Remarks by Lisa Campbell, Senior Deputy Commissioner, Mergers Branch, Competition Bureau
International Antitrust Forum
Fifth Annual Chicago Forum on International Antitrust Issues, June 12-13, 2014
June 12, 2014
(Check against delivery)
Good afternoon and thank you for inviting me to join you to discuss recent developments in antitrust enforcement in Canada and Mexico.
At the Competition Bureau, we’re focussed on greater openness and transparency. Practically speaking, this means increased dialogue with parties under investigation and more transparency in the work we do, while preserving our discretion and other enforcement interests. It means more competition advocacy, and more developed, diversified and coordinated relationships with our partners and stakeholders.
As part of communicating this new vision, we recently released our 2014-2015 Annual Plan, entitled "Promoting Compliance for the Benefit of Canadian Consumers". This forward-looking plan sets out four priorities, which we will pursue over the coming year as we continue our efforts to ensure Canadians benefit from a competitive and innovative marketplace:
- apply effective and integrated enforcement and administration of the Competition Act, labelling statutes and new anti-spam legislation;
- increase competition promotion efforts to advance a culture of compliance and competition advocacy;
- align with and deliver on Government of Canada priorities; and
- increase organizational synergies through our people, planning and systems.
Promoting compliance with the Competition Act and other legislation within our mandate is a continuing priority for the Competition Bureau. Going forward, we will work with our partners and utilize the full range of tools available to us to ensure maximum compliance with this legislation for the benefit of Canadians. Shared compliance comes from the recognition that we all — the Bureau, the business community and the legal community — have a role to play in promoting compliance.
As part of our compliance promotion efforts, we have published a number of easy to understand pamphlets; launched our first annual anti-cartel day to increase awareness among businesses about how to avoid engaging in cartel activity, such as price-fixing and bid-rigging; and produced an innovative video on corporate compliance. I encourage you to have a look at these materials, which are available on our website. We are also in the process of developing a three-year strategic plan, which we hope to have ready for consultation later this year.
We have been active in antitrust enforcement and I’ll focus on four areas: cartel enforcement, merger review, abuse of dominance, and agreements between competitors.
On this page
The Competition Act includes three key areas of cartel enforcement. First, section 45, the conspiracy provision, makes it a criminal offence for two or more competitors or potential competitors to conspire, agree or arrange to fix prices, allocate customers or markets, or restrict output of a product. The maximum penalties for this offence are a fine of $25 million, jail for up to 14 years, or both.
Second, section 46, the foreign directives provision, makes it a criminal offence for a company carrying on business in Canada to implement any foreign directive intended to give effect to a conspiracy entered into outside of Canada that would contravene section 45 if it had been entered into in Canada. Penalties include a fine in the discretion of the court. This provision allows us to target international cartel activity affecting Canada where the conspirators are not located or incorporated in our country.
Third, section 47, the bid-rigging provision, makes it a criminal offence for two or more bidders, in response to a call or request for bids or tenders, to agree on bids submitted, to agree that one party will refrain from bidding, or to agree that one party will withdraw a submitted bid, in each case without informing the person calling for the bids of this agreement. Penalties for bid-rigging include a fine in the discretion of the court, jail for up to fourteen years, or both.
In recognition of the fact that some desirable business transactions require explicit restraints to make them as efficient as possible, the Act includes an “ancillary restraints defence” so that strategic alliances, joint ventures or other types of legitimate collaborations between competitors are not treated as criminal offences. We can still challenge such agreements civilly if there are substantial anti‑competitive concerns.
The past year has been impressive for the Bureau in terms of cartel enforcement. Since April 2013, our cartel investigations resulted in fines totalling over $56 million CAD and we’ve pursued several significant policy developments.
Last summer, a Canadian retail gasoline operator was convicted by the Quebec Superior Court of conspiring to fix gasoline prices in two local markets in Quebec based on the criminal conduct of its managing director, who also pleaded guilty to the same offence. The decision is the first contested application of provisions in the Canadian Criminal Code, enacted almost a decade ago, defining the criminal liability of corporations and other organizations for conduct engaged in by their employees and others.
In 2013, following an investigation by the Competition Bureau, a Japanese supplier of motor vehicle components was fined $30 million by the Ontario Superior Court of Justice for its participation in a bid-rigging conspiracy. This fine is the largest ever ordered by a court in Canada for a bid-rigging offence.
