Competition Bureau Performance Report on Written Opinions Provided Under the Competition Act

October 2004

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Introduction

The Competition Bureau (Bureau) is responsible for the administration and enforcement of the Competition Act, the Consumer Packaging and Labelling Act, the Textile Labelling Act, and the Precious Metals Marking Act. The Bureau promotes and maintains fair competition so that Canadians can benefit from competitive prices, product choice, and quality services. The Bureau's approach to the administration and enforcement of the Acts is based on five principles: confidentiality, fairness, predictability, timeliness, and transparency.

The ability of the Commissioner of Competition (Commissioner) to provide binding Written Opinions ensures that the administration and enforcement of the Competition Act remains predictable and transparent.

This report is intended to provide an update on the Bureau's performance against service standards for Advisory Opinions¹ (1998-1999 to 2002-2003) and Written Opinions (2003-2004). As of April 1, 2003, Advisory Opinions no longer exist. They have been replaced with Written Opinions (section 124.1 of the Competition Act²). New fees and service standards were developed for Written Opinions and are reported separately from Advisory Opinions.

This report will also form the basis of part of the consultations to be held at a Forum scheduled in Toronto on November 2, 2004.

Background

Since November 1997 when the Fee and Service Standards Policy³ came into force, the Bureau has met with interested stakeholders on a regular basis to discuss its fees, service standards, process improvements, and information requirements, among other things. In the past, performance against service standards for Advisory Opinions was reported along with performance against service standards for merger review. This report, dedicated to Advisory and Written Opinions, is the first of its kind.

Table 1 includes a summary of the fees and service standards which came into force in November 1997 for Advisory Opinions.

Table 1: Fees and Service Standards⁴ for Advisory Opinions (Nov. 1997 to March 31, 2003)

	Fee	Service Standard
Sections 52 – 55.1 and 74.01 – 74.06 of the Competition Act
non-complex	$500	8 days
complex	$500	30 days
All other sections of the Competition Act
non-complex	$4,000	4 weeks
complex	$4,000	8 weeks

After further consultations with stakeholders, Written Opinions became part of the Competition Act with the coming into force of section 124.1 on April 2, 1003. The section allows the Commissioner to provide binding written advice known as Written Opinions. Table 2 summarizes the fees and service standards for Written Opinions.

Table 2: Current Fees and Service Standards for Written Opinions

	Fee	Service Standard
Section 45 to 51 and 795 of the Competition Act Written Opinions
non-complex	$15,000	6 weeks
complex	$15,000	10 weeks
Section 52, 52.1, 53, 54, 55, 55.1, 74.01(1)(a), 74.01(1)(c), 74.01(2), 74.01(3), 74.02, 74.04, 74.05, 74.066 of the Competition Act Written Opinions
non-complex	$1,000	2 weeks
complex	$1,000	6 weeks
Part IX of the Competition Act Written Opinions
non-complex	$5,000	2 weeks
complex	$5,000	4 weeks
Written Opinions with respect to any other provision of the Competition Act
non-complex	$5,000	4 weeks
complex	$5,000	8 weeks

Workload and Resources

The Bureau is organized into separate Branches which deal with the provisions of the legislation covering Civil Matters, Criminal Matters, Mergers, and Fair Business Practices.

The Civil Matters Branch investigates competition cases reviewable by the Competition Tribunal and provides Written Opinions under the abuse of dominant position; refusal to supply; exclusive dealing, tied-selling, and market restriction; consignment selling; delivered pricing; and specialization agreement provisions of the Competition Act.

The Criminal Matters Branch investigates alleged criminal offences and provides Written Opinions relating to potential anti-competitive behaviour covered by the criminal provisions of the Competition Act. These include conspiracy to fix prices or allocate customers/markets, bid-rigging, price maintenance, price discrimination and predatory pricing.

The Mergers Branch is responsible for the review of merger transactions, including those that require pre-notification filing. The Merger Notification Unit (MNU) is responsible for administering Part IX and related matters of the Competition Act (Notifiable Transactions) and for providing Written Opinions related to merger notification and Part IX. The MNU continues to frequently provide non-binding oral advice to its clients.

The Fair Business Practices Branch promotes fair competition in the marketplace by discouraging deceptive business practices and by encouraging the provision of sufficient information to enable informed consumer choice. The Branch applies both criminal and civil provisions of the Competition Act and provides Written Opinions on proposed business conduct to assess whether it may contravene the false or misleading representations and other deceptive marketing practices provisions. The Fair Business Practices Branch also administers a number of voluntary guidelines offering clarification and interpretation of the Competition Act as well as three laws promoting fair representation in the marketing of consumer products:

• the Consumer Packaging a Labelling Act;
• the Textile Labelling Act, and
• the Precious Metals Marking Act.

