INDU Committee Meeting

STANDING COMMITTEE ON INDUSTRY

COMITÉ PERMANENT DE L'INDUSTRIE

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, May 2, 2000

• 0905

[English]

The Chair (Ms. Susan Whelan (Essex, Lib.)): I call the meeting to order. Pursuant to the committee's mandate under Standing Order 108(2), a review of the Competition Act, we're very pleased to have with us this morning, from Carleton University, Professor Donald McFetridge from the Faculty of Economics, and from Osler, Hoskin, and Harcourt, Mr. Tim Kennish, a lawyer.

I propose that both provide their opening comments and statements, and then we'll move to questions together. Unless there is a different agreement, I'll begin, in the order as listed, with Professor McFetridge.

Professor Donald McFetridge (Faculty of Economics, Carleton University): Thank you.

I have a brief statement to make and then I would be happy to answer any questions you might want to pose.

I've been working in the field of antitrust economics for almost 30 years. I'm not here representing any particular group—just as an economics professor—and I hope my experience will be of some assistance to you.

I have several general, overriding points I'd like to make. In my opinion, the overriding objective of competition law should be the preservation and enhancement of the vitality of the competitive process. Protecting competition is not the same as protecting individual competitors. In my opinion, competition law should not be used to protect or to give advantage to individual competitors or classes of competitors, nor should competition law be used to pursue other political or social objectives.

Nevertheless, if competition is allowed to flourish, many of the good things commonly sought by governments are likely to follow. These include economic efficiency, growth, and economic opportunity. The historical record on this is hard to dispute.

Competition law alone is not sufficient to ensure the vitality of the competitive process. Competitive markets are open markets. Restrictions on the international and interprovincial flow of goods, services, and investment reduce the vitality of the competitive process. Ownership restrictions and regulatory barriers to entry reduce the vitality of the competitive process.

Occasionally, competition law can offset some of the negative effects of these types of restrictions. More frequently, however, it cannot. Indeed, trying to twist competition law so as to accommodate an anti-competitive regulatory environment is likely to compromise and even corrupt competition law. Bad regulation begets bad competition law.

Competition law can be misused. It can be used as a tool for competitive harassment. It can be used to discourage aggressive price, quality, or service competition, which makes other competitors uncomfortable and which they are all too ready to label as predatory.

It can be used as a bargaining lever in what are essentially contractual disputes. For example, a distributor whose dealership is terminated may claim or threaten to claim that this is a refusal to supply under subsection 61(6) or section 75. It is essential to understand that the grievances of individual market participants matter or should matter only to the extent that they imply a threat to the integrity of the competitive process itself.

Competition issues are generic. The same analytical tools can be applied in all markets. The same analytical issues arise in all markets. In my opinion, it is not necessary to have an industry-specific competition policy. In particular, there is no reason to have a specialized merger law for banks or for insurance companies—or for airlines, for that matter.

• 0910

This brings me to some of the legislation presently before Parliament. I have some brief comments, and I'm sure you'll want to explore some of them later.

I strongly oppose the provisions of Bill C-26 with respect to the amendment of the Competition Act. The protection of competitors rather than competition is likely to lead to higher prices and poorer service. Secondly, I strongly oppose the cease-and-desist provisions of Bill C-472, again on the grounds that they protect competitors rather than competition.

Thirdly, while I am not opposed in general to changing the list of illustrative anti-competitive acts under section 78, I have some difficulties with some of the anti-competitive acts proposed in connection with Bill C-26 and some difficulty with some of the proposals under Bill C-402. As a general matter, it is not clear that a list of illustrative anti-competitive acts is still necessary.

Finally, insofar as the longer-term issues are concerned, I support the decriminalization of section 50 and section 61. I support restricting their application to situations in which competition is likely to be lessened substantially.

Thank you.

The Chair: Thank you very much, Professor McFetridge.

Mr. Kennish, please.

Mr. Tim Kennish (Lawyer, Osler, Hoskin and Harcourt): Madam Chair and other distinguished members of the committee, I appreciate this opportunity to speak to you about some current issues in competition law.

In these opening remarks I plan to discuss a number of specific issues that relate to pending legislation, to which Professor McFetridge has alluded. Also, I will comment on a couple of areas in respect of which no reforms have been proposed.

The first topic, and the one of greatest personal interest to me, is the provision of the proposed legislative package that would restructure the act's principal provision dealing with horizontal agreements between competitors—Bill C-472. What it contemplates is that so-called hard-core criminal offences would be hived off and would continue to receive criminal treatment, but would be judged according to a per se or absolute standard. The balance of the agreements that didn't fall into this category would be judged under a new civil standard, which would examine them according to what is known in the business as the “rule of reason” approach, which assesses the economic consequences of the arrangement, both good and bad, and adjudges whether or not it transgresses the standard.

The judicial history of section 45 has been fraught with difficulty in that the case law has not provided great certainty in terms of people planning activity that may be affected by the possible application of that section. The Supreme Court's decision in 1992 in the leading case, the so-called PANS case—PANS is an acronym for Pharmaceutical Association of Nova Scotia, I think, the defendant in that case—did not materially assist, although it was quite an elegant statement of the law.

The principal difference between the criminal treatment and the civil provision is that the new civil approach would not expose those agreements to the imposition of fines or penalties. Also, there would be the application of the rule of reason, wherein there would be an assessment of pro-competitive benefits, such as efficiency improvements that might come about, which is not possible under the present law.

The so-called hard-core offences are considered to be presumptively unredeeming and not worthy of examination as to whether there are any benefits that flow from them and are simply banned outright. The per se approach on these hard-core offences is thought to have an enforcement simplicity that would enable prosecutions to be more effective in areas that pose the greatest threat to competition.

• 0915

But at the present time—and this is clear from the PANS case—because we do not have a full rule of reason approach in the existing section, which is all criminal, there isn't the possibility that efficiencies or other pro-competitive benefits of an agreement can be taken into account in assessing its legality.

This is significantly different from how mergers are judged. Mergers are assessed on solely a civil basis, again applying a rule of reason approach. Interestingly, mergers are much more effective in eliminating competition between parties to those mergers than are agreements amongst competitors that might just create a strategic alliance or joint venture, in that they are permanent and they tend to eliminate all aspects of competition in the area of the merged business.

In joining forces in business life today, parties have choices in how they want to integrate their businesses or coordinate them, but those choices today are affected by whether or not they will receive merger treatment or will be exposed to the sanctions of the criminal law if that standard is transgressed.

This concern has caused the Department of Justice and the FTC in the United States to publish an antitrust guideline concerning collaborations, with a view to clarifying the application of this area of the law in the U.S. It opens with statements that support the view that collaborations or strategic alliances have the potential to generate efficiencies that benefit consumers, such as lower prices, improved quality, and new products. I will point out that the guidelines were published to reverse the perception that the antitrust laws were set against competitor collaborations and also out of a concern that these negative perceptions might discourage the development of pro-competitive collaborations.

