Competition, innovation and infrastructure

Remarks by John Pecman, Commissioner of Competition

McCarthy Tétrault LLP

Toronto, Ontario

May 25, 2016

(As prepared for delivery)


Introduction

Good afternoon, everyone. I’m pleased to be here and I’m looking forward to our upcoming question and answer session. I’d like to spend most of our time today in discussion, so I’ll try to keep my remarks relatively short.

I will touch on just two topics—but two topics that are “hot” right now on Canada’s competition landscape: innovation and infrastructure.

Competition drives innovation

Let’s begin with innovation. I’ve said this before, but I can’t emphasize it enough. Innovation is a key element of a healthy, sustainable economy. Strong competition drives innovation, which in turn drives productivity, efficiency and economic growth. And for consumers, innovation brings more choices and higher quality products and services in a dynamic marketplace.

We are experiencing a rapidly changing global economy in which innovative technologies are disrupting traditional markets and long‑standing business models. In this new environment, it’s incumbent on the Bureau to do all it can to foster competition and innovation in the marketplace in order to maximize the potential benefits for Canadians and Canadian businesses.

That means advocating for regulatory frameworks that allow competition and innovation to thrive.

That means supporting innovation in the digital economy by targeting and deterring anti‑competitive practices that impede new entrants.

That means regularly reviewing our enforcement approach to keep pace with change, and—as that approach evolves—consulting with stakeholders to ensure we are providing effective guidance for businesses and competition law practitioners.

And finally, that means encouraging innovation within the Bureau itself, in the spirit of continuous improvement, as we strive to be an agency that is nimble, creative, and ahead of the curve.

Pro‑competitive regulation

With respect to advocacy, the Bureau will continue to provide pro‑competitive policy advice to regulators and legislators, particularly those grappling with challenges brought by disruptive technologies in the digital economy.

For example, our recent white paper on the modernization of taxi regulations made a significant contribution to ongoing regulatory reviews. Our recommendations have been reflected and referred to in numerous recent regulatory changes in municipalities across the country. This is where our advocacy stands to have the greatest impact—during policy development and regulatory review, before rules are created that unnecessarily stifle competition and innovation.

We are now turning our sights on “Fintech”, as we undertake a market study into technology‑led innovation in the Canadian financial services sector. We will focus on innovations that impact how consumers and small and medium‑sized businesses interact with financial services and products. These will include areas like peer‑to‑peer banking, mobile wallets and payments, crowd‑funding, and online‑based financial advisory services (or "robo‑advisors"). The Bureau will look at the impact of technology led‑innovation on the competitive landscape, examining the barriers to entry or expansion of FinTech companies, factors influencing adoption of these products and services, as well as the state of current regulatory frameworks.

We understand that innovative business models—whether they emerge in the taxi industry, FinTech or other sectors— often challenge the status quo. This market study will provide guidance to the Bureau and regulators, to ensure that Canada nurtures an environment that provides support and opportunities for FinTech companies to innovate, grow and compete in global markets.

Innovation in enforcement

With respect to enforcement, we will continue to support the emergence of innovative business models in the digital economy by deterring anti‑competitive practices that impede new entrants. And equally important, through the course of our reviews and investigations, the Bureau will continue to consider the effects of firms’ behaviour on non‑price factors such as quality, convenience, and, in particular, innovation in this rapidly‑evolving space.

The Bureau took these factors into account, for example, during its extensive investigation into a number of allegations of anti‑competitive conduct on the part of Google in relation to its online search, search advertising and display advertising services in Canada.

While that investigation has concluded, the Bureau recognizes that data‑driven companies play an important and growing role in Canada’s economy. The emergence of “Big Data” and its effects on competition is also a prevalent concern on the international stage. As the OECD Competition Committee recently observed, some are referring to data as the “new oil”, or the currency of the digital economy. On May 10th, the German and French competition authorities released a joint study on “Competition Law and Data” to further feed the debate on assessing data as a factor to establishing market power.

