supplemental information requests ("SIRs"), it will be necessary to issue a few SIRs before knowing for sure. I will endeavour to update on this once we can reflect on our experience with a few of them. There will also be instances where data is required from third parties, including through the use of section 11 orders, but I anticipate that we can limit these requests to the small minority of cases where the Bureau is fairly likely to conclude that a transaction is anti‑competitive.
The availability of the efficiencies defence in Tervita also brought to light the fact that we are often faced with insufficient knowledge about the efficiencies that parties may claim. This information gap frequently exists during merger reviews and, as was the case Tervita, may extend long into the litigation process. Another change to our information gathering processes that may be necessary relates to how and when we obtain information about efficiencies that are relevant to mergers. The first best scenario has merging parties providing this information to us early enough and with sufficient support to assess their claims. However, when we do not receive this information, I anticipate that we will take steps to get it. That may involve including additional questions in SIRs or issuing section 11 orders to merging parties after SIRs have been issued, something that we have not previously done, including after the filing of a section 92 application.
While the SCC’s decision in Tervita may have been the biggest mergers‑related development last year, another significant development occurred on April 30, 2015, when the Bureau filed an application with the Tribunal challenging Parkland’s acquisition of Pioneer gas stations or supply contracts in 14 communities in Ontario and Manitoba.Footnote 34 The Bureau’s review concluded that the parties’ post‑merger market shares in these communities would be between 39 and 100 percent. As these markets become more concentrated, the likelihood of coordination between remaining retailers increases. Very recently, the Bureau also obtained the first contested injunction issued pursuant to section 104 of the Act in a mergers case.Footnote 35 We welcome the Tribunal’s recognition of the irreparable harm that could accrue to consumers and the public interest in six communities before the application challenging the merger is determined. The Tribunal’s helpful guidance for future cases where injunctions may be sought is also instructive.
In 2013, the Mergers Directorate reviewed the Loblaw/Shoppers transaction. This transaction, which was valued at approximately $12.4 billion, raised significant competition concerns that were resolved by way of a consent agreement.Footnote 36 Among other things, this agreement required the divesture of 18 retail stores and nine in‑store pharmacies in order to preserve competition for the retail sale of pharmacy products and drugstore‑type merchandise in Canada. Last year, the Bureau approved the sale of all of these retail stores and in‑store pharmacies.Footnote 37 The agreement also includes ongoing behavioural restrictions on certain Loblaw programs and agreements on the supply of products for retail sale. As I will discuss in more detail shortly, the Monopolistic Practices Directorate is continuing to review these programs and agreements under the abuse of dominance provision.
The Mergers Directorate also entered into consent agreements to resolve its competition concerns in respect of the Holcim/Lafarge,Footnote 38 Medtronic/Covidien,Footnote 39 Transcontinental/Quebecor MediaFootnote 40 and Kingspan/VicwestFootnote 41 transactions. The first three matters raised particularly interesting issues.
First, in the Holcim/Lafarge matter, as the parties decided upfront to sell all of Holcim’s Canadian operations to address competition concerns in Canada, the Bureau’s review was focused on determining whether assets located outside of the country were important to the effectiveness of Holcim’s Canadian businesses. The Bureau ultimately found that Holcim’s cement plant in Three Forks, Montana needed to be included in the divestiture package because this plant has historically provided the majority of Holcim’s cement in Alberta. With the inclusion of this plant as a source of cement for Alberta, the Bureau was satisfied that a purchaser of all of Holcim’s Canadian operations and associated assets would likely be an effective and viable competitor for cement supply in Alberta. The Bureau recently approved the sale of this package to CRH.Footnote 42
Given the cross‑border flow of cement between the U.S. and Canada, the Bureau worked very closely with the FTC to determine the acceptability of Holcim’s initial remedy proposal. Using teleconferences, emails and an in‑person meeting, frequent and open communication between the Bureau and FTC was instrumental in aligning our common interests in requiring the divestiture of assets operating to serve both jurisdictions. Throughout the review of this global transaction, we also cooperated with our European counterparts, where communication was facilitated by tripartite teleconferences with the FTC and the European Commission. Whether through bilateral or trilateral exchanges, our dialogue with our foreign counterparts focused on substantive matters as well as on process and timing, and ultimately allowed for a coordinated resolution to the benefit of the agencies, the parties and ultimately the consumers in each jurisdiction.
Second, the consent agreement in the Medtronic/Covidien matter provided for the divestiture of Covidien’s drug‑coated balloon catheter business, together with a perpetual, non‑exclusive license to certain intellectual property, to an upfront buyer within 10 days of the proposed transaction being completed. As noted in the Information Bulletin on Merger Remedies in Canada, the Bureau strongly prefers fix‑it‑first solutions.Footnote 43 The Bureau worked closely with the FTC during the investigation, consent agreement negotiations and monitor selection.
