Redesigning competition law enforcement

Canada's competition enforcement system has long been seen by critics as too weak, enabling too much concentration of power among domestic champions in industries like transportation and telecommunications at the expense of smaller players and consumers alike.

That all could change as the federal government promises a revamp of Canada's decades-old competition law following consultations that heard from various intervenors, most notably from the Competition Commissioner himself, Matthew Boswell.

In an extraordinary intervention, Boswell, who heads the law enforcement agency responsible for competition policy, made public in March a brief that included 50 recommendations designed to "help modernize and strengthen" the Competition Act, which he said is seen as "outdated, weak, complex, slow and out of touch."

Boswell is calling for the Competition Bureau to gain increased powers to enforce injunctions to temporarily stop anti-competitive mergers, order market studies, and compel companies to provide more information while allowing private parties easier access to challenge anti-competitive mergers, as is the case in the United States.

Canada has long been seen as a country that doesn't emphasize competition in its economic priorities compared to the U.S., Europe, the U.K. and Australia. Says Boswell: "That's why we see a very concentrated economy and we see multiple oligopolies that control our economy in different sectors."

Any new legislation could mean significant changes in the institutional design of Canada's competition law regime and align Canada more closely to those in other jurisdictions. To discuss these possible changes, the CBA's Competition Law Conference in Toronto on April 27 will take a comparative look at the competition enforcement agencies.

"It's time to look at whether our process is working the way it's intended," said Susan Hutton, a senior partner in the Competition and Foreign Investment Group at Stikeman Elliott in Ottawa, who's moderating the panel. "Institutional design is about who gets to make the decisions, how these decisions are appealed and whether the decision-maker is separate from the investigator and prosecutor."

Canada has a prosecutorial type of system where the Competition Bureau has few powers to take action itself. Instead, the Bureau must go to the Competition Tribunal and make its case, as we saw recently with the Rogers-Shaw telecommunications merger. In that case, the tribunal rejected the Bureau's effort to stop the merger.

Another panelist, Michael Phelan, a retired Federal Court of Canada judge and former member of the Competition Tribunal, believes that the system devised in the 1970s and 1980s has served Canada well but may no longer be fit for purpose.

"When it was established, you had totally regulated industries," Phelan said in an interview. "The world has changed so dramatically and the avenues of distribution have changed as well."

Yet Phelan is reluctant to ditch the prosecutorial approach to competition enforcement, which stands in contrast to the administrative model at the European Commission, which has wide discretion to issue orders on its own.

"The fact that the Bureau loses cases isn't a good reason to rejig the whole system," he told CBA National. He remains favorable to a separation between the administrative body (the Bureau) and the ultimate decision maker, admitting that his view reflects his background as a litigator in private practice.

Yet despite his reticence to give the Bureau too many additional powers, Phelan says some reform is needed. Timeliness is an issue in a fast-changing world, and cases tend to stretch out too long. One possibility would be giving the Tribunal specific deadlines to make decisions.

Phelan, currently senior counsel with Conlin Bedard in Ottawa, also looks favourably on giving private parties the right to sue for relief against anti-competitive actions, as in the U.S.

And though he's not looking for radical change, Phelan thinks it's time for Canadians to shed this idea that the economy needs oligopolies because Canadian companies are too weak and too small to compete in the big world. "It's actually a terrible approach for a country to take," he said.

For his part, Anthony Di Domenico, a partner and co-leader for Competition, Marketing and Foreign Investment at Fasken in Toronto, thinks the competition regime needs some "tweaks," but he opposes any radical change. "I don't think a fundamental redefinition of the role of the Bureau necessarily is required. The Bureau has quite a significant number of tools at its disposal to administer and enforce the act."

In particular, Di Domenico objects to any erosion of the prosecutorial approach to competition law enforcement, which would allow the Bureau to investigate, prosecute and adjudicate some cases. "You can't keep the Bureau as a law enforcement agency and also give it decision-making powers."

And he disagrees with those who contend that the approach of the Competition Act is outdated and no longer suitable for a digital, globalized economy. "I don't think the law is so fundamentally inept that it can't keep up with a service and technology-based economy."

Also joining the panel will be Nicole Kar, an Australian-trained lawyer who is the global head of Antitrust and Foreign Investment at Linklaters in London and Russell Damtoft, associate director of the Office of International Affairs at the Federal Trade Commission in Washington.

As a public servant, Damtoft will speak to how anti-trust regimes work in different jurisdictions. His boss, FTC Chair Lina Khan, has already made it clear where she stands on possible changes to the Canadian system.

In a nine-page letter to the consultation dated March 31, she and Jonathan Kanter, assistant attorney general in the Justice Department's Antitrust Division said their views were not intended to be a recommendation on the most appropriate law for Canada but an effort to give Canada the benefit of their experience. Neither thought much of Canada's use of the efficiencies defence, which prioritizes economic efficiency over the welfare of consumers and other players when allowing mergers to go ahead. "Our experience has been that efficiencies are often claimed but rarely proved," the letter said, noting that these claims are often vague or speculative and that other countries share American skepticism.

The two U.S. officials also implicitly back the Competition Bureau in its quest to gain the authority to conduct market studies and compel the production of information, saying that the se studies "bolster the FTC's enforcement agenda and advocacy efforts."

The letter also notes that there are calls in Canada to end the one-year statute of limitation for challenging mergers outside of the notification regime and reminds readers that there is no similar statute of limitations applicable in the U.S.

Finally, the antitrust officials write: "It is a valuable aspect of the U.S. regime that there is no statute of limitations to block transactions, and that were there one, it would materially impede our ability to stop mergers that ultimately lessened competition."