We have this problem in Canada because we have only a criminal provision. The U.S. law already distinguishes between hard-core criminal offences, which are prohibited on a per se basis, and civil treatment of remaining horizontal arrangements. I think our law is having a chilling effect on parties considering entering into these arrangements in that they are concerned they may be stigmatized by transgressing a criminal provision, by being convicted of a criminal offence and exposed to penalty consequences, which can be harsh, and also to civil actions, which can be derived from violations of the criminal law of provisions. These provisions aren't easy to draft and it's a bit of a challenge to try to capture this in language, although it has been done elsewhere. I think this provision represents a significant improvement in the law.

In my second point, I'd like to join my colleague in commenting on the temporary order provision of the same bill, Bill C-472, condemning that proposed power to be given to the commissioner to, in effect, on his own motion, issue an order to require parties to desist from continuing to engage in conduct that he considers may be anti-competitive, in circumstances where the party is considered to be in a dominant position.

The act now contains authority for the Competition Tribunal to issue interim orders. However, the commissioner has to apply to the Competition Tribunal for that order and, except in ex parte cases, which are kind of exceptional and short-term in operation, the party against whom the order is made is notified of the application and is given the opportunity to make representations as to why the order ought not to issue.

The new provisions are different. You don't have to go to the Competition Tribunal for this authority, nor is the party given notice of the fact that the order is going to be made or given the opportunity to make representations about it.

• 0920

The order initially is for up to 20 days, but it can be renewed twice, for periods of 30 days, totalling 80 days. If the respondent or the person against whom the order is made seeks to appeal it, then the order is in effect until the appeal is disposed of, so it has potentially significant longer-running implications. The temporary order is enforceable in the same manner as an order of the Competition Tribunal, which is just to say that failure to comply with it could be punishable by a fine or imprisonment.

I think it's undesirable as a policy matter to have such an unwarranted interference with due process. I think it raises serious issues of natural justice and fairness, but there are also, I think, issues concerning its legality and constitutionality. Even if it's ultimately upheld, I think it is likely to generate challenges before the courts, which could tie up these issues for some time.

I think the key problem here is the one that Chief Justice Brian Dickson, in the leading decision of the Supreme Court of Canada, indicated in Hunter and Southam: that it's inappropriate for a law enforcement official to also be acting in a judicial capacity in regard to the same matter. In other words, you shouldn't be authorizing the issuance of orders in support of your own investigations.

In summary, I think the power contemplated by this provision is unnecessary and overreaching. If a more expeditious procedure to obtain interim orders is what is needed, then I think that's the way to go.

The third point is that in regard to international cooperation and assistance, I support the proposal to authorize the agency to enter into agreements with other antitrust agencies to enlist their assistance and to provide assistance to them in regard to civil matters. This would correspond to an existing authority that is already there in regard to criminal matters.

It's obviously no longer a situation in which businesses operate within a pure domestic environment. The enforcement of law shouldn't stop at the border. You need to give to get. Recently the Supreme Court of Canada, in the Global Securities case, upheld the principle that it is appropriate to reciprocate.

The U.S. and other leading antitrust jurisdictions have similar authorities, but they're qualified by reference to the need to have reciprocal arrangements, and currently Canada, in the civil area, does not.

There is one significant problem that I think needs to be addressed, that is, the adequate protection of confidential information. One of the shortcomings of the Competition Act today is that it doesn't adequately provide protection for confidential information that is provided on a voluntary basis. In prior discussions with the bureau concerning arrangements that would involve the exchange of information with other agencies, the need for that protection has been raised.

The new bill contemplates that any agreement entered into with another jurisdiction would have provisions respecting confidentiality of information sent by Canada to foreign states, but it doesn't stipulate what those provisions are to be. People are concerned that the information might be provided to a foreign state, and they are concerned that it might then be further disclosed to a private plaintiff for purposes of litigation—which might support enforcement activities in the other country.

Access to the tribunal: it's an important topic and I could speak at length about it, but I just would say that after extensive debate I've come to the view that what is now proposed, with the various protections and safeguards built into the proposed legislation, is largely unobjectionable.

• 0925

The bar and other groups have in the past weighed in with concerns about the possibility of abuse in strategic behaviour being engaged in by competing parties accessing these rights, but with the Competition Tribunal as a gatekeeper from whom leave is to be obtained, that is addressed in part. Also, the Competition Tribunal can award costs against parties that are unsuccessful in proceedings. Again, that will further discourage frivolous behaviour. The orders that can be obtained in these private actions will not include the grant of monetary compensation awards but largely only prohibitory remedies, and there will not be access for the purposes of challenging mergers, which is one of the civil jurisdictions.

All of those things make it a positive addition to the law, but the fact that private actions can be brought is not a single panacea. The process before the Competition Tribunal is a cumbersome and costly one and there are other improvements that are required if we're going to unlock its potential—and some of these are also contained in other elements of the bill that I'm not getting into.

One reason that people have pushed for private access to the tribunal is that the bureau resources are thought to be too limited to support all of the meritorious cases that might be brought and that they therefore tend to look for ones that have particular public interest associated with them.

Undoubtedly one of the reasons why the bureau's resources are stretched is that they spend a lot of time reviewing mergers. The merger activity of the bureau is a reflection of the high level of activity in the business and of the fact that since 1988, when the merger pre-notification rules mandating the review of certain sizes of mergers came in, there has been no adjustment in the thresholds that determine which cases have to be reviewed. In that intervening time, the Canadian dollar has diminished by approximately a third, which means there has been a substantially increased number of cases now culled into the process. That would not have been the case in 1988 in real dollar terms.

So I think that at a minimum the thresholds ought to be elevated to restore those original dollar levels, those real dollar levels. I think this would eliminate a lot of smaller cases that are now clogging the system and are arguably impairing the bureau's ability to handle its other responsibilities. I might mention that the U.S. seems to be moving in a similar direction with the pending legislation before Congress proposing the elevation of Hart-Scott merger review thresholds to levels that would be roughly comparable to where we would be if we went back to our 1988 levels.

If the bureau received low marks in its performance, I think it was related undoubtedly to the experience people have had in the merger area, which is the most frequent point of contact with the bureau for the public and business, and was due to the fact that the flood of cases has really stretched to the limit their ability to handle them on a timely basis.

There will be a financial consequence associated with reducing the number of cases that have to go through the process, because they now charge $25,000 for each filing, but I think it is inappropriate to have the bureau's funding determined by the number of cases that are in the system. There should be another source of funding for their needs.

• 0930

My final comment relates to the VanDuzer-Paquet report and recommendations. This won't do justice to what is a balanced and thoughtful report.

I'm generally in agreement with their observations and recommendations. I think a case could be made for repealing price discrimination—but I think there are also significant political considerations in doing that—for decriminalizing it and assessing price discrimination in the context of its impact on competition, which the law does not do now. It puts it in a more appropriate enforcement perspective. Currently the law is very much out of sync with the enforcement practice. If you look at the price discrimination enforcement guidelines, I think it's a real stretch to match up the enforcement attitudes expressed there with the law, and I think that is always an uncomfortable situation to be in.

I think it's similarly desirable that the predatory pricing provisions of the act be decriminalized. At a minimum, I think, the civil law provides a better basis for evaluating the competitive effects of aggressive pricing behaviour, bearing in mind that if aggressive pricing does not transgress the standard, then it does benefit consumers.