Third, the consent agreement in the Transcontinental/Quebecor Media matter provided for the divestiture of more than 30 community newspapers by an independent trustee. Many of the overlapping papers were in financial distress and the objective of the sale process in this case was to test for the availability of possible alternatives to Transcontinental owning all the papers. In the end, the independent trustee was able to divest 14 papers, with Transcontinental maintaining ownership of the other papers.Footnote 44
The Mergers Directorate also cleared several other media mergers, including the Postmedia/Sun MediaFootnote 45 and TVA Group/ TranscontinentalFootnote 46 transactions, after concluding that they would not substantially lessen or prevent competition in any relevant market. In each of these matters, the Mergers Directorate recognized that newspapers and magazines are double‑sided platforms that bring together two different types of economic agents — readers and advertisers — and facilitate interactions between them. The Mergers Directorate also took into consideration the dynamic nature of media markets and the challenges faced by traditional media in adapting to an increasingly digital world. While the Bureau consults with a wide range of industry participants as part of its normal merger review process, it issued for the first time a public statement asking Canadians to use the Bureau’s website to share their views regarding the Postmedia/Sun Media transaction.Footnote 47
In addition to these media mergers, the Mergers Directorate cleared the Continental/VeyanceFootnote 48 and GlaxoSmithKline/NovartisFootnote 49 transactions after concluding that they would not substantially lessen or prevent competition in any relevant market as a result of the parties’ settlement agreements with the U.S. Department of Justice and the FTC, respectively. While the Bureau’s priority is to obtain a remedy that resolves competition concerns in Canada, it will, where appropriate, take into consideration and rely on remedies agreed upon in other jurisdictions, provided that such remedies address the Bureau’s concerns.
Other major transactions reviewed by the Mergers Directorate over the past year include the Marriott/Delta,Footnote 50 Burger King/Tim Hortons,Footnote 51 Manulife/Standard Life,Footnote 52 TVA Group/Vision Globale,Footnote 53 TransForce/ContransFootnote 54 and Reynolds/NovelisFootnote 55 transactions. It also reviewed a number of non‑notifiable transactions, including the Bell Aliant/OnteraFootnote 56 and Bragg/Bruce TelecomFootnote 57 transactions. The parties chose to abandon the Bragg/Bruce Telecom transaction after being informed that the Bureau had significant concerns and was prepared to challenge it before the Tribunal if necessary. These transactions are a reminder that mergers of any size may be reviewed and challenged by the Bureau.
By now it should come as no surprise that we may require behavioural remedies to resolve our concerns with a merger when structural remedies are either unavailable or insufficient. For example, we obtained behavioural remedies in respect of the BCE/Rogers/GLENTELFootnote 58 and TELUS Health/XD3 SolutionsFootnote 59 transactions. First, BCE, Rogers and GLENTEL entered into a consent agreement requiring that they implement administrative firewalls to prevent the sharing of competitively sensitive information, including subscriber information, pricing and promotional offers. These firewalls were necessary to ensure that the transaction did not provide BCE and Rogers with the ability to share confidential information, leading to a substantial lessening of competition, which could result in consumers paying higher prices for wireless products and services. Second, TELUS Health provided written undertakings to amend certain of its contracting practices that limit competition. These changes are intended to make it easier for pharmacists to switch to another service provider, and ultimately ensure that new or existing pharmacy management solution providers are able to effectively compete in Quebec.
I have spoken previously about our increased focus on transparency, and the Mergers Directorate is no exception. Since late May 2014, it has issued 12 position statements, which summarize its findings and provide our stakeholders with valuable guidance on our approach to merger review. The Mergers Directorate will continue to issue position statements in appropriate cases, including where the issues are sufficiently important or complex; clarification of a point of law or policy is needed; the matter in question has generated substantial public interest; the review involved new analytical tools, findings or outcomes; or a consent agreement is filed with the Tribunal.
The Mergers Directorate also released a new Pre‑Merger Notification Interpretation Guideline for public comment.Footnote 60 This draft guideline is intended to clarify the interpretation of the word "goods" contained in paragraph 111(a) of the Act, which may assist businesses in determining whether a proposed acquisition of loans, mortgages or receivables must be reported to the Bureau. Interested parties are invited to provide their comments until July 28, 2015.
Finally, while on the subject of pre‑merger notification, I note that P&H recently agreed to adopt a compliance program designed to better ensure that it follows the law after its failure to notify the Bureau of two proposed acquisitions.Footnote 61 Failure to notify a transaction may result in serious consequences under the Act. However, we were satisfied that a compliance program was sufficient in this particular case given that:
- P&H management immediately reported the situation to the Bureau once it was discovered and
- P&H worked cooperatively with the Bureau to develop the compliance program. In my view, this is a great example of "shared compliance".
Monopolistic Practices Directorate
The Monopolistic Practices Directorate (the "MPD"), formerly the Civil Matters Branch, detects, investigates and deters business practices that have a negative impact on competition, such as abuse of dominance, as well as certain types of anti‑competitive agreements or arrangements between competitors. Like the Mergers Directorate, MDP has been very busy over the past year.
