Annual Report of the Commissioner of Competition for the year ending March 31, 2005

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Chapter 7: How We Do it All

Education is essential to the work of the Bureau. Consumers need truthful and accurate information to make informed purchasing decisions. Similarly, businesses need information about the Bureau and its enforcement approach to ensure they can comply with the law. The Bureau increasingly uses the media to reach Canadians. In 2004-2005, the Bureau issued 38 news releases and 27 information notices describing the benefits of its activities for the economy and for Canadians. Staff also responded to hundreds of enquiries from journalists in Canada and abroad. Senior Bureau managers and Communications Branch staff were available to the media and acted as spokespersons on key issues.

Media Relations

In this outreach resulted in 2624 media stories referring to the Bureau, an increase of almost 25 percent from the previous year. Independent analysis indicates that more media outlets than ever before are covering the Bureau and that the coverage is increasingly positive.

Stories that appeared in the media included those on merger reviews and Bureau investigations into various anti-competitive business practices. Coverage also focused on consumer issues, which shows that Bureau stories did not only appear in the business section of newspapers. The amount of radio and television coverage also increased from previous years. Broadcast stories reached small, regional communities where people might not have been exposed to Bureau messages previously.

Information Bulletins, Guidelines, Handbooks and Pamphlets

Revised Merger Enforcement Guidelines

On September 21, 2004, the Bureau issued the Revised Merger Enforcement Guidelines to replace the guidelines issued in 1991. The key improvements are the following:

• a better explanation of the Bureau’s approach to market definition;
• a more detailed description of the Bureau’s analysis of competitive effects arising from a merger; and
• a summary of the current law on efficiencies as set out in section 96 of the Competition Act.

Clarification of the Enforcement Approach in the Airline Industry

On September 23, 2004, the Bureau clarified its approach on the enforcement of the Competition Act in the airline industry by sending an open letter to major Canadian airlines. The letter outlined changes to the airline industry and indicated the policy it would follow when enforcing the predatory pricing and abuse of dominance provisions of the Act in light of these changes.

The major points in the Bureau’s policy are as follows:

• The principles established by the Competition Tribunal (in the first phase of the Air Canada case) regarding application of the avoidable cost test are relevant for similar cases that might arise in the future.
• The avoidable cost test would only constitute one part of the abuse of dominance analysis. The other elements of section 79 (i.e. the practice of anti-competitive acts and a substantial lessening or prevention of competition) would also have to be considered.
• The purpose of avoidable costs set out in the Airline Regulations (to distinguish predatory actions from vigorous competition) was to focus on the response of a dominant domestic carrier to competition or new entry into the market.
• A dominant carrier’s actions that could attract enforcement action include reducing fares to undercut competitors, adding significant capacity, failing to remove capacity in accordance with seasonal or other usual practices, and substantially increasing the number of tickets offered at fares matching the lowest fares of a competitor.
• The Bureau would not take enforcement action against fare matching (i.e. reducing fares to match but not to undercut competitors’ prices), unless it is accompanied by other acts, such as a significant increase in capacity or in seats offered at the lowest price.
• The Bureau would consider all the elements of abuse of dominance rather than only the avoidable cost test when deciding to take enforcement action against a dominant carrier responding to entry or competition by doing something more than fare matching.

In early August 2004, Air Canada made an application to the Minister of Transport to rescind the undertakings Air Canada provided to the Commissioner of Competition in December 1999. The Minister requested the Commissioner’s views and rescinded the undertakings by Order in Council on August 17, 2004.

Consultations on the Treatment of Efficiencies under the Competition Act

On September 24, 2004, the Bureau launched national consultations on the role of efficiencies under the Competition Act. To assist in those consultations, the Bureau issued a consultation paper entitled "Treatment of Efficiencies in the Competition Act". The paper covered the Bureau’s experience with the current treatment of efficiencies under the Act as well as other jurisdictions’ experience with efficiencies. It also examined the merits of various proposals, including the following:

• maintaining the status quo (i.e. an efficiencies defence);
• maintaining the status quo except when the merger created a monopoly or near-monopoly;
• reviewing efficiencies as part of the overall assessment of a merger (rather than an efficiencies defence);
• allowing a post-merger assessment of whether the predicted claims of efficiencies were achieved; and
• allowing for the consideration of efficiencies in specialization agreements, joint ventures and strategic alliances.

The Bureau hired the Intersol Group to conduct national consultations based on the consultation paper. As well as reviewing the results of this process, the Commissioner will look at the results of an international round table discussion that coincided with an Organisation for Economic Co-operation and Development meeting in October 2004.

