PPF Report on Proposed Amendments to Canada's Competition Act
Public Reaction to White Paper is Mixed
As reported in the July 2003 issue of The Competitor, the Government of Canada released a discussion paper on June 23, 2003 entitled Options for Amending the Competition Act: Fostering a Competitive Marketplace (the White Paper), which proposed significant amendments to Canada's Competition Act (the Act).
The White Paper generated significant public comment and debate, and the Public Policy Forum (PPF), an independent non-profit organization, was mandated by the Government to steer a consultation process, which included written submissions and roundtable discussions.
Based on the results of this consultation process, the PPF has released a report that summarizes public comment on the proposed amendments (click to view). Predictably, given the significance of the proposed amendments, the PPF report reveals a wide divergence of views. Although there is some support for each of the amendments, there is also some scepticism about the need for the proposed reforms, as many intervenors felt that the existing Competition Act is sufficiently effective in deterring anti-competitive behaviour and in encouraging competition. Further study of the specific reforms was also strongly advocated.
Briefly, the proposed amendments included:
- strengthening the civil non-merger provisions of the Competition Act (such as abuse of dominance, tied selling, exclusive dealing, refusal to supply, etc.) through the institution of administrative monetary penalties (fines), private damage claims, and restitution (in cases of misleading representations);
- creation of a per se criminal conspiracy provision (and a companion civil provision for non-criminal agreements between competitors), coupled with an "ancillary and necessary" defense and binding advisory opinions;
- de-criminalizing predatory pricing, price discrimination and promotional allowances; and
- allowing for inquiries into the state of competition in markets in Canada at the request of the Commissioner of Competition ("market references").
A brief overview of public comment on each category of proposed reform:
Strengthening the Civil Provisions
Widely divergent views were presented vis-à-vis the merits of providing additional penalties for the civil non-merger provisions. According to the PPF, while small and medium-sized business representatives and consumer groups generally supported the measures, a majority of respondents felt that the proposed reforms are unnecessary and that they could have a "chilling effect" on pro-competitive behaviour.
Reforming the Criminal Conspiracy Provision
The PPF reports significant concern in respect of the proposal to create a dual-track approach to agreements among competitors (i.e., a per se criminal offence to address "hard-core" cartel behaviour, and a civil provision for other agreements among competitors that may substantially lessen competition). Supporters of the reform cited the need to modernize the conspiracy provision, albeit in a cautious and careful manner. The majority of intervenors, however, were concerned that it would be very difficult to craft a provision that clearly distinguishes hard-core cartel conduct from potentially pro-competitive or competitively benign arrangements. There was also concern that the proposed pre-clearance process would impose undue costs and delays on business.
Reforming the Pricing Provisions
While there was general support for the proposal to decriminalize the predatory and discriminatory pricing provisions (as well as the related promotional allowances provision), the PPF reports that there were diverse and often diverging reasons for this support. A large majority of commentators agreed that the current provisions can discourage pro-competitive interactions, but debated the merits of addressing these practices under the umbrella of sections 78 and 79 (abuse of dominance). It should be noted, perhaps, that if strengthened in the manner proposed by the Government, dealing with pricing issues under abuse of dominance might result in broader rather than narrower enforcement than is currently the case.
Market References
On the basis that the Government should be better informed about the operation of certain industries and markets generally, there was some support for the proposal that the Commissioner of Competition be granted the power to ask (with the approval of the Minister of Industry) an independent body such as the Canadian International Trade Tribunal (CITT) to initiate inquiries into the state of competition and the functioning of markets in any sector of the Canadian economy. However, both supporters and opponents of this proposal questioned whether the CITT was the appropriate body to conduct such inquiries, and expressed apprehension that these market references could encourage politically or strategically motivated decision-making. The potential high cost for businesses and industry participants of conducting such references was also of concern. Finally, opponents questioned the necessity for this new power, maintaining that the Commissioner currently has all the tools necessary to investigate issues regarding anti-competitive conduct in an industry, and that the Government of Canada and Parliamentary Committees already have the authority to initiate and undertake similar investigations into the state of competition in a number of sectors.
With a federal election imminent and a new Commissioner of Competition, the Competition Bureau's omnibus amendments agenda has been on hold for several months. The new Commissioner appears to be taking a fresh look at the proposed amendments in light of the PPF report. In that regard, the Commissioner invited a very select group of stakeholders to Ottawa on April 27, 2004 to discuss "technical" aspects of the proposed new remedies for the non-merger civil provisions, as well as de-criminalization of the pricing provisions. Criminal conspiracy reform was not on the agenda.
This article can be found in the following Stikeman Elliott publications:
