Speaking Notes for Sheridan Scott Commissioner of Competition

for

Sheridan Scott
Commissioner of Competition
Competition Bureau

Looking forward: The Bureau Priorities for 2007-2008

CBA/IBA Spring Conference
Toronto, Ontario
May 3-4, 2007

(Check against delivery)

Since we met last year at the CBA's Fall meeting, I have been looking forward to your spring event, not just because I enjoy your company. Although I do. And not just because it marks the end of winter, which it does. But because spring is one of my favourite seasons. Spring is a time of renewal, a time of looking forward. And I know that you have every expectation that I will take the spirit of spring to heart and look forward to the Bureau's activities in the year ahead.

And I certainly will.

But I have now reached a stage in my tenure as Commissioner, where I can look back at my past musings in order to situate where we are going.

So let me take you back two years, a long time by Ottawa standards. In June of 2005, I concluded a speech to an Insight conference in Montreal (" C is for Competition ") with these words:

" And for our economy, impeded competition is not a recipe for a happy ending, but for mediocre performance and stagnation. That is why Canada needs an effective and vigorous competition policy and enforcement in our own markets. It is why we need a continued focus on ways to ensure that government policies contribute to market functioning rather than inhibiting market forces. And it is why, the international efforts of the Competition Bureau, focussed on cooperation, coordination and convergence, will ensure that Canadians and Canadian businesses can and will benefit from competitive markets at home and abroad . "

Over the past two years, I have often spoken about: effective enforcement; the need for a competition friendly economic environment; and our international efforts to accelerate competition globally.

These three themes form the basis, or "tripod" if you prefer, of our efforts to ensure that competition in Canadian markets is strong and efficient. And as you know, it is this competition that drives Canada's global competitiveness and prosperity.

Today, I am going to reflect a bit on what has taken place in this triad of areas. And in each case, I am going to reflect on our priorities for the future, which you can also, by the way, find posted on our web site.

And I will be ever mindful of Robin William's words that: "Spring is nature's way of saying, 'Let's party!'." I fully intend to be sufficiently brief to let this spring fling continue.

So let's get going. And let's focus first on the part of the tripod that I think interests you most: Enforcement.

While our work as advocates may generate more press, and our efforts on the world stage may seem more glamorous, the bread and butter of the Competition Bureau was, is and shall remain our enforcement efforts.

And while Spring brings renewal once a year, at the Bureau renewal is an ongoing process. We are constantly looking for ways to be more effective, more efficient, and to reduce the burden of compliance and uncertainty for business. As Kevin Lynch, the Clerk of the Privy Council, said in a recent speech: "...renewal is and must be an ongoing process. It's about ensuring (that) the Canadian public service continually strives for excellence, responding to the shifting realities and challenges we face as a national institution, in an ever-changing world."¹

The challenge he outlined for the public service as a whole has been fully embraced within the Bureau.

I cannot begin to enumerate all of the ways we have responded, but some examples should give you a good sense of what we have been up to.

Let me begin with an area where we, like most other major anti-trust agencies, are very focussed: cartels.

Cartels are a plague in any market. They merit, and will receive from us, the most strict attention.

This is not something new. I have persisted in making this point at every occasion. And yet? Well, for reasons unknown, there is a myth about the land that the Bureau is going soft on international cartels, a myth apparently fostered by our decision to dedicate additional targeted resources to fighting domestic cartels.

Let me play the role of myth-buster today. We have no intention of giving up the pursuit of international cartels. How could we? Markets are increasingly global. Canadian consumers and businesses increasingly depend on the products of supply chains that span continents and industries. And cartels in any link in these chains hit us right in our individual pocketbooks and on our collective bottom line.

We are going to go after major international cartels. Plain and simple. And we are going to do so with new approaches to take account of changing realities on the international front.

International cooperation amongst enforcement agencies is now "standard procedure". Our enforcement practices and policies, including in respect of immunity programs, reflect deepened international collaboration and growing convergence in anti-cartel enforcement. Bilaterally, and through the OECD and the International Competition Network, we are tackling enforcement on a multilateral front.

Immunity seeking cartel members often identify Washington as their first port of call. The EC, Canada and other jursidictions are also targeted as the applicant races to secure the immunity deal. We recognise the demands placed on applicants to meet their obligations in each jurisdiction and often collaborate with the applicants and our enforcement partners to dovetail our cooperation demands, for example in scheduling back to back proffers and witness interviews.