In addition, on March 18, 2005, the Commissioner appointed an advisory panel of experts with backgrounds in business, economic policy and trade to help assess the role that efficiencies should play in the context of Canada’s economy in the 21st century. The Advisory Panel on Efficiencies will consider the general economic and business implications of the current treatment of efficiencies under the Competition Act. It will comment on the characteristics that Canada’s competition policy framework should contain in order to ensure that efficiencies are properly addressed. It will also consider the treatment of efficiencies in other jurisdictions and review the results of national consultations on efficiencies initiated by the Bureau. Its report will be published in the summer of 2005.

Authenticating Canadian Diamond Claims

The Bureau continues to participate as an observer member of the Canadian Diamond Code Committee. This group administers the Bureau-endorsed "Voluntary Code of Conduct for Authenticating Canadian Diamond Claims", which was revised in July 2004. For more details, go to www.canadiandiamondcodeofconduct.ca/html/EN_code.htm.

Warnings to Consumers

Cashable Vouchers

In December 2004, the Bureau issued a warning about cashable voucher promotions. A growing number of Canadian retailers have been running cash-back promotions to lure customers to spend money on big-ticket items. These promotions often require purchasers to file their claims within a limited time and under strict conditions. There is also no guarantee that purchasers will get back 100 percent of the voucher’s face value.

Skybiz.com

In May 2004, the Bureau advised Canadian consumers, on behalf of the U.S. Federal Trade Commission (FTC), that Canadians who invested in SkyBiz.com could submit a claim for redress. In June 2001, the FTC charged that SkyBiz violated the Federal Trade Commission Act. SkyBiz promoted a work-at-home business opportunity and a chance to earn thousands of dollars. Participants were required to purchase a $125 e-Commerce Web Pak. The case, scheduled to go to trial in January 2003, was settled out of court. The settlement provided $20 million for consumer redress, among other elements.

Work-at-home Opportunities

In May 2004, the Bureau warned Canadians about work-at-home business opportunities, which are often fraudulent, requiring individuals to invest money in order to work.

The Web Site

The Bureau’s Web site continues to provide a wealth of valuable information to a wide and varied audience — from consumers and businesses to law and media professionals.

Following an in-depth examination of the Bureau’s audience and its information needs, an assessment of the site’s existing content as well as the identification of best practices and an analysis of peer sites, the Bureau restructured the site.

The site continues to feature an automatic e-mail distribution list that sends subscribers information updates. To subscribe, go to: http://www.competitionbureau.gc.ca/epic/site/cb-bc.nsf/frm-eng/PJSH-6X9J7C

Information notices, news releases, speeches, warnings and the most recent versions of publications are available on the site. Consumers and businesses also have access to electronic commerce applications, such as the CA Number Database.

Information Centre

The Information Centre is the primary access point for incoming information requests and complaints from Canadians, international consumers, businesses and agencies. The Bureau’s clients include business people, chief executive officers, members of Parliament, the media, lawyers, consumers, domestic and foreign corporations, importers, retailers and the general public. Information and complaint specialists provide information and advice to clients, mainly over the telephone, and register complaints on subjects such as the following:

• false or misleading representations and deceptive marketing practices;
• packaging and labelling of consumer products;
• textiles and precious metals;
• CA identification number searches;
• restraints to competition; and
• mergers.

The Information Centre is also responsible for providing information and advice related to the four statutes administered by the Bureau, and for capturing complaints that may lead to formal Bureau investigations. The information gathered by the Centre is essential to helping the Bureau shape its public awareness and enforcement activities. The public can contact the Centre in several ways:

• through its toll-free line (1 800 348-5358) from 8:30 a.m. to 5:00 p.m. (Eastern Time);
• through an electronic complaint form
• by facsimile (819-997-0324); and
• by mail (Competition Bureau, 50 Victoria Street, Gatineau QC K1A 0C9).

Stakeholder Consultations

Stakeholder outreach ensures that the Bureau is in a position to take all Canadian interests into account as it promotes and maintains a fair and competitive economy. Throughout 2004–2005, the Commissioner held consultations across Canada with representatives of small, mediumsized and large businesses, consumer and public interest groups, and private sector organizations, members of the legal and academic communities, and provincial government and law enforcement officials. In August and September 2004, the Commissioner travelled to Nunavut, the Northwest Territories and Yukon to better understand the competition concerns of Canadians living in the North.

A team dedicated to outreach to small and medium-sized business worked on several projects this past year. First, for the launch of the Bureau’s new website, the team developed a portal for owners of small and medium-sized businesses that provides targeted information and messages about many of the common competition concerns that arise for them.

The team also identified key organizations that may better help the Bureau understand the competition issues facing small and medium-sized businesses. Bureau representatives met with members of the Canadian Federation of Independent Business in January 2005. The participants provided the Bureau with excellent feedback on their concerns and presented future possibilities for Bureau messages to reach the organization’s 105 000 members.

