Remarks by Melanie L. Aitken, Commissioner of Competition
Canadian Bar Association Competition Law Section 2012 Competition Law Spring Forum
Best Practices in a Time of Active Enforcement
May 2, 2012
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Good afternoon and thank you Keith (Reutter) for that kind introduction. It is always a pleasure to have the opportunity to speak to our colleagues at the Bar at the Spring Forum. It is hard for me to believe, but this is my fourth Spring Forum as Commissioner. As always, the Competition Law Section has organized an interesting and relevant agenda.
Three years ago, I stood before you following the passage of the most significant amendments to the Competition Act in 25 years. We were in the midst of cross-Canada consultations, and were, with your input, beginning the process of implementing the amendments.
Now, three years later, it is an opportune time for us to take stock of our experience with the amendments and with most, but certainly not all, of the heavy lifting done with respect to their immediate implementation, to look ahead to future challenges, and indeed opportunities to ensure that Canada's competition regime remains at the forefront of economic and legal thinking.
The amendments have laid a strong foundation for the Bureau to become a more effective enforcement agency. It should come as no surprise that we are welcoming that challenge, and, consistent with the direction given to us by Parliament, focusing on the essence of our mandate — the objective, principled enforcement of the Act. Particularly in a time of constrained spending, enforcement is without doubt the most effective way for us to deliver on our responsibility to ensure that Canadian businesses and consumers prosper in a competitive and innovative marketplace.
In my remarks today, I would like to look back at our enforcement experience with the amendments so far, discuss the priorities we have pursued and are pursuing, and begin to glance ahead to what may be next in Canadian competition law and policy.
An enormous amount of work, both within the Bureau and with contributions from our stakeholders, has gone into the successful implementation of the 2009 amendments. The engagement and thoughtful participation of the Bar, in particular, has supported our work to produce strong meaningful guidance that takes business and global realities into account.
Momentum was created for these changes over many years, and as a result of the work of the Bar, the Industry Committee, the Bureau, the academic community, and the Competition Policy Review Panel, to name just a few, a general consensus evolved, and was embodied in the legislation passed by Parliament in 2009.
The result is an updated Competition Act that facilitates more effective enforcement, aligns us with our international counterparts, and ensures that both businesses and consumers benefit from a competitive marketplace. It is our job to ensure we take that opportunity and make the most of it.
When the amendments were passed, a second phase of work began, where we got down to the business of developing new and revised guidelines, adjusting and articulating our enforcement approach, and changing our internal processes to ensure we effectively delivered on our enhanced mandate.
During this time, the Bar-Bureau relationship has been extremely valuable, as we have discussed, debated, tested, and refined our guidance and our approach. The flurry of activity following the amendments brought us into regular close contact, and our interactions have been on the whole, collegial and productive.
There is always room for further clarity and refinement, and I look forward to continuing to work through outstanding issues, and to tackling the questions that arise as we move forward with your valuable input.
To help us gauge how far we have come, I would now like to delve into some more specifics, and share some of our enforcement experiences to this point with the amended provisions of the Act.
The changes to the merger review regime were clearly some of the most significant changes contained in the amendments. A new two-stage merger review process was introduced, the notification threshold was raised, and the limitation period was shortened from three years to one.
The increased notification threshold and reduced limitation period created new challenges to our ability to serve the public interest. By definition, these changes create a legitimate opportunity for parties to either seek to fly under the radar or defer plans to exercise enhanced market power for merely one year, so as to exhaust the Bureau's ability to potentially challenge. As a direct result of these amendments, we have changed the way we approach non-notifiable transactions. We now actively monitor the market to identify mergers that, while not subject to mandatory notification, may raise competition concerns so that we can take action where necessary within the one-year limitation period.
More immediately affecting your respective practices, consistent with the recommendations of the Competition Policy Review Panel, the amendments instituted a two-stage merger review process. As you've heard me speak on this subject before, suffice it to say I firmly believe that, aligning incentives for merging parties and the Bureau, and also aligning our process with that of our major trading partners, including the U.S., has been a huge step forward to a coherent merger assessment and enforcement regime.