The evidence showed that Yazaki Corporation secretly conspired with other Japanese motor vehicle components manufacturers to submit bids or tenders in response to requests for quotations to supply Honda and Toyota with motor vehicle components. In addition to the size of the penalty, which sends a strong message that cartelists will be penalized for defrauding Canadians, the case is important because of the international collaboration that occurred. We worked with our counterparts in a number of other jurisdictions, including the United States, Japan, the European Union and Australia.
The Competition Bureau’s Immunity and Leniency programs apply equally to domestic and international conspiracies and have proven to be our most valuable tools for detecting and prosecuting cartel activity under the Act. Under the Immunity Program, the first party to disclose to the Bureau an offence not yet detected or to provide evidence leading to a referral of evidence to the Public Prosecution Service of Canada may receive immunity from the PPSC, provided that it fully cooperates with the Bureau’s investigation and any ensuing prosecutions. Subsequent cooperating parties may receive lenient treatment under the Bureau's Leniency Program.
We’ve updated the frequently asked questions on our Immunity and Leniency Programs. The updated FAQs address additional topics, such as how the Bureau treats immunity and leniency markers in the context of investigations that it does not intend to pursue, and expand on and clarifying existing topics, such as the proffer (statement provided by the immunity or leniency applicant) process, indirect sales, and how the Bureau determines the recommended fine.
We’ve also taken steps to increase the detection of cartel activity outside of the Immunity and Leniency Programs. For example, last year we launched our Criminal Cartel Whistleblowing Initiative. This initiative is a way for members of the public to provide information to the Bureau regarding possible violations of the criminal cartel provisions of the Act. Anyone who has reasonable grounds to believe that a person has committed, or intends to commit, a criminal offence under the Act, may notify the Bureau of the particulars of the matter and may request that his or her identity be kept confidential. The Bureau will keep confidential the identity of a person who has made such disclosure and to whom an assurance of confidentiality has been provided. The Bureau will also ensure that any information provided by a whistleblower that is communicated to other law enforcement agencies does not reveal the identity of the whistleblower.
The Mergers Branch has been extremely busy of late. We set a record in May for the numbers of pre-merger notification filings received by the Mergers Branch. We’re continuing to streamline and reduce review time for non-complex transactions, so that we can focus efforts on more complex cases.
A merger case currently before the Supreme Court of Canada started several years ago, when the Competition Bureau filed an application with the Competition Tribunal to challenge CCS Corporation's (now Tervita Corporation) acquisition of Complete Environmental Inc. and its proposed Babkirk hazardous waste landfill site. The $6 million acquisition had closed that year and both the assets and revenues of the target were well below the pre-merger notification thresholds in the Competition Act. In Canada, however, the Commissioner has jurisdiction to challenge even non-notifiable transactions within one year of closing. Our application alleged that the transaction would lead to a substantial prevention of competition in the market for the disposal of solid hazardous waste within northeastern British Columbia.
In 2012, the Tribunal ruled in our favour, ordering divestiture and finding that the acquisition had likely substantially prevented competition in the market for the supply of landfill services for solid hazardous oil and gas waste within northeastern British Columbia. The corporation’s appeal was rejected by the Federal Court of Appeal with costs, and its appeal to the Supreme Court of Canada was heard this March. We look forward to the outcome of the case, which marks the Bureau's first court challenge to a merger since 2005, and sets an important precedent for future prevention of competition cases. The Bureau is committed to enforcing the merger provisions of the Competition Act in respect of mergers of all sizes, not only those that surpass the pre-merger notification thresholds.
As part of the Bureau’s overall international engagement strategy, the Mergers Branch has continued to enhance our cooperative relationship with our international counterparts, with whom the majority of our case cooperation occurs. This winter, our Commissioner met with Chairwoman Edith Ramirez of the U.S. Federal Trade Commission, Assistant Attorney General Bill Baer of the U.S. Department of Justice Antitrust Division and President Alejandra Palacios Prieto of the Mexican Federal Economic Competition Commission in a productive discussion on cross-border collaboration in competition law enforcement. The meeting built upon joint work undertaken by the four agencies over a number of years, and allowed the heads of the agencies to exchange information and discuss enforcement priorities, policy issues and recent developments in each jurisdiction. We’ll be continuing to work and support our Mexican colleagues as they implement their new legislation.