Finally, the team met with representatives from Industry Canada’s Small Business Policy Branch, who provided insight into policy issues and upcoming Industry Canada initiatives affecting small and medium-sized businesses.

The large enterprise outreach team identified key organizations that represent large companies, and Bureau representatives met with two of the organizations during the year. The meetings were a valuable opportunity for representatives of these organizations and the Bureau to exchange views.

Consumer and Competition Dialogue

On December 6, 2004, the Bureau hosted a meeting with representatives of various consumer associations to develop an open and constructive dialogue about keeping Canadian consumers well informed on competition issues. The one-day meeting, which the Commissioner chaired, provided the Bureau with an opportunity to outline its work, mandate and benefit to consumers, explain its approaches to competition law enforcement and explore ways to strengthen links between the Bureau and consumer organizations. Participants were representatives from eight Canadian consumer associations: Option consommateurs, Public Interest Advocacy Centre, L’Union des consommateurs, Consumers Council of Canada, Automobile Protection Association, Canada’s Association for the Fifty Plus, Consumers’ Association of Canada, and Canadian Consumer Initiative. Senior Bureau officials and the Director General of Industry Canada’s Office of Consumer Affairs also attended. It was agreed that the dialogue would continue with regular meetings.

Communications Projects

Pamphlets

On March 31, 2005, the Bureau published new pamphlets on the subjects of fraudulent work-at-home opportunities and bait and switch selling. The pamphlets provide an overview of the provisions of the Competition Act that touch on these anti-competitive practices and explain how they can affect consumers and businesses.

Bi-annual Consultation Forum on Fees and Service Standards

In November 2004, the Bureau held its bi-annual consultation forum on fees and service standards. Since 1995, Bureau officials have met regularly with stakeholders to discuss the Fee and Service Standards Policy and related documents in order to report on the Bureau’s success in meeting service standards for merger notification, discuss stakeholder concerns and report on the Bureau’s progress with written opinion requests. Two performance reports were published and distributed to participants before the meeting, one on Bureau performance in merger review and the other on written opinion requests. The forum also included a discussion on the current filing fee structure and possible alternative structures. These information-sharing opportunities are positive opportunities for stakeholders to meet with Bureau representatives and share points of view. The Bureau is committed to holding these forums every two years. For more on the Bureau’s Fee and Service Standards Policy, visit the Bureau's Web site.

Other Initiatives

ICPEN Worldwide Blitz on Scams and Spam

In February 2005, the Bureau and 76 government agencies from around the world participated in a special two-day Internet surveillance and enforcement program. The Internet sweep was carried out under the leadership of the International Consumer Protection and Enforcement Network (ICPEN). The Bureau has been a member of this network since its creation in 1992, and always participates in this annual event. This year, the Bureau elected to focus on bogus weight loss product claims. Bureau officers searched for Canadian-based sites that were making unrealistic performance claims and sending out spam using “harvested” e-mail accounts. The Bureau will analyze the results of the sweep and take follow-up enforcement action, as necessary. Final results will be presented at the next ICPEN semi-annual meeting in November 2005.

Fraud Awareness Month in Canada and Abroad

On February 1, 2005, the Fraud Prevention Forum, which the Bureau chairs, launched its Fraud Awareness Month campaign, the largest of its type to date in Canada. Over the course of the month, more than 40 private and public sector organizations educated Canadians about fraud. Activities included airing public service announcements on radio and television, distributing nearly 40 million fliers, posters and tip cards, and publishing newspaper advertisements and Web banners.

The Fraud Prevention Forum comprises private sector firms, consumers and volunteer groups, government agencies and law enforcement organizations committed to fighting fraud aimed at consumers and businesses.

The concept of Fraud Awareness Month has been adopted abroad. During the fall 2004 meeting of International Consumer Protection and Enforcement Network (ICPEN), the Bureau proposed that an ICPEN Fraud Awareness Month be held within network countries. In addition to Canada, 17 ICPEN member countries ran Fraud Awareness Month in February 2005. Given the success of this first event, ICPEN has decided to repeat the initiative in 2006. A survey after Fraud Awareness Month indicated that Canadians feel public awareness is the most effective tool for combating fraud. The survey found that the majority of Canadians recalled exposure to messages relating to fraud in 2005, with most saying that what they saw, read or heard had altered the way in which they would respond to fraudulent solicitations.

Top Ten Scam Lists

During Fraud Awareness Month, organizations in various parts of Canada worked to alert consumers to common consumer fraud in their area.

In Manitoba, the Fraud Prevention Forum informed residents of the 10 most common consumer scams in the province: identity theft, Internet scams, telemarketing scams, lottery scams, deceptive sales practices, pyramid selling schemes, bogus business opportunities, bogus charities, Nigerian letter schemes and office supply scams. Participants in the campaign included the Competition Bureau, the Consumers’ Bureau of the Manitoba Department of Finance, the Winnipeg Police Service, and D-Division of the Royal Canadian Mounted Police.