The Fair Business Practices Branch provides most of the Written Opinions provided by the Bureau. Table 3 provides a breakdown of the Advisory and Written Opinions by Branch. Note that only those opinions provided between April 1 and March 31 in each year are reported.

Table 3: Breakdown of the Advisory and Written Opinions Provided by Branch

	98-99	99-00	00-01	01-02	02-03	03-04
Criminal Matters Branch	8	8	2	1	5	2
Civil Matters Branch	–	–	3	4	4	–
Mergers Branch	3	4	2	2	–	–
Fair Business Practices Branch	43	37	33	19	35	23
Total	54	49	40	26	44	25

While the workload in each branch dedicated to providing Written Opinions is small compared to investigative work, when a request for a Written Opinion is received, it is treated as a priority. Procedures were established before section 124.1 of the Competition Act came into force to ensure that clients receive timely and accurate service.

To promote compliance with, and foster transparency in the administration and enforcement of the Competition Act, the Bureau publishes Written Opinions, or summaries thereof⁷ , that add to the understanding of how the law is administered or where a new issue or sector of the economy is being examined.

This work is done after the requester receives his/her response and the service standard has been stopped. Should the Bureau wish to publish a Written Opinion in its entirety, a Bureau representative will contact the party within 30 days to seek consent. If the party objects, the Bureau will edit the opinion to remove company names and/or produce a summary of the opinion that protects identities and commercially sensitive information. There are currently eleven summaries of Written Opinions on the Bureau's Web site eight of which deal with Multi-level marketing plans. While this number is low compared to the number of Opinions provided, the Bureau is committed to improving the number and quality of the summaries posted on its Web site. Those Opinions where novel or important interpretations have been provided will continue to be the priority for publishing.

In accordance with Treasury Board Policy⁸ the revenue generated through fees are re-invested to improve the service for which they were earned, shorten response times, and identify and improve inefficiencies. Table 4 provides a breakdown of the revenue generated through Written Opinion requests.

Table 4: Revenue

	Revenue Generated Through Written Opinion Requests
1998-1999	$57,600
1999-2000	$55,491
2000-2001	$40,505
2001-2002	$33,500
2002-2003	$47,650
2003-2004	$76,000

Most Written Opinion requests relate to sections 55 and 55.1, multi-level marketing (MLM) plans and schemes of pyramid selling, and the Fair Business Practices Branch is responsible for providing these opinions. Taking advantage of its network of regional offices, during fiscal year 2003-2004, the Fair Business Practices Branch transferred primary responsibility for Written Opinion requests dealing with MLMs to the Prairie Regional Office located in Winnipeg Manitoba. The Atlantic Regional office in Halifax, Nova Scotia has primary responsibility for Written Opinions dealing with section 74.01 of the Competition Act, the promotional contest provisions.

Alberta, Saskatchewan, and Nova Scotia require direct sellers to obtain a Written Opinion from the Bureau stating that their marketing plan raises no concerns under the Competition Act prior to obtaining a direct sellers licence. This has created a situation where these requesters are seeking assurance that they will receive a positive Opinion. Many applications for a Written Opinion under the MLM provisions now include a clear request that the reviewing officer speak with the applicant prior to issuing a negative opinion. Often, this contact results in a quasi negotiation of the plan details, particularly where, in theory the plan may not pose concerns under the Competition Act, but when put in practice it very well could. Back and forth discussions, supplementary information requests, and new submissions have Bureau officers virtually participating in the development of the proposed plan, rather than simply providing an Opinion. While resources committed to providing Written Opinions continue to be modest, these types of opinion requests can require significantly increased levels of resources. These types of negotiations were never envisioned under the Written Opinion program and were not taken into account when service standards were established.

However, feedback such as "Ability and willingness to address potential issues pro-actively prior to and to avoid issuing a negative opinion is helpful and has several desirable consequences for industry participants and the public"⁹ shows that, in some cases, the Bureau is responding to the needs of the client during these negotiations.

Meeting the Service Standard

Substantial internal discussion with respect to appropriate service standards took place while revising the Fee and Service Standards Policy. The Fair Business Practices Branch is still not certain whether the current service standards are the most appropriate, particularly for those related to MLMs. However, what is more of an issue for reviewing officers is the start time of the service standard itself and the time during the standard when progress is not within the control of the officer (the time during the quasi negotiations mentioned).