In February 2014, following an 18‑month investigation into the ebook industry in Canada, MPD reached a consent agreement with four major ebook publishers.Footnote 62 As part of the consent agreement, the four publishers agreed to remove or amend clauses in their distribution agreements with individual ebook retailers that the Bureau believes have the effect of restricting retail price competition, which will allow retailers to offer discounts on ebooks.
Shortly after the consent agreement was filed with the Tribunal, Kobo, the largest ebook retailer in Canada, brought an application seeking to rescind or vary the terms of the agreement on the basis that it includes terms that could not be the subject of an order of the Tribunal. We subsequently filed a reference pursuant to subsection 124.2(2) of the Act, asking the Tribunal to determine the nature and scope of its jurisdiction under subsection 106(2) of the Act. The reference was heard on June 25, 2014 and the Tribunal issued its decision on September 8, 2014.Footnote 63
In summary, the Tribunal found that it can grant an application to rescind or vary the terms of a consent agreement under subsection 106(2) of the Act only where one or more of the following conditions are 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. Kobo has since appealed this decision to the FCA. The appeal will be heard on June 18, 2015.
There have also been developments in our cases involving the Toronto Real Estate Board ("TREB") and the Canadian Real Estate Association ("CREA"). First, in the TREB matter, the SCC dismissed TREB’s application for leave to appeal the FCA’s earlier decision,Footnote 64 which found that the Tribunal’s decision was based on an overly narrow interpretation of section 79 of the Act and ordered the Tribunal to reconsider the Bureau’s case on its merits. The Tribunal is scheduled to rehear this case beginning in late September 2015, and we look forward to resolving it. Second, in the CREA matter, an issue arose between the parties concerning the interpretation or application of certain terms in the consent agreement they reached in September 2010. Following motions before the Tribunal, Justice Rennie issued a decision finding that, based on the evidence before him, CREA’s Rules do not contravene the consent agreement.Footnote 65
While we were not successful in the CREA matter, it is important to note that the Tribunal’s decision is significant in several respects. First, it describes the principles governing the Tribunal’s approach to the interpretation of consent agreements. Second, it demonstrates that the Bureau will not hesitate to seek to enforce the terms of a consent agreement where it believes that a respondent is not fully complying with them. Finally, although Justice Rennie did not find for the Commissioner, he left it open that the Tribunal may reach a different conclusion if presented with a different set of facts. As such, the decision preserves the Commissioner’s ability to enforce the agreement and limits CREA’s ability to engage in what we consider to be abusive behaviour. On this last point, it bears repeating that the consent agreement remains in full force, that Realtors are still able to offer mere posting services, and that CREA is still prohibited from discriminating against Realtors who wish to provide such services to home sellers. As such, consumers can continue to expect greater choice in service and pricing options when selling their homes.Footnote 66
Speaking of consent agreements, MPD also reached an agreement with Medtronic, Canada’s largest supplier of insulin pumps for diabetic patients, which requires the company to cease engaging in practices that limit competition and restrict consumer choice.Footnote 67 Following an investigation, the Bureau raised concerns that Medtronic included restrictive terms in the warranty for one of its popular insulin pumps that limited the ability of rival companies to supply competing products. Medtronic agreed to revise its warranty terms and to advise customers about the revisions.
In addition, MPD is continuing to advance several important cases with high impact on the Canadian economy and consumers, a number of which are focused on our priority areas of promoting competition in the digital economy and supporting innovation in Canadian markets. For example, it continued to move forward with its inquiry concerning Apple Canada’s use of restrictive clauses in its contracts with Canadian wireless carriers. In the Bureau’s view, these clauses may impact the manner in which the carriers conduct their business, particularly with respect to how they price and market smartphones and corresponding wireless services. Similarly, they may foreclose suppliers of competing smartphones from a market and reduce choice and innovation, and may increase the price of smartphones and/or wireless services for Canadian consumers. The Bureau’s inquiry is ongoing and no decision has been made in terms of enforcement action.
MPD has also continued to seek section 11 orders on key files where appropriate, on both subjects of the inquiry and third part market participants, including as part of its Apple, Loblaw and ebooks inquiries. With all this activity, MPD has continued to refine the Bureau’s approach to seeking section 11 orders in accordance with very helpful guidance from the courts, and we are encouraged by the increased efficiency that the use of these orders has brought to our investigations.
Finally, MPD is continuing to prepare for the abuse of dominance proceedings brought against Direct Energy. As noted earlier, the Tribunal recently issued a decision allowing this application to proceed, notwithstanding that Direct Energy has exited the relevant market.Footnote 68
(c) Cartels and Deceptive Marketing Practices Branch
The Cartels Directorate, formerly the Criminal Matters Branch, detects, investigates and deters hard‑core cartels, including agreements among competitors to fix prices, allocate markets, restrict supply or rig bids. The Cartels Directorate also reaches out to stakeholders engaged in procurement to enable them to detect and deter bid‑rigging and other cartel activities.