And we will be looking for other creative ways to ensure that we can use our full powers to participate in what must be a concerted international effort. In this regard, I will continue to seek ways to explore the notion of comity in dealing with international cartels.

To be sure, we won't be everywhere. There is no shortage of cases, given the steady stream of new immunity applicants. But we are not bounty hunters; we will act only where and when we can make a difference for Canadians.

So when I say that domestic cartels remain one of our priorities for the next year - and they are - don't forget to keep a look over your international shoulder. Our priority areas don't limit our activities; they simply provide a particular focus where we want to be more effective.

And that's precisely what we intend to do with respect to domestic cartels. That's why we are putting our resources closer to the scenes of the crimes, in regional offices across Canada. We are building our investigative skills, establishing strong local contacts and greater awareness . Over the past year alone, our regional offices conducted 50 seminars on how to prevent and detect bid-rigging.

The results are generating not only greater awareness of this serious economic crime but more bid-rigging inquiries and an influx of complaints that are now being directed and handled by our regional enforcement staff. And as we build our presence and enforcement capacity, we are building enforcement links with law enforcement agencies in the regions.

Case in point. As reported in the media over the past year, the Bureau has a number of important domestic conspiracy inquiries underway, including alleged price fixing among gasoline station operators in a number of local markets in Québec and an alleged boycott of Go Travel Direct, an Internet based tour operator. Also over the past year, we obtained prohibition orders to conclude our inquiry of price fixing among autobody shops in Fort McMurray, Alberta as well as the Sothebys auction house case. I should also mention that the Attorney General is appealing the decision not to commit the accused to trial in the St. John's taxi case.

The pendulum does not swing wildly between international and domestic cartel enforcement. So let's put that myth to bed and remember that our approach is one of calibration, of simple adjustment to current circumstances, aimed at making us more effective and efficient enforcers, to the benefit of Canadians.

You know, I enjoyed playing mythbuster so much in terms of cartels, that I am going to do the same for another key area of our work: Mass marketing fraud.

Over the past few years, the Bureau has made concerted efforts to attack fraud in the marketplace, with a special emphasis on mass marketing fraud, which plagues the rapidly expanding mail and electronic marketplaces.

And as our efforts have ramped up, I have been repeatedly asked what the Competition Bureau has to do with fraud: surely that is better left to the police. That is the myth whose busting time has come.

Now I can understand the confusion here - it's true that the police have an important role to play in attacking fraud. But so do we.

Our job is to encourage competition. Our job is to support the proper functioning of the market place. Competition and a properly functioning market place bring benefits to all Canadians. But markets don't function properly when consumers no longer have confidence in them. And that's precisely what fraud undermines.

Were Adam Smith alive today, admittedly as a very, very old man, he might well have put it this way: We cannot, and we must not, allow the invisible hand to be led astray by the criminal actions of fraudsters.

This is not news to many of you. And it is not news to other competition authorities. Tim Muris, when Chairman of the Federal Trade Commission, observed in 2002 that "....fraud is a serious threat to proper functioning of markets around the globe." ²

He went on to say that fraud is the place to start if we want to develop an international law enforcement approach to misleading information in the market place. This is because certain types of seller deceit are bound to attract categorical condemnation by agencies around the world, much the same way as cartels have.

Obviously, we agree. And in partnership with other law enforcement agencies in Canada and internationally, we at the Competition Bureau have made mass marketing fraud a core concern of the Bureau and one where we have had a great deal of success. We were particularly pleased with the Ontario Court of Appeal's decision in the Benlolo case, which underlined the criminal nature of the infractions and made it clear that jail sentences can be appropriate for white collar criminals. Much like the fine paper case last year, the court also stressed the need for fines to be more than a cost of doing business.

In case you have not discovered this feature on our web site, you can track such developments on the law and litigation section.

Clearly, this area will remain another of our priorities for the coming year, with a particular emphasis on scams that exploit Canadians.

We are also continuing our focus on the electronic market place. While central elements of this market place - e-mail and the internet - might be seen simply as vehicles like the mail or telephone for disseminating fraudulent mass marketing messages, we believe it warrants particular attention in light of the growing role e-commerce is playing as an engine for economic growth.

