FAIT Committee Report
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Box 15.2 The conduct typically covered by competition laws and regulations includes:
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The Competition Bureau had the following comments on the general state of competition policy and enforcement in the Americas:
Among the 12 countries in the hemisphere that currently have competition laws, many have only recently developed them. And even among those countries that do have them, there is an imbalance in the level of effective enforcement. ... Technical assistance to countries with no or a relatively underdeveloped policy regime will be an essential ingredient for the conclusion of an FTAA framework on competition. Those providing technical assistance will need to understand the necessity for a gradualist strategy that begins with the development of an intellectual, political, and social consensus about the value of competition policy, and culminates in the adoption of sound competition laws and effective enforcement of those laws. [Patricia Smith, 31:1555]
The Committee, nevertheless, believes that the microeconomies of the CARICOM and Central America are a special case; there are likely to be significant resource constraints in developing and maintaining a national competition law. Indeed, without some resource help to improve the cost-benefit of introducing a formal competition policy framework, these countries might be better off relying on the only costless competition policy regime around, that being a policy of free trade.
I believe that further conceptual analysis needs to be undertaken to explore the workable options for very small economies, such as CARICOM members, where the resource constraints for establishing and operating a domestic competition institution are major considerations. However, where small economies share compatible views and objectives in terms of competition law and policy, the adoption of regional or sub-regional rules - possibly based on the model provisions - and institutions might be feasible for countries with little or no resources to establish their own regimes. Such an approach could provide for a more effective and rational allocation of resources. [Patricia Smith, 31:1600]
The Committee was provided with advice on how competition policy should be addressed multilaterally and in the FTAA.
Conceptually ... we need an agreement on the basis of the TRIPS - using the same concept as the trade-related intellectual property agreement, commonly known as TRIPS. This would mean a trade-related anti-competitive measures agreement, or TRAMS. ... What would a TRAMS agreement contain? In our view, number one, it would contain an obligation to adopt a sound competition law with appropriate scope and independence for investigation and adjudications. Key provisions would be: a provision against cartels and criminal conspiracy; a provision for merger review; a provision for abuse of dominant position; an advocacy role for the competition authority to make sure competition is considered in the various policy fora; a protection of confidential information, because you can't run a competition regime unless you have that; and finally, access to effective deterrents, be they monetary or criminal. There also has to be a commitment to transparency, national treatment, non-discrimination, and procedural fairness. You cannot run a competition system on less. If it doesn't respect national treatment and transparency, the point is lost totally. [Konrad von Finckenstein, 113:1120]
And
[C]ompetition policy and law is a highly complex area, as we all know. It is the Alliance's opinion that the focus should shift away from coming up with and trying to agree on substance of competition rules and remedies and look more toward the development of a clear set of principles and guidelines for the open and fair administration and enforcement of these rules. [Pamela Fehr, 112:925]
The Committee understands that these suggestions do not mean that they favour the harmonization of competition policy across the Americas. At this stage of the game, the Committee agrees that it is not necessary for the Americas to have a single set of competition rules. It would be best to leave such a decision for later, if at all.
The Committee now returns to the issue of the suitability of competition policy, specifically predatory pricing provisions, replacing anti-dumping policy. The Committee received a wide spectrum of views on this specific issue. Favourable comments were of the following sort:
[T]he anti-dumping rules and the competition provisions adopted by national legislative assemblies on unfair pricing practices are all pursuing a common objective, namely, maintaining the conditions for fair competition. This leads us to question the logic and pertinence of pursuing a public policy of maintaining two distinct legal systems, one which applies to foreign producers and which is based on the administration of anti-dumping duties, the other which polices the operators in the domestic market and which is designed to prevent predatory pricing policies. I feel that this dual system is artificial; I find it difficult to explain the logic behind it. Consequently, ... I think that Canada should, on the one hand, make an effort to promote the convergence of the anti-dumping system and, on the other hand, advocate competition rules with respect to unreasonably low pricing practices. [Vilaysoun Loungnarath, 110:1430]
Unfavourable comments were of the following genre:
[D]umping, as one type of unfair trade, is the situation where foreign exporters sell at prices that are lower than at home or are beneath cost, and … thereby hurt Canadian producers. Non-predatory price discrimination by a foreign exporter without market power in the market of import - namely, Canada - cannot be reached by traditional competition law. ... Well, the problem is, competition law traditionally has required that, for price discrimination or predatory pricing to be found and to be prohibited, there be predation. It requires that the person doing it means to hurt the competitor and has to have market power in order to do so, because what he's trying to do is cut prices, drive the competitor out, and then reap the benefits of monopoly pricing afterwards. ... If I were to drop the anti-dumping recourse and adopt the normal rules of price predation in competition law, I would, in effect, have given up my right to counteract dumping. ... [T]he trade-off of anti-dumping for competition law is not indeed a trade-off at all; it's a mere giveaway. [Michael Flavell, 99:925]
The Committee's understanding of the issue is that predatory pricing and anti-dumping were born out of different necessities and intentions. The former provisions were conceived to protect the interests of consumers, with the objective of securing a competitive process for the longer term. The latter provisions, on the other hand, were conceived to protect domestic producers from a specific foreign rival with special circumstances enabling it to discriminate between markets. Often these circumstances are protected domestic markets.