At the end of March, in collaboration with the U.S. agencies we issued best practices on cooperation in cross-border merger investigations. Building on many years of collaboration in reviewing mergers that affect both Canada and the United States, these practices reflect the recognition that both the reviewing agencies and the merging parties benefit from efficient processes and consistent outcomes in cross-border merger reviews. It outlines current day-to-day cooperation practices relating to inter-agency communication, the coordination of review timetables, the collection and evaluation of evidence, as well as the consideration and implementation of remedies.
Abuse of dominance
As you are all well aware, the size of a business, even one that dominates a particular market, is not in an of itself, a cause for concern. Businesses may need to become large to achieve lower production costs or to compete against foreign and domestic competitors. However, when a dominant company exploits its market power in a way that hurts competition in the marketplace the Competition Act may come into play.
The abuse of dominant position sections of the Competition Act may apply when all of the following criteria are met:
- the dominant firm or firms have market power — that is the ability to set prices above competitive levels;
- the dominant firm or firms engage in anti‑competitive acts — business practices that are intended to reduce competition; and
- the anti‑competitive acts have substantially lessened competition, or are likely to do so.
In a case in which we’re alleging that the Toronto Real Estate Board ought to make it easier for Web-based real estate services to compete, the Federal Court of Appeal ruled recently in favour of the Competition Bureau, allowing an appeal of an earlier decision that went in TREB’s favour, and sending the dispute back to the Competition Tribunal to hear the merits of the case.
Agreements between competitors
Section 90.1 of the Competition Act relates to agreements between competitors. In February, we reached an agreement with four major ebook publishers that is expected to lower the price of ebooks in Canada. Following an 18-month investigation into the ebook industry in Canada, the Bureau signed a consent agreement with Hachette Book Group, HarperCollins, Macmillan and Simon & Schuster. Canadian consumers will benefit from the agreement registered with the Competition Tribunal, in that the Bureau expects that competition among retailers will increase, resulting in lower prices for ebooks. The four publishers have agreed to remove or amend clauses in their distribution agreements with individual ebook retailers that the Bureau believes have the effect of restricting retail price competition, which will allow retailers to offer discounts on ebooks. The Bureau alleges that the publishers engaged in conduct that resulted in reduced competition for ebooks in Canada, contrary to the civil competitor collaboration provision in section 90.1 of the Competition Act. Shortly after the consent agreement was filed with the Tribunal, Kobo Inc., the largest ebook retailer in Canada, brought an application seeking to rescind or vary the terms of the agreement on the basis that it includes terms that could not be the subject of an order of the Tribunal and a motion to stay the registration of the agreement pending the determination of its application. The Tribunal granted the requested stay.
We have filed a reference pursuant to subsection 124.2(2) of the Act asking the Tribunal to determine the nature and scope of its jurisdiction under of subsection 106(2) of the Act, and in that relation the meaning of the words "the terms could not be the subject of an order of the Tribunal". The matter continues before the Tribunal.
It’s worth noting that the Competition Tribunal is a specialized Tribunal to deal with civil cases, combining expertise in economics and business with expertise in law. The Tribunal is a strictly adjudicative body that operates independently of any government department. The cases it hears are complex and deal with matters such as mergers, misleading advertising and restrictive trade practices. We’ve recently revived meetings among the Bureau, the Bar and members of the Tribunal to consider and address, among other things, how to fast-track cases before the Tribunal.
The Competition Act provides that in some instances, the Commissioner may apply to the Tribunal, the Federal Court or the superior court of a province for administrative remedies. By way of example, following an international investigation, the Bureau brought a civil case in provincial superior court against five companies and three individuals related to misleading representations. The case moved rapidly to decision at first instance and culminated in the highest administrative monetary penalty following contested litigation, a favourable finding from the Ontario Court of Appeal, and permanent injunctive relief.
For criminal prosecutions, the Bureau’s cases under the cartel and mass-marketing fraud enforcement provisions are prosecuted by the Public Prosecution Service of Canada before provincial courts.