Indeed, in addition to the unqualified "good" that we now actually get information not dependant on the risk tolerance of parties to close without comfort, our ability to meet our service standards has been positively influenced by the move to a two-stage review process, particularly in the case of complex transactions. In the two years pre-amendments, the average review of a complex merger took approximately 50 days, whereas in the two years following the amendments, that has declined to just under 36 days, a marked improvement, freeing up parties to complete or, occasionally adjust, their deal plans more quickly, and the Bureau staff to move on to other reviews expeditiously.
When the amendments were introduced, we certainly heard concern about the frequency with which the Bureau might issue requests for additional documents, in the form of Supplementary Information Requests.
Let me say clearly that I understand these concerns — we recognize that complying with a SIR may be demanding, depending on the circumstances. But it is also worth putting these anxieties into perspective. Since the amendments to the merger review process came into force in March 2009, we have issued SIRs in only 18 cases. To break that number down, over the past three years, on average, we have only issued six SIRs per year, a small fraction (about 3%) of the 200 to 225 transactions that we review annually.
It is also worth noting that the time parties needed to respond to SIRs has been relatively short, and is generally decreasing as we benefit from all sides' increased familiarity with the process. These quick compliance periods are a result of procedures that have been implemented by the Bureau and what we generally see as the practical good sense on the part of parties and their counsel in getting down to business rather than obscuring the legitimate task at hand with legal and other — even less productive — debate. In fact, of the seven SIRs issued in the past year, over half have been responded to in fewer than five weeks.
These numbers clearly demonstrate that not only do we carefully consider whether or not to issue a SIR, we also carefully consider the scope of the SIRs we do issue, to ensure that they are focused. I can assure you that we remain committed to using information requests only in respect of those transactions for which we require additional information to conduct a sufficiently thorough review. We are also committed to engaging in pre-issuance dialogue with the parties to ensure that SIRs surgically target only the information we require.
Even three years into the two-stage merger review process, there are still some practical areas where we would like to see more consistency in counsel's practices related to compliance with SIRs, eg. rolling production, which is of mutual benefit to the parties and the Bureau. Also, we are endeavouring to provide additional clarification regarding our expectations for the certification of responses to SIRs.
However, overall, I am pleased with how the Bar and the Bureau have worked together to navigate the new review process and to develop a "Made in Canada" approach, sensitive to our context. We've come quite a commendable distance since our fist acquaintance with the new process in the Suncor/Petro Canada case in the summer of 2009.
Another benefit of the new review process is that we are now very much on the same page as the U.S. and other international competition agencies, which has facilitated cooperation on multi-jurisdictional reviews.
While not strictly related to the amendments, our court challenge to the CCS/Babkirk merger was consistent with our renewed enforcement mandate, supported by a coherent review framework and my commitment to seek remedies when we are persuaded that a significant lessening or prevention of competition is likely.
While we strive to resolve matters — consent agreements are only meaningful and robust in their terms in a context where all players understand the role the Bureau is committed to play — principled, consistent and unafraid of the consequences of litigation when the tests under the Act are met and Canadians are at risk. Sufficient and comprehensive reviews and robust remedies in those cases requiring them, such as Ticketmaster / Live Nation, IESI-BFC Ltd. (BFI) and Waste Services Inc., and the Teva / ratiopharm merger.
Whatever the outcome of CCS in particular, there will be two important lessons:
- Preparedness to litigate where we believe the public interest requires it. This informs the context within which all other ultimately problematic transactions can be addressed.
- Clarifying the law on prevention, and perhaps on efficiencies claims.
Another significant change brought about by the amendments was the move to a per se illegal standard for hard-core cartels.
In the two years since the new section 45 came into effect, the Bureau has commenced more, but also more focussed, investigations, and has become more efficient at conducting those investigations.
Following the amendments, the Criminal Matters Branch critically assessed its case prioritization and selection process to ensure the efficient use of resources. As a result of the move to a per se standard, and the work that the Branch has done to streamline its operations, section 45 cases are being advanced much more quickly. For example, in a recent section 45 case, the investigation advanced from proffer to the use of formal powers in less than two weeks.
