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Effective competition law and policies are key elements assuring the competitiveness and efficiency of the Canadian economy. Competition is a key driver of productivity. The benefits of competition are well known: lower prices and more product choice for consumers, and more efficient, dynamic and innovative firms. Competition promotes quality, efficiency and consistent improvement, and it disciplines firms to the challenges of the marketplace.
The Panel has been asked to ensure that Canadian competition policies are relevant in the context of global commerce and economic activity that extends beyond domestic markets. In light of the Panel's mandate, this review will focus on those aspects of competition policy that affect Canada's global competitiveness as set out in this paper.
Canada is by no means alone in studying and updating its competition laws and institutions.40
International organizations such as the OECD and the International Competition Network have engaged in ongoing efforts to develop recommended practices to improve and harmonize competition law enforcement internationally. Competition law over time has become increasingly focussed on international markets. Several high-profile merger cases, subject to review in more than one jurisdiction, have demonstrated the international nature of global competition and the implications this has for domestic competition regimes.
The OECD released in-depth reviews of Canada's competition law and institutions in 200241 and 2004.42 The 2002 review made a number of recommendations on areas for improvement. Among other things, the 2004 review noted that recommendations in the 2002 review on the continued existence of foreign ownership restrictions and regulations that restrict trade among the provinces were not effectively addressed.
Another OECD study released in August 2007 rated Canada as ninth of 30 OECD countries in terms of its antitrust framework and policies related to regulated industries.43
The Competition Act and the Competition Tribunal Act set out the legal and institutional framework for competition law in Canada. The Commissioner of Competition (the "Commissioner") is responsible for investigating alleged anti-competitive conduct and mergers, as well as misleading advertising and other deceptive marketing practices. The Commissioner also heads the Competition Bureau (the "Bureau"), which carries out investigative and advocacy work.
The Competition Act contains prohibitions under the criminal law for the most damaging types of conduct such as bid rigging and conspiracies to unduly lessen competition. These provisions are subject to criminal penalties. Other provisions are civil or noncriminal as they address commercial activities that are deemed anti-competitive only in limited circumstances. Examples under civil provisions are mergers or abuses of a dominant position that are likely to prevent or lessen competition substantially. There is also an elective two-track civil and criminal system addressing misleading advertising. Remedies in noncriminal matters usually consist of Competition Tribunal orders to prohibit or alter a business practice or a merger transaction.
Canada has a three-part system for the enforcement of the competition law: investigation, prosecution and adjudication.
At the end of an investigation by the Bureau, the Commissioner decides whether to refer the matter to the Competition Tribunal in the case of a noncriminal matter, or to the Attorney General of Canada in the case of a criminal matter. If the evidence is insufficient, the matter is discontinued. Once a criminal matter has been referred to the Attorney General, the Director of Public Prosecutions has the independent discretion to determine whether it is in the public interest to prosecute before the courts.
The Competition Tribunal Act establishes the powers of the Competition Tribunal. The Competition Tribunal is empowered to hold hearings and decide matters under the noncriminal provisions of the Competition Act.
In practice, contested proceedings before the courts and Competition Tribunal are rare. Most cases are resolved on a consensual basis, and there is a wide range of remedies available under the Competition Act depending on the nature and seriousness of the matter. There is also scope for filing lawsuits for the recovery of damages by private parties under the Competition Act involving criminal matters, as well as limited private enforcement before the Competition Tribunal in civil matters.
Although Canada's competition laws date from 1889, the current regime has been in place since 1986, when the Competition Act became law. The Act has been subsequently amended by Parliament in 1992, 1999, 2000 and 2002. In general, these amendments have addressed process issues or emerging issues such as deceptive telemarketing. The legislation continues to be the subject of periodic Parliamentary review and debate within the professional community concerned with such matters. While a full review of all aspects of the legislation is beyond the scope of the Panel's mandate, a few germane topics are discussed below.
Changes to the conspiracy provisions have been vigorously debated over the past decade. Only conspiracies that prevent or lessen competition "unduly" are illegal in Canada. Concerns have been expressed that the current provision fails to adequately deter anti-competitive behaviour such as agreements between competitors to fix prices and allocate markets, customers or output. These concerns also question whether the current provisions might discourage businesses from forming pro-competitive strategic alliances. To date, most of the debate has centred on developing an elective "two-track" system that would define agreements that would be prosecuted criminally, while also reserving a noncriminal approach for strategic alliances and others types of agreements.
Another issue that has been the subject of debate and legislative proposals has been the treatment of efficiencies. The debate centres on balancing the efficiency gains that may be realized by producers against the losses that consumers may experience as a result of an anti-competitive merger. This issue has been fully considered by the Competition Tribunal and the courts only once, in the Superior Propane/ICG Propane merger case from 1998 to 2002. Since 2004, the Competition Bureau has consulted widely on the treatment of efficiencies and has commissioned several independent reports on the issue.44
The granting of formal investigatory powers to the Bureau or another independent government agency to conduct market studies is another subject of debate. Currently, as part of its advocacy function, the Bureau undertakes market research to assess the state of competition in various sectors of the Canadian economy. Proponents of granting formal investigatory power to the Bureau or another government agency argue that such a measure would assist in obtaining complete and accurate information, and thus be more useful in increasing the understanding of how certain markets operate. Such formal market studies are conducted in several other jurisdictions. Opponents argue that the Bureau already has sufficient means to conduct market studies using public information and voluntary requests to obtain information from stakeholders in the marketplace. In addition, opponents have raised concerns that the line between the Bureau's market study and enforcement activities would become blurred.
A final and crucial issue for competition agencies is how to evolve their mandates, activities and operations to reflect a new and changing global commercial environment. World economic activity is increasingly driven by multinational enterprises that pursue opportunities and run their businesses with a global perspective. These firms consider not domestic markets and local competition, but rather competition for global markets that span borders. The challenge for competition authorities in Canada and around the world is to internationalize their policies and approaches sufficiently to adapt to these new realities and continue to deliver on their objectives of ensuring fair and efficient competition for producers and consumers alike.
COMPETITION LAW QUESTIONS