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Annual Report of the Commissioner of Competition for the Year Ending March 31, 2000

Maintaining a modern approach to Competition Law

For consumers and businesses to receive the full benefit of effective competition law, it is important for the legislation and the Bureau's policies and enforcement guidelines to be reviewed on a regular basis to maintain their currency with developing jurisprudence and economic thought. A modern, up-to-date approach to the legislation also enhances Canada's ability to compete internationally.

The Competition Bureau believes strongly in the value of consultation concerning proposed changes to both the legislation and the Bureau's approach to enforcing the legislation. Consequently, the Bureau actively seeks the opinion of its stakeholders on a number of issues.

Policy Initiative: Draft Immunity Information Bulletin

An important initiative in the Competition Bureau's commitment to keep current and evolve to better detect anti-competitive criminal conduct was the release of a new draft Immunity Information Bulletin. The new Bulletin refines the previous draft Co-operating Parties Bulletin, draws from recent experiences in investigations of cartel activity, and is consistent with similar policies followed by Canada's trading partners, such as the United States and the European Union.

The Bulletin explains the distinct roles of the Commissioner and the Attorney General and the conditions under which the Commissioner would consider recommending immunity to the Attorney General. The consultation process for providing comments on the draft Bulletin ended after March 31, 2000.

Consultation: Competition Policy and Intellectual Property Rights

Today's economy is based on knowledge and innovation and driven by rapid advancements in information and communications technologies. In this context, intellectual property and intellectual property rights are becoming increasingly important. To provide clarity on how the Bureau will deal with the interface between competition policy and intellectual property rights, the Bureau prepared draft Intellectual Property Enforcement Guidelines. The Guidelines were published for public comment on June 11, 1999 and will be finalized in the next fiscal year.

^{Photo Credit: Eugene Besruky}

Here are some of the "new" and enthusiastic enforcement support officers.

In the document, the Bureau outlines its guiding principles for dealing with issues involving intellectual property rights and competition law, and explains its analytical approach for determining whether conduct involving intellectual property is anti-competitive. In general, the Bureau takes enforcement action if the conduct involved is proscribed by the Competition Act and is something more than the mere exercise of the intellectual property owner's statutory or common-law intellectual property rights.

Bureau Staff: Bridging Program

The Bureau has a dedicated, professional and talented workforce. A vital component of this staff is the support personnel: administrative assistants and clerical workers. This year, the Bureau launched a bridging program to build on these strengths and equip these employees to consider new career opportunities as enforcement support officers. These new positions are designed to complement the work of the Bureau's competition law officers. The duties involve handling evidence, coordinating the administrative and operational side of team projects and handling routine complaints and inquiries.

Over the past year, 11 specially designed training modules were offered to 43 participants in the program. Towards the end of the year, a number of candidates were appointed to newly created positions.

Amendments to the Competition Act

On December 27, 1999, amendments to the notifiable transactions provisions of the Competition Act and related amendments to the Notifiable Transactions Regulations came into force. Under the new provisions:

asset securitization transactions are exempt from the notifiable transactions provisions of the Act (section 15 of the Regulations)
the information required for short- and long-form filings was moved from the Act to the Regulations and revised to be more relevant (sections 16 and 17 of the Regulations)
the target of a hostile takeover bid is required to supply short- or long-form information following notification by the Commissioner (subsection 114(3) of the Act)
the Commissioner, subsequent to denial of a request for an advance ruling certificate, is empowered to exempt parties from the obligation to notify and wait the prescribed period (paragraph 113(c) of the Act)
waiting periods are 14 days after filing short-form information and 42 days after filing long-form information.

Private Members' Bills

Possible changes to the Competition Act continued to attract the attention of both the public and members of Parliament, and significant resources were spent during the past year dealing with Private Members' Bills. Below is a list of these Bills and a brief description of the proposed amendments.

Private Members' Bills, 1999-2000

Bill C-201 (formerly C-235): Vertically Integrated Suppliers

Requiring vertically integrated suppliers to set retail prices at a level that would cover "marketing costs" and a "reasonable return."
Adding a new civil provision for vertically integrated suppliers similar to paragraph 61(1)(a) of the current criminal provisions.

Bill C-229 (formerly C-409): Deceptive Contests Sent by Mail

Prohibiting any person from posting a letter with a logo similar to a registered government logo.
Prohibiting Canada Post from transmitting a letter, not in an envelope, that is an invitation to participate in a contest and contains a statement that "the delivery of a prize or other benefit to a participant in the contest, lottery or game is, or is represented to be, conditional on the prior payment of any amount by the participant."

Bill C-438 (replacing C-229): Deceptive Contests Sent by Mail

Prohibiting any person from delivering printed material conveying the general impression that the recipient has won a prize or advantage, when the distribution of such prize or advantage, or any request for information regarding the recipient, is conditional on the prior payment of a sum of money or specific telephone charges.

Bill C-458: Deceptive Contests Sent by Mail

Prohibiting any person from distributing printed material that contains a contest, lottery or game of chance whose contents convey the general impression that the recipient has won a prize or advantage, and the distribution of such prize or advantage, or any request for information regarding the recipient, is conditional on the prior payment of a sum of money or specific telephone charges.
Requiring that a committee of the House of Commons, of the Senate or of both Houses of Parliament, on the expiration of five years after the coming into force of this Act, conduct a comprehensive review of the provisions and operation of this Act.