The current version of the Fee and Service Standards Handbook¹⁰ (Handbook) defines the start time of the service standard ‘clock' as when a complete request is received. A request is deemed complete when payment is received and the information requirements, as outlined in the Handbook, are fulfilled. The information requirements for most Written Opinion requests outline all of the information a reviewing officer requires to assess, formulate an opinion, and make a recommendation to his/her superiors. However, it may take up to one week for the reviewing officer to read all of the information provided in a request to determine its completeness. The combined delay between receiving the request, discussions/negotiations with the applicant, and starting the service standard clock poses problems for reviewing officers and requesters alike, particularly when there is only a 14 calendar day period to provide the Opinion.

Tables 5 through 12 show the Bureau's record at meeting the service standards set for providing Written Opinions. Although we have seen a marked improvement in meeting service standards between 2002-2003 and 2003-2004, there is still room for improvement and the Bureau is committed to monitoring internal procedures and shortening response times for requests for Written Opinions.

The Fair Business Practices Branch

Table 5: Advisory Opinions provided by the Fair Business Practices Branch

	1998-1999		1999-2000		2000-2001		2001-2002		2002-2003
	Total	Met	Total	Met	Total	Met	Total	Met	Total	Met
Non-complex (8 Days)	35	21 60%	32	21 66%	27	18 67%	15	5 33%	26	9 35%
Complex (30 Days)	8	2 25%	5	2 40%	6	1 17%	4	0 0%	9	4 44%
Total	43	23 53%	37	23 62%	33	19 58%	19	5 26%	35	13 37%

Table 6: Written Opinions provided by the Fair Business Practices Branch

	2003-2004
	Total	Met
Non-complex (2 Weeks)	22	13 59%
Complex (6 Weeks)	1	1 100%
Total	23	14 61%

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The Criminal Matters Branch

Table 7: Advisory Opinions provided by the Criminal Matters Branch

	1998-1999		1999-2000		2000-2001		2001-2002		2002-2003
	Total	Met	Total	Met	Total	Met	Total	Met	Total	Met
Non-complex (4 Weeks)	5	411 80%	5	412 80%	1	0130%	–	– –	2	2 100%
Complex (8 Weeks)	3	3 100%	3	3 100%	1	1 100%	1	014 0%	5	315 60%
Total	8	7 88%	8	7 88%	2	1 50%	1	0 0%	7	5 71%

Table 8: Written Opinions provided by the Criminal Matters Branch

	2003-2004
	Total	Met
Non-complex (6 Weeks)	1	1 100%
Complex (10 Weeks)	1	1 100%
Total	2	2 100%

The Civil Matters Branch

Table 8: Written Opinions provided by the Criminal Matters Branch

	1998-1999		1999-2000		2000-2001		2001-2002		2002-2003
	Total	Met	Total	Met	Total	Met	Total	Met	Total	Met
Non-complex (4 Weeks)	–	– –	–	– –	3	3 100%	4	4 100%	3	0 0%
Complex (8 Weeks)	–	– –	–	– –	–	– –	–	– –	1	0 0%
Total	–	– –	–	– –	3	3 100%	4	4 100%	4	0 0%

During fiscal year 2002-2003, the Civil Matters Branch did not meet the service standards in the four Advisory Opinion requests it received. With respect to the review of the complex Opinion, the applicable 8 week service standard ran to an actual 22 weeks. As the Bureau waited approximately twelve weeks for additional information, the Opinion was provided fourteen weeks late.

All three of the non-complex Opinions were requested in December when there are statutory holidays.

In addition, one non-complex request was related to the complex matter thus requiring the expertise of a very limited number of officers, economist and legal counsel to maintain consistency and to ensure that the cumulative effect of the proposed business plans did not pose an issue under the Competition Act. The Bureau provided the non-complex opinion three weeks late.

One non-complex request required the review of both the Criminal Matters and the Civil Matters Branches. Extra time was required for the coordination and the approval processes in both branches; this Opinion was provided two weeks late. One non-complex matter led to a request for additional information for which the Bureau waited 5 weeks, providing the opinion 5 weeks late.

There were no Written Opinions provided by the Civil Matters Branch during fiscal year 2003-2004.