There's a comment in their report which suggests that the bureau might need to increase its level of enforcement in this area. I agree with those who are of the view that predation is a pretty exceptional circumstance and who have not wanted to discourage aggressive price competition.

Finally, on price maintenance, the third area that was focused on in that study, I think it should have application only in the vertical situation, the vertical price-fixing situation. On occasion the bureau has threatened or has sought to apply it to horizontal pricing arrangements between competitors. I think it should be clarified that it has no such application. Again, I support it being removed from the criminal side of the law and changed from a per se offence to one where consequences are judged according to the effect on competition.

Thank you for your time. I look forward to the discussion.

The Chair: Thanks very much, Mr. Kennish. Now we'll begin with questions from Mr. Penson.

Mr. Penson, please.

Mr. Charlie Penson (Peace River, Canadian Alliance): Thank you.

Welcome to the panel this morning. I want to talk a little more generally about competition law.

Professor McFetridge, you've touched on the area that I'm interested in. You talked about competition law alone and how there's no guarantee of competition. I take it from your comments that a healthy marketplace with a lot of competitors and the proper business environment for them to be operating in would provide competition in a way that competition law alone cannot do.

In that regard, you also made reference to Bill C-26 on the airline merger. I see that in The Globe and Mail this morning, the Minister of Heritage is talking about getting rid of foreign investment limits or raising them, in terms of newspapers. Wouldn't that be one of those environment things that could achieve competition by allowing lowering or by getting rid of foreign investment limits in these areas to ensure this competition, without having to use the blunt instrument of competition law?

Prof. Donald McFetridge: Yes, I agree completely. Competition law sometimes can overcome regulatory barriers to entry or barriers to entry based on international trade or interprovincial trade. Sometimes it can't. Sometimes you make a competition decision that you wouldn't otherwise make.

Hypothetically, two dairies might want to merge. That might not be a problem except for the fact that maybe you can't ship in milk from a neighbouring province where there is a competing dairy. That would be a regulatory barrier that says competition law has to work within this framework, and it may forbid this merger that would otherwise be beneficial.

There are competitive fixes in the sense that milk could be shipped in from elsewhere, but there may be provincial rules that say there can be no interprovincial trade in milk or something like that. You can have all kinds of examples of where you end up doing the wrong thing with your competition law as a consequence of prior regulatory decisions you made.

• 0935

Again, there was a big conflict or an amount of concern regarding the way in which a major bookstore perhaps treats publishers. Part of the issue would be that there are plenty of large bookstores and book chains that could compete in this country and are presently not allowed to, so that you have restrictions on competition, restrictions on the number of competitors. Then you get worried because, having restricted competition and restricted entry, you have a limited number of players there—granted, they're endowed with market powers as a consequence of those regulatory restrictions—and then you try to come up with all kinds of fixes, which competition law is really not that well suited to do.

So I agree: the first necessary condition for a healthy and vital competitive marketplace is open markets. As I say, there are many examples of this, of where you end up trying to impose on competition law and policy an obligation which it's really not all that well suited to deal with.

Mr. Charlie Penson: I think you—or maybe it was Mr. Kennish—also mentioned the interprovincial barriers as a problem in that area. This is another area of regulation that really inhibits competition from establishing. I'm thinking back a while to the breweries, for example, when each had to have an operation in one province, independent of any others.

I live in Alberta, near the B.C. border, where we see a very restrictive provincial government on the B.C. side. It doesn't allow that flow into the province. But I spent a few weeks in France in January; the trucks are rolling through Europe, and even tourists don't have to stop at the borders between the EU countries, yet we have these barriers in Canada. How big a factor in inhibiting competition is regulation like that, would you think? Is it significant?

Prof. Donald McFetridge: I think it is still significant. I can't quantify it; I can't pretend to be able to. There are a number of cases I've personally seen.

For example, maybe a province has a “buy local” purchasing policy. Maybe there are two suppliers. Again hypothetically, it might be, say, culverts for the highway department or something like that. They have two competing plants. Maybe one wants to close or wants to have a joint venture or something like that. There's still plenty of competition or potential competition from plants, say, in other provinces, but the province wants to have the policy of buying locally, and they won't necessarily avail themselves of the competition from elsewhere.

Therefore, you have a problem. If you have open provincial borders, there should be competition. So there shouldn't be a competition problem, but there is. Then you have to go about trying to fix that or forbidding the joint venture or the merger. Again, this is hypothetical, but that's the kind of issue that does come up—and it comes up fairly frequently, I think.

Mr. Charlie Penson: I have a question for Mr. Kennish.

You talked about the mergers, about the threshold level needing to be raised. Prior to 1987 or 1986 or whenever it was you said that provision was put in place.... I'm not familiar with it. What took place before that? Did mergers have to be approved by the Competition Bureau? Is there a case to be made that there would be no need to review mergers in regard to competition law?

Mr. Tim Kennish: Prior to 1988 there was no requirement to pre-notify or to give notice to the government about proposed merger transactions. Canada, in common with many countries, now has such a requirement—and has since 1988.

The policy reason for requiring it, I think, is that mergers can compromise competition to a point where it transgresses the objective of the law, and they may be already completed to the point where it's irreversible by the time the enforcement authorities catch up with it. By requiring prior notice to the regulatory authorities to allow them to examine it, they are in a position where, if it appears that what's planned is going to have an adverse effect on competition, it can be prevented from occurring.

Mr. Charlie Penson: But I judge by what you're saying that these would be the large mergers, then. You're saying that there's a certain threshold level that should not have to be captured by it.

• 0940

Mr. Tim Kennish: The present standard has two thresholds. One involves the acquired business having gross assets or gross annual revenues in excess of $35 million in Canadian dollar terms, and one the parties and their affiliates having Canadian assets or annual revenues, in aggregate, of over $400 million. Those are the same levels that they were in 1988. Whether that was the appropriate standard at that time, as it was thought to be, to capture the ones more likely to create an issue, there has been an erosion in the value of those thresholds by a third.

Mr. Charlie Penson: Yes, I understand that. Has there been any assessment done that you're aware of that says anything above this needs to be reviewed and anything below that level...? Even if you adjust them according to your formula, how do we judge whether that is an appropriate level or not?

Mr. Tim Kennish: It's hard to say. It's not always just the big mergers that create issues. Big mergers don't always have competitive overlaps that are of concern to competition law, but generally the larger ones tend to have more issues. As a matter of not intruding too much on business life, the decision is to try to focus on the larger cases. I know that when the legislation first came in it wasn't expected that there would be anywhere near as many cases as are now being reviewed today—which is over 400 a year.

Mr. Charlie Penson: In regard to the proposed mergers of the banks a couple of years ago, which were denied, some people would argue that Canadians are paying the price now for the banks not being allowed to merge. There has been a tremendous amount of consolidation in the way banks do business. A lot of rural communities tend to be hurting and losing their banks and their local administration. Again, back to the point that if we allowed more competition into the country.... What's wrong with allowing our banks to merge as long as we allow competition into the country to make sure that there's a competitive environment?

For example, what I'm thinking of is that some of our major banks are getting almost half of their earnings from operations outside of Canada. Their competitors, the European and Asian banks, have been merging at a tremendous rate and have been gaining some kind of competitive advantage in those international operations.