Post-amendments, the average length of a section 45 investigation has declined significantly. In the three years before the new section 45 took effect, the average length of an investigation, from inquiry commencement to closure or referral for prosecution, was 637 days, or nearly 2 years. Post-amendments, the average investigation length has decreased by 71%, to just 184 days, or 6 months.
Supporting this expectation is our overdue insistence that, if parties want to take advantage of our marker and leniency protocols, which we encourage, they must honour their obligations fully, and in a timely way.
Not surprisingly, as time passes, our cases are shifting from conduct that occurred under the old s. 45 to hybrid cases (where the alleged conduct occurred both pre- and post-amendments), and now, to cases that fall exclusively within the new section 45. Over the past year, the Criminal Matters Branch has also discontinued or referred all longstanding legacy cases to the Director of Public Prosecutions for prosecution.
Coincident with a more robust provision, the Branch has made greater use of formal information-gathering powers since the amendments, to more effectively advance investigations. In particular, we are conducting more, although very carefully chosen, searches, and section 11s are being increasingly used to compel the production of documents and to require targets to provide written returns of information, particularly in international cartel investigations where the relevant information is located beyond our borders.
As you know, the amendments also increased the maximum penalties available under the Act's criminal provisions. I have said in the past that we plan to respond to this undeniably harmful conduct with the degree of seriousness that it deserves, including urging the PPSC to seek maximum fines and jail terms where appropriate.
This means in practice an enforcement approach that acknowledges the reduced burden of proof and an insistence upon full, frank and timely dealings by parties with the Bureau. This will not change overnight; but now is the time; the amendments are the opportunity to shift the way the Bureau conducts business to correspond to the strong message from Parliament to enforce the Act, and to the appropriate expectations of Canadians.
Consistent with this perspective, and by way of example, we obtained our first guilty plea under the new section 45 in January, involving a conspiracy in the polyurethane foam industry, resulting in a fine of $12.5 million — our highest fine to date for a domestic cartel.
In addition, if the Bureau obtains evidence that implicates individuals in criminal activity, we will not hesitate to recommend, where appropriate, to the DPP that those individuals be charged.
As most of your know I'm sure, individuals from companies that are second-in or subsequent leniency applicants are not immune from prosecution. In a recent case, the Bureau recommended to the PPSC that individuals be "carved out" from cooperating companies. We will continue this practice, where appropriate.
New remedies and increased penalties for deceptive marketing practices
We have also signalled the importance with which we regard misleading advertising cases, and have sought the new maximum AMP of $10 million under the civil deceptive marketing provisions in three cases — Rogers, Bell and Yellow Page.
In June 2011, the Bureau entered into a consent agreement with Bell Canada, which required Bell to, among other things, pay an AMP of $10 million in relation to misleading representations about the prices offered for its services.
In March, in the Yellow Page case, a business directory scam, the Ontario Superior Court of Justice assessed an AMP of $8 million against the corporations involved. The Court also ordered the respondents to pay full restitution, by way of refunds, to the victims of the scheme. The Yellow Page case was also the first time the Bureau has applied for and successfully obtained an interim property disposition injunction.
Of course, the Rogers case is still before the courts bogged down as it is by constitutional challenges and procedural delays, but whatever the outcome, the decision will provide further legal certainty in this area.
Finally, on a relatively low-profile matter, Nivea, we were able to send a deterrence message in no uncertain terms, that representations made to the Commissioner, and embodied in court orders, will, if flouted, face real consequences. The same can be said with regard to a breach of a Consent Agreement in the mergers context. For the Competition Act to have vigour, commitments made to the Commissioner and the courts must be honoured.
There are still some areas where it is too early to make an assessment of our experience with the amended Act, for example, AMPs for abuse of dominance, the de-criminalized pricing practices provisions, and section 90.1, the civil competitor collaboration provision.
In December 2010, we filed an application with the Competition Tribunal under the de-criminalized price maintenance provisions of the Act, challenging the restrictive rules that Visa and MasterCard impose on merchants who accept their credit cards. The hearing is set to begin next week.
Our first case under s. 90.1, the Air Canada case, is now making its way through the Tribunal, and we look forward to the increased clarity that decision will bring, as we do in the Cards case. The hearing is scheduled to begin in November of this year.