I mentioned at the outset our focus on transparency. As part of our ongoing Action Plan on Transparency, the Competition Bureau is continuing to consult on important issues and provide guidance on investigations and stakeholder communications. We’ve done this through the release of our Information Bulletin on Communication during Inquiries, position statements and other guidance documents. As an example, in the past year we’ve issued 14 position statements, which summarize our findings in merger reviews and provide our stakeholders with valuable guidance on our approach. We will continue to issue position statements in appropriate cases, including where the issues are sufficiently important or complex; clarification of a point of law or policy is needed; the matter in question has generated substantial public interest; or the review involved new analytical tools, findings or outcomes.
Last fall, we held a workshop on antitrust issues in the pharmaceutical sector, which focused on the potential competition law implications of certain strategies and practices employed by pharmaceutical firms that may have the effect of diminishing competition between branded and generic pharmaceuticals. Approximately 100 participants from both Canada and abroad attended the workshop, including representatives from the Bureau, Health Canada, the US Federal Trade Commission, the pharmaceutical sector, the legal community and academia.
In March, we published draft Enforcement Guidelines on Price Maintenance. The guidelines describe the Bureau’s general approach to enforcing section 76 of the Competition Act, with respect to common business practices, such as minimum resale pricing, manufacturer-suggested resale pricing and minimum advertised pricing.
This April, we released a draft update of our Intellectual Property Enforcement Guidelines (IPEGs) for public consultation. The update involves revisions to reflect the amendments to the Competition Act that have occurred since the IPEGs were released in 2000. The update also reflects recent Bureau enforcement experience and supports our Action Plan on Transparency, which aims to promote the development of a more cost-effective, efficient and responsive agency, while providing Canadians with more opportunities to learn about the Bureau’s work. Interested parties were invited to provide their views on the draft updated IPEGs as well as indicate if there are other competition/IP issues that they believe the Bureau should address. The consultation ended on June 2nd and copies of the submissions we received are available on the Bureau’s website.
Working with our international counterparts continues to be a priority for the Competition Bureau. As an example of international cooperation, we recently announced that, following a review by the Bureau and the U.S. DOJ, Louisiana Pacific Corporation (LP) and Ainsworth Lumber Co. Ltd. (Ainsworth) have terminated their previously announced agreement in which LP would acquire Ainsworth. Both parties own oriented strand board (OSB) mills. The Bureau’s review concluded that, had LP’s acquisition of Ainsworth proceeded as proposed, it would have likely resulted in a substantial lessening of competition for the supply of OSB. The U.S. DOJ arrived at a similar conclusion. The parties ultimately decided to abandon the proposed transaction. As the mills that would have been acquired serve purchasers in both Canada and the United States, the Bureau cooperated and worked very closely with the U.S. DOJ throughout its review of the proposed transaction. The Bureau’s long standing relationship with the U.S. DOJ ensured an efficient and coordinated review of this matter, consistent with the agencies’ agreement on Best Practices on Cooperation in Cross-Border Merger Investigations.
We’re also developing relationships with counterparts in other countries, such as China’s State-owned Assets Supervision and Administration Commission, Ministry of Commerce for the People’s Republic of China, State Administration for Industry and Commerce, and the National Development and Reform Commission, in an effort to facilitate future communication and collaboration between the agencies. The goal of these efforts is to support efficient and effective competition enforcement.
Finally, we are delighted to have been named co-chair of the ICN’s Merger Working Group this year for a three-year term. The other co-chairs of this working group are the European Commission and the Competition Commission of India. We are also a member of the OECD Competition Committee Bureau, and our Commissioner has taken on the role of OECD-ICN coordinator.
A year from now, the Bureau will have realigned its operations to become a more streamlined and effective agency. We’re concluding a number of cooperation agreements with domestic and international agencies, which we anticipate will allow us to better leverage our collective resources for maximum impact. The major antitrust developments that we expect to see are increased international collaboration on investigations, enforcement and policy at all levels of our institutions. Finally, in recognition of the rapid evolution of technology in many markets, we intend to focus on the role of innovation in competition. Innovation encompasses more than the introduction of new products or services — it also means more efficient processes for existing products and services, and improvements to existing products or services. Competitive rivalry often drives the pursuit of innovation and, as a result, competition plays a critical role in this regard. Whether it’s through mergers, joint ventures, strategic alliances, contractual arrangements or other business conduct, firm interaction can either promote or suppress innovation in the marketplace. For these reasons, innovation is fundamental to promoting economic growth and international competitiveness.
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