Back to my point that I was making with Mr. McFetridge, as long as there's a competitive environment, with the foreign banks maybe operating here in a competitive environment, is there anything wrong with mergers taking place here?

Mr. Tim Kennish: Well, I guess the judgment of the Competition Bureau that examined the information was that the mergers—and there were four of the big five banks involved in them—domestically were going to threaten the branch banking system and the—

Mr. Charlie Penson: But I'm asking for your point of view on it, not the bureau's.

Mr. Tim Kennish: Well, I think there was probably already more competition from other players than was thought to exist at that time. The prospect of further expansion of foreign players in the market, I think, was.... There they have much more e-business banking being done. It seemed to me that it was a situation that might have been worked through by doing divestitures in places where there were the most serious consequences, rather than denying them completely.

The Chair: Thank you very much, Mr. Penson.

Mr. McTeague, please.

Mr. Dan McTeague (Pickering—Ajax—Uxbridge, Lib.): Thank you, Madam Chair.

Gentlemen, I think we're going to have a little fun here this morning, between the comments that were made a little earlier between yourself and myself, Mr. Kennish, on another committee some weeks ago. Perhaps we'll have an opportunity to expand on our twin discussions on the same day. I'm sorry about juggling this and going between my committee here on industry, which is above my other committee, transport, on another floor.

I have a few questions I'd like to throw in your direction first, Professor McFetridge. I have some concern with the position taken by you and others with respect to cease-and-desist powers, particularly where there may be cases of blatant abuse of dominance.

• 0945

The concern I have is reflected and echoed, I think, not so much by those who have specific interests, i.e., large dominant players, but by small people, small players, independents, retailers, and others, who may very well be subject to the anti-competitive acts of individuals but who know very well that the Canadian bar in this country is not very strong in comparison to, say, that of our trading partner south of the border.

I would like to perhaps focus on your concern with respect to your belief, in any event, that current competition law can protect certain competitors, can protect major players over smaller players. Is it not true to say that we already have a bad competition regime in Canada? Your position that the proposed changes protect competitors instead of protecting competition seems to ignore the failings in the current act—and in the view of many, I think—and indeed, it propagates a myth, in my mind at least, that all is rosy.

I would like to ask you if you have identified any problems with the current act in the subject areas the bills before us touch on. Or do you think everything is just fine and dandy?

Prof. Donald McFetridge: Oh, I don't think everything is fine and dandy. I think, as Tim Kennish has said, that tribunal proceedings seems to be very long, very costly, and very drawn out. I agree with much of what is in the VanDuzer-Paquet report in regard to section 61 and section 50. I think I could propose a number of changes. As I say, there are probably a lot of operational changes that are more for lawyers, procedural changes for lawyers to be discussing in terms of the commissioner being able to move things through the tribunal process—or through the courts, for that matter—more expeditiously.

I have no problem with the proposal to change section 45 to have, effectively, a per se component and a rule of reason component. That's something that has been proposed for a long time and that I have no problem with. I have no problem in particular with private access to the Competition Tribunal for section 77, section 75, and for that matter, sections 78 and 79. These are all changes that I would support, and I suspect that there are all kinds of others that I—

Mr. Dan McTeague: I've noticed that our Competition Act has a number of interesting words built into it. I want to deal with today's current reality of a nation that is highly oligopolistic, with a number of strategic industries where we do not have new entrants to markets, notwithstanding the fact that we have the United States or various other provinces where competition can enter a particular market. You've seen the gas and the grocery industries; with the exception of ARCO in British Columbia, there are no new entrants into the marketplace.

Therefore, one would probably make the argument that once you have achieved a substantial degree of power as a result of some of the loose wording.... On a previous heritage committee, there was discussion about how Chapters was able to gain its position with respect to wording like “substantial”, like “practice”. There are other words that have been used in there which allow the threshold to be so high that any large player can basically constitute a possible abusive situation, close the door behind them, and then, of course, have a situation unlike the United States, where there seems to be no trepidation in going after Microsoft, where ADM, Archer Daniels Midland, is found to be in a position of collusion. We don't seem to have the ability to do those things in this country or to arrest potential problems.

Professor McFetridge, on the question of cease-and-desist powers, my concern is this: how can we call these individuals...? We call the Competition Bureau “competition police” when they're not able to arrest a potentially abusive anti-competitive situation given the environment in which the country.... Our Competition Act seems to be the plaything of a very few, select number of individuals. Small players really have no say and certainly don't have the ability to defend themselves or to prosecute a question successfully.

Prof. Donald McFetridge: Okay. May I start with the initial part of your first statement as to—

Mr. Dan McTeague: As you wish.

Prof. Donald McFetridge: —the issue of blatant abuse of dominance? There is provision for the commissioner to get an interim order. I think a number of people have said that this provision could be streamlined or made more effective, but if we in fact have blatant abuse, I would hope that the commissioner would be able to convince the tribunal to issue an injunction in a timely fashion.

• 0950

Mr. Dan McTeague: But you've just stated—

Prof. Donald McFetridge: I would hope that the commissioner would be able to convince the tribunal that there is a substantial lessening of competition.

Mr. Dan McTeague: Mr. McFetridge—

Prof. Donald McFetridge: If you can't do so in the case of blatant abuse, then you may want to respond by simply changing the law to get something he can prove.

Mr. Dan McTeague: Mr. McFetridge—and this is perhaps a key-in to Mr. Kennish now—when one talks about the ability to stop a potentially anti-competitive situation from occurring, it's a little akin to somebody who's committing a felony of some type, or an act which a police officer will see. Does a police officer, in every instance, have to seek a search warrant or seek the advice of a judge to stop an act from occurring? Wouldn't it then be too little, too late, for the very people in this country who are trying to make ends meet, the individuals who are competing against large players and who may not have the wherewithal as a result of the status quo?

I appreciate your concern about the interim order, but it takes time to get that interim order, and the damage might have already been done. You suggest that there ought to be some kind of streamlining. I don't see how a temporary cease-and-desist order would not answer to the whole question of being able to streamline the process, at least until there is some point of natural justice.

Prof. Donald McFetridge: There are two points in response. First—and again, this is more for the members of the legal profession—I would think that you'd want the commissioner to have to convince somebody other than himself that there was irrevocable damage going to be done.

Secondly, it is damage to the competitive process, not damage to any particular competitor. That's what you'd want to get out of there.

Mr. Dan McTeague: Mr. Kennish, if I could ask you...? You were concerned about natural justice and fairness for those businesses that are currently being laid waste in the marketplace by dominant players. You didn't say that, but this is my view.

My concern from my standpoint.... I spoke to you some weeks ago when you were a representative for the bar association. You're here today on behalf of your law firm, Osler, Hoskin, and Harcourt. I was wondering where the natural justice is for small independent players who are being disciplined or who might be disciplined or subjected to an anti-competitive act, where those individuals may not be able to avail themselves, as a result of singular damages, as opposed to what we've seen in the United States, where there might be triple damages, as opposed to the bar in Canada, which is relatively small by comparison.... Where is the natural justice for those individuals who are being hurt or potentially hurt? Will your firm, you as an individual, your bar association, be there to advocate for them unless they have big bucks?