In southern Ontario, the Bureau, PhoneBusters and the Better Business bureaus of Hamilton, Kitchener, London and Windsor alerted residents to the 10 most common scams in the area: identity theft, Internet scams, office supply scams, lottery scams, deceptive sales practices, bogus charities, bogus business opportunities, deceptive vacation schemes, Nigerian letter schemes and fraudulent cheque schemes. More information can be found on the Bureau’s Web site.

In British Columbia, the Bureau, the Better Business Bureau of Mainland B.C. and the Business Practices and Consumer Protection Authority of British Columbia alerted residents to the 10 scams most often carried out in B.C.: Internet fraud, identity theft, bogus business and franchise opportunities, Nigerian letter schemes, bogus health and wellness products, foreign lotteries, Internet work-at-home scams and bogus employment services, bogus charities, unsolicited e-mail, and mail and office supply scams and unsolicited invoices.

British Columbia’s Scam Jam 2005

Scam Jam is a one-day public fraud awareness event organized by the Better Business Bureau. The Competition Bureau’s Pacific Region office is a sponsor of this annual event, which was held in Vancouver on March 16, 2005, and featured speakers, kiosks and a live radio show to educate people about what they can do to avoid being victims of fraud.

Creation of Atlantic Partnership

In February 2005, the Bureau announced the creation of the Atlantic Partnership: Combating Cross-Border Fraud. The goal of this partnership between law enforcement and government agencies in Atlantic Canada and the United States is to work together to reduce, identify, investigate and prosecute cross-border fraud. Partners are Canada Post Corporation, Charlottetown Police Department, Halifax Regional Police, Office of the Attorney General of New Brunswick, Royal Newfoundland Constabulary, Saint John Police Force, Service Nova Scotia and Municipal Relations, U.S. Federal Trade Commission, U.S. Postal Inspection Service and the Competition Bureau.

Special Constable Status Granted to Competition Law Officers

Four competition law officers from the Bureau’s Atlantic Region were granted special constable status, allowing them to serve summonses and subpoenas in New Brunswick while fulfilling their duties under the Competition Act, the standardsbased statutes and the Criminal Code. The Bureau now has officers with special constable status in Prince Edward Island, Nova Scotia, New Brunswick, Quebec, Ontario, Manitoba, Saskatchewan, Alberta and British Columbia.

Project FairWeb

Project FairWeb is the Bureau’s first dedicated Internet surveillance and enforcement program aimed at combating misleading and deceptive advertising found on the Internet. Launched in April 2004, FairWeb’s initial focus has been on misleading and unsubstantiated claims relating to bogus weight loss products. For more information, go the Bureau's Web site.

Stop Spam Here Awareness Campaign

The Bureau is a member of Industry Canada’s Task Force on Spam, which officially launched Stop Spam Here, a public education and awareness campaign. More information is available at www.stopspamhere.ca.

Anti-Phishing Awareness Campaign

The Bureau, as chair of the Fraud Prevention Forum, joined Visa Canada and the RCMP on November 3, 2004, to launch a consumer awareness campaign about phishing scams (stealing personal identity and financial information online). For more information, go to the Bureau's Web site.

Cross-Border Fraud and Deception

In March 2004, the Bureau signed informationsharing protocols with two of its international partners to more effectively fight cross-border consumer fraud and deception perpetrated through telemarketing, mail and the Internet. These protocols formalize how the Bureau and its law enforcement partners share complaint and investigation data, and streamline prior co-operation agreements. They advance the implementation of the 2003 OECD Guidelines for Protecting Consumers from Fraudulent and Deceptive Commercial Activities Across Borders. The Bureau signed a similar information-sharing protocol in 2002 with the U.S. Federal Trade Commission.

This protocol was amended in May 2004 to clarify the conditions under which certain information could be shared. A similar modification was made to the Canada-Australia Information Sharing Protocol in October 2004. In March 2005, the Canada-United Kingdom Information Sharing Protocol was amended in the same way, and a provision added concerning the disclosure gateway for the U.K. Office of Fair Trading.

Vancouver Strategic Alliance against Deceptive Marketing Practices

In June 2004, the U.S. Federal Trade Commission joined the Vancouver Strategic Alliance, which had been established in March 2004 to fight deceptive marketing practices targeting citizens and businesses. The Competition Bureau and the Vancouver Police Department are also partners. The purpose of this joint venture is as follows:

• to coordinate law enforcement activities;
• to identify fraudulent, deceptive and misleading practices with a British Columbia connection;
• to facilitate information sharing; and
• to support action against individuals or groups engaging in these deceptive practices across borders.