As I have said before, our immunity and leniency programs have consistently proven to be our best tools for detecting, investigating and prosecuting cartel conduct. For example, the Cartels Directorate granted immunity and/or leniency markers to 21 different parties in FY2013‑14 and to 19 different parties in FY2014‑15. Parties that engage in anti‑competitive conduct have clearly recognized the benefits that result from self‑reporting early and cooperating with the Bureau.
As with the other Directorates, last year was another good year for the Cartels Directorate, with almost $8 million in fines being secured in its motor vehicle components, retail gasoline and information technology cases.
First, on August 20, 2014, DENSO pled guilty to three counts of bid‑rigging under the Act and was fined $2.45 million by the Ontario Superior Court of Justice (the "OSCJ") for its participation in an international bid‑rigging conspiracy.Footnote 69 The evidence shows that DENSO conspired with other Japanese motor vehicle components manufacturers to coordinate their respective responses and to agree on which party would win bids submitted in response to requests for quotations to supply Toyota with certain motor vehicle components. Similarly, on December 11, 2014, Yamashita pled guilty to two counts of bid‑rigging under the Act for its participation in an international bid‑rigging conspiracy and was fined $4.5 million by the OSCJ.Footnote 70 The evidence showed that Yamashita conspired with another Japanese supplier of motor vehicle components to rig bids for anti‑vibration components and systems sold to Honda. To date, the Bureau’s investigation involving motor vehicle components has resulted in seven guilty pleas and over $56 million in fines imposed by the courts since April 2013.
Second, following a lengthy criminal trial before the Quebec Superior Court (the "QSC"), Pétroles Global was found guilty of fixing the price of retail gasoline in three local markets in Quebec. On April 17, 2015, it was fined $1 million for its role in a price‑fixing conspiracy.Footnote 71 To date, 33 individuals and eight companies have pled or were found guilty with fines totalling over $4 million. Of the 33 individuals who have pled or were found guilty, six have been sentenced to terms of imprisonment totalling 54 months.
Third, on May 21, 2015, Stephen Forgie pled guilty to one count of bid‑rigging for his role in an alleged bid‑rigging conspiracy relating to federal government contracts for the supply of professional information technology services to Library and Archives Canada.Footnote 72 Mr. Forgie received an 18‑month conditional sentence, 60 hours of community service and a $23,000 fine. The conduct in this case pre‑dates the passage of the Safe Streets and Communities Act,Footnote 73 which has removed conditional sentences as an option for individuals convicted under the bid‑rigging or other cartel provisions in the Act.
In addition to these fines, additional charges were laid against one company and one individual in December 2014 for their role in an agreement to rig bids for contracts involving road construction, water treatment and other infrastructure projects in the Saint‑Jean‑sur‑Richelieu region of Quebec between January 2008 and December 2009.Footnote 74 This is the third set of charges laid in this ongoing investigation.
While I am on the subject of Quebec, as you know the Charbonneau Commission has been looking into allegations of corruption and collusion in Quebec’s construction industry. One of our managers was subpoenaed and appeared before the Commission on October 8, 2014 to discuss various topics related to the Bureau’s work and mandate.
Although the Cartels Directorate had a number of successes last year, it also experienced setbacks in its retail gasoline and information technology services cases. In particular:
- On July 31, 2014, the Quebec Court of Appeal (the "QCA") upheld the QSC’s decision staying the price‑fixing charges against Couche‑Tard.Footnote 75 In summary, the QSC had found that while the repudiation of a plea agreement does not generally constitute an abuse of process, in this case it caused irreparable harm to the fairness of the trial process because Couche‑Tard had revealed its defence and that, by doing so, its right to a fair and equitable trial had been compromised.
- Following a previous ruling that there was sufficient evidence for the accused to stand trial, a lengthy trial ended on April 27, 2015, with the jury’s verdict of not guilty for seven individuals and three companies accused of rigging bids to obtain Government of Canada contracts for the provision of information technology services.Footnote 76
- Shortly before this jury trial began, some of the defendants challenged the constitutional validity of subsection 69(2) of the Act.Footnote 77 In particular, they argued that this provision violates the right to life, liberty and security of the person guaranteed by section 7 of the Charter and the right to be presumed innocent until proven guilty guaranteed by paragraph 11(d) of the Charter, and that it could not be justified under section 1 of the Charter. The OSCJ agreed with the defendants, finding that subsection 69(2) of the Act could result in an accused being convicted without the Crown being required to establish guilt beyond a reasonable doubt.Footnote 78 Significantly, the judge confined this decision to criminal cases, stating that "[n]othing in these reasons prevents the use of [subsection] 69(2) in a … Tribunal proceeding".Footnote 79
Notwithstanding these setbacks we will continue to vigorously enforce the criminal cartel provisions against those who engage in anti‑competitive conduct, including both companies and individuals. In this regard, cracking down on cartels has been, and continues to be, a top priority for the Bureau. As the U.S. Supreme Court has recognized, cartels are "the supreme evil of antitrust".Footnote 80 When competitors agree to fix prices, allocate markets, restrict output or rig bids, they thwart the forces of competition. They deprive consumers of the benefits of competition, such as lower prices, increased product choice and greater innovation. These types of agreements represent the most egregious forms of anti‑competitive conduct and we will continue to put our full weight behind eradicating these deceitful practices.