Bill C-402 (formerly C-472): Abuse of Dominant Position

Adding to the current list of examples of anti-competitive conduct in section 78 of the abuse-of-dominant position provisions:

(j) requiring a supplier to pay a fee to a retailer as a condition for selling a product,if the fee is unrelated to, or in excess of, the actual costs incurred by the retailer with respect to the product, for the purpose of impeding or preventing a supplier's entry into or expansion in a market;
(k) squeezing, by a vertically integrated retailer, of the margin available to an unintegrated person competing with the retailer, for the purpose of impeding or preventing the person's entry into, or expansion in a market; and
(l) unilaterally withholding amounts owing to a supplier for some purported reason without the prior agreement of the supplier, for the purpose of disciplining the supplier.

Bill C-349: Vertically Integrated Gasoline Suppliers

Prohibiting vertically integrated gasoline suppliers from operating in the retail market.A vertically integrated gasoline supplier is defined as a corporation that supplies gasoline at retail and:

(a) whose retail sales of gasoline represent more than five percent in value of the total of all retail sales of gasoline,
- in Canada, or
- in a province; and
(b) who manufactures, or is affiliated with one or more corporations that manufacture more than 20 percent of the gasoline the supplier sells at retail.

Bill C-276: Negative Option Marketing

Prohibiting a bank to which the Bank Act applies, a broadcasting undertaking within the meaning of the Broadcasting Act, and a Canadian carrier within the meaning of the Telecommunications Act, from charging for the provision or sale of a new service unless:

(a) the enterprise gives to the client at least once a month for three consecutive months a notice, by any means of communications, including electronic or digital means of communications, containing:

a description of the new service,
the date the new service is to begin,
the cost of the new service calculated monthly and annually,
a statement that the new service is not mandatory,
a statement that the client may obtain the new service by responding to the enterprise by the means described in the notice, which may be any means of communications, including electronic or digital means of communication, and
any other matter that may be prescribed; and

(b) the enterprise has received by any means of communications including electronic or digital means of communication, the express consent of the client for the purchase or reception of the new service by the client.

Bill C-340: Bank Mergers

Amending the merger approval process under the Bank Act allowing the Minister of Finance to approve a merger provided:

(d) the Minister is advised, in writing, by the Superintendent of Financial Institutions, whether or not the Superintendent has
- (i) taken control of any applicant or of the assets of any applicant under subsection 648(1), or
- (ii) taken control of any applicant or the assets of any applicant under subsection 510(1) of the Trust and Loan Companies Act, as the case may be, that, in the opinion of the Superintendent, at least one of the applicants is not financially sound and the amalgamation would prevent the applicant from becoming insolvent; or
(e) the Superintendent provides the Minister with a written statement informing the Minister that, in the opinion of the Superintendent, none of the applicants is about to become insolvent, the statement is tabled in the House of Commons by the Minister and the amalgamation is approved by a resolution of the House of Commons supported by a majority of the members of that House and a resolution of the Senate supported by a majority of the members of that House.

VanDuzer Report on Anti-competitive Pricing Practices and the Competition Act

Following the review of Bill C-235 (reintroduced as Bill C-201 in October 1999) by the House of Commons Standing Committee on Industry, Committee members voted on April 20, 1999 to "review the anti-competitive pricing practices within the Competition Act and any related enforcement guidelines and operations of the Competition Bureau."

In order to inform the debate and facilitate the work of the Committee, the Bureau commissioned Professor J. Anthony VanDuzer, Associate Professor, Common Law Section, University of Ottawa, and his colleague, Professor Gilles Paquet, to undertake a study that would assess the adequacy of the pricing provisions in the Competition Act, the appropriateness of the Bureau's interpretation and pricing enforcement guidelines, and the suitability of the Bureau's administrative practices, enforcement policy and case selection criteria.

On November 25, 1999, the Commissioner submitted the report to the Standing Committee on Industry. In summary, major findings or recommendations made by Professor VanDuzer included the following:

The civil review process would be preferable to the current criminal process for all pricing provisions except horizontal price maintenance.
Enforcement guidelines for predatory pricing and price discrimination should be revised and new guidelines prepared on how the abuse provisions apply to anti-competitive pricing practices, and on the relationship between the horizontal price maintenance and conspiracy provisions.
The Bureau should develop more jurisprudence concerning predation cases.

In his testimony before the Committee, the Commissioner noted that the report provided a good survey of the pricing provisions of the Competition Act and laid out the complex issues involved in enforcing them. As recognized by Professor VanDuzer, for example, a fundamental difficulty in enforcing provisions related to predatory conduct lies in distinguishing between vigorous price competition and predatory pricing. The Commissioner also observed that the Bureau was in the process of reviewing its predatory pricing guidelines as well as developing new guidelines for the Act's abuse-of-dominant-position provisions. He indicated, however, that he was not in favour of shiftig completely away from criminal law to deal with anti-competitive pricing practices for a number of reasons.

The complete report, along with the Commissioner's statement, is available on the Bureau's Web site (http://www.cb-bc.gc.ca). The Industry Committee hearings are ongoing.