Looking back then, the Bar and the Bureau have collaborated in many ways over the last three years — on guidance materials, the mechanics of our new merger review process, and other issues of concern.
I think we can all appreciate that increased transparency surrounding the Bureau's enforcement approach and processes will help create the certainty that allows counsel to advise their clients accurately and businesses to operate with confidence. Increasing our overall level of transparency and predictability is one of my overarching goals as Commissioner, and the motivation behind such initiatives as the merger register, and the publication of more position statements that describe our analysis of complex merger reviews.
Although we may not agree on everything, I welcome an open dialogue that allows perspectives to be voiced and debated, because this will ensure that we are considering all options, which will ultimately lead to a stronger competition regime.
Now, as the work surrounding the implementation of the amendments winds down, we may want to consider expanding that dialogue by asking ourselves whether it is an appropriate time to begin exploring other areas to ensure that the Canadian competition law regime continues to be one of the strongest and most innovative in the world.
We are very pleased with the amendments, as they represent an important shift toward effective enforcement, and alignment with international best practices. I do not expect, nor would I suggest, any further major legislative changes at this time.
However, it is never too early to start a conversation about "what comes next" for Canadian competition law. Legal and economic thinking are constantly evolving, and it is important that we debate and discuss the issues that are not only important within Canada, but those that are shaping the enforcement of competition law in other jurisdictions.
For instance, as has been discussed many times over the years, Canada remains unique in that we have a provision of the Act that deals separately with efficiencies that may be created by mergers where there are competition concerns, rather than including efficiencies as one of the factors to be considered when assessing whether a merger is likely to result in a substantial lessening or prevention of competition.
We took steps in the recently revised Merger Enforcement Guidelines to clarify that efficiency gains may be relevant to the analysis under section 92 of whether a merger is likely to prevent or lessen competition substantially, albeit in a limited sense. As we move forward, there may be value in exploring further how the Bureau, and the Act, should treat efficiencies in merger reviews and whether the separation is artificial — out of step and possibly harmful to the economy.
Another area where I believe we would all benefit from further discussion is with respect to section 79, the abuse of dominance provision, and whether the courts have interpreted the Act correctly in appearing to require that conduct have an intended negative effect on a competitor in order to be considered under this provision.
As you know, in January 2009, the Bureau released a previous draft of the Abuse of Dominance Guidelines for consultation. In light of revisions made in response to that consultation, and to be faithful to the wording of sections 78 and 79 of the Act, we determined that a further draft and consultation period would be appropriate.
The revised draft Guidelines are intended to provide a concise overview of the Bureau's enforcement approach to the abuse of dominance provisions, and one that declines to prejudge key questions of when the Tribunal could consider itself to have jurisdiction. To do otherwise risks counselling under enforcement in an area of enormous economic significance.
Once the Guidelines are finalized, previous sector-specific guidelines and bulletins on the abuse of dominance subject will be archived, as the approach in any finalized Guidelines would supersede the guidance in these bulletins.
Again, given the scope of the changes, we felt it appropriate to have another period of consultation, which is currently ongoing. I look forward to your comments and submissions as part of that process.
Looking ahead, there are certainly other areas where we can all benefit from further discussion and debate within the competition law community. For instance, the limitation without obvious reason to agreements between competitors in section 90.1, and, as has been discussed in the past, additional guidance on section 76, the price maintenance provision.
At this point, in the absence of decisions made by the courts or Tribunal in some areas, we have only the legislative provisions, without the gloss or clarification that comes through case law. We are seeking a balance between providing as much predictability to our stakeholders as possible, and refraining from trying to anticipate how the courts and the Tribunal will interpret the legislation in the years to come.
In addition to sanctioning anti‑competitive conduct, a consistent and principled approach to enforcement, and a strong enforcement preparedness, pursued by an ever-stronger Bureau in terms of powers and human capital, will have the added value of testing these new provisions, and increasing certainty by developing a body of jurisprudence.
Once again, I hope to continue our strong working relationship with the Bar as we work together to ensure that the Canadian economy benefits from strong competition and innovation. Thank you.
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