Educating Canadians about the devastating effects of cartels is an important aspect of what we do and, on March 26, 2015, we held our second annual Anti‑cartel Day.Footnote 81 As part of Anti‑cartel Day, we developed a number of resources to assist businesses and trade associations in recognizing and preventing cartel activity, including videos on cartels and bid‑rigging. We also added new webpages to our website focusing on the construction sector — a sector that is particularly susceptible to cartel activity. The goal was to encourage companies to do things the right way — the legal way.
While we are on the subject of cartels, I want to briefly refer to the decisions in Jacques, Thouin and Nestlé. Each of these decisions dealt with issues relating to the disclosure of information collected by, provided to or in the possession of the Bureau.
First, in Jacques, the SCC ordered that wiretap evidence obtained by the Bureau during its retail gasoline price‑fixing investigation in Quebec be disclosed to the class action plaintiffs’ counsel and their experts.Footnote 82 The SCC dismissed the defendants’ claim that certain provisions of the Criminal Code and the Act are inconsistent with disclosure of such wiretap evidence. This decision considered the rules of the Quebec Code of Civil Procedure, which include broad principles that govern the disclosure of evidence at the discovery stage. Time will tell if this decision also applies to class actions filed outside Quebec.
Second, in Thouin, the QSC ordered that the Bureau’s lead officer or any other in its retail gasoline price‑fixing investigation testify in the ongoing class action proceedings.Footnote 83 Significantly, the Bureau’s lead officer was ordered to answer questions and provide records relating to all of the markets subject to the class action, including where charges were not laid. The Crown has been granted leave to appeal this decision, which could impact law enforcement generally, to the QCA.
Third, in Nestlé, the OSCJ concluded that factual information provided to the Crown by cooperating parties prior to the execution of an immunity agreement or a plea agreement is not subject to settlement privilege and must be disclosed by the Crown.Footnote 84 As with the decision in Tervita, we are continuing to analyze the implications of the OSCJ’s decision. However, at this time, I think it is fair to say that the specific context of the case is important. Here, the situation involved a criminal prosecution in which the Crown is proposing to call witnesses from an immunity or leniency applicant; the information from the immunity or leniency applicant appears to be relevant to the charges; and the disclosure of the information will not be used to the prejudice of the immunity or leniency applicant. In our view, this decision will not deter parties from applying for immunity or leniency in the future, as our programs already make it clear that disclosure of such information is likely.
Finally, it is worth noting that a Canadian was extradited to the U.S. on antitrust charges — the first time this has ever happen. In particular, John Bennett was extradited from Canada to the U.S. on a charge of participating in a conspiracy to pay kickbacks and commit fraud with respect to work on an environmental cleanup project in New Jersey.Footnote 85 This is just another example of the close cooperation between Canada and the U.S.
Deceptive Marketing Practices Directorate
The Deceptive Marketing Practices Directorate (the "DMPD"), formerly the Fair Business Practices Branch, is primarily responsible for ensuring truth in advertising. It does this by enforcing the false or misleading representations and deceptive marketing practices provisions in the Act, as well as related packaging and labelling legislation.
As with the other Directorates, last year was another big year for DMPD. It resolved a number of high‑profile matters, pursued ongoing litigation, commenced new litigation and was responsible for precedent‑setting results relating to refunds for consumers, cooperation with the FTC and the appointment of a compliance monitor.
In September 2012, the Bureau began legal proceedings against Bell, Rogers, TELUS and the Canadian Wireless Telecommunications Association (the "CWTA"), requiring them to stop misleading advertising that promotes costly "premium texting services", and to compensate consumers. The Bureau's investigation found that Bell, Rogers and TELUS, in conjunction with the CWTA, facilitated the sale to their own customers of premium‑rate digital content for fees that had not been adequately disclosed. Customers were misled into believing this content was free, when it was not.
On March 16, 2015, the Bureau announced that it had resolved the legal proceedings against Rogers.Footnote 86 Under the terms of the consent agreement, Rogers agreed to pay up to an estimated $5.42 million in refunds to affected consumers — the largest refund obtained to date as part of a Bureau settlement. Rogers also agreed to cease billing for premium text messaging services unless the customer has approved the charges; create a Consumer Awareness Campaign designed to educate its customers about how charges can be incurred on their wireless devices and the steps they can take to avoid unwanted charges, including safety tips for online purchases; and enhance its corporate compliance program, as necessary, with respect to billing customers on behalf of third parties. The legal proceedings against Bell, TELUS and the CWTA remain ongoing.