Mr. Tim Kennish: In the area in which the temporary orders operate—abuse of dominance is the civil area—there are complex economic issues, and the effect of what people or businesses do isn't all that straightforward. That's one of the reasons why the law isn't black and white and saying that if you do this, we'll fine you. It has to be examined in all circumstances. The move proposed by your Bill C-472 to allow private access to the tribunal gives a bit more scope for protection of individual rights in that area, but it's still a complicated area.

I said this before, at that other hearing: the Competition Act being the law of general application applying to all businesses, you have to recognize that it's a balancing consideration here. For example, the commissioner is allowed just to issue an order to shut down your business. That can have disastrous consequences for a business. He has to be right. I think it's a great comfort for people to know that he has to persuade a judge he has evidence to support the position that there is such a threat to the competition that this action should be taken.

The Chair: Last question, Mr. McTeague.

Mr. Dan McTeague: Thank you, Madam Chair. I would disagree with you completely that we should wait six months, ten months, two years, three years, as in merger cases or in other cases, for a tribunal to ultimately make a decision.

Your belief that there is some kind of balance in the system that is really to the advantage of the potentially abusive player does not constitute, in any reasonable person's belief, the demise of that large, abusive, dominant player. I don't think General Motors or Imperial Oil Limited or Chapters is likely to be put out of business because of a particular anti-competitive act that would be seen as anti-competitive in other jurisdictions.

• 0955

I'm wondering if you could perhaps enlighten this committee, because we're dealing with a really important piece of legislation. The Canadian bar and the Competition Act, as it is currently written, tend to be very statutory as opposed to judicial. There's very little interpretation in terms of the courts. We've had very few decisions like, as you pointed out, the PANS case, the Nova Scotia pharmaceuticals.

I'm wondering if you can explain or perhaps illustrate for this committee why it is that the bar in Canada tends to be so pro-defence whereas in the United States it tends to be anti-competition, antitrust.

Mr. Tim Kennish: I wouldn't have thought—or at least it's not my view—that the antitrust bar in Canada is materially different from the U.S. bar in its outlook towards the issues in the field. I think there's a high similarity in viewpoints globally; I mean, there are people who represent plaintiffs and there is more of a tradition of a plaintiff's bar in the U.S. They have treble damages and that has tended.... It's not necessarily a great thing and hasn't been replicated in many other jurisdictions because it's thought to create an unfair advantage for claimants.

I don't think we're uncaring, necessarily, about the concerns of protecting competition, but I do think there is a balancing that goes on here and these things have to be kept in.... We're talking about interim injunctions. Interim injunctions may take a couple of weeks to get, but if you have a case, you can get them; it's not a matter of waiting for a year of damage to occur before any sort of remedial action can be taken.

The Chair: Thank you very much, Mr. McTeague.

Just before I go on to Monsieur Brien, Professor McFetridge, I missed you in response to Mr. Penson's question about banks. Did you have some comments you wanted to make on that?

Prof. Donald McFetridge: I did have just a brief comment.

Certainly one of the major issues—and I must confess that I was retained by the Competition Bureau in connection with the bank mergers, so I come at it from that perspective—that they were trying to deal with was the extent to which foreign entry and potential foreign competition was there. I think it varies from product line to product line. In the credit cards area, the area of credit card issuing, there's a lot of competition from offshore and U.S. banks and financial institutions. In some other areas, it was the banks that pretty much lost the business to third-party payroll processors and things like that. We could see that process going on.

The question that was fundamental was this: what about branch banking? There are just two views. One is that branch banking is an anachronism, that bricks and mortar simply don't matter any more. The other view is that bricks and mortar still do matter, that the banks in Canada have very large branch networks, which they have changed and consolidated and changed the nature of, but they're still there and they're still important.

Then the question was to what extent you were going to have a lot of entry in the foreseeable future into branch banking if you had the mergers, if you allowed the mergers. The bureau's judgment at the time was that there wasn't a lot of prospect for large-scale entry into local branch banking by the foreign banks. Foreign banks didn't necessarily express a huge amount of interest in terms—

Mr. Charlie Penson: But there are barriers, too.

Prof. Donald McFetridge: And I have no problem with any legislation or any regulatory changes that reduce the extent to which they could come into the market, but these issues were addressed. I agree with your fundamental premise that the regulatory regime has to be hospitable to entry or you're hobbled.

The Chair: Thank you very much.

No, Mr. Brien?

Mr. Penson, do you have more questions?

Mr. Charlie Penson: No.

The Chair: Mr. Pickard, do you have any questions?

Mr. Jerry Pickard (Chatham—Kent Essex, Lib.): No.

The Chair: Mr. McTeague, you said you had a few more questions.

• 1000

Mr. Dan McTeague: Madam Chair, I don't wish to belabour the point. I just wanted to provide for our guests here today some of the comments that have been made by Professors Paul Collins and Jeffrey Brown. I believe that in several statements to the American Bar Association they've talked about comparative.... I found one of their comments very interesting. It's a summary, on page 5, and I'll provide a copy for the committee, Madam Chair:

In summary, the Canadian legal environment for antitrust is from from identical to that of the United States. Canadian antitrust lawyers are accustomed to a law that is more statutory than judicial, relative to their U.S. counterparts. Furthermore, owing perhaps to the evolutionary characteristics of antitrust law in Canada and the United States, the Canadian antitrust bar is a modest one in terms of size, and relations between businesses and Canadian antitrust authorities tend to be far less adversarial than in the United States.

I guess I appreciate the concern that we don't want to have a situation where we open the door to potentially abusive situations as far as applications to the tribunal are concerned, through private action, through orders like cease and assist, that we do not in any way, shape, or form avail ourselves to our largest...to the similarity in terms of legislation of the United States.

But I am concerned, Mr. Kennish, by your comment a little earlier that perhaps the resources of the Competition Bureau could be better utilized if they were not so focused, I suppose, on questions of mergers.

I think you and I talked about this very briefly when we touched on this in another committee: most of the law firms that will be coming before us tend to advocate some of the largest merger cases. I can understand their frustration, certainly given that the global competition review gave low marks to our competitor, but I guess I had some questions as to why anyone would rate our Competition Bureau. And who was doing the rating? Of course it's clearly those who have a very small niche by comparison, relatively speaking, to the United States, who did the rating. Perhaps out of whatever reason—frustration—things are not going as well as they want.

When I first saw the global review report, my fist went up in the air and I said, yes, finally someone's waking up to the reality that we have problems with the Competition Act. It is the kind of concern that is raised constantly in my riding and in ridings across the country, whether it's about gasoline, groceries, or cable, whatever the case may be. But I find it somewhat disheartening to know that those who rewrote the Competition Act in 1986 are, again, those who believe that our process is not streamlined enough to accommodate their concerns about rushed mergers.

I'm wondering if you could explain to this committee how it is that the United States seems to be so effective and doesn't have any trepidation about calling someone a monopolist or a predator, as in the case of Microsoft, as in the case of Eastman Kodak, as in going as far back as the Sherman acts of the 1890s. Why do we in this country tend to think that simply trying to protect competition somehow provides an investment chill or stifles investment? Why is the bar so slavish to the defence? Why is it not antitrust?

