Improving the Competition Act and Canadian Competitiveness

November 22, 2005

It is my pleasure to be here this morning to discuss the latest proposed changes to the Competition Act.  As members of the Committee likely are aware, the Canadian Council of Chief Executives has participated in an important way in virtually every stage of reform that this legislation has undergone. 

Mr. Chairman, the pace of change in the marketplace is accelerating. Competition law, along with other economic framework policies, must keep pace if Canada is to continue to be an attractive location for investment and offer a sound foundation from which businesses can compete internationally.  Needless to say, dynamic firms operating from a Canadian base are the best way to ensure jobs and social benefits for Canadians and to provide Canadian consumers with useful and competitively priced products. 

As I stated before this Committee last December, we support two of the specific provisions in Bill C-19.  The repeal of the criminal pricing provisions and replacement with a civil regime is acknowledged by nearly all stakeholders as overdue, while the removal of the airline specific provisions will make clear that the law is one of general application and that all players are to be judged on an equal footing.

In our previous submission, we indicated that we had problems with two other provisions in Bill C-19.  The 1986 amendments to the Act drew a clear distinction between criminal offences of anti-competitive conduct, and the civil reviewable practices.  C-19 would greatly increase the Administrative Monetary Penalties (AMPs), to $10 million for a first offence, for civil cases of deceptive marketing.  As pointed out by Professor Peter Hogg, a noted constitutional scholar, in his brief to this Committee on behalf of the Retail Council of Canada, this raises the penalties to a quasi-criminal level without the protections normally afforded in criminal proceedings, giving rise to serious questions about the protections of the Charter of Rights.

Bill C-19 also would provide authority for the Commissioner of Competition to seek restitution for consumer loss resulting from false or misleading representations.  Restitution is appropriate where the Bureau is proceeding under the criminal track in cases of outright fraud committed on consumers.  However, what may constitute a “misleading” representation is a grey area, and the Bureau has not made a convincing case that there are significant problems in this area requiring much greater powers.  Significantly increasing the size of AMPs, and allowing restitution where no consumer loss has been shown, would in reality be punitive measures that could simply deter the kind of aggressive but fair advertising that is an important part of a competitive consumer marketplace.

The government’s most recent proposals for Bill C-19 would grant the Commissioner the power to launch an inquiry into the state of competition in any industry sector. This idea was extensively discussed during public consultations undertaken by the Competition Bureau in 2003, and the response was generally quite negative.  The reality is that the Bureau already has sufficient power in this area and the government has several other means by which it can assess the state of competition in specific sectors and/or markets. There is considerable concern in the business community that such inquiries could be politically motivated, which frankly has been reinforced by the fact that the government made the announcement to include this new power as part of the package of measures announced on October 6 to deal with higher energy prices.

Equally important, introducing a general power of market investigation in this manner raises concerns of fairness and due process.  As the Competition Bureau itself has noted in its recent paper on “Market Studies”, dated October 6, 2005, it raises important legal questions, including whether such a study could be used as a disguised enforcement inquiry, and whether the power to compel evidence could violate the Charter’s guarantee against self-incrimination.

We also have serious concerns with several of the amendments put forward by the Bloc Québecois, in particular the proposal to remove the word “unduly” from section 45.  Canadian firms of all sizes are increasingly using joint ventures and strategic alliances to undertake pre-competitive research, to develop new products or to secure markets in other countries.  When these arrangements are undertaken among competitors or potential competitors there may be some incidental effect on competition, but in almost all cases this would clearly be outweighed by the overall gains to the Canadian economy.  Getting rid of the test of an “undue” lessening of competition would undoubtedly cast a chill on such alliances, and inhibit the kind of innovative strategies that could actually improve competition in the Canadian marketplace as well as secure a stronger basis for Canadian firms to compete internationally.

As I stated at the outset, our goal should be to ensure that the Competition Act strengthens the Canadian marketplace while also enhancing the ability of firms of all sizes to grow and compete more effectively in the global arena.  Many of the proposals before this Committee fail to meet that test. 

Thank you Mr. Chairman, and I look forward to your questions.