In July 2014, the U.S. District Court of Maryland ordered Aegis Mobile, a company located in the U.S., to hand over information that will assist the Bureau in moving forward with these proceedings.Footnote 87 The U.S. District Court compelled Aegis, who had provided advertising analysis to the CWTA, to produce documents to the FTC pursuant to section 1782 of US Code — a provision that allows U.S. courts to provide assistance to foreign and international tribunals and to litigants before such tribunals. The FTC has delivered those documents to the Bureau. This marks the first time a U.S. court has granted this kind of investigative assistance to obtain information on behalf of the Bureau. It is an example of the Bureau’s ability to reach beyond Canada’s borders when enforcing the Act, and highlights the strong working relationship between the Bureau and the FTC.
DMPD also secured restitution for consumers in its case involving Matthew Hovila, and donations to charity in its case involving Bauer Hockey Corp. First, on June 4, 2014, the Bureau announced that Mr. Hovila had been ordered to pay restitution of over $185,000 to the victims of an online job opportunities scam.Footnote 88 Earlier that year, he had been sentenced to 30 months in jail, including 15 months for contravening the criminal false or misleading representations provisions of the Act and 15 months for breaching a court order.Footnote 89 He also pled guilty to being in possession of proceeds of crime under the Criminal Code and was sentenced to a year in jail, to be served concurrently. The Bureau takes consent orders seriously and will not hesitate to enforce them should there be a breach. Second, on November 13, 2014, the Bureau announced that Bauer had agreed to cease making certain performance claims related to the Bauer RE‑AKT hockey helmet; to make a $500,000 donation of equipment to a registered Canadian charity supporting youth participation in sport; and to implement an enhanced corporate compliance program.Footnote 90 Although Bauer had conducted testing on the helmet prior to making the performance claims, the Bureau concluded that the testing was not adequate and proper to support the claims. The Bureau takes representations to the public about performance claims that are not based on prior adequate and proper testing very seriously, particularly when they relate to the health and safety of consumers.
DMPD also resolved cases concerning ordinary selling price claims and deceptive telemarketing. First, on May 6, 2015, the Bureau announced that it had reached a consent agreement with Michaels of Canada, ULC related to its price advertising for custom and select ready‑made framing.Footnote 91 Following its investigation, the Bureau concluded that Michaels did not ensure that the frames were offered for sale in good faith prior to promoting them at substantial discounts. Under the agreement, Michaels was required to pay an AMP of $3.5 million, establish a corporate compliance program and ensure that its price claims for all products comply with the ordinary selling price provisions of the Act. Second, on May 27, 2014, the Bureau announced that Richard Béliveau had pled guilty to eight charges of misleading advertising and deceptive telemarketing under the Act and one charge of possession of property obtained by crime under the Criminal Code and was sentenced to 18 months in prison.Footnote 92 Mr. Béliveau participated in a scheme in which telemarketers contacted businesses and not‑for‑profit organizations in Canada and the U.S., claiming that these organizations had previously ordered online business directory listings. By falsely implying a pre‑existing business relationship, the telemarketers deceived the organizations into paying for listings they had not ordered.
While the Bureau prefers to resolve matters on a consensual basis, it will not hesitate to commence contested proceedings in appropriate cases. For example, earlier this year the Bureau commenced legal action against two large Canadian rental car companies, along with two U.S. affiliates, for what it considers to be deceptive marketing practices.Footnote 93 The Bureau’s investigation found that Avis and Budget advertise prices for vehicle rentals and other associated products that are not attainable due to additional fees imposed during the rental process. Furthermore, these fees are inappropriately characterized as taxes, surcharges and fees that governments and agencies require Avis and Budget to collect from consumers. As a result, we filed an application with the Tribunal seeking an end to alleged false or misleading price representations by Avis and Budget, $30 million in AMPs, and refunds for consumers.Footnote 94 This case marks the Bureau’s first proceeding under the new provisions of the Act that came into force as part of the Canadian Anti‑spam Legislation in July 2014Footnote 95 because Avis and Budget also used electronic messages to disseminate the alleged false or misleading representations.
Finally, educating Canadian on how to avoid falling victim to deceptive marketing practices and other fraudulent activity is an important part of the outreach provided by DMPB. For example, on March 5, 2015, the Bureau, alongside representatives of the Vancouver Police Department, the Better Business Bureau and Fraud Prevention Forum partners, officially kicked off Fraud Prevention Month ("FPM") by announcing this year’s Top Ten Scams.Footnote 96 The Bureau participated in several activities and published a variety of materials during FPM, including a series of eight animated videos based on the scams in the Canadian Edition of The Little Black Book of ScamsFootnote 97 and details about the most common investment scams.Footnote 98 For the third consecutive year, the Bureau hosted a Twitter Chat on "2 Good 2 B True Day", which this year focused on fake online reviews.Footnote 99 Beyond these FPM‑related activities, DMPB also issued a number of consumer advisories, including advisories warning consumers to be wary of weight loss products promoted through social media sites,Footnote 100 back‑to‑school and clothing donation bins,Footnote 101 fake online endorsementsFootnote 102 and fake emails offering consumer refunds.Footnote 103
(d) Competition Promotion Branch
The Competition Promotion Branch is responsible for a significant amount of the non‑enforcement work that takes place at the Bureau, including with respect to advocacy, market studies, guidance documents, and domestic and international cooperation. I want to spend a few minutes talking about the developments in each of these areas.