Mr. Tim Kennish: I think that's probably not an accurate characterization, Mr. McTeague, about the people who are involved in this practise area. In every significant case in which there are interests on both sides, you will have people representing not only the protagonists of a merger, but you will also have some of the people who would ordinarily represent that kind of person opposing the merger. They do so on the basis of competition policies and principles and law. So I think you do get a fairly vigorous viewpoint presented on these issues, on these important issues to talk about.

We don't have the long antitrust tradition they have in the U.S. The Sherman Act has been an article of faith and part of the American way of life since the late 19th century. Our act goes back, of course, and has that similar heritage, but it has never been as important a part of our life. It's really only since the mid-1980s, with the advent of these civil jurisdictions, that it has gained more importance. We are getting religion in a hurry in this area.

Mr. Dan McTeague: Are you, though, Mr. Kennish? It seems to me that the bar association opposes any type of change that I've been looking at since.... Gosh, I see that André Ouellet, in 1983, tried to change the undueness standard in terms of price fixing. The bar opposed that. I noticed several cases throughout the short history of the past 20 or 30 years in which the bar and the Chamber of Commerce could usually be trotted out to defend the status quo.

• 1005

In all of this, Mr. Kennish, I see a situation in which large firms, because of singular damages, will be able to advocate on behalf of large clients, whereas I see small companies, small individuals—Barney's Bait and Tackle and Donuts—not being able to get a chance to have their position advocated effectively if, indeed, our laws say a lot but are practically impossible to enforce.

When we try to make even the slightest suggestion we usually wind up with a front line of the usual individuals who come out to fight any type of change, even though by comparison, and not from a business perspective but from a much wider marketplace comparative, I think, consumers are increasingly alarmed and concerned that their Competition Act just doesn't pass the smell test. How is it possible...?

Sorry, but did you have something to say, Mr. Penson?

Mr. Charlie Penson: It's the business environment of your government that doesn't pass the smell test.

Mr. Dan McTeague: Well, Mr. Penson—

The Chair: Mr. Penson, that's not appreciated.

Mr. McTeague.

Mr. Dan McTeague: Thank you, Mr. Penson, but I think Canadian independent small business might have a problem with that kind of statement.

But in any event, I'm concerned, Mr. Kennish, as to what direction you believe the bar association and your own firm can honestly take in terms of representation on any bill when, indeed, you happen to represent a particular constituency, which is, to say the least, usually large, usually very dominant, and usually very successful in crafting the kind of legislation that isn't capable of protecting consumers.

Mr. Tim Kennish: I would say that people who are involved in this understand the issues and aren't necessarily compromised by their representation of clients in particular situations. They frequently have to represent clients that are on the other side of that same issue, but I think people who have an interest in this.... I've followed this ever since I've really been in practice, and reform has been constantly a theme that we've interested ourselves in.

I think a number of these reforms here are very helpful and are quite groundbreaking. I think the provisions for access to the tribunal will be significant. I think the other steps that provide for facilitating actions before the tribunal will be helpful improvements.

It does take time to identify what is the right course of action to take, and the act gets improved. I'm supportive of the commissioner's approach to not wait ten years to amend the act but to try to do it on an incremental basis where things are identified as being in need of reform.

But, for example, in this abuse area, to my knowledge the bureau has never lost an abuse case. It doesn't get every remedy that it seeks, but in seven contested cases it has won every case. That's not to say it's a totally effective remedy, but they have a fairly impressive track record so far.

Their track record in merger enforcement hasn't been so stellar, but the difficult cases have gone into court. There are a lot of other situations where they get resolutions where there are competition issues raised; they've opposed something and the parties have backed off and have restructured their transaction to get around it.

Mr. Dan McTeague: Mr. Kennish, when it came—

The Chair: Last question, Mr. McTeague.

Mr. Dan McTeague: Thank you, Madam Chair.

Mr. Kennish, when it comes to the question of mergers I too have been alarmed at the bureau's handling of some of them, most notably the recent acquisition by Loblaws of Loeb's and its subsidiary, its wholesale arm constituting 35%, 45%—and maybe even in some instances 50%—of the marketplace.

I guess the question of looking at mergers is important because once you have granted them, it's very difficult to recover. As you and I both well know—and perhaps as other firms who are not here today but who will come before us are painfully aware—in the case of Superior Propane, for instance, monopolies of 70% to 100% will effectively be granted on a challenge by the tribunal, not to see things the same way the bureau does.

Do you consider mergers that have the effect, sir, for instance, in the grocery industry, of having three players dominating almost 100% of the grocery industry, as something that is not in the wider public interest and which we, as members of Parliament of all political stripes, including the Reform/Alliance, should be concerned with?

• 1010

Mr. Tim Kennish: Well, concentration gets to a point where there's a concern that those left in the business will see that there's a greater advantage in collaboration than there is in competing very hard, because they can't really very effectively do as well as they can through collaboration. That's an issue.

But there are also some classic cases where you have fairly balanced competition and it seems to generate tremendously big advantages for the public, such as Pepsi and Coke and some other situations. It seems as though businesses tend to concentrate themselves and then get to a point where some novel development starts to undermine the business and they're off again on a new track.

One of the things that's very difficult to assess in terms of the enforcement record of the bureau and in terms of what's going on is the fact that so much is done in a confidential environment that we don't really know about it. Even Don McFetridge and I, who practise in the area, don't really have a very good picture of all that's going on or what the real reasons are. You mentioned the Loblaws case. I don't know any of the real facts there. I've read what's published, but it's not depth, so it's hard to assess it. I can say from my own experience that I don't think there are a lot of cases in which the bureau is taking a pass on issues that ought to be challenged. I think they're pretty conscientious about doing their job.

Mr. Dan McTeague: Thank you.

I have no more questions, Madam Chair.

The Chair: Thank you very much, Mr. McTeague.

Professor McFetridge, could you expand a little on the Competition Bureau's present review of mergers and on whether or not they apply the proper economic analysis or if there are any failings in the analysis they're using to determine whether a merger should proceed or not proceed?

Prof. Donald McFetridge: In general, they're using the appropriate framework. I think considerable thought went into the framework for merger analysis as it's embodied in the Competition Act. I think that in general it's still applicable and I don't see any serious need to tinker with it.

For the section 93 factors, which would require the bureau—and then ultimately the tribunal if a merger goes to the tribunal—to assess the broad state of competition in the market, including foreign competition, potential entry, technological change, and these types of things, the law is well written here, I think.

The Chair: As though the tribunal as well.... Is it applying it properly, then?

Prof. Donald McFetridge: You might want to quarrel a bit with the time horizon that the bureau has imposed on itself, this sort of two-year horizon—“well, we won't look beyond two years”—other than the fact that it's very hard when you're doing merger analysis to look ahead at all, to make very good predictions about what will happen in the future.

That's one of the difficulties with merger analysis, unlike some of these abusive practices in which you have an ongoing history or something that's tangible and that you can relate to. In a merger, you're trying to predict what will happen as a consequence of the change in the structure of the market. That can be very difficult. I can understand the bureau not wanting to go too far out into the future, but in some cases that might shift the balance of concern from one side to the other. You may have all kinds of competitive developments that may occur two and a half or three or four years down the road; you're ignoring that and that's probably not very good.