The Mergers Branch

Table 10: Advisory Opinions provided by the Mergers Branch

	1998-1999		1999-2000		2000-2001		2001-2002		2002-2003
	Total	Met	Total	Met	Total	Met	Total	Met	Total	Met
Non-complex (4 Weeks)	2	2 100%	3	3 100% –	2	2 100%	2	2 100%	–	– –
Complex (8 Weeks)	1	1 100%	1	1 100%	–	– –	–	– –	–	– –
Total	3	3 3 100%	4	4 4 100%	2	2 100%	2	2 100%	–	– –

There were no Written Opinions provided by the Mergers Branch during fiscal year 2003-2004.

The Bureau has significantly revised internal processes for providing Written Opinions. An internal procedure was developed in 2002 and 2003 to ensure that Written Opinions are treated as a priority by all Bureau staff, including when the Department of Justice is consulted. Internal timelines, deadlines and performance standards have been included in the procedure to ensure that all employees involved in providing Written Opinions are aware of their roles and responsibilities.

The Bureau's internal information management system has also been modified to reflect the new fees, service standards, and procedure. Revising this electronic data capturing system ensures that the Bureau is accurate when it reports on fees received and performance against service standards.

Feedback Leaflets

When the Fee and Service Standards Policy was developed in 1997, the Bureau also included feedback mechanisms. Feedback Leaflets are used to ensure that those who seek Bureau services to which a fee applies have timely and systematic opportunities to provide ongoing input about the quality of the service received.

Between 1997 and 2003, generic Feedback Leaflets were used to capture service level feedback on both Advisory Opinions and Merger Review. In January 2004, the Leaflet was revised and two new Feedback Leaflets were developed, one for merger review and one for Written Opinions. Starting in January 2004, every Written Opinion has been accompanied by a blank revised Feedback Leaflet. The Leaflet was revised to capture more detailed information on the quality of service. Table 11 provides an overview of the Feedback Leaflets received during the last five fiscal years.

Table 11: Returned Feedback Leaflets Fiscal Years 1999-2000 to 2003-2004

		Service Rendered within Specified Time		Quality of Service
	Total Leaflets Received	Yes	No	Excellent	Good	Fair	Poor
Advisory and Written Opinions	48	46	2	29	18	1	–
Percentage	100%	96%	4%	60%	38%	2%	–

In response to concerns raised during the Merger Review Benchmarking Study,¹⁶ the Bureau assigned the Compliance and Operations Branch the task of receiving the Feedback Leaflets and compiling the data received. This way, a respondent's anonymity is preserved. Quarterly and year-end reports are prepared by the Compliance and Operations Branch and are provided to the enforcement branches. Bureau managers use this information to target areas for improvement and monitor client expectations.

The Feedback Leaflet return rate during the last two fiscal years has been 16%. Between April 1999 and March 2002, the return rate was 32%. The Bureau is pleased with the feedback received; however it hopes that the return rate will increase with the use of the revised Feedback Leaflets. Positive feedback such as: "This is the best service I have ever received from a government department" and "I wish we could get this type of service from the FTC in the United States. We appreciate your good work." show that clients value the Written Opinion program. Constructive criticism such as: "Advisory Opinion (written) was too generic. Items addressed were not specific & detailed." shows that at least in some cases, from the client's perspective, the Bureau can improve the quality of the opinions it provides.

Government On-Line

Government On-Line ("GOL") is the Government of Canada's multi-year drive to deliver key information, products and services to Canadian citizens and businesses and to non-Canadians, electronically over the Internet. By 2005, Canada's goal is to be known around the world as the government most connected to its citizens, with Canadians able to access all government information and services on-line at the time and place of their choosing. The Competition Bureau is playing a leadership role in GOL, along with Industry Canada, by accelerating our GOL target date by a full two years – from 2005 to 2003. To that end, the Bureau, having consulted with stakeholders, began an on-line initiative which manifests itself today through our web-page and web-based services.

Prior to April 2003, the Bureau's Web site allowed clients to request and pay for Advisory Opinions on-line. Although this service was not used very frequently, the Bureau continued to provide and maintain this service as an alternative to making the request through traditional mail.

In April 2003, when fees for Written Opinions came into force, the Bureau could no longer offer this alternative for all Opinion requests. A maximum of $5,000, applicable taxes included, can be paid to the Federal Government via the Internet. As a result, only the requests related to the Fair Business Practices Branch¹⁷, which are below $5,000, are eligible for on-line payment.

The Bureau decided to remove the option of paying and requesting a Written Opinion on-line for all categories because it felt that allowing some and not others would lead to confusion. Also, in the majority of cases, the Bureau encourages prior discussion of the request with an officer and in many cases, non-electronic documents or items need to be included in the request. The expenditures related to updating the on-line payment system and Web site are not deemed cost beneficial at this time.