This past year, we vastly improved our ability to detect fraudulent misrepresentations by using specialised intelligent software which scans the internet and helps to determine where the greatest risk to consumers lie. I'm happy to say that current developmental work will further improve the effectiveness of this tool in the coming year.

Let me turn now from cartels and mass marketing fraud to something completely different, but definitely not in the Monty Python sense of that phrase.

Cartels and mass marketing fraud are two of our priorities for one very good reason: there are absolutely no redeeming pro-competitive virtues associated with either of them. That is why we will attack both aggressively with all the weapons at our disposal - from consumer education to criminal prosecution.

The situation is significantly more nuanced with respect to two remaining areas - mergers and abuse of dominance - where we have also identified priority activities for this year.

We recognize that the business activities covered by these provisions can serve to enhance both efficiency and competition, although they can, at times, harm one or both. So our challenge is to ensure that, while we guard against anti-competitive mergers and business dealings, we do not impose undue burdens on the positive transactions.

Our efforts in this regard fall within several general thrusts. First, we are acting to ensure that our work is both transparent and comprehensible to the business community, focussing particularly in those areas where business needs as much certainty as possible to pursue pro-competitive activities. We are publishing backgrounders to our decisions so that our basis for action can be understood. This should assist businesses to anticipate our future actions. And, we are publishing guidelines on the Act , trying to ensure that our interpretation of the Act is clear. Again, this should facilitate business decisions and increase confidence as new practices are considered.

This year alone, we published a technical bulletin on "regulated" conduct, an information bulletin on merger remedies in Canada, a draft information bulletin on the Abuse of Dominance provisions as applied to the Telecommunications Industry as well as a half dozen technical backgrounders. Examples of planned bulletins include the draft revised Predatory Pricing Enforcement Guidelines , a draft Corporate Compliance Bulletin and the Confidentiality Bulletin.

This is all part of our priority work this year on clarifying fundamental merger and civil enforcement principles. The end result should be lower business uncertainty and more competitive markets. And we hope it will also result in fewer cases where we have to take enforcement action. This is consistent with our continuum of efforts to help businesses to conform to the Act without unduly limiting the vital creative forces that thrive in a competitive marketplace, and which are essential to Canada's future.

The priority work we have been doing in these areas is also consistent with the Bureau's operating principles of transparency and predictability. And, since I am in the myth busting mood today, I would also venture to observe that we continue to have success with respect to a third operating principle - timeliness.

We know that companies in the global economy are increasingly concerned about time pressures - and so are we. That's why we work relentlessly to complete an investigation as quickly as our duty and responsibilities under the Competition Act permit. And we are proud of our record. Over the last five years we have cleared approximately 90% of our merger filings in less than 10 days and the balance, on average, in less than 8 weeks. That average figure contains a small group - from 1-3% of cases depending on the year - where the investigation is more challenging and time consuming.

Parties of course are free to close these transactions after the initial statutory waiting period of 42 days. However, this is not a right to close with clearance, and parties to complex or very complex transactions often elect to wait, given the risk they would assume under the Act , should the Bureau feel it was necessary to challenge the merger within the statutory limitation period.

So you can rest assured that we will work diligently, sensitive to the deadlines that may be imposed by the market or a particular business or deal structure. We have always been pleased with the cooperation of merging parties, that facilitates our ability to work quickly, and based on what I have heard from many of you, I anticipate that it will continue.

Let me turn now to the second leg of our tripod, advocacy. Way back in my 2005 speech that I referred to earlier, I quoted Henry David Thoreau who observed that:

"Trade and commerce, if they were not made of India-rubber, would never manage to bounce over the obstacles which legislators are continually putting in their way."

Our job is to help identify those obstacles, and where possible lower or eliminate them.

Now I have spoken at length to this audience about these efforts, so let me quickly run through the priority list which remains essentially unchanged from last year.

Let me begin with one particular sector that deserves special mention today: telecommunications. As you undoubtedly know, the Governor in Council recently issued a variance directive to the CRTC to accelerate market deregulation in the local market. Given the concentrated nature of this market and the expected rapid expansion of coverage required of the Bureau, we sought and were given additional resources to deal with competition complaints that may arise as the industry adopts to the new freedoms. The extent to which we will need them is, of course, unknown and I am hopeful that the industry participants will recognize and respect the boundaries of acceptable practices. If not, we will intervene as necessary. What this means, of course, is that this past advocacy area is moving rapidly to the enforcement side of our mandate, though there are still a number of proceedings in this sector where we intend to intervene before the CRTC.