With respect to efficiencies in section 96 of the act, that, even after all this time, has not been resolved. I think there's some expectation that the Competition Tribunal will pronounce upon the appropriate interpretation of section 96 in its Superior Propane decision. We will see, I guess, when they hand down their decision—it's supposed to be sometime this summer—exactly how they propose to interpret section 96. Then we'll see if it's consistent with what Parliament might have intended.

The Chair: Thank you.

As well, in your opening comments you talked about how competition law alone is not the only answer to ensure a competitive process. You referred to what you think are other barriers out there. I'm not necessarily sure I would agree with—or maybe I misunderstood—your reference to supply management. I'm not sure if I understood it or didn't understand it.

• 1015

You specifically referred to milk as an example. When I look at industry and at professions across Canada, I see supply management applied in almost every single thing we do, and yet I hear over and over from economists that supply management in the agriculture sector somehow causes this barrier. Yet we don't hear it when it comes to applications for doctorates or for people applying for the doctorate program. We don't hear it for engineers. We don't hear it for people applying to professional schools. We don't think that's supply management—and I'm not sure what it is if it's not.

Prof. Donald McFetridge: I think those are two completely different things. There's certainly no question that a professional society that is empowered to set its own professional standards might tend to set them too high, because not only are they concerned with the competence of their members, they would like to restrict membership, and there's certainly a potential issue there with quality and standard-setting by any professional association. I don't dispute that. That's a possibility.

In general, a lot of these associations really aren't concerned with limiting the number of engineers or limiting the number of other types of practitioners as professionals in our economy. They are simply concerned with establishing some quality standards so that the public knows what they're getting, so that when they hire a PEng they know what it means when they hire one.

Supply management is something completely different. I know this is probably really not the place where anybody wants to debate supply management, although I guess it gets debated fairly frequently in all different types of fora around here. Supply management is restricting the number of producers and the amount they can produce, and that's what it's for. The price of dairy quota is positive for a reason: because there is monopoly profit there.

Now I know this is not something that you're going to be very sympathetic with, but that, to me, is a separate issue. If governments want to support their agricultural sector by restrictions on entry—what you would call supply management—into chickens, eggs, or dairy products, that's a decision they have to make.

No agricultural support system is without its failings. Those of us who are economists and who are very critical of supply management, and I'm certainly one of them, have to recognize that—politically—governments all over the world support their agricultural sectors in one way or another, and it's really a matter of finding the least harmful way of doing it. I accept that. Maybe we can take that part off the table.

What I was talking about are the ramifications of supply management that have effects downstream. It seems to me that—and this was a hypothetical—it's one thing to say there shall be only so much milk produced by farms in Canada. That's one thing. But then to say that possibly there can be limited or no interprovincial trade in it is another matter; that says that each province then is guaranteed a certain amount.

Well, if you limit interprovincial trade, you're going to cause problems downstream for processors, in that you can create a potential monopoly, not because there aren't potential competitors out there—and this was my dairy example—but because you have precluded them by regulation from competing. That's all I was saying: regulations that keep competitors out of markets, whether it's a provincial market or the national market, are the enemy of competition, and competition law and policy sometimes can't do very much about fixing that.

I think it can sometimes be politically convenient to say, oh, we have all these regulations but we have this competition policy, so everything's fine. Well, not necessarily. Competition policy may be just the window dressing there and it really can't do anything about the lessening of competition that has been put in place for other reasons.

The Chair: I guess, then, that I did misunderstand your earlier comment, because I wouldn't disagree with you that there are interprovincial trade barriers which we need to deal with as a government and as a country. I think there's a working group of provincial ministers and the federal minister actively working on that. We know it's very difficult to make change.

• 1020

Again, when it comes to your statement about how competition law alone is not the answer to ensure the competitive process, I don't necessarily disagree with that either. I think, though, that there's also another player in here, which is the consumer. Throughout this discussion this morning, I'm not sure that the consumer has been captured enough in the comments I've heard. Although Mr. McTeague and I may not agree on everything, I do believe that the consumer has to be a factor, a player, a part of the process. The reason we want competition to be there is so that there are benefits to the consumer.

Again, your example, milk, reminds me of the fact that we compare ourselves continuously to the United States. We just went through an entire report on productivity and competitiveness. Over and over, economists that we had before this committee talked about comparisons to the United States. Well, the facts are that when you compare our milk policy to that of the United States, the price to the consumer for dairy products is 25% lower in Canada. That has been done over and over, and there have been studies, over and over, that would show that.

I think we have to remember that this element needs to be there and that the consumer needs to be there in the process. I'm not sure how we answer that, but I do think we have to remember that the consumer also has to be part of the picture. Competition is very important. I recognize that. To ensure that there are players in the system is very important, but we also have to ensure that the consumer is still part of the picture in the end.

Prof. Donald McFetridge: Can I respond?

The Chair: Professor McFetridge.

Prof. Donald McFetridge: I fully agree. Competition is a means to an end. The reason we have competition is to deliver the best products at the best prices for the people who buy them. That's why it's all there. That's why we're going through this. I have somewhat of a difference of interpretation with Mr. McTeague. It's a question of whether protecting competitors necessarily protects the competitive process, which has this ultimate goal of delivering the best products at the best price on the best terms.

That's certainly what the goal of all of us who are involved in competition law and policy is. Normally, the consumer's interest is served by competition. If supply management can result in a solution that's as good as or better than competition on a continuing basis.... I don't believe that, but if that's true, I have no ideological opposition to a system that has been shown to work and to work to everybody's benefit. I have grave reservations about whether I could be shown that, but that's another matter. I fully agree that—

The Chair: But I guess that's the challenge when we look at the Competition Act as we move into the future, as we look at globalization, as we look at fewer dominant players. How do we ensure that competition continues to exist? How do we ensure that the consumer continues to benefit? How do we ensure that the consumer continues to receive a good price and good quality of product? As we look at an ever-changing society, as we look at what's happening with e-commerce, I don't think we can predict the future; I really don't. That's one of the challenges we have as we take a look at the Competition Act, at the competition law as it exists. Where is the future and how do we ensure that the law continues to evolve so that it reflects the future?

Prof. Donald McFetridge: I agree that it certainly is very difficult to predict the future. I also would want to reinforce what Tim Kennish has said, though: that the way in which we analyse the consequences of changes in structure of markets is very similar to the way in which they do it in the United States, and Europe is converging with us, rather than us with them. I think our system of analysis is pretty good in that regard. Yes, you may have fewer players, but you may have more trade than we used to have, more international competition. You may have lower barriers to entry. Technology may change.

I think what governments want to do is to certainly be vigilant on the competition front, but to also remove any impediments to competition that they have placed there for other reasons, or at least to recognize that we are making a sacrifice, that we are placing impediments on the competitive process because we don't want so-and-so competing in this market or because we want to give an advantage to such-and-such. They should just say, just admit, that this is what we're doing and that there is a sacrifice. But to go through the charade of saying, well, we're putting all these barriers in, but they don't cost us anything, I think that's.... That's politics, but there's a certain amount of hypocrisy there.