To date, the Bureau has not received any complaints and very few comments concerning the removal of this electronic alternative. If clients prefer to apply and pay for Written Opinions on-line and they voice this preference, the Bureau may make a request to the Department of Public Works and Government Services to increase the ceiling for payment on-line.

Conclusion

This report is the first of its kind: a performance report devoted entirely to Written Opinions. In prior years, discussion and resources have, for the most part, been devoted to the fees and service standards related to merger notification.

While the vast majority of Bureau revenue is generated through fees for merger notification, the Written Opinion program is no less important to the clients it serves.

The Bureau's track record at meeting service standards for Written Opinion requests has room for improvement. As mentioned above, there have been significant improvements made to the Written Opinion program and procedures. The Bureau, every year, strives to improve success rates at meeting service standards and providing even more certainty to clients on the timeliness and quality of its responses. Furthermore, in a continuing effort to improve transparency and predictability, the Bureau recognizes the utility of having summaries of past opinions publicly available on its Web site and will endeavour to improve the number and quality of these summaries. Comments will be sought from stakeholders at the consultation forum on November 2, 2004 in Toronto. Comments and suggestions are also welcome via Feedback Leaflets and/or direct telephone calls and/or emails to Rachel Laurin, Service Improvement Officer, Compliance and Operations Branch, Competition Bureau, (819) 994-0390, laurin.rachel@cb-bc.gc.ca

Footnotes

¹Prior to April 1, 2003, written Advisory Opinions provided by the Bureau were not binding on the Commissioner. Section 124.1 of the Competition Act, which came into force on April 1, 2003, makes written advice provided by the Bureau binding on the Commissioner; this binding written advice is called a Written Opinion. Bureau officers however, continue to provide non-binding oral advice.

²Section 124.1 of the Competition Act as enacted by clause 15 of Chapter 16, S.C.2002, states that: (1) Any person may apply to the Commissioner, with supporting information, for an opinion on the applicability of any provision of this Act or the regulations to conduct or a practice that the applicant proposes to engage in, and the Commissioner may provide a written opinion for the applicant's guidance.

(2) If all the material facts have been submitted by or on behalf of an applicant for an opinion and they are accurate, a written opinion provided under this section is binding on the Commissioner. It remains biding for so long as the material facts on which the opinion was based remain substantially unchanged and the conduct or practice is carried out substantially as proposed.

³The current Fee and Service Standards Policy can be found on the Bureau's Web site at www.cb-bc.gc.ca under Business Services, Fees and Service Standards.

⁴A service standard is the maximum time within which the Bureau will endeavour to provide a response.

⁵These sections deal with conspiracy, foreign directives, "bid-rigging", conspiracy relating to professional sport, agreements or arrangements of federal financial institutions, illegal trade practices, definition of "allowance", and abuse of dominant position.

⁶These sections deal with false or misleading representations; deceptive telemarketing; deceptive notice of winning a prize; double ticketing; multi-level marketing and pyramid selling; false or misleading representations; misleading warranties and guarantees; misleading price representations; untrue, misleading or unauthorized use of tests and testimonials; non-availability of advertised specials; sale above advertised price; and promotional contests.

⁷These Opinions can be found on the Bureau's Web site under Compliance and Enforcement.

⁸Treasury Board's External Charging Policy can be found on its Web site at: www.tbs-sct.gc.ca under Policies.

⁹This quote was taken from a Feedback Leaflet that was completed and returned to the Bureau. Refer to page 17 for further information on Feedback Leaflets.

¹⁰The Fee and Service Standards Handbook can be found on the Bureau's Web site under Business Services, Fees and Service Standards.

¹¹The Opinion that did not meet the service standard was provided three days late.

¹²The Opinion that did not meet the service standard was provided four days late.

¹³The Opinion that did not meet the service standard was provided nine days late.

¹⁴The Opinion that did not meet the service standard was provided one week late.

¹⁵One Opinion was provided 5 days late. One Opinion was provided eleven weeks late; during the time that the request was made, there were major changes to the senior management team of the Criminal Matters Branch. The requester was informed and agreed to the delay.

¹⁶The Merger Review Benchmarking Report was published by the Bureau's Compliance and Operations Branch after it conducted a thorough study of the Bureau's merger review process. The report is available on the Bureau's Web site under Merger Info, Publications.

¹⁷With the exception of requests related to paragraph 74.01(1)(b) of the Competition Act.