We are also continuing with our detailed examinations of competition within the regulated professions, including yours. I should point out that a recent OECD report ³ suggested that regulation of professional services in Canada is overly restricted and identified this as one of five policy priorities most likely to boost the growth of GDP per capita in Canada in the future.

The publication of our professions study is due this fall. We will be consulting with each profession we are studying over the next month, in order to have them comment on the accuracy of our summary of the regulations.

We are also continuing our advocacy efforts in the health care sector, looking at an area where Canadian prices seem high by international standards -- generic drugs. We plan to have an initial draft of a study in this area made available for public comment in late spring, and to finalize the report in the fall.

And on a more general note, we are continuing to develop an approach that will enable government departments to assess and reduce the impacts of their legislation on competition in Canadian markets. Indeed, I am pleased to report that Industry Canada is hosting a pilot of the "competition lens" or "competition assessment" project that I have spoken to you about on many occasions.

As I do each time I speak about our advocacy work, I must emphasize that we respect the legitimate social, health, cultural, security and other objectives that governments choose to pursue. But we want to ensure that in the pursuit of these objectives, the costs in terms of reduced competition are recognized and minimized. In other words, we are seeking to keep Thoreau's barriers as low as possible.

And keeping barriers low while maintaining and enhancing global competition is a core objective of our international work, the third leg of our tripod. As businesses are increasingly global, they will increasingly benefit from both the increased adoption of sound competition policies in many countries that are not yet up to speed, and from improved and more cohesive enforcement across the international range of their operations.

Our international work can advance both objectives. It allows us the opportunity to learn and demonstrate best practices in competition law and enforcement. It allows us to seek improved international enforcement in the increasingly global business environment. And it fosters the spread of competition philosophies and laws to emerging economies which can play vital roles in future international growth.

Despite the importance of this work, I will be brief today. In the case of the International Competition Network, the "ICN", our work to date and future plans are easily accessed on the ICN website ( And a recent article I published as Chair of the ICN Steering Group in the Global Competition Review – which I know you all read each evening before retiring for the night – also provides a good review of past accomplishments and future directions. While much could be said about both, I will simply observe, on a going forward basis, that I am very excited about our work on unilateral conduct. I am also pleased about our renewed focus on implementation and on finding new and innovative ways to get our messages out to stakeholders. I believe these activities hold much promise and are certain to keep us busy over the next year.

With respect to the OECD, we are cooperating in a number of committees looking at issues such as restrictions in the legal profession, how to provide more effective guidance to businesses about enforcement standards and single firm cases, dynamic efficiencies in merger analysis and post-merger review.

The Working Party on Enforcement and Cooperation, under Tom Barnett's able leadership, will also hold a roundtable on practices that member agencies and observers find useful in international antitrust enforcement co-operation and co-ordination.

I know that what you have heard today sounds like we have a lot of work underway. We do. And we are accomplishing a great deal in a number of other areas.

Credit for this must go to all of the staff of the Bureau. I am proud of this great team, their professionalism, enthusiasm and dedication make the Bureau a great place to work.

And we are all motivated by the importance of our work. Let me leave you with the comments of Pierre Karl Péladeau to the Canadian Club of Ottawa this April. He sums up the importance of competition as follows:

"The essence of our entrepreneurial culture is competition. We believe it is the best way to innovate, to offer better services to people and to create wealth – wealth for our millions of shareholders, wealth for our tens of thousands of employees, wealth for our society and wealth for our country. " ⁴

I agree.

Now let's see if Robin Williams was right that spring really is nature's way of saying, ‘let's party!'.

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¹ Remarks by the Clerk of the Privy Council and Secretary to Cabinet, Remarks to the Carleton University School of Public Administration , March 9, 2007.

² Timothy J. Muris, Chairman, Federal Trade Commission, The Interface of Competition and Consumer Protection (Fordham, New York City, October 31, 2002) at 23, available at <http://www.ftc.gov/speeches/muris/021031fordham.pdf>

³ OECD, Economic Policy Reforms: Going for Growth 2007 .

⁴ Notes for an address by Pierre Karl Péladeau, President and Chief Executive Officer, Quebecor Inc.: Canadian Club of Canada, April 17, 2007 .