Significant sectors in the Canadian economy are subject to comprehensive regulation. In these regulated sectors, competition concerns may arise as a result of both regulatory action and inaction. The Act provides me the mandate to make submissions to regulators so as to bring competition matters up for considerations. We have done so, and done so effectively, at all levels of government. And we will continue to do so in areas that are important for Canadians. Advocacy does not replace enforcement; it is a complement — and, as my colleague Jeanne Pratt observed recently — a necessary complement, especially in regulated sectors, to effective enforcement of the Act.
The number of advocacy submissions made by the Bureau has increased significantly, from three in FY2013‑14 to 33 in FY2014‑15 — an increase of 1000%. Since late May 2014, the Bureau has provided submissions to the Canadian Radio‑television and Telecommunications Commission (the "CRTC") in respect of its wholesale mobile wireless services,Footnote 104 wholesale services and associated policies,Footnote 105 Let’s Talk TV,Footnote 106 video‑on‑demandFootnote 107 and Wholesale CodeFootnote 108 reviews.
In the course of the CRTC’s proceeding on wholesale mobile wireless services, the Bureau submitted that Canada’s largest wireless carriers have shown they had both the incentive and the ability to set high rates for wholesale roaming to hurt their rivals’ competitiveness in retail markets. In a recent decision, in line with the Bureau’s recommendations, the CRTC put in place regulatory measures to limit the rates the incumbents can charge for wholesale roaming.
Furthermore, in a landmark decision, the CRTC adopted the Bureau’s recommendations in the Let’s Talk TV review and will implement new policies that will provide more choice in television services and potentially lower cable bills for consumers. Specifically, the Bureau advocated for greater competition on four fronts:
- First, consumers should be provided more choice and flexibility in how they purchase TV channels. In response, the CRTC will require television service provider to offer "pick‑and‑pay" and "small bundles" by the end of 2016.
- Second, protections regarding potential exercises of market power by vertically‑integrated television service providers need to reflect all the other changes happening in the market. In response, the CRTC sought to update its Wholesale Code, which it intends to implement as regulation rather than a guide.
- Third, we advocated for the relaxation of genre exclusivity and protection. The CRTC has agreed and has significantly relaxed these protections.
- Finally, consumers should have the all of the information they need to make informed decisions when signing up, adding, removing or cancelling services. And it shouldn't be burdensome to do those things. To this end, the CRTC has introduced policies that will make it easier for consumers to get the information they need, and has improved the ease with which those customers can switch providers. The CRTC’s work on this front continues with its current consultation on a television service provider code of conduct.
These decisions were quickly followed‑up with additional consultations, including a process regarding video‑on‑demand services, where the Bureau once again advocated for greater consumer choice in how and from whom Canadians purchase their viewing content.
Beyond these submissions to the CRTC, the Bureau is continuing with its review of the restrictions on advertising among pharmacists, dentists and veterinarians. The products and services these professionals provide are critical to the welfare of Canadians. As such, the Bureau has a responsibility to promote competition in these areas to ensure that consumers benefit from lower prices and higher levels of choice and quality. I expect that this report will be released later this month.
In addition to these advocacy submissions, the Bureau released a new publication, The Competition Advocate, to be published periodically.Footnote 109 This short commentary offers the Bureau’s views to inform and start public discussions on a wide range of issues in sectors across the economy that could benefit from increased competition. The first issue of The Competition Advocate focused on the taxi industry’s digital dispatch services and expressed 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.Footnote 110 Further issues are expected to be issued shortly.
In addition to the advocacy projects I have already discussed, the Bureau has been active in providing advice to governments as a result of market studies. While not all of this advice has been given in a public forum, I will highlight the appearance of Bureau staff at the House of Commons Standing Committee on Natural Resources this past December as a follow‑up to our Propane Market Study undertaken earlier in 2014. To me, this is exactly what our role should be in undertaking advocacy projects. In 2015, the Bureau will continue to participate in a range of activities to promote and advocate for the benefits of a competitive marketplace.
As noted previously, the Bureau is committed to providing guidance to its stakeholders. Over the last year, the Bureau published final versions of the Intellectual Property Enforcement Guidelines (phase‑one update),Footnote 111 the Corporate Compliance Programs Bulletin,Footnote 112 the Price Maintenance Enforcement Guidelines,Footnote 113 the Information Bulletin on Communication during InquiriesFootnote 114 and the Production of Electronically Stored Information Guidelines.Footnote 115 Several of these guidance documents were released for public comment earlier this year, as were the draft Intellectual Property Enforcement Guidelines (phase‑two update),Footnote 116 and the draft Competition and Compliance Framework.Footnote 117 The Bureau also released white papers describing its approach to retail mergersFootnote 118 and patent litigation settlements.Footnote 119
As you may know, the Information Bulletin on Communication during Inquiries summarizes how and when the Bureau generally communicates during an inquiry with parties under investigation, industry participants, complainants and the general public. While we chose not to incorporate all of the comments provided by the CBA, we committed to revisiting the Bulletin after a year to determine if any updates are required. We invite the CBA to participate in this process, which we expect to be underway later this year.