As the collection, analysis, and use of data is increasingly becoming an important source of competitive advantage, driving innovation and product improvement, the Bureau will continue to actively monitor developments in this area.

In another case related to the control of data—I was encouraged by the recent ruling from the Competition Tribunal in the Bureau’s case against the Toronto Real Estate Board (TREB). The Tribunal supported the Bureau’s view that TREB was abusing its market power by preventing brokerages from offering innovative products and services to consumers over the internet. The Tribunal not only ruled that the restrictions TREB imposes on its members’ use and display of the data in the Toronto Multiple Listing Service system are anti‑competitive, but found them to have had “a considerable adverse impact on innovation, quality, and the range of residential real estate brokerage services” available in the Greater Toronto Area.

The Tribunal’s message about the role of competition in spurring innovation is an important one, and can be applied more broadly across the Canadian economy. The Bureau will continue to take action to foster open and competitive markets in which innovation can thrive.

Ahead of the curve

And as we do so, we will be paying close attention to emerging issues in the rapidly changing marketplace, and updating our enforcement approach to ensure that we are staying ahead of the curve.

Just as we did with our recent update of the Bureau’s Intellectual Property Enforcement Guidelines, or IPEGs, we will focus on emerging competition issues and adapt our approach in consultation with our stakeholders. Intellectual property is a perfect example of a rapidly evolving area that has an important intersection with competition law. The Bureau will continue to review the IPEGs on an annual basis to ensure our enforcement guidelines keep pace with changes in the market and guidance received from the courts.

This process of regular policy review and evolution matches what we are recommending to regulators and legislators who are seeking to cope with the changes and pressures introduced by a shift to a rapidly changing digital economy. Once again, it is imperative we do not restrict the benefits that competition and innovation bring to consumers, to businesses, and to the Canadian economy. We must adapt to changing times in order to allow competition and innovation to thrive.

Safeguarding infrastructure investments

Now I’d like to move on to my second subject—infrastructure—and I promise to be brief.

In March, the Government of Canada announced the largest infrastructure investment in the history of our country—creating an opportunity for the Bureau to contribute its expertise to safeguarding the government spending that will fuel municipal and provincial infrastructure projects across the country.

The Organization for Economic Cooperation and Development (OECD) notes that the distinctive nature of public procurement and its context make it particularly vulnerable to collusion and corruption, particularly in the construction sector. The presence of bid‑rigging and other collusive agreements can increase prices paid by public procurers by over 30 percent, and result in inferior quality and project range. Distortion of the public procurement process also inhibits investment, innovation and economic development.

As a result, the Bureau is taking action to heighten awareness about bid‑rigging and to equip the procurement community with tools to prevent, detect, and deter this damaging and illegal behaviour. We will be holding workshops with key players, including procurement officials at all levels of government, as well as representatives from private industry. To advance these initiatives, we have been reaching out to other government departments involved in this process and we have received a high degree of interest.

While we are amping up our efforts on the prevention front, we are not downing tools on the enforcement front. A number of recent Bureau investigations have led to numerous bid‑rigging charges laid against companies and individuals involved in the procurement process for infrastructure projects.

Cracking down on cartels remains a priority for the Bureau. Bid‑rigging conspiracies are a fraud on the consumer, and rigging bids for public contracts is a fraud on tax payers and on all Canadians. We look forward to collaborating with all our partners to prevent, detect, and deter anti‑competitive conduct, and protect Canada’s historic investment.

Conclusion

Just last week, the Bureau published its draft Annual Plan for the year ahead. As you’ll see, the themes of innovation and infrastructure are key points of focus for the Bureau as we continue to preserve and protect competition for the benefit of consumers, businesses, and the Canadian economy. We invite your submissions on our plans for the coming year—on these topics and others.

Thank you again for the opportunity to speak with you today. I look forward to our discussion.

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