• 1025

But I certainly suggest that the system we have for analysing the consequences of changes in market structure is probably a pretty good one. There are areas where I do feel very strongly; I have looked at a lot of cases, for example, with respect to resale price maintenance. Maybe one case in ten is about horizontal lessening of competition. Most of the cases that come up are disputes between a distributor and a manufacturer, between a franchisee and a manufacturer, or something like that. Most of them have very little to do with the competitive process and with the extent of competition in the market. There is an example where competition law can, in fact, if you don't craft it properly, be counterproductive, because it can be used as a device for competitive harassment.

People talk about how in the U.S. the tone is different and the bar is different. Oh, indeed it is. They have a long history of private actions, a lot of which are pure competitive harassment. Certainly there is a very vocal plaintiff's bar, but let's not equate that with people who are concerned with the public interest and nothing but the public interest. They're just representing a different set of private interests, and they may or may not be an entirely useful addition to what we have already in the Canadian context.

The Chair: Thank you.

Mr. McTeague.

Mr. Dan McTeague: Madam Chair, it might be useful if—and this is in terms of a point of order for the committee—we were to have some consideration for an analysis of the various impacts on the economy in the absence of market forces when you have an oligopoly or a monopoly, whether that is a private sector monopoly or a public sector monopoly.

The Chair: I'll take that under advisement, Mr. McTeague.

Mr. Penson, do you have a question?

Mr. Charlie Penson: I have a question arising out of your comment in regard to whether the Competition Bureau does thorough analysis.

Mr. McFetridge, in the recent Air Canada-Canadian review, the Competition Bureau was asked for a very narrow scope in terms of their investigation. It seems to me that if there's a failing it's that the minister may interfere with the full extent of what the bureau might be wanting to investigate. In that particular instance, I note that Mr. von Finckenstein went beyond what he was asked to provide, which was a fairly bold move, but it seems to me that if they're going to be able to do an analysis, they shouldn't be restricted in that regard. I was just wondering what your comments might be.

Prof. Donald McFetridge: If they're responsible for protecting the integrity of competition in Canada, then they can't be limited in terms of what they're allowed to look at. Certainly in Mr. von Finckenstein's letter to the Minister of Transport, he did propose a number of structural remedies that I think were probably not on the table, and certainly I don't think there's any question that one of the ways in which you can have competition is to allow more foreign competition. That's true in this market and in just about any other.

If you rule that out then we're back in the Chapters kind of situation again: you're creating domestic market power and then you're wringing your hands about it—and then you want to impose all kinds of rules that are not necessarily very productive or in the social interest. But that's what I said to start with: bad regulation begets bad competition law. That's maybe where we are on that.

Mr. Charlie Penson: Just so I understand this, I think I have it completely clear, but I'm not sure if that has happened all around the table here.

Mr. McFetridge, my understanding of what you're saying is that from a consumer point of view, from a Canadian point of view, competition is what's required. We need to have healthy competition, but there are different ways of getting there. You can have a healthy environment for businesses to operate in, which is one way, or you can have competition law as almost a last resort, as a way if it's not working effectively. Can you just clarify for us that there are two models to look at here? Or how would you portray that?

Prof. Donald McFetridge: The best protection for consumers is a free and open market with as few barriers as possible to new competitors coming in, whether they're regulatory, ownership, or trade barriers, whatever types of barriers. That is a necessary condition.

Now, you might, as I suggested, be able to overcome some of the negative effects of regulatory barriers to entry by the application of competition law. In other words, you'd say you're not going to allow any foreign products, say, into the country, but you'll make sure that there are two, three, four, or five competing domestic producers. It's possible.

• 1030

But if you did allow foreign products in, maybe you could allow a lot more freedom for domestic mergers, for your domestic firms to have consolidations that would be both in their interest and in the country's interest—in other words, realization of economies of scale and things like that.

All I'm saying is that competition policy does not operate well in the confines of a restrictive regulatory environment.

The Chair: Thank you, Mr. Penson.

Mr. Cannis, did you have any questions? I had you on my list.

Mr. John Cannis (Scarborough Centre, Lib.): No.

The Chair: Thank you.

Mr. McTeague, did you have a last question?

Mr. Dan McTeague: Madam Chair, I wanted to suggest to the chair and to my colleagues here the possibility of perhaps providing a list of American witnesses who might be able to enlighten us as to their backgrounds and their knowledge of the American antitrust system, in order to serve as a cantilever to what we have here in Canada. I'm concerned, and certainly I think Mr. McFetridge's comments have illustrated that in circumstances where you have distributors opposed to manufacturers and others.... I think of, for instance, Microsoft, Eastman Kodak, and others, where, yes, it's people within the same general industry. But I think this committee, because of the importance of statute and given the dearth of judicial comments on competition law, should avail itself of some expert witnesses from the United States. I think that would only be helpful to this committee.

The Chair: Mr. McTeague, for the process the committee has undertaken for the next three weeks that's not going to be possible, only because we had asked committee members to supply witness names back at the beginning of April and we've already arranged the meetings for the next three weeks. We could possibly look at that again when we return in the fall, but the process for these hearings has already been established and set for the next three weeks—not to get into the American versus the Canadian so much as to look at the situation. But it is a possibility when we return in the fall.

Mr. Dan McTeague: If I may suggest, Madam Chair, I'm quite willing to wait even into September or October. This process began based on my bill, Bill C-201, last March or April, so I think time would help us if we had the ability to examine all sides, given the comparative between ourselves and the United States in so many other areas in terms of our economies. I think it would be very helpful to the committee—

The Chair: Mr. McTeague—

Mr. Dan McTeague: —to at least understand that our Competition Act is harmonized.

The Chair: Again, I cannot set the mandate for the committee in the fall—

Mr. Dan McTeague: That's fine. I understand.

The Chair: —because we don't know who's going to be chairing the committee in the fall and we don't know who will be members of committee in the fall.

Mr. Dan McTeague: I'll let you in on a secret: it's not going to be me.

The Chair: We will definitely keep that on the list of items to consider.

Mr. Dan McTeague: Thank you.

The Chair: I want to thank Professor McFetridge and Mr. Kennish for being here.

Do you have any final comments you'd like to leave with us?

Mr. Tim Kennish: I would just like to concur with what Professor McFetridge said in the beginning: that our law really looks to competition, looks to the protection of competition, as opposed to identifying consumer protection as its main purpose. Consumers, but also competitors in the business, are the beneficiaries of unrestricted competition. Competition law is really there to ensure that there aren't unfair advantages taken at the expense of those interests. When it works properly, it works very well.

I would add one other thing. I think the Canadian and U.S. competition laws, although coming from different historical roots, are converging. Our laws are not very different. Our methodologies and approaches are not tremendously different today.

Thank you very much for your time.

The Chair: Professor McFetridge, do you have anything further to add?

Prof. Donald McFetridge: No, other than to thank you for your attention and express the hope that I've been a bit helpful.

The Chair: On behalf of the committee, I'd like to thank both of you for being here this morning. Actually, it has been a very interesting meeting and has added a lot of food for thought for upcoming meetings in the next few weeks. Obviously competition law and the Competition Act make up a very large area, and it affects a large and different variety of groups, of interests. As a committee, we're going to be touching on some specific ones and will not be able to cover them all, but we do appreciate your comments.

The meeting's adjourned. I remind committee members that we're meeting this afternoon.