In addition to these guidance documents, the Bureau also provided a number of submissions to the Organisation for Economic Co‑operation and Development, including submissions for the Roundtable on Airline Competition.Footnote 120
Domestic and international cooperation
On the domestic front, the Bureau signed memoranda of understanding ("MOUs") with the Ontario Ministry of Government and Consumer ServicesFootnote 121 and the Ontario Securities Commission.Footnote 122 These memoranda promote cooperation and collaboration by, among other things, providing for the sharing of information and best practices. The Bureau now has 20 MOUs in place with domestic partners, with more in the pipeline.
Similarly, on the international front, the Bureau signed MOUs with China’s State Administration for Industry and Commerce ("SAIC"), China’s Ministry of Commerce ("MOFCOM") and the Competition Commission of India (the "CCI").Footnote 123 These MOUs will facilitate communication and collaboration between the Bureau and the foreign agencies in a variety of areas, including:
- notifications of matters that are of mutual interest or concern;
- the coordination of investigations, merger reviews and enforcement activities;
- the sharing of best practices and policy developments; and/or
- joint education and competition promotion initiatives.
In fact, three officers from the Bureau spent time with the CCI earlier this year to exchange experiences and knowledge pursuant to the MOU. The Bureau now has cooperation instruments in place with 13 international jurisdictions, with more on the way.
The Bureau also participated in a number of meetings with foreign competition agencies, including agencies in Hong Kong, Mexico, New Zealand, South Africa, South Korea and the United States. Most recently, we met with the heads of the U.S. and Mexican competition agencies in Mexico City on May 21, 2015 to discuss their efforts to promote effective and efficient cooperation throughout the North American Free Trade Area.Footnote 124 The topics discussed included, among other things, best practices in competition law enforcement, the current priorities of each agency, and how to cooperate with and provide technical assistance to Latin American agencies.
The Bureau has good working relationships with a number of antitrust agencies around the world, but there is more that we can be doing to collaborate. As I discussed in more detail during my speech at the North American Antitrust Authorities Conference, some of the issues we are considering at the Bureau are best practices, regional competition law networks and second generation cooperation agreements.
First, I am a firm advocate of international fora like the International Competition Network and the Organisation for Economic Co‑operation and Development, 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. We will continue to take every opportunity to engage with our partners in those fora and to deepen our partnerships.
Second, I am a proponent of exploring whether one day we might be able to implement a North American Competition Law Network that provides more structure and direction on issues of common concern in North America. That would ultimately allow the agencies, their stakeholders and the North American economy to reap the maximum benefits of cooperation.
Finally, information sharing can also be facilitated through bilateral and multilateral cooperation instruments, of which we are seeing more all the time. We currently have cooperation instruments with 13 jurisdictions, including the recent MOUs with SAIC, MOFCOM and CCI. 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 amending an arrangement with the New Zealand Competition Commission. Such agreements could allow us to exchange information more easily and to work towards our enhanced cooperation goals.
Workshops and public policy discussions
In addition to our competition promotion work, the Bureau also engaged and cooperated with our stakeholders to advance the public policy discussion in Canada on competition policy. Whether it be at CBA Conferences like this one, at various CBA roundtables, or through the work of the Legislative and Policy Committee of the CBA, looking at how we can better Canada’s competition regime is very important. In this respect, the past year has been a good one.
We have participated at a number of events that, I believe, helped to foster the dialogue between the CBA and the Bureau, and advanced the thinking on competition policy. By way of example, these events included the innovation workshop, which considered the role of innovation in the marketplace and its impact on competition policy;Footnote 125 the roundtable on patent litigation settlements, which considered various issues related our white paper; and the five‑year retrospective on the amendments to the Act, which considered whether the amendments achieved the objective of modernizing the Act to better protect Canadians from the harm caused by anti‑competitive conduct. The Bureau is also involved with the Competition Tribunal Liaison Committee, which is examining ways to increase the effectiveness of the Tribunal. These have been good discussions; and, in my opinion, they have allowed us to draw upon our collective knowledge, experience and expertise to assess ways to better Canada’s competition regime. We live in a constantly‑evolving marketplace, and I believe it is important that the Act keeps pace.
I realize that I have spoken at length and want to leave some time for questions. But before I leave, I want to emphasize that my vision for the Bureau is of an organization that is open, balanced and transparent. As we move forward with this vision, it is with the expectation that you, our partners, will continue to work with and support the Bureau on a wide variety of initiatives. We value the collaborative relationship that we have built with the CBA over the past several years and we look forward to building an even stronger relationship going forward.
Thank you again for the opportunity to be here today. I look forward to any questions you may have.
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