Speaking Notes for Melanie L. Aitken, Interim Commissioner of Competition

The Senate Banking, Trade and Commerce Committee Hearings Regarding Competition Act Amendments

Ottawa, Ontario
May 13, 2009

(Check against delivery)

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Thank you, Mr. Chairman.

It is an honour to be here today to discuss the recent amendments to the Competition Act. My name is Melanie Aitken and, since January, I have had the privilege of serving as Interim Commissioner of Competition. Prior to that I headed the merger review group at the Competition Bureau, and before that I spent many years in private legal practice in Toronto.

I would like to say how pleased we are at the Bureau to have the new tools Colette has just described to carry out our mandate to enforce the Competition Act. We firmly believe the amendments will help us better fulfill our mission, which is to contribute to the prosperity of Canadians by protecting competitive and honest markets where efficiencies and innovation are fostered, and where consumers can make informed choices.

An honest marketplace benefits everyone in the economy — businesses and consumers. It is the goal of the Competition Act, and the role of the Bureau, to ensure those conditions prevail. And yet, as Colette has highlighted, before the amendments, our cornerstone cartel provision was ineffective and badly out of step with that of our major trading partners. This was a particular challenge for us at the Bureau, since combating cartels is our number one priority because of their very harmful effects.

At one and the same time, the provision was too broad and too narrow. It was too narrow, and an outlier around the world, in that, to convict, the prosecution had to prove not just an agreement between competitors to fix prices, but further, in this context of unambiguously harmful conduct, an anti-competitive effect. Needless to say, this consumed enormous resources to try to establish a complex economic effect; very few prosecutions were successful, even when conspirators were caught red-handed.

At the same time, the previous cartel provision captured far too much — every business collaboration in Canada was potentially subject to the threat of criminal prosecution. That included vertical agreements, franchise agreements, and research and development agreements. This broad cartel provision had the potential to discourage firms from entering into beneficial alliances and collaborations.

The Government’s fix, as Colette has explained, has been to narrow the criminal provision, explicitly de-criminalizing all but the most egregious of cartel activities, while allowing for review under a civil track of other forms of agreements between competitors that seriously risk substantially lessening or preventing competition. Even then, the most that could happen is an order to dissolve the agreement. No fines, no risk of criminal exposure.

Our previous merger review regime was out of synch as well. The old provisions did not provide us with the proper tools or sufficient time to review the very small number of transactions each year that have the potential to significantly harm competition in Canada. We are confident that the new provisions, designed with an emphasis on predictability and aligning incentives, will allow the Bureau to collect the information we need to proceed with a responsible review. At the same time, it will give more certainty to business about timing and process and harmonize our process with the U.S., which should help parties navigate the process more efficiently in a global marketplace. This is no small matter, and the reduced time frame for challenging mergers and increased thresholds for notification will give merging parties predictability and lighten the compliance burden, particularly for smaller ventures that can less readily assume the associated costs of a filing. It is in the public interest that the Bureau has the tools to do the best job possible in ensuring mergers won’t result in a substantial lessening of competition, while doing all we can responsibly do to reduce the burden on business.

Significantly, the amendments decriminalized a number of pricing practices reflecting the reality, and international recognition, that creative pricing can be pro-competitive, and that hard and fast rules carrying the risk of criminal investigation can blunt entrepreneurial incentives. Liberating businesses to be innovative in organizing their pricing practices can only be a good thing; if that freedom is abused, the company will still be subject to civil sanctions.

Finally, the amendments enhanced penalties for those who break the law. Pre-amendments, the level of deterrence for certain types of illegal conduct was negligible. For many it was seen as just a licence fee for misleading and cheating honest consumers and businesses. Now, in areas such as false and misleading advertising, which target vulnerable consumers and businesses, not only can the courts and Tribunal administer higher penalties, we will now be able to act on behalf of consumers to seek restitution in many cases — an additional, powerful deterrent and a way for victims to get their money back.