In the case of anti-dumping, the interests of consumers are being subordinated to those of domestic producers. When viewed in this light, the Committee is of the opinion that competition policy and its administrative authority should never be put in the position of subordinating the interests of consumers to those of producers. However, without the permanent disappearance of the ability to discriminate between domestic and foreign markets, there are indeed circumstances in which the interests of domestic producers should prevail over those of consumers; but not in all instances. Provided that proper administrative discretion is exercised in the application of anti-dumping provisions, the Committee concludes that there is no valid reason, or political appetite for that matter, for folding anti-dumping into antitrust. Competition and anti-dumping policies should, for the time being, remain separate.
Another issue of contention would be the relationship between competition policy and dispute settlement. The special trade committees struck to oversee how to fit competition policy into the trade regime have already concluded that the ability of a foreign government to contest the decisions of another country's competition authority would infringe excessively on national sovereignty. Trade and competition policy experts have instead focused their efforts on the adoption of a competition policy review mechanism and a council to oversee a competition authority's enforcement record in terms of its procedural fairness and transparency obligations.
It's a subject for negotiation whether dispute settlement procedures could be used to determine if member countries are respecting their obligations to implement and maintain competition laws pursuant to a competition framework. ... We believe that the effectiveness of an FTAA agreement on competition policy would also be enhanced with the establishment of a competition policy review mechanism, which we've stolen from the WTO trade policy review mechanism. A council would be tasked with the responsibility of preparing a periodic review on the substantive provisions of a country's competition law and the competition agency's enforcement record. Both the competition policy review mechanism and the council would promote transparency and establish a competition authority's track record of procedural fairness, and in our view could be an acceptable alternative to addressing the issue of compliance. [Patricia Smith, 31:1555]
The Committee understands that the proposed FTAA competition policy review mechanism and FTAA Competition Policy Advisory Committee would not be able to review or comment on individual decisions made by a competition authority. They, however, would be able to shed more light on the competition policy and enforcement regime of different countries of the hemisphere and make recommendations for modernizing their practices. Thus, in the absence of recourse to ex post case review, ex ante information will be disseminated as a caveat to would-be foreign traders and investors of the hemisphere. This approach would serve to clarify and provide more predictability on competition matters to foreign traders and investors. A peer review mechanism should also provide for the possibility of influencing reforms of these policies when needed, without encroaching on national sovereignty.
In consideration of all these factors, the Committee, therefore, recommends:
28. That the Government of Canada: (a) encourage the introduction of competition policy and law regimes with strong enforcement provisions of these laws by countries of the Americas that do not presently have them; (b) resist those parties to a Free Trade Area of the Americas agreement who would have anti-dumping provisions merged with predatory pricing provisions of competition policy and law; (c) consider the desirability of a competition policy review process that would, at a minimum, provide routine oversight and report on a member country's competition policy and its competition authority's enforcement record in matters of procedural fairness and transparency; and (d) provide for periodic review to have competition policies broadened and strengthened.
1 The 12 countries with competition laws are Argentina (1919), Brazil (1962), Canada (1889), Colombia (1959), Costa Rica (1994), Chile (1959), Jamaica (1993), Mexico (1934), Panama (1996), Peru (1991), Venezuela (1991) and the United States (1890). The eight countries debating, designing or drafting competition laws are Bolivia, Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras, Nicaragua, and Trinidad and Tobago.