Submission to the Broadcasting and Telecommunications Legislative Review Panel

January 11, 2019

On this page

  1. Executive Summary
  2. Introduction
  3. Balancing Competition and Regulation
  4. Making competition a key objective of telecommunications regulation
  5. Promoting competition by enabling access to bottleneck facilities
  6. Ensuring a level playing field between competitors
  7. Providing consumers with clear information
  8. Conclusion
  9. Annex A – Bureau Enforcement Activities in the Communications Sector
  10. Annex B – The Competition Act and its application to Canada's communications sector

1. Executive Summary

  1. Pursuant to section 125 of the Competition Act,Footnote 1 the Interim Commissioner of Competition ("Commissioner") is pleased to offer the Competition Bureau's (the "Bureau") viewsFootnote 2 in response to the Broadcasting and Telecommunications Legislative Review Panel's (the "Review Panel") Call for Comments of September 24, 2018.
  2. Broadcasting and telecommunications services play an essential role both in Canadians' social and cultural lives, as well as in their ability to participate in the digital economy domestically and abroad. The Bureau applauds the Review Panel's work to review the sector's legislation to ensure it can support rather than impede the changes in the technology and business models that are fueling Canada's economy.
  3. Applying a competition lens, reliance on market forces and competition should be preferred whenever feasible. Where market forces alone are insufficient to achieve certain policy objectives, regulation may be appropriate. Regulation may also be appropriate to address market failures, such as information asymmetries.
  4. The Bureau's specific recommendations are that the Review Panel:
    1. consider the four principles set out in the Bureau's framework for balancing competition and regulation in examining possible changes to Canada's communications regulations. These principles are:
      1. regulation should only address legitimate policy objectives;
      2. regulation should be based on the best available evidence;
      3. regulation should be proportionate to associated harm; and
      4. regulation should be regularly reviewed to reflect market conditions.
    2.  ensure that:
      1. each layer in communications networks benefits from tailored regulation that fits the issues and challenges associated with that layer, including appropriate objectives and regulatory tools; and
      2. reliance on market forces is maintained as one of the key objectives of telecommunications regulation.
    3. consider regulatory measures to ensure that telecommunications carriers can obtain access to bottleneck facilities owned by third parties as a means of promoting access and competition in telecommunications markets.
    4. adapt broadcasting regulations to level the playing field between all market participants in a way that is neutral to the technologies and business models used.
    5. take measures to ensure that Canadian consumers are provided with accurate and clear information regarding promotional offers and terms of service by communications service providers and/or their representatives, before entering into agreements with service providers, to facilitate informed purchase decisions.