Similarly, the Act did not effectively deter anti-competitive conduct in the area of abuse of dominance, where the Tribunal was generally limited to requiring the offending company to discontinue the activity going forward. In other words, the company got to keep any money it made breaking the law, having excluded healthy competition through anti-competitive conduct that was designed to eliminate competition. What is key is that these amendments introduce material incentives to comply with the law.

There is no doubt in my mind that the changes to the Act, including the ones I have highlighted here, coupled with the strong investigative and analytical teams at the Bureau, will allow us to better enforce the Competition Act on behalf of Canadians.

I would suggest that this is even more important in a recession. Economic crime cuts closer to the bone when times are tough, and, if anything, we believe that the temptation to break the law may increase. Cartels and other anti-competitive conduct are more prevalent in declining industries, while the kind of innovation, productivity growth and cost effectiveness that honest competition can unleash are important drivers of recovery. For that reason, the principled application of sound competition policy is critical in promoting a speedier recovery from the economic downturn.

We are very conscious, however, that our role must be carefully calibrated. We must be measured, and communicate clearly what is onside and what is potentially illegal under the new law. But we must also enforce the law, so that legitimate business alliances, innovation and efficiencies in the economy can all flourish.

Let me be clear: this is not about creating obstacles to legitimate business conduct. We take seriously our duty to make sure those in the marketplace understand this, and that is why we are out in the community conducting consultations and education sessions with national consumer groups, the Bar, and the business communities in Toronto, Montreal and Vancouver.

For example, we worked with the Canadian Chamber of Commerce and the Canadian Council of Chief Executives to put on an education session for their members in Toronto last week. We have met with Catherine Swift and others from the Canadian Federation of Independent Business. We have an event planned with the Retail Council of Canada. In Vancouver and Montreal, we held open events for the local business communities. And more are planned across the country to ensure everyone who cares has an opportunity to present their input, and that we can provide as much explanation and education as possible in return.

The feedback we have received has been very positive. Many participants have described the sessions as valuable and said they walked away feeling they could work well with the new legislation.

But Mr. Chairman, Honourable Senators, we are doing more than just talking. We have a responsibility and a commitment to ensure these amendments are implemented in the most effective and transparent way possible. And so, we have issued draft guidelines outlining our approach to the two major substantive areas of change to the law; namely, our merger review process, and competitor collaborations. These draft guidelines lay out, as clearly as we can, how we intend to proceed in these two areas.

The draft merger review process guidelines explain how we will ensure that any burden on merging parties is reduced to the extent reasonably possible, while still allowing us to do our important work on behalf of Canadians. Our face-to-face consultations wrapped up last week, and the exchange and reception were quite encouraging.

The second draft guidelines, those on competitor collaborations, were made public last Friday, and will likewise be the subject of extensive consultations later this spring. These guidelines discuss in detail our approach to the new legislation and explicitly exclude specific types of agreements from criminal exposure. We provide concrete examples that illustrate the clear limits to what we would investigate under the criminal provision, and describe our approach to all other agreements. We state clearly that we are interested in taking cases only where there is a significant competition issue.

We will listen to the wisdom of our interlocutors in the legal, business and consumer communities, and we will make any necessary changes to our two sets of draft guidelines before issuing them in final form in the coming months.

Mr. Chairman, I have had the great good fortune to be leading this organization when these amendments passed. I have clearly communicated to all our staff that getting the implementation right — making sure the new and improved Competition Act is administered and enforced in the most effective, efficient manner possible — is our number one priority.

As Interim Commissioner, I take my role as a law enforcement officer very seriously, and I will not hesitate to act when we uncover evidence of a breach of the law. Business crime costs everyone in the economy. Honest competitors deserve the full protection of the law.

We are committed to doing our part, responsibly, to ensure legitimate business grows strongly in Canada, and we believe these amendments will help us do so.

And with that, Mr. Chairman, Honourable Senators, Colette and I would welcome your questions.