2. Introduction

  1. Most, if not all, Canadians subscribe to one or more communications services, with more than 99% of households subscribing to a landline and/or mobile service and 98% having access to fixed broadband internet access.Footnote 3 These services play a major role in Canadians' everyday lives, from work, to entertainment, to cultural activities. At the same time, the sector is in a constant state of innovation and technological change. From abandoning traditional landline phones in favour of wireless devices,Footnote 4 to "cutting the cord" on traditional television services,Footnote 5 Canadians are responding to changes in the communications sector. The legislative framework needs to adapt to new opportunities and challenges offered by emerging communications paradigms, while remaining flexible to future developments.
  2. The Bureau has a continuing interest in the regulation of the communications sector in Canada, including both the telecommunications industry and the broadcasting industry, due to the central role that these industries play in the day-to-day lives of Canadians. The Bureau has significant enforcement experience in matters relating to both industries, as described in more detail in Annex A. In addition, the Bureau has frequently engaged in advocacy efforts relating to telecommunications and broadcasting, including our ongoing market study on the broadband sector in Canada,Footnote 6 interventions before the Canadian Radio-television and Telecommunications Commission ("CRTC") concerning the regulation of these industries,Footnote 7 and participation in past policy reviews touching on competition issues in telecommunications.Footnote 8 The Review offers the Bureau an opportunity to provide a broader perspective on the importance of competition in Canada's communications sector, and on potential changes to the legislative framework that will promote competition in the sector.
  3. The Bureau advocates that regulation should be used only where market forces will not achieve legitimate policy objectives, and even then, only to the extent necessary to address those objectives. Regulation can impede competition, while reliance on competition can result in lower prices, greater innovation, and improved choice for all Canadians.Footnote 9
  4. The Bureau will focus the majority of its comments on the Review Panel's first theme - reducing barriers to accessing telecommunications networks. As part of this discussion, the submission:
    1. presents a four-layer model of communications services to explain the differing objectives of telecommunications and broadcasting regulation, and the importance of maintaining reliance on market forces as a crucial part of telecommunications regulation; and
    2. proposes measures to facilitate access by carriers to bottleneck facilities and services owned by third parties.
  5. The Review Panel's second theme - supporting the creation, production and discoverability of Canadian content - generally involves social and cultural objectives rather than economic objectives. Having said that, the Bureau notes that measures, such as subsidies and requirements to carry or promote certain content, may distort competitive forces if they apply to certain competitors in the industry and not to others. In the absence of legitimate policy reasons for differential treatment, frameworks should be as neutral as possible as between competitors.
  6. The Bureau will also offer its perspective on the third theme, improving the rights of the digital consumer. Consumers should receive accurate and clear information concerning communications products and services to ensure that they can make informed purchase decisions. Enshrining such principles in legislation would help reduce the occurrence of deceptive marketing practices in this important sector of the Canadian economy.
  7. The fourth and final theme of the Review Panel's Call for Comments concerns a review of the institutional framework for the communications sector, including the allocation of regulatory responsibilities. To facilitate this review, Annex B to this submission provides a brief overview of the Bureau's role and activities in relation to the telecommunications and broadcasting industries.

3. Balancing Competition and Regulation

  1. The telecommunications and broadcasting industries involve policy objectives that may be difficult for regulators to achieve solely through reliance on market forces. The Bureau advocates that where regulation may be necessary to achieve legitimate policy objectives, care should be taken to ensure that such regulation is no broader than necessary to address those objectives. Leaving room for competition to operate in the market can result in lower prices, greater innovation, and improved choice for all Canadians.
  2. Telecommunications regulators have developed regulations aimed at achieving their policy objectives by removing barriers to entry or expansion by potential competitors, including network effectsFootnote 10 and access to passive infrastructure and rights-of-way. In addition, considerable regulation has been put in place concerning the allocation of limited resources in the form of radio spectrum to wireless carriers.Footnote 11
  3. In the case of the broadcasting industry, policy-makers have identified Canadian contentFootnote 12 as beneficial to the Canadian society as a whole by strengthening Canadian identity and civic engagement.Footnote 13 As such, policy-makers may decide that more Canadian content is needed than what the market would produce if left to its own devices. Regulation may thus be necessary to ensure content producers and distributors have appropriate incentives to ensure the creation, production and discoverability of sufficient Canadian content.
  4. To help regulators balance regulations and competition, the Bureau has developed a framework of four principles, based on international best practices.Footnote 14 If the Review Panel determines that new or existing regulatory measures are necessary to achieve the policy objectives set out in its Terms of Reference, the four principles outlined below may assist in building a framework:
    1. Regulation should only address legitimate policy objectives: Regulation that affects the prices, output or quality of products should be limited to circumstances when market forces cannot satisfy policy concerns. Regulation should not be designed to meet other objectives, such as ensuring that industry participants earn a certain level of income, or that consumers can purchase products at fixed prices. Market forces are the best way to determine how products should be provided, and should be deviated from only in exceptional circumstances where there is documented evidence that market based competition would run counter to a regulator's legitimate policy objectives.
    2. Regulation should be based on the best available evidence: While industry experience can be necessary to frame the relevant issues for regulation, empirical evidence can provide an objective measure of what is occurring on a broad scale across various communications services and consumer groups. A key component of the Review should be the collection and preservation of marketplace data in order to ensure that the best possible evidence is available to the Panel to inform its recommendations.
    3. Regulation should be proportionate to harm: Regulation should be cast narrowly to preserve the greatest possible amount of market‑based competition. Regulation that goes too far can have negative and unexpected results on the industry. Minimal regulation allows policy objectives to be fulfilled, and provides maximum scope for beneficial market forces in regulated markets. When deciding whether regulation would be in the public interest, regulators should consider using the "market failure test" proposed by Jeffrey Church and Roger Ware.Footnote 15 In short, the test asks regulators to first identify and attempt to quantify the problems that would occur in the market if the proposed regulation is not enacted, then second to ask whether the proposed regulation will feasibly address these problems in such a way that the benefits of the regulation will outweigh the costs. The test also proposes that the burden of showing that regulation is preferable to leaving things as-is should rest on the proponents of that regulation.
    4. Regulation should be regularly reviewed to reflect market conditions: As the Canadian communications sector continues to innovate and change, its legislative and regulatory frameworks will need to be reviewed and updated to ensure that they remain effective and relevant. The Bureau notes that Canada's communications regulators, such as the CRTC, periodically review their policies and codes of conduct to ensure that they still serve their intended purposes. Certain statutes, such as the Canada Transportation Act, go further by explicitly requiring comprehensive statutory reviews to assess the operation of the legislation as a whole.Footnote 16 As part of ensuring that Canadian telecommunications and broadcasting regulations are subject to periodic review, the Review Panel may also wish to consider the use of "sunset clauses", whereby regulations or decisions would expire on a set date unless further action is taken by policy-makers.

Recommendation A

The Bureau recommends that the Review Panel consider the four principles outlined in the Bureau's framework for balancing competition and regulation when examining possible regulatory changes to Canada's communications regulations. These principles are:

  1. regulation should only address legitimate policy objectives;
  2. regulation should be based on the best available evidence;
  3. regulation should be proportionate to associated harm; and
  4. regulation should be regularly reviewed to reflect market conditions.

4. Making competition a key objective of telecommunications regulation

  1. In its Call for Comments, the Review Panel discusses the need to ensure that all Canadians are able to benefit from innovation and investment in infrastructure that enables access to safe, secure and high-quality telecommunications services at affordable prices. As previously discussed, reliance on competition should be preferred whenever feasible. Competition among suppliers is widely recognized as an important means of bringing innovative products to consumers at low prices.Footnote 17
  2. The importance of competition is reflected in the Canadian Telecommunications Policy found at section 7 of the Telecommunications Act, which counts among its objectives "foster[ing] increased reliance on market forces for the provision of telecommunications services and ensur[ing] that regulation, where required, is efficient and effective."Footnote 18 In addition, CRTC decisions relating to telecommunications regulations often feature a competition dimension, including recent decisions relating to the agency's regulatory framework for wholesale wireless and wholesale wireline access.Footnote 19
  3. In contrast, broadcasting regulationgenerally places less emphasis on fostering competition as a means of achieving its policy objectives. While telecommunications regulation has traditionally focused on economic objectives such as price and efficiency, broadcasting regulation is primarily concerned with ensuring that Canadians can choose from a wide range of programming that reflects Canadian attitudes, opinions, and creativity.Footnote 20 To ensure the provision of such programming, the Broadcasting Act sets out both requirements and incentives to favour the production and delivery of certain content.Footnote 21
  4. While both statutes deal with Canadian communications networks, they concern different aspects of these networks, each with their own objectives and challenges.Footnote 22 To better understand these differences, it may be useful to divide communications networks into four hierarchal layers.Footnote 23 Each layer relies on the services offered by the layer below it.

    Layer # Name Description
    4 Content The information delivered to and from users through applications such as a particular TV show, the text of an email, a blog post.
    3 Application The various programs and functions used by end-users, such as web browsers, video streaming services, voice services, and email clients.
    2 Logical The logical infrastructure that keeps information flowing smoothly within and across networks such as TCP/IP protocols used to interconnect network devices on the Internet.
    1 Physical The physical infrastructure used in the underlying network that makes communication possible such as copper and fibre cables, satellites, etc.
  5. Physical infrastructure (Layer 1) is the underlying networks used to provide both wireline and wireless communications, including both switching and transport. This includes cables, wireless masts and antennae, satellites, radio spectrum, and the passive infrastructure referred to by the Review Panel in its Terms of Reference, comprising of poles, ducts, and rights-of-way.
  6. Logical infrastructure (Layer 2) is comprised of the management and routing functions that keep information flowing smoothly within and across networks. This includes protocols to assign addresses and deliver packets on the network, such as the TCP/IP protocols that enable the Internet. Certain provisions of the Telecommunications ActFootnote 24 and net neutrality rules operate at this layer to prevent carriers from using their infrastructure at Layer 2 to control or influence the applications or content carried using their networks.
  7. Applications (Layer 3) are the various software systems that allow users to perform tasks using the network, such as voice services, web browsers, online games, and email clients. Broadcasting, that is to say the distribution of audio or video information, can be considered a category of the applications accessed by consumers using communications networks.
  8. Content (Layer 4) involves the actual information that is delivered using the applications running over the communications network. Examples of content include particular television shows, the text in an email, or the content of a webpage loaded into a web browser. The Broadcasting Act regulates the content that is transmitted by means of the lower layers (Layers 1-3), and includes provisions aimed at promoting the creation and distribution of Canadian content.
  9. Participants in the communications sector may offer products and services involving one or more of the listed layers. For example, traditional Internet Service Providers ("ISPs") offer telecommunications services such as broadband Internet access to its customers, but do not generally sell applications or programming. Their product and service offerings are centred at Layers 1 and 2. Online video streaming companies offer a variety of programming through their applications, but rely on the networks of ISPs to deliver its services to its consumers. Their product and service offerings involve Layers 3 and 4. Vertically integrated communications firms offer not only video-streaming applications and content, but also the underlying networks needed to deliver them to consumers. Their product and service offerings encompass all four layers.
  10. Telecommunications regulation is generally concerned with the first two layers, that is to say, with the physical and logical infrastructure of communications networks.Footnote 25 The physical networks used to provide communications services can constitute barriers to entry, particularly where they involve high investment costs and bottleneck facilities that carriers must have reasonable access to in order to compete in the market (e.g. poles and ducts, wireless masts, and radio spectrum). As such, telecommunications regulation often centers on facilitating access by competitors to existing facilities and services as a means of promoting entry and expansion by competitors.
  11. Broadcasting regulation, in comparison, is focused on the production and distribution of certain programming, and as such generally concerns the fourth layer.Footnote 26 These policy objectives are based around cultural and social objectives rather than economic objectives.
  12. Regulation should be tailored to each layer of service. Introducing policy objectives and approaches to one layer that are designed for another layer risks diluting their effectiveness and interfering with the efficient regulation of the first layer.

Recommendation B

The Bureau recommends that:

  1. each layer in communications networks has tailored regulation that fits the issues and challenges associated with that layer, including appropriate objectives and regulatory tools; and
  2. reliance on market forces is maintained as one of the key objectives of telecommunications regulation.

5. Promoting competition by enabling access to bottleneck facilities

  1. Competition can be further fostered in the telecommunications sector by enabling access to bottleneck facilities owned by third parties. Examples of such bottleneck facilities include the last-mile portion of wireline networks, placement of equipment on poles or masts in locations where competitors cannot easily build their own structures, and access to the necessary radio spectrum to offer wireless services.Footnote 27
  2. Telecommunications regulators have implemented a number of regulatory measures designed to ensure that telecommunications carriers can obtain reasonable access to bottleneck facilities.Footnote 28 However, carriers may still experience difficulties in obtaining access in situations where bottleneck facilities are not owned by incumbent carriers, but by third parties that do not themselves compete in telecommunications markets, such as municipalities, utility companies or building owners.Footnote 29
  3. Telecommunications carriers make extensive use of poles and ducts to support telecommunications transmission lines for wireline services. Similarly, access to towers, tall buildings, and other support structures is necessary for carriers to deploy the antennae and equipment needed for wireless services. Where third parties choose not to allow carriers access to this infrastructure, or choose to provide access exclusively to certain carriers, this can create a barrier to entry in the region.
  4. The CRTC has the authority under sections 43 and 67 of the Telecommunications Act to grant Canadian carriers access to public rights-of-way in order to construct transmission lines. While the CRTC has jurisdiction to order access where support structures are owned by other telecommunications carriers, Canadian courts have ruled that the regulator lacks such jurisdiction where support structures are owned by third parties that are not themselves telecommunications carriers.Footnote 30 In practice, there may be little to prevent such third parties from slowing or even blocking network deployments by refusing access to their infrastructure, or demanding exorbitant payments for such access.  
  5. With the advent of 5G services and the need to install more equipment in local communities than ever before,Footnote 31 such "hold-up" by third party owners may create a barrier to the development of next generation networks in Canada in a manner contrary to policy-makers' objectives. Similar concerns recently led the United States Federal Communications Commission to issue an order that addresses the policies of certain state and local regulatory authorities, on the basis that local regulations in certain jurisdictions were materially impeding 5G deployment in various ways.Footnote 32
  6. This problem was noted by the Telecommunications Policy Review Panel, which recommended amending certain provisions of the Telecommunications Act to give a central decision maker the authority to resolve such cases.Footnote 33 The Review Panel may wish to consider the introduction of a regulatory mechanism to facilitate access to bottleneck infrastructure on reasonable commercial terms to ensure the deployment of telecommunications networks in line with regulators' legitimate policy objectives.

Recommendation C

The Bureau recommends that the Review Panel consider regulatory measures to ensure that telecommunications carriers can obtain access to bottleneck facilities owned by third parties as a means of promoting competition in telecommunications markets.

6. Ensuring a level playing field between competitors

  1. The production and promotion of Canadian expression and programming is a core objective of the Broadcasting Act, as set out in the Broadcasting Policy for Canada.Footnote 34 Canadian content is advanced through a combination of subsidies,Footnote 35 both from general revenues and through contributions from broadcasters, and by requiring broadcasters to carry a certain amount of Canadian content as part of their offerings. These regulatory measures may be needed because market forces alone are unlikely to produce the amounts of Canadian content that policy-makers determine are socially and culturally optimal.
  2. While traditional broadcasters remain strongly represented in the Canadian market, consumers are increasingly replacing or supplementing their information and entertainment choices with exclusively online content.Footnote 36 Currently, traditional broadcasters are subject to a different regulatory scheme than domestic and foreign over-the-top ("OTT")Footnote 37 service providers, including a requirement to contribute to the funding and delivery of Canadian content.Footnote 38 This has created a challenge for broadcasting policy-makers, who must determine how to adapt their frameworks to ensure that Canadian content continues to be created, produced and discovered in this rapidly changing environment.Footnote 39
  3. Regulations should strive to maintain competitive neutrality between service providers; that is, firms should compete on the merits and should not benefit from undue advantages due to their business model,Footnote 40 ownership, nationality, or other factors not related to performance. Subjecting OTTs to a different set of regulatory requirements than traditional broadcasters may lead to distortions in how these companies compete in the market.
  4. The Bureau recommends that the Review Panel consider updates to the broadcasting framework that would level the playing field between traditional broadcasters and new business models. The Review Panel should also consider whether rules on traditional broadcasters could be updated as a means of allowing competition on a more level playing field.Footnote 41

Recommendation D

The Bureau recommends that the Review Panel adapt broadcasting regulations to level the playing field between all market participants in a way that is neutral to the technologies and business models used.

7. Providing consumers with clear information

  1. Consumers are not always provided with sufficient information, or information that is explained in an adequately clear manner, to make informed purchase decisions about their communications services.Footnote 42 This can make it more difficult and time-consuming for consumers to search for a provider and compare what are often complex service offerings.
  2. The pressure on service providers to offer better prices or innovate is a function of consumer mobility. The number of customers who are willing or able to switch service providers has to be large enough to make a competitive strategy of lowering prices and innovating profitable. Making it harder for consumers to switch providers softens competition by diminishing that pool of contestable customers. This makes it more difficult for consumers to effectively benefit from the rapid emergence of new offerings in the communications sector.
  3. In a recent submission to the CRTC, the Commission for Complaints for Telecom-television Services ("CCTS") noted that the main sales practice-related issue facing customers that have reached out to CCTS appears to be a mismatch between what the customer was expecting when they subscribed to a service, and their subsequent experience with the service.Footnote 43 The CRTC has introduced a number of codes of conduct for communications service providers aimed at, among other objectives, ensuring that Canadians receive sufficient information in plain language to allow them to make informed purchase decisions.Footnote 44
  4. The Bureau's mandate to administer and enforce the provisions of the Competition Act relating to false or misleading representations and deceptive marketing practices has given it considerable expertise in considering the impact of false or misleading representations. In light of the experiences of telecommunications regulators and the Bureau's own enforcement activities and experience in the telecommunications industry over the last few years,Footnote 45 the Bureau submits that the Review Panel should consider how Canada's communications framework could be updated to improve disclosure of information to consumers. In order to reduce switching costs and allow informed purchase decisions, consumers should be provided with accurate and easy to understand information regarding promotional offers and terms of service by communications service providers and/or their representatives. The information should be succinct, in plain language, and presented to consumers both before they enter into service agreements with communications service providers, and on an ongoing basis.
  5. Whether this principle should be enshrined directly in communications legislation, or instead left to the discretion of regulatory agencies through the use of regulations and codes of conduct, is an issue that could be explored further during the course of the Review. However, given the complexity of the terms found in these contracts, including items relating to product offerings, prices, contract duration, and promotional offers, the Bureau proposes that the onus should be on service providers to ensure that consumers understand what services they are purchasing, and under what terms and conditions.

Recommendation E

The Bureau recommends that the Review Panel take measures to ensure that Canadian consumers are provided with accurate and clear information regarding promotional offers and terms of service by communications service providers and/or their representatives, before entering into agreements with service providers, to facilitate informed purchase decisions.

8. Conclusion

  1. The Bureau believes that reliance on market forces and competition should be preferred to achieve regulators' legitimate policy objectives. Where market forces alone are insufficient to achieve certain policy objectives, regulation may be appropriate.  As the digital revolution continues to shape Canada's communications and broadcasting industries, ensuring that the regulatory framework governing communications networks and services promotes competition is of critical importance.
  2. The Bureau presents the recommendations set out in this submission in order to help the Review Panel consider competition as part of its consultation in relation to the established themes of the Review. At the Review Panel's request, the Bureau would also be pleased to provide its perspective on the potential competitive effects of various proposals that the Review Panel may receive in the course of its consultations.

Annex A – Bureau Enforcement Activities in the Communications Sector

This Annex provides a brief overview of recent Bureau enforcement cases relating to the telecommunications and broadcasting industries. It is not an exhaustive list of Bureau activity in the communications sector.

  1. Bell's proposed acquisition of French language specialty channels from Corus Entertainment (2018): The Bureau informed the parties that it would not approve a proposed transaction pursuant to which Corus would sell French language specialty channels Historia and Séries+ to Bell. Bell had previously divested 50% interests in the channels as part of a broader remedy package in a consent agreement between Bell and the Bureau to address the Bureau's competition concerns regarding Bell's acquisition of Astral Media in 2013. The Bureau's review of the proposed transaction determined that the conditions that had led to the divestiture in 2013 had not materially changed to the point that the remedy was no longer necessary.Footnote 46
  2. Bell's acquisition of Manitoba Telecom Services (MTS) (2017): After a nine-month investigation into Bell's acquisition of MTS, the Bureau, Bell, and Xplornet Communications reached a consent agreement that addressed the Bureau's concerns regarding the merger's effect on mobile wireless services in Manitoba. Bell agreed to divest a significant number of subscribers and assets, as well as provide transitional services, to Xplornet Communications. Footnote 47
  3. Settlement with Comwave in relation to level of service and pricing claims (2016): The Bureau reached a settlement with Comwave Networks Inc., through which the company agreed to pay an administrative monetary penalty of $300,000 for making what the Bureau concluded were false or misleading representations regarding charges and level of service for internet and home phone connections. The Bureau found that Comwave's advertisements misrepresented the charges that consumers would pay for services, as the advertised prices were not attainable because of additional non-optional fees. In addition, the Bureau concluded that Comwave misrepresented its internet and home phone services as "unlimited" when in fact, there were monthly caps on usage. While this information was disclosed in fine print disclaimers, and Comwave's staff was instructed to provide some of this information to consumers who phoned the call centre, the Bureau concluded that this was not sufficient to prevent the advertisements from being misleading. Comwave also agreed to establish a compliance program designed to help prevent similar issues in the future.Footnote 48
  4. Settlements with Bell, Rogers and Telus in relation to false or misleading representations in advertisements (2015-2016): The Bureau reached agreements with Bell, Rogers and Telus in relation to these carriers making, or permitting to be made, what the Bureau concluded were false or misleading representations to customers in advertisements for premium text messages appearing in pop-up ads, apps, and social media. The Bureau also determined that wireless customers were charged by third parties on their wireless phone bills for premium text messaging services, such as trivia questions and ringtones, which they did not intend to purchase and for which they had not agreed to pay. The companies involved agreed to issue up to $24 million in rebates to customers and donate approximately $1 million for consumer advocacy and research groups.Footnote 49
  5. Bell and Rogers' acquisition of GLENTEL (2015): The Bureau reached an agreement with the parties to resolve the Bureau's concerns that the acquisition of GLENTEL by Bell, followed by a subsequent sale of 50% of that carrier to Rogers, would result in a substantial lessening of competition in the wireless sector. Further to the agreement, the parties agreed to put administrative firewalls in place to prevent the sharing of competitively sensitive information, including subscriber information, pricing and promotional offers.Footnote 50
  6. Postmedia's acquisition of Sun Media (2015): Following a five-month review of Postmedia's proposed acquisition of Sun Media's English-language assets (including print newspapers and digital properties), the Bureau concluded that the proposed transaction was unlikely to substantially lessen or prevent competition in any relevant antitrust market. This conclusion was due to a combination of factors, such as the lack of close rivalry between their newspapers, existing competition from free local daily newspapers and the increasing competitive pressures from digital alternatives to traditional print newspapers.Footnote 51
  7. Settlement with Bell in relation to false or misleading representations in reviews and ratings (2015): The Bureau reached an agreement with Bell Canada concerning situations in which Bell employees were encouraged to post positive reviews and ratings of certain Bell-owned apps in app stores, without disclosing that they worked for Bell (a practice sometimes referred to as "astroturfing"). While Bell acted quickly to remove these ratings when it became aware of the matter, the Bureau determined that these reviews and ratings nevertheless created the general impression that they were made by independent and impartial consumers, and temporarily affected the overall star rating for the apps. Bell agreed to enhance and maintain its corporate compliance program to address the practice, as well as pay an administrative monetary penalty of $1,250,000.Footnote 52
  8. Eastlink's proposed acquisition of Bruce Telecom (2014): Following an investigation, the Bureau concluded that the proposed acquisition would substantially lessen competition in the sale of wireline broadband internet services and certain service bundles in Port Elgin and Paisley, Ontario. Ultimately, the parties decided not to proceed with the proposed transaction.Footnote 53
  9. TELUS' acquisition of Public Mobile (2013): Following an investigation, the Bureau issued a No Action Letter to the parties indicating that the Bureau did not, at that time, intend to make an application under section 92 of the Competition Act with respect to the proposed transaction. In conducting its investigation, the Bureau reviewed information obtained from TELUS and Public Mobile, including strategic documents, business plans and customer switching data.Footnote 54
  10. Bell's acquisition of Astral Media (2013): Following an extensive review of the proposed acquisition, the Bureau reached an agreement with Bell to address the Bureau's concerns relating to competition in the supply of English and French pay and specialty programming services in Canada. Bell agreed to divest itself of Astral's ownership interest in a number of television programming services and agreed to certain restrictions, including a prohibition on imposing restrictive bundling requirements on any provider seeking to carry The Movie Network or Super Écran.Footnote 55

Annex B – The Competition Act and its application to Canada's communications sector

The Competition Act

  1. The Bureau, as an independent law enforcement agency, ensures that Canadian businesses and consumers prosper in a competitive and innovative marketplace. Headed by the Commissioner, the Bureau is responsible for the administration and enforcement of the Competition Act, the Consumer Packaging and Labelling Act (except as it relates to food), the Textile Labelling Act and the Precious Metals Marking Act.
  2. The Competition Act is a federal law governing most business conduct in Canada. It contains both criminal and civil provisions aimed at preventing anti-competitive practices in the marketplace. Its purpose is to maintain and encourage competition in Canada in order to:
    • promote the efficiency and adaptability of the Canadian economy;
    • expand opportunities for Canadian participation in world markets while at the same time recognizing the role of foreign competition in Canada;
    • ensure that small and medium-sized enterprises have an equitable opportunity to participate in the Canadian economy; and
    • provide consumers with competitive prices and product choices.
  3. As a law enforcement agency, the Bureau investigates alleged contraventions of the Competition Act. When a contravention is found, the Bureau may apply for remedies before the Competition Tribunal or courts (for civil provisions), or refer cases to the Public Prosecution Service of Canada (for criminal provisions).
  4. Key provisions of the Competition Act include:
    • Merger review pursuant to sections 91 and 92 of the Competition Act. Mergers are generally viewed by the Bureau as a positive way to increase competitiveness, allowing Canadians to benefit from lower prices, better product choice and higher quality services. However, the Competition Bureau pays close attention to the small portion of mergers that could substantially prevent or lessen competition in particular antitrust markets. If the Commissioner determines that a merger is likely to substantially prevent or lessen competition, he or she may apply to the Competition Tribunal for an order to prevent, dissolve or alter the merger. Although horizontal mergers (that is to say, mergers between competitors) generally raise the most issues for the Bureau, it may also examine vertical mergers and conglomerate mergers where these are likely to substantially prevent or lessen competition. While both the Bureau and the CRTC are responsible for reviewing mergers in the broadcasting and telecommunications industries, the Bureau uses a competition-focused lens while the CRTC uses its own review criteria.
    • Monopolistic practices, particularly the abuse of dominance provisions in sections 78 and 79 of the Competition Act.Footnote 56 When a dominant company exploits its market power in a way that hurts competition in the marketplace, the Competition Act may be enforced. This includes situations where the dominant firm or firms engage in business practices that are likely to substantially prevent or lessen competition. This particularly includes conduct designed to exclude, predate on, or discipline competitors.
    • Cartels, including conspiracies pursuant to section 45 and bid-rigging pursuant to section 47 of the Competition Act. A cartel is formed when competitors make an agreement, an arrangement or conspire to lessen or prevent competition. The most common forms of cartel conduct include rigging bids, fixing prices, market allocation, and output restriction. Cartels are illegal because they lead to higher prices, decreased product choice and less innovation.
    • Criminal and civil provisions that prohibit false or misleading advertising pursuant to sections 52 and 74.01 of the Competition Act, and related provisions dealing with deceptive marketing practices. Under the criminal provisions, the general provision prohibits all materially false or misleading representations made knowingly or recklessly for the purposes of promoting a product or a business interest. Other provisions specifically prohibit deceptive telemarketing, deceptive notices of winning a prize, double ticketing, and schemes of pyramid selling. The multi-level marketing provisions prohibit certain types of representations relating to compensation. Under the civil provisions, the general provision prohibits all materially false or misleading representations made for the purposes of promoting a product or a business interest. Other provisions specifically prohibit performance representations that are not based on adequate and proper testing, misleading warranties and guarantees, false or misleading ordinary selling price representations, untrue, misleading or unauthorized use of tests and testimonials, bait and switch selling, and the sale of a product above its advertised price. The promotional contest provisions prohibit contests that do not disclose required information.

The Bureau and other communications regulators

  1. The provisions of the Competition Act apply to the conduct of all firms operating in the communications sector.
  2. As the Bureau's authority and mandate in the communications sector overlaps with that of several other organizations, the Bureau has reached agreements with a number of these organizations to establish a framework for interaction and cooperation in enforcement or other matters of mutual interest. These include two agreements in relation to the CRTC, and a memorandum of understanding between the Bureau and the Spectrum and Telecommunications Sector of Innovation